Mobile Infrastructure Corp

Previous wording

The following is a financial review and analysis of our financial condition and results of operations for the three months ended March 31, 2024 and 2023. This discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and the notes thereto and Management’s Discussion and Analysis of Financial Conditions and Results of Operations in our annual report on Form 10-K for the fiscal year ended December 31, 2023. Unless otherwise indicated, references in this Quarterly Report on Form 10-Q (this “Quarterly Report”) to “MIC,” “we,” “us,” “our,” and the “Company” refer to Mobile Infrastructure Corporation and its consolidated subsidiaries prior to the closing of the Merger and to Mobile Infrastructure Corporation (f/k/a Fifth Wall Acquisition Corp. III) and its consolidated subsidiaries following the closing of the Merger, as the context requires. References in this Quarterly Report to “Legacy MIC” refer to Mobile Infrastructure Corporation and its consolidated subsidiaries prior to the closing of the Merger. References in this Quarterly Report to “FWAC” refer to Fifth Wall Acquisition Corp. III.

Current wording

The following is a financial review and analysis of our financial condition and results of operations for the three and six months ended June 30, 2024 and 2023. This discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and the notes thereto and Management’s Discussion and Analysis of Financial Conditions and Results of Operations in our annual report on Form 10-K for the fiscal year ended December 31, 2023. Unless otherwise indicated, references in this Quarterly Report on Form 10-Q (this “Quarterly Report”) to “MIC,” “we,” “us,” “our,” and the “Company” refer to Mobile Infrastructure Corporation and its consolidated subsidiaries prior to the closing of the Merger and to Mobile Infrastructure Corporation (f/k/a Fifth Wall Acquisition Corp. III) and its consolidated subsidiaries following the closing of the Merger, as the context requires. References in this Quarterly Report to “Legacy MIC” refer to Mobile Infrastructure Corporation and its consolidated subsidiaries prior to the closing of the Merger. References in this Quarterly Report to “FWAC” refer to Fifth Wall Acquisition Corp. III.

Previous wording

Mobile Infrastructure Corporation (formerly known as Fifth Wall Acquisition Corp. III or “FWAC”) is a Maryland corporation. We focus on acquiring, owning and leasing parking facilities and related infrastructure, including parking lots, parking garages and other parking structures throughout the United States. We target both parking garage and surface lot properties primarily in the top 50 U.S. Metropolitan Statistical Areas, with proximity to key demand drivers, such as commerce, events and venues, government and institutions, hospitality and multifamily central business districts. As of March 31, 2024, we own 42 parking facilities in 21 separate markets throughout the United States, with a total of approximately 15,400 parking spaces and approximately 5.2 million square feet. We also own approximately 0.2 million square feet of retail/commercial space adjacent to its parking facilities.

Current wording

Mobile Infrastructure Corporation (formerly known as Fifth Wall Acquisition Corp. III or “FWAC”) is a Maryland corporation. We focus on acquiring, owning and optimizing parking facilities and related infrastructure, including parking lots, parking garages and other parking structures throughout the United States. We target both parking garage and surface lot properties primarily in the top 50 U.S. Metropolitan Statistical Areas, with proximity to key demand drivers, such as commerce, events and venues, government and institutions, hospitality and multifamily central business districts. As of June 30, 2024, we own 42 parking facilities in 21 separate markets throughout the United States, with a total of approximately 15,400 parking spaces and approximately 5.2 million square feet. We also own approximately 0.2 million square feet of retail/commercial space adjacent to its parking facilities.

