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07-05-2025
- Automotive
- Yahoo
Q1 2025 Driven Brands Holdings Inc Earnings Call
Good morning and welcome to Driven Brands first-quarter 2025 earnings conference call. The earnings release and the net leverage ratio reconciliation are available for download on our website at On the call with me today are Jonathan Fitzpatrick, President and Chief Executive Officer; Danny Rivera, Executive Vice President and Chief Operating Officer; and Mike Diamond, Executive Vice President and Chief Financial Officer. In a moment, Jonathan, Danny, and Mike will walk you through our financial and operating performance for the quarter. Before we begin our results, I'd like to remind you that management will refer to certain non-GAAP financial measures. You can find the reconciliation to the most directly comparable GAAP financial measures on the company's investor relations website and in its filings with the Securities and Exchange Commission. During the course of this call, we may make forward-looking statements in regards to our current plans, beliefs, and expectations. These statements are not guarantees of future performance and are subject to a number of risks and uncertainties and other factors that could cause actual results and events to differ materially from results and events contemplated by these forward-looking statements. Please see our earnings release and our filings with the Securities Exchange Commission for more information. Today's prepared remarks will be followed by a question-and-answer session. We ask you to limit yourself to one question and one follow-up. Now, I will turn it over to Jonathan. Good morning, ladies and gentlemen, and welcome to the Driven Brands Q1 2025 earnings call. (Operator Instructions) This call is being recorded on Tuesday, May 6, 2025. I would now like to turn the conference over to Joel Arnao, SVP of Finance and Investor Relations. Please go ahead. Story Continues Jonathan Fitzpatrick Good morning. Thank you for joining us today to discuss Driven Brand's first quarter 2025 financial results. I want to acknowledge the hard work and great execution by the more than 7,500 Driven Brands team members and our amazing franchisees for how they continue to deliver in a dynamic macroeconomic environment. Having accomplished the sale of our U.S. car wash business, our focus for 2025 is on our key priorities of delivering our 2025 outlook and utilizing excess free cash flow to reduce debt. Now I will begin with a review of our Q1 2025 highlights and then turn it over to Danny, who will be taking over as CEO this week, and he will discuss the business in greater detail. And then Mike, who will detail our first quarter financial results. For Q1 2025, Driven delivered revenue of $516 million, up 7.1% versus the prior year, supported by 177 net new stores over the past 12 months and 0.7% same-store sales growth. Our 17th consecutive quarter of positive same-store sales growth. We generated diluted adjusted EPS from continuing operations of $0.27 and adjusted EBITDA of $125 million. We closed our U.S. car wash transaction on April 10 and used the majority of cash proceeds to retire debt. As of today, we have paid down nearly $290 million since the beginning of this year. And since the beginning of 2024, this brings total debt repaid to more than $0.5 billion. I'll now turn it over to Danny. Daniel Rivera Thank you, Jonathan. Our growth in cash playbook continues to generate predictable high quality growth and robust free cash flow. Q1 was a clear demonstration of the power of our platform. Even in uncertain times, customers depend on their vehicles to live their lives and care for their families. Whether it's a routine oil change, a broken AC, squealing brakes, or a collision, Driven Brands' diversified portfolio, anchored by our non-discretionary services, meets those needs. Take 5 Oil Change, home of the stay-in-your-car 10-minute in oil change, continues to deliver industry- leading growth. Take 5 delivered same-store sales growth of 8% for the quarter, marking its 19th consecutive quarter of positive same-store sales. We complemented this organic momentum with 168 net new openings over the past year, leading to a strong year-over-year revenue and adjusted EBITDA growth of 15% and 14%, respectively, while maintaining healthy adjusted EBITDA margins of 34%. We have a robust pipeline of approximately 1,000 sites in place which has been organically built over the past five years. We continue to have direct real estate visibility into more than one-third of this pipeline, which provides a clear line of sight to achieving our target of at least 2,000 total locations over the next five years. Take 5 Oil Change continues to be our most compelling growth engine, fueled by a proven operating model, strong consumer demand, and disciplined execution. This growth is made possible by the outstanding efforts of our franchisees and our corporate teams who support them every day. This quarter, that momentum was recognized as Take 5's climb to number 27 on entrepreneurs' list of fastest growing franchises, further validation of the brand's momentum and unit level economics. Our Franchise segment, home to some of the most iconic names in the automotive