Mobile Infrastructure Corporation — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Dollar amounts below are USD millions unless stated otherwise. The August 25, 2023 business combination with Fifth Wall Acquisition Corp. III was accounted for as a reverse recapitalization; comparative operating results primarily reflect Legacy MIC.
Business context
The company owns and leases parking facilities and related commercial space. At quarter-end it owned 43 facilities in 21 U.S. markets, with 15,676 parking spaces, approximately 5.4 million square feet of parking space and 0.2 million square feet of adjacent retail/commercial space.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $8.1 | $8.4 | $22.4 | $22.0 |
| Net loss | $(24.6) | $(4.7) | $(31.7) | $(13.0) |
| Net loss attributable to common stockholders | $(23.1) | $(2.9) | $(27.9) | $(7.9) |
| Net loss per common share | $(1.77) | $(0.22) | $(2.13) | $(0.61) |
| Net operating income (NOI) | $5.9 | $6.1 | $15.6 | $14.6 |
| Operating cash flow | Not separately stated for quarter | $(1.4) | $2.0 |
Q3 revenue declined 3.4%; nine-month revenue increased 1.6%. Nine-month NOI rose 7.4%, while Q3 NOI fell 3.1%. Approximate NOI margins, calculated as NOI divided by revenue, were 72.8% versus 72.6% for Q3 and 69.9% versus 66.1% for the nine-month periods. Interest expense was $10.9 million for nine months, up 14.9% year over year.
Q3 and nine-month losses included an $8.7 million real estate impairment and $16.1 million noncash Series 2 preferred issuance expense. These were partly offset by a $4.6 million noncash gain from remeasurement of the earn-out liability. General and administrative expense increased, including equity compensation costs. Nine-month cash flow from operations turned negative; investing cash use was $0.2 million and financing provided $9.3 million. Cash and restricted cash totaled $18.7 million, including $13.7 million unrestricted cash.
At September 30, total assets were $427.5 million and total liabilities $219.9 million. Notes payable were $135.1 million net and the revolver was $58.4 million net. The revolver commitment was reduced to $58.7 million and matures April 1, 2024. Management disclosed approximately $64.1 million of debt maturing within one year and insufficient cash or available liquidity to repay it; the disclosed amount should be reconciled with the debt maturity schedule and revolver maturity. Two loans totaling $38.5 million were out of covenant, resulting in additional cash-management restrictions and approximately $0.5 million of restricted cash.
Material changes, outlook and risks
- The merger and $46 million Series 2 preferred financing closed August 25. The company received $39.0 million net cash proceeds from the reverse recapitalization and used financing proceeds in part to pay down $15.0 million of revolver borrowings and repay certain mortgages. Approximately 95.3% of FWAC Class A shares were redeemed.
- Series 2 preferred stock is expected to convert by December 31, 2023, or earlier upon a change of control, into approximately 13.8 million common shares including paid-in-kind dividends. This represents substantial potential dilution relative to the 13.1 million weighted-average common shares reported for the periods.
- Management states that substantial doubt exists about the company’s ability to continue as a going concern. It is pursuing extensions and amendments for near-term debt, but says the plan is subject to market conditions and does not alleviate the doubt. The filing provides no quantified earnings or revenue guidance.
- Management’s stated priorities include improving lease structures and revenue per available stall, pursuing accretive growth, and refinancing near-term debt to spread maturities. It is evaluating acquisition targets with more than $325 million in asset value. Hybrid work and uneven return-to-office patterns continue to weigh on certain urban properties; percentage rent can also be affected by timing of operator cash receipts.
- Tenant concentration is significant: SP+ accounted for 61.6% of nine-month revenue excluding commercial revenue; Premier Parking accounted for 11.9%. The company also identifies interest rates, parking demand, refinancing access, covenant compliance, and its ability to raise capital as risks.
- Common distributions have been suspended since 2018; Series A and Series 1 preferred distributions have been suspended since 2020 but continue to accrue. No cash dividends may be paid on common stock until preferred distributions are paid.
- Disclosure controls were not effective due to unremediated material weaknesses involving segregation of duties, system access controls and GAAP application. The filing also describes a prior FWAC accounting-control weakness that had not been remediated.
- Unusual or contingent items include an $8.7 million impairment linked to delayed return-to-work trends or reduced demand, a $1.2 million gain from settlement of an indemnification-expense dispute, a $1.8 million vendor dispute accrued in accounts payable and a $0.7 million appeal bond related to a Texas commission judgment.
Important facts for investors to verify
- Debt maturities and refinancing progress, including the apparent difference between the stated $64.1 million due within one year and the revolver maturity plus scheduled 2024 mortgage principal.
- Liquidity available for debt service, compliance with revised credit-facility covenants, and the status of the two covenant-failing loans and related cash controls.
- Timing and final share count from Series 2 conversion, its dilution impact, and any further equity or debt financing needs.
- Whether operating cash flow improves and whether parking demand, operator collections, and tenant concentration support revenue and NOI trends.
- Progress on real estate impairment risks and remediation of material weaknesses in financial reporting controls.