Previous wording

In connection with the Merger, Mobile Infra Operating Partnership, L.P., a Maryland limited partnership (the “Operating Partnership”), converted from a Maryland limited partnership to a Delaware limited liability company, Mobile Infra Operating Company, LLC (following the conversion, the “Operating Company”). In connection with the conversion, each outstanding unit of partnership interest of the Operating Partnership was converted automatically, on a one-for-one basis, into an equal number of identical membership units of the Operating Company. The Company is a member of the Operating Company and owns substantially all of its assets and conducts substantially all of its operations through the Operating Company. The Operating Company is managed by a board of directors, one appointed by the Company and one appointed by the other members of the Operating Company. Currently, the two directors of the Operating Company are Manuel Chavez, III, our Chief Executive Officer and a director, and Stephanie Hogue, our President, Chief Financial Officer and a director. The Company owns approximately 67.2% of the Common Units of the Operating Company. Color Up, LLC, a Delaware limited liability company (“Color Up”) and HSCP Strategic III, LP, a Delaware limited partnership (“HS3”), are also members of the Operating Company and own approximately 26.4% and 6.4%, respectively, of the outstanding Common Units. Color Up is our largest stockholder and is controlled by Mr. Chavez, Ms. Hogue and, Jeffrey Osher, a director of the Company. HS3 is controlled by Mr. Osher.

Current wording

In connection with the Merger, Mobile Infra Operating Partnership, L.P., a Maryland limited partnership (the “Operating Partnership”), converted from a Maryland limited partnership to a Delaware limited liability company, Mobile Infra Operating Company, LLC (following the conversion, the “Operating Company”). In connection with the conversion, each outstanding unit of partnership interest of the Operating Partnership was converted automatically, on a one-for-one basis, into an equal number of identical membership units of the Operating Company. The Company is a member of the Operating Company and owns substantially all of its assets and conducts substantially all of its operations through the Operating Company. The Operating Company is managed by a board of directors, one appointed by the Company and one appointed by the other members of the Operating Company. Currently, the two directors of the Operating Company are Manuel Chavez, III, our Chief Executive Officer and a director, and Stephanie Hogue, our President and a director. The Company owns approximately 68.1% of the Common Units of the Operating Company. The remaining Common Units are held by certain of our executive officers and directors (directly or indirectly) and outside investors.

Previous wording

In the first quarter of 2024, 26 of our 42 assets converted to management contracts. We believe asset management contracts provide the opportunity for net operating income ("NOI") growth through more transparent and controlled expense management, and will reduce the revenue variability associated with the timing of payments for contract parking agreements. In addition, the move to management contracts properly aligns the incentives and rewards for revenue growth between the third-party operator and the company. This change is also expected to result in better revenue linearity compared to revenue recognition in our lease agreements, in which lease payments are based on cash collections from operators. Overall, the conversion to contracts also provides enhanced visibility on the performance of the portfolio within our financial results. Our intent is to convert the remaining assets to asset management contracts by the end of 2027, with additional assets expected to be converted in 2024.

Current wording

In the first half of 2024, 27 of our 42 assets converted to management contracts. We believe asset management contracts provide the opportunity for net operating income ("NOI") growth through more transparent and controlled expense management, and will reduce the revenue variability associated with the timing of payments for contract parking agreements. In addition, the move to management contracts properly aligns the incentives and rewards for revenue growth between the third-party operator and the company. This change is also expected to result in better revenue linearity compared to revenue recognition in our lease agreements, in which lease payments are based on cash collections from operators. Overall, the conversion to contracts also provides enhanced visibility on the performance of the portfolio within our financial results. Our intent is to convert the remaining assets to asset management contracts by the end of 2027, with additional assets expected to be converted in 2024.

Previous wording

The increase in total revenues for the three months ended March 31, 2024 compared to the same period in 2023 is due primarily to 26 of our 42 assets converting to management contracts in the first quarter of 2024, as noted above. The change to management contracts results in us recognizing revenue from all parking transactions at those locations. Under the previous lease agreements, we only received a portion of the revenue after a certain threshold was reached.

Current wording

The increase in total revenues for the three months ended June 30, 2024 compared to the same period in 2023 is due primarily to 27 of our 42 assets converting to management contracts in the first half of 2024, as noted above. The change to management contracts results in us recognizing revenue from all parking transactions at those locations. Under the previous lease agreements, we only received a portion of the revenue after a certain threshold was reached.