aftermarket, including Meineke, Maaco, and CarStar, remains a strong contributor to free cash flow. Despite some top line softness this quarter, primarily driven by Maaco, the segment delivered exactly what we needed, solid adjusted EBITDA margin performance of 62%. Our International Car Wash segment also posted a very strong quarter, delivering one of its best revenue and adjusted EBITDA results to-date. Same-store sales grew 26% while year-over-year revenue and adjusted EBITDA increased 25% and 36%, respectively. Adjusted EBITDA margins remain solid at 36%, representing approximately 280 basis points of improvement compared to the prior year. As we've shared in previous quarters, having the right portfolio of assets is imperative for Driven. As Jonathan mentioned, we're pleased to report that the U.S. car wash transaction officially closed on April 10. This strategic move delivers three immediate benefits to Driven Brands. First, we used the majority of proceeds to repay debt, supporting one of our highest priorities. Second, it will help us achieve our outlook for net CapEx, which is approximately $70 million less than last year. Third, this divestiture simplifies our portfolio by removing its most discretionary component. Deleveraging remains a key priority for Driven. With proceeds from the car wash sale, we remain firmly on track to meet our goal of reducing net leverage to 3 times by the end of 2026. Tariffs are also top of mind as we look ahead to the rest of 2025. We've analyzed the potential impact through two lenses: Margin and demand. On the margin side, our diversified sourcing strategy and pricing power, anchored by the non-discretionary low frequency nature of our services, help us mitigate foreseeable risks. On the demand side, our offerings remain essential. Even in uncertain times, people rely on their vehicles. Our brands offer compelling, cost-effective solutions to consumers. And our iconic brands remain trusted providers to get people back on the road. Before I hand it over to my partner and Driven CFO, Mike Diamond, I want to thank the thousands of employees and franchise partners across Driven Brands. Their dedication and execution powered a solid start to the year. And while macro uncertainty lies ahead, I remain confident in our team and our ability to deliver. I also want to personally thank Jonathan for his leadership, vision, and guidance through the years. And I look forward to continuing to partner with him in his new role as Chair of the Board. With that, I'll turn it over to Mike. Michael Diamond Thank you, Danny. And good morning, everyone. Q1 2025 was another strong quarter for Driven marked by robust operating performance led by our Take 5 Oil Change business. Additionally, the sale of our U.S. car wash business provided liquidity for debt pay down and refocuses our business on its non-discretionary service foundation. As a reminder, with the announced divestiture of our U.S. car wash business, the results for that business are included in discontinued operations and are not included in financial details provided today, unless otherwise noted. Driven recorded its 17th consecutive quarter of same-store sales growth, increasing 0.7% in Q1. Total units were flat in Q1 as continued growth in our Take 5 Oil Change locations was offset primarily by the negotiated departure of a 19-unit franchisee in our Franchise brand segment. System-wide sales for the company grew 2.2% in Q1 to $1.5 billion. Total revenue for Q1 was $516.2 million, an increase of 7.1% year-over-year. Q1 operating expenses increased $41 million year-over-year. Key drivers of this increase include an increase in company and independently-operated store expenses of $19.6 million driven by higher sales volumes and more stores in Q1 of 2025 versus Q1 of 2024. An increase in SG&A of $19.2 million, approximately $7 million is the result of lapping a gain in Q1 of 2024 from the refranchising of company locations, offset in part by losses from assets in Q1 of 2025. The remaining $12 million increase is driven primarily by investments and growth initiatives. Operating income declined $6.8 million to $61.3 million for Q1. Adjusted EBITDA increased 1.9% to $125.1 million for the quarter. As a reminder, this growth came without the benefit of PH Vitres, which we divested in August 2024, but the results of which are still included in Q1 2024 results. Adjusted EBITDA margin for Q1 was 24.2%, a decrease of roughly 120 basis points versus Q1 of last year, as sales growth was offset by the aforementioned increases in store expenses in SG&A. Net interest expense for Q1 was $36.5 million, $7.2 million lower than Q1 last year, driven primarily by ongoing debt pay down. Income tax expense for the quarter was $7 million. Net income from continuing operations for the quarter was $17.5 million. Adjusted net income from continuing operations for the quarter was $44.2 million. Adjusted diluted EPS from continuing operations for Q1 was $0.27, up $0.02 from Q1 last year, driven by strong operating performance and continued debt pay down. Our new segmentation better highlights the attributes of our business model, including the strong trajectory of our Take 5 business and the stable cash flow generation of our Franchise brands. As