Previous wording

The increase in property operating expense for the three months ended March 31, 2024 compared to the same period in 2023 is due primarily to 26 of our 42 assets converting to management contracts in the first quarter of 2024, as noted above. The change to management contracts results in higher reflected operating expenses as revenues reported were net of certain costs under the previous lease agreements.

Current wording

The increase in property operating expense for the three months ended June 30, 2024 compared to the same period in 2023 is due primarily to 27 of our 42 assets converting to management contracts in the first half of 2024, as noted above. The change to management contracts results in higher reflected operating expenses as revenues under the previous lease agreements were calculated based on collections reduced by certain costs, whereas these costs are now recorded as property operating expense under management contracts.

Previous wording

The $0.4 million increase in general and administrative expenses during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 is primarily attributable to non-cash compensation cost for certain executive LTIP Units and restricted stock units granted in January 2024 as well as an increase in payroll and technology expenses.

Current wording

The $0.5 million increase in general and administrative expenses during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 is primarily attributable to non-cash compensation cost for certain executive LTIP Units and restricted stock units granted in the first half of 2024, as well as an increase in payroll and technology expenses.

Previous wording

The decrease in interest expense of approximately $0.6 million during the three months ended March 31, 2024 compared to the same period in the prior year is primarily attributable to the repayment of $9.9 million of mortgage loans and the paydown of $15.0 million on the Revolving Credit Facility in Q2 2023 partially offset by increases in interest rates on the Revolving Credit Facility compared to the prior year.

Current wording

The decrease in interest expense of approximately $0.6 million during the three months ended June 30, 2024 compared to the same period in the prior year is primarily attributable to the repayment of $9.9 million of mortgage loans and the paydown of $15.0 million on the Revolving Credit Facility in the third quarter of 2023 partially offset by increases in interest rates on the Revolving Credit Facility compared to the prior year.

Previous wording

In connection with the Merger, in August 2023 we recognized a liability for Earn-Out Shares which may vest if certain hurdles are met regarding share price. Changes to the fair value during the period are based on changes in Company stock price and are reflected in earnings.

Current wording

In connection with the Merger, in August 2023 we recognized a liability for Earn-Out Shares which may vest if certain hurdles are met regarding share price. Changes to the fair value of the liability during the period are reflected in earnings.

Previous wording

Professional fees increased by approximately $0.2 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily attributable to higher utilization of legal professional services firms in 2024.

Current wording

Professional fees increased by approximately $0.2 million during the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was primarily attributable to additional professional service fees and costs associated with being publicly traded on the NYSE American.

Previous wording

During the three months ended March 31, 2024, we impaired approximately $0.2 million of our real estate assets as a result of a planned disposition of a property.

Current wording

During the six months ended June 30, 2024, we impaired approximately $0.2 million of our real estate assets as a result of a planned disposition of a property.

Previous wording

The following table presents our NOI as well as a reconciliation of NOI to Net Loss, the most directly comparable financial measure under U.S. GAAP reported in our consolidated financial statements, for the three months ended March 31, 2024 and 2023 (dollars in thousands):

Current wording

The following table presents our NOI as well as a reconciliation of NOI to Net Loss, the most directly comparable financial measure under U.S. GAAP reported in our consolidated financial statements, for the three and six months ended June 30, 2024 and 2023 (dollars in thousands):

Previous wording

The following table presents our calculation of EBITDA and Adjusted EBITDA for the for the three months ended March 31, 2024 and 2023 (dollars in thousands):

Current wording

The following table presents our calculation of EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023 (dollars in thousands):

Previous wording

We have $90.6 million of debt maturing within twelve months of the date of the issuance of the Quarterly Report which is comprised of $58.7 million related to the Revolving Credit Facility and $31.9 million of notes payable. We are currently analyzing financial and strategic alternatives in order to satisfy these debt maturities. See Note B —Summary of Significant Accounting Policies in Part I, Item 1Notes to the Consolidated Financial Statementsof this Quarterly Report for further discussion.