a reminder, in mid-March, we included unaudited pro forma 2024 quarterly results for these new segments to aid investors in evaluating our business. This detail can be found on the Investor Relations page of our website. Q1 performance for each of our segments include Take 5 Oil Change, which had another impressive quarter of growth with same-store sales growth of 8% and revenue growth of 15.3%. Strong sales continue to be driven by a combination of non-oil change services, which is now above 20% of Take 5's total system-wide sales and the continued benefit from the use of premium oils which account for approximately 90% of our oil changes. Adjusted EBITDA for the quarter was $100.9 million, reflecting growth of 13.5%, compared to Q1 2024. Adjusted EBITDA margin was 34.4%, a decrease of 50 basis points versus Q1 last year, driven by higher repair and maintenance and rent expenses. Additionally, we opened 22 net new units in the quarter, of which, 17 were company-operated stores and 5 were franchise-operated. Franchise brands recorded a 2.9% decline in same-store sales. While we do not plan to break out our Franchise businesses by brand, we will provide additional color from time to time if there are significant variations in performance. In Q1, there was such a variation, with softness in the segment driven primarily by Maaco. Segment revenue declined $4.6 million or 6.1%. Adjusted EBITDA declined $3.2 million to $44.4 million. Adjusted EBITDA margin for Q1 declined approximately 40 basis points from Q1 of 2024 to 61.9% driven by the decline in revenue. During the quarter, we closed a net of 19 units driven primarily by the negotiated departure of a 19-unit franchisee. Our Car Wash segment, representing our international car wash business, had one of its most profitable quarters ever with the same-store sales growth of 26.2% driven by improved operations, expanded service offerings, and more favorable weather relative to a year ago. Adjusted EBITDA increased $6.4 million to $24.4 million in Q1. Adjusted EBITDA margin increased 280 basis points to 35.9%. Turning to liquidity, leverage, and cash flow for Q1. Our cash flow statement shows a consolidated view of cash flows for Q1, inclusive of our discontinued operations. Net capital expenditures for the quarter were $47.5 million consisting of $56.2 million in gross CapEx, offset by $8.7 million in sale leaseback proceeds. Capital expenditures from our U.S. car wash operations in Q1 were approximately $3 million. Proceeds from assets held for sale in Q1 generated an additional $3.5 million of cash. As a reminder, we now sold through a majority of our assets held for sale and would expect to generate modest amounts of proceeds through the rest of 2025. Free cash flow for the quarter, defined as operating cash flow less net capital expenditures, was $27.6 million driven by strong operating performance. We utilize this cash to continue executing our strategy of systematic deleveraging. We ended Q1 with net leverage of 4.3 times net debt-to-adjusted EBITDA, reflecting a debt paydown of $43 million in the quarter. In late February, we extended our revolving credit facility for an additional five years. The facility now matures in February of 2030. This facility will continue to have a capacity of $300 million and bears an interest rate of SOFR+ between 2% to 2.25%. During Q1, we announced the sale of our U.S. car wash business for approximately $385 million which is comprised of gross cash proceeds of $255 million and a seller note of $130 million. The seller note, which bears paid-in-kind interest, will be held on our balance sheet at its present value as a long-term note receivable starting in Q2. This transaction closed on April 10. Following close, we used almost all of the net proceeds to pay down a meaningful portion of the outstanding balance on our term loan. As of today, we have paid down a total of $246 million against the term loan in Q2 and have an outstanding term loan balance of roughly $81 million. This reduction in debt will save us more than $15 million of annualized interest expense, which was reflected in our outlook provided on the Q4 call. I'd now like to spend a bit of time on the current operating environment, including the potential impact of tariffs on our business. As Danny mentioned earlier, the driven portfolio benefits from providing generally non-discretionary services for an asset, a person's transportation, that is essential for their livelihood. While declining consumer sentiment can impact frequency among our more discretionary brands and services, like Maaco, our business model remains resilient overall. We are mindful, however, that if consumer sentiment continues to worsen, it could affect certain segments of our business. While the margin side is a bit more dynamic, we believe we are well-positioned thanks to our strong supply chain team and a geographically diversified supply chain. We source a meaningful portion of our products from domestic suppliers, Mexico and Canada. Furthermore, almost all products from Mexico and Canada are covered under the USMCA and are generally exempt from tariffs. And the cost of oil, our largest individual product category, is driven by global market prices with minimal exposure to direct