Current wording

We have $93.1 million of debt maturing within twelve months of the date of the issuance of the Quarterly Report which is comprised of $58.7 million related to the Revolving Credit Facility and $34.4 million of notes payable. We do not currently have sufficient cash on hand, liquidity or projected future cash flows to repay these outstanding amounts upon maturity. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.

Previous wording

During 2023 and the first quarter of 2024, we have taken steps to both extend and ladder maturities in our debt profile, including:

Current wording

During 2023 and the six months ended June 30, 2024, we have taken steps to both extend and ladder maturities in our debt profile, including:

Previous wording

Existing capital expenditure activities expected to be completed in the near-term for general maintenance are expected to cost approximately $0.5 million.

Current wording

Existing capital expenditure activities expected to be completed in the near-term for general maintenance are expected to cost approximately $0.1 million.

Previous wording

Our future acquisitions or development of properties cannot be accurately projected because such acquisitions or development activities depend upon available opportunities that come to our attention and upon our ability to successfully acquire, develop, finance and lease such properties. However, we have identified a pipeline of acquisition opportunities that we believe is bespoke and actionable, while being largely off-market and unavailable to our competitors. As of March 31, 2024, we have identified and are evaluating several parking facilities with approximately $300 million in asset value as potential acquisition targets.

Current wording

Our future acquisitions or development of properties cannot be accurately projected because such acquisitions or development activities depend upon available opportunities that come to our attention and upon our ability to successfully acquire, develop, finance and lease such properties. However, we have identified a pipeline of acquisition opportunities that we believe is bespoke and actionable, while being largely off-market and unavailable to our competitors. As of June 30, 2024, we have identified and are evaluating several parking facilities with approximately $300 million in asset value as potential acquisition targets. However, we are unlikely to acquire additional parking facilities until more favorable financial market conditions are realized.

Previous wording

We are currently accruing dividends in accordance with the terms of the Series A Preferred Stock and Series 1 Preferred Stock. As of March 31, 2024, the balance unpaid dividends outstanding was approximately $0.7 million and $9.5 million for Series A Preferred Stock and Series 1 Preferred Stock, respectively. No cash dividend on the Common Stock can be paid until the preferred distributions are paid.

Current wording

We are currently accruing dividends in accordance with the terms of the Series A Preferred Stock and Series 1 Preferred Stock. As of June 30, 2024, the balance unpaid dividends outstanding was approximately $0.7 million and $9.2 million for Series A Preferred Stock and Series 1 Preferred Stock, respectively. No cash dividend on the common stock can be paid until the preferred distributions are paid.

Previous wording

As a result of the Merger, our previously outstanding warrant became the Warrant to purchase 2,553,192 shares of our common stock at an exercise price of $7.83 per share, exercisable as of the date of the Closing. As of the Closing Date, FWAC, Legacy MIC, and Color Up entered into a Warrant Assumption and Amendment Agreement (the “Warrant Assumption and Amendment Agreement”) to the Warrant Agreement, whereby the Company assumed the Common Stock Warrants remaining outstanding and unexpired at that time, and such Common Stock Warrants became the common stock warrants of the Company. On August 29, 2023, the Company and Color Up entered into the Amended and Restated Warrant Agreement pursuant to which the Warrant Agreement was amended and restated to reflect the effects of the Merger and permit Color Up to exercise the Warrant on a cashless basis at Color Up’s option.