tariffs. Our supply chain is nimble and can adjust quickly to changing conditions. Although we expect some cost increases, given the nature and breadth of our products, our pricing power will help mitigate the potential impacts of current tariffs. More importantly, we are actively managing the situation through ongoing internal and external conversations to ensure we remain agile and well-positioned as tariff rates continue to evolve. We are reiterating our fiscal 2025 outlook on revenue, same-store sales, net store growth, adjusted EBITDA, and adjusted diluted EPS. We remain appropriately cautious for the upcoming quarter. We expect Take 5 growth to moderate as it continues growing over a larger base. Our Car Wash business to generate more moderate growth and softer trends in our most discretionary business, Maaco, to continue. These factors combined with the changes in our business from the divestiture of our U.S. car wash business and PH Vitres, lead us to reiterate our expectation that the second half of 2025 should contribute a percentage in the low 50s for our full-year revenue and adjusted EBITDA. We remain focused on achieving our net leverage target of 3 times by the end of 2026, with the majority of our free cash flow earmarked for reducing outstanding debt on both the revolver and term loan. We're encouraged by our start to the year and confident in our ability to sustain momentum even amid a dynamic operating environment. As we focus on continuing to grow our Take 5 business and maintaining the strength of our franchise segment, we remain committed to generating cash and executing our deleveraging plan. With that, I will turn it over to the operator, and we are happy to take your questions. Question and Answer Session Operator (Operator Instructions) Simeon Gutman, Morgan Stanley. Simeon Gutman Good morning, guys. I wanted to start with Take 5, thinking about the EBITDA margin which was solid on an 8% comp, the margin itself, I guess was down a little year-over-year, is there a way to think about how do you manage that margin? And then in subsequent quarters, if same-store sales slows, could we see a reverse dynamic where margin actually goes up? Was there anything that was unusual in the first quarter? Thanks. Michael Diamond Morning, Simeon, I'm not sure I would say anything unusual. I think as we discussed, the key drivers of that margin were a little bit of pressure on both repair and maintenance and rent expense, both of which are really just engineered to make sure that we have the right assets and the right locations that are appealing to our customers. I think that the main takeaway is while there's a little bit of pressure, we feel really good about what the team is doing to manage their costs, and we feel really good about, in general, the top line performance, even if it does moderate a bit through the rest of the year. In general, that team is operating at a very high level and we're confident in their ability to continue to perform. Simeon Gutman Is there anything you can share as a follow-up on the Franchise brands? If the comp softness continues, is there any way you can drive EBITDA up in that scenario, or is it going to be proportionate to the sales direction? Michael Diamond I would say, in general, the nature of our Franchise business is there aren't as many levers to pull, but that's okay because the stability is exactly what we need to drive the consistent cash flow. I would say, in the long term, we feel very good with where the Franchise brands can go. You think about the stable iconic brands we have that have been around for over 50 years and have weathered many different types of pressures. As we mentioned, this softness is driven largely by our most discretionary business, Maaco, but feel good with where the trajectory of that segment is going over the long term of 2025. Simeon Gutman Okay. Thanks. Good luck. Congratulations, Danny, Jonathan. Operator Justin Kleber, Baird. Justin Kleber Good morning, guys. Thanks for taking the questions. First one for me, just as we think about the shape of comps over the balance of the year, you were below the annual guide in 1Q. Sounds like you expect kind of the softness to continue in 2Q. So the question is, are you expecting positive comps in 2Q? And then what would drive the implied acceleration over the back half of the year? Is that just easier comparisons or is there something else identifiable that you would point us to? Michael Diamond I'll say a couple of things. We're not going to provide quarter-specific guidance, although we try to give a little bit of color on how we see, at least, Q2 shaping up. Our full-year reiteration of all of those metrics incorporates performance we've seen so far to-date through Q2. I think if you look at the construct of Q1, obviously, we had strength from our Take 5 brands and a little bit more softness from Granchise. I think that overall for the rest of the year probably equilibralizes, although it may take a little bit of time, just given some of the discretionary pressure we see in Maaco. But we still feel good with the 1% to 3% just based on the trends we're seeing. Justin Kleber Okay. And then just a follow-up on Simeon's question on Take 5 margins, how quickly does the decline in what we're seeing with like base oils show up in your product costs? What's the typical lag as we think about the potential margin tailwind in that business from the decline in oil? Michael Diamond We reset that every quarter. Now, as a reminder, we have a franchise system as well that we sell to, so there is a little bit of a ballast that comes down as the oil price comes down. But in general, it's about a quarter lag from the oil prices. Justin Kleber All right. Thank you, guys. Best of luck. Operator Seth Sigman, Barclays. Seth Sigman Good morning, everyone. I wanted to get an update on the glass business. It seems like we get back into it and maybe that business was positive in the quarter. But any more perspective on how it's performing and how it's starting to ramp? Daniel Rivera Hey Seth. This is Danny. Look, I'd say a couple things on the glass business. Number one, still a multiyear business for us, multiyear strategy for us. Nothing's changed in the underlying dynamics of the industry. We still feel good about being in that space. And we started to focus on growth last year. And towards the back half of last year, we mentioned several areas where we're showing growth in terms of landing insurance carriers and landing commercial accounts. I mentioned at the time that it takes a couple quarters from the time that you ink those deals to the time that you operationalize those accounts and you start to see the traffic flow through your stores. We're seeing the benefit of that here in 2025. So I'd say, look, good business. Nothing's changed in the underlying dynamics. We're seeing growth towards the back half last year which is materializing. And we're in early innings still, so I'd say nothing has changed from that respect. Seth Sigman Okay. Helpful. And then on the international car wash momentum. For the last couple of quarters, I feel like it's been overshadowed by the challenges in the U.S. car wash business. So it's nice to see that now. Can you update us on the performance there? Remind us what's different about that business versus the U.S. And you had called out whether how incremental do you think that is versus just underlying strength in the business. Thanks. Daniel Rivera So to your point, Seth, I mean, car wash international, that business has been a good business for a long time. You can see it now obviously with the financials that we're posting comps of 26%, margins of 36%. I'd say there's two fundamental differences to the U.S. business. Number one, it's not really a franchise business. It's an independent owner model. So it's a slightly different from a business modeling perspective. And number two, we are the industry leader in Europe, so there's a clear differentiation there. I'd say, look, the team continues to do a great job. Nothing new there. You're just seeing the numbers broken out for the first time. I'd also highlight, to Mike's point, while the business is doing quite well and we did benefit from some weather, let's say, last year which helped our comps in Q1, we'd expect the comps of that business to normalize through the back half of the year. Operator Brian McNamara, Canaccord Genuity. Brian McNamara Good morning, guys. Thanks for taking the question. I'm curious if you have observed any signs of oil change deferrals from your customers, at least, recently as kind of the widely consumer confidence has gotten hit? And what trends you're seeing in terms of car counts in those units? Thanks. Daniel Rivera I mean, suffice it to say, we are thrilled with the 8% comps that Take 5 put up in the first quarter. That business continues to be an absolute juggernaut. And we're happy, honestly, with both sides of the equation. Volume is good. We're seeing great increases -- majority of the increases coming from the Czech side of the house. So we're not seeing any material changes to the trends that you're referring to. If anything, I think, Mo Khalid and Mike DeTrana, who are the President and Vice President of marketing respectively, continue to do just a great job with our kind of two-pronged approach from a marketing perspective. We've got great top of the funnel brand marketing that's in place, keeping Take 5 top of mind for consumers. And they're doing an amazing job from a performance marketing perspective at the bottom of the funnel being really data-oriented and surgical. So we're just continuing to see great trends out of that business. Brian McNamara Great. And then secondly, I know the last several calls have been all about Car Wash and Auto Glass. I'm curious if you could provide an update on Auto Glass. It's great to actually talk about Take 5 taking up the predominant portion of the call. But any update on Auto Glass would be helpful. Thanks. Daniel Rivera Nothing more than what I said a second ago. I mean, Auto Glass, we put it in the corporate and other segment, again, as an indication that it's early on from an EBITDA percentage. Of overall EBITDA, it's quite small. We're incubating that business. We still believe in the long term growth of that business. Multiyear plan. The team's focused on growing revenue through insurance and commercial partners. And we're seeing the growth internally and where those numbers are flowing through in 2025. Brian McNamara Great. Thanks