Current wording

As a result of the Merger, our previously outstanding warrant became a warrant to purchase 2,553,192 shares of our common stock at an exercise price of $7.83 per share, exercisable as of the date of the Closing (the “Common Stock Warrants”). As of the Closing Date, FWAC, Legacy MIC, and Color Up entered into a Warrant Assumption and Amendment Agreement (the “Warrant Assumption and Amendment Agreement”) to the Warrant Agreement, whereby the Company assumed the Common Stock Warrants remaining outstanding and unexpired at that time, and such Common Stock Warrants became the common stock warrants of the Company. On August 29, 2023, the Company and Color Up entered into the Amended and Restated Warrant Agreement pursuant to which the Warrant Agreement was amended and restated to reflect the effects of the Merger and permit Color Up to exercise the Common Stock Warrants on a cashless basis at Color Up’s option. Subsequently, Color Up distributed the entirety of the Common Stock Warrants to HSCP Strategic III, LP, an entity controlled by Mr. Osher, and Bombe Asset Management, LLC, an entity owned and controlled by Mr. Chavez and Ms. Hogue.

Previous wording

While exercise of the Warrant is a potential source of cash, we do not currently believe this is a likely event and therefore do not use this assumption in our operating plans.

Current wording

While exercise of the Common Stock Warrants is a potential source of cash, we do not currently believe this is a likely event and therefore do not use this assumption in our operating plans.

Previous wording

The following table summarizes our cash flows for the three months ended March 31, 2024 and 2023 (dollars in thousands):

Current wording

The following table summarizes our cash flows for the six months ended June 30, 2024 and 2023 (dollars in thousands):

Previous wording

Comparison of the three months ended March 31, 2024 to the three months ended March 31, 2023:

Current wording

Comparison of the six months ended June 30, 2024 to the six months ended June 30, 2023:

Previous wording

The cash used in operating activities for the three months ended March 31, 2024 was primarily attributable to payment of certain general and administrative and professional fees and changes in working capital which offset the benefit of changes in NOI for the period.

Current wording

The cash used in operating activities for the six months ended June 30, 2024 was primarily attributable to payment of certain general and administrative and professional fees and changes in working capital, which offset the benefit of changes in NOI for the period.

Previous wording

The cash used in investing activities during the three months ended March 31, 2024 was primarily attributable to capital expenditures and payments on sale of one parking asset in February 2024 as the sale was financed with a note receivable. The cash used in investing activities during the three months ended March 31, 2023 was primarily attributable to routine and strategic capital expenditures and the sale of one parking asset in February 2023.

Current wording

The cash used in investing activities during the six months ended June 30, 2024 was primarily attributable to capital expenditures and payments on sale of one parking asset in February 2024 as the sale was financed with a note receivable. The cash provided by investing activities during the six months ended June 30, 2023 was primarily attributable to routine and strategic capital expenditures and the sale of one parking asset in February 2023.

Previous wording

The cash used in financing activities during the three months ended March 31, 2024 was primarily attributable to the refinancing of certain notes payable and related loan fees. The cash used in financing activities during the three months ended March 31, 2023 was primarily attributable to principal payments on mortgage loans, including $1.0 million for the one parking asset sold in February 2023, as well as distribution payments to non-controlling interest holders in MVP St. Louis Cardinal Lot, DST.

Current wording

The cash used in financing activities during the six months ended June 30, 2024 was primarily attributable to the refinancing of certain notes payable and related loan fees. The cash used in financing activities during the six months ended June 30, 2023 was primarily attributable to principal payments on mortgage loans, including $1.0 million for the one parking asset sold in February 2023, as well as distribution payments to non-controlling interest holders in MVP St. Louis Cardinal Lot, DST.

Previous wording

Certain demand drivers of our business are subject to seasonal fluctuations, specifically those impacted by sports seasons, concerts and theaters. Some of our locations may also see fluctuations in demand due to inclement weather, especially in our Midwest markets. These factors are unique to each location and we expect the fluctuations will primarily impact transient parking revenues while contract parking revenues will remain relatively stable. Because of these seasonality factors, and other factors described herein, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

Current wording

Certain demand drivers of our business are subject to seasonal fluctuations, specifically those impacted by sports seasons, concerts and theaters. Some of our locations may also see fluctuations in demand due to inclement weather, especially in our Midwest markets. These factors are unique to each location and we expect the fluctuations will primarily impact transient parking revenues while contract parking revenues will remain relatively stable. Due to these seasonality factors, and other factors described herein, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.