a lot, guys. Operator Chris O'Cull, Stifel. Christopher O'Cull Thanks. Good morning, guys. My question relates to Take 5 franchise unit growth during the quarter. It looks like franchisees added five units, but were there more gross openings all set maybe by closures? I'm just trying to understand why franchise unit growth at Take 5 during the quarter was a little lower than the recent trend. Daniel Rivera I would say that there's nothing to highlight per se. I mean, generally speaking in franchising, if you've been around franchising for some time, Q4 tends to be a heavier period in terms of openings. As folks try to rush to get the numbers in by the end of the year, Q1 can therefore be a little bit lighter. I would say, overall, if we look at Take 5, it continues to be just an amazing business from a growth perspective, so 22 net new openings for the quarter, 168 on a trailing 12-month basis. And nothing's changed, Chris, in terms of how we think about the long term growth of that business. We're still targeting north of 150 units a year. We're still targeting to have two franchise locations for every one corporate location. So Q1 maybe be a little slower traditionally, but nothing to call out. Christopher O'Cull Danny, do you expect tariffs to raise the cost of equipment or construction for franchisees that are opening units? Michael Diamond I'll take that one. I would say, it's obviously something that's on our radar, but nothing that we've seen so far that gives us any concern. We obviously track CapEx per unit very closely. And so far, that has been in line with our expectations that we designed at the beginning of the year. So we'll keep an eye on it. But I would say, at this point, it's more just something we observe and not anything that we're seeing really impact the cost of the builds. Daniel Rivera Yeah. Chris, the only thing I'd add is, we keep a pulse obviously on franchisees and how they're feeling about growth. And there's no slowdown from what we're seeing, right? The franchisees are very happy to spend their time in Take 5, to put their capital to Take 5, and it just continues to be a great return on their investment. Christopher O'Cull Great. Thanks, guys. Operator Peter Keith, Piper Sandler. Peter Keith Thank you. Good morning. Nice quarter, guys. Great results with Take 5 Oil Change. I guess you are calling for the comp to slow in Q2. Certainly, it's tough to call for acceleration from an 8%. But you do have an easier compare. And any reason why it would slow or you just want to be prudent? Michael Diamond I think I'll give the answer I've given in the past which is I may pressure the internal team to deliver as good a numbers as they are, but I think it's unrealistic to assume an 8% continuing, especially when you think about that business continues to grow. Danny mentioned the 168 new units. What that does is create just a bigger base across which the growth has to cover. And so I think, it's really just prudence recognizing the continued success of that business. But also just the continued growing base makes the math a little bit harder to math as you work through it. Peter Keith Okay. Makes sense. And then on the Maaco side and I guess on collision, in general. Maaco, I guess, you clarified non-insurance claim based and so it's just more discretionary collision repair. CarStar is more insurance based. I guess can you confirm that dynamic? And what's happening with insurance claims? I know that's been under pressure. Has that started to get better on the CarStar side? Daniel Rivera Hey Peter. This is Danny. So to your point, right, the easiest way maybe to think about the dynamic between Maaco and our collision businesses, generally speaking, if you're pulling up in a flatbed truck, you're probably going to a collision shop. If you've got a light fender-bender, you're probably going to a Maaco. That's probably the easiest kind of layman's way to understand it. So to your point, since Maaco's a bit more of a discretionary business, it also focuses a lot more on overall paint jobs which, again, is a little bit more discretionary in nature. We're seeing a little bit of softness here in Q1. I'd reiterate, look, Maaco's a 55-year-old business, I believe. It's been through many upward cycles and downward cycles. It's a very stable, iconic business. And the team has a good action plan in place. So while I think we'll continue to see softness into Q2, we think we can get that business back on track in the second half of the year. As far as the collision space, so we flagged a few quarters ago and certainly, our public peers out there has mentioned this. There has been a bit of softness in the collision space for some time now. We haven't seen a material change to that softness. But that being said, we've also mentioned that we believe, based on all the industry data that we have, that we're taking share during that softness. And in Q1, we believe we've continued to take share. So I'd say primarily, the softness for the Franchising segment is driven by Maaco, the fact that it's a bit more discretionary. And again, we've got plans in place to hopefully get that back on track here by the second half of the year. Peter Keith Very helpful. Thank you so much. Operator Robbie Ohmes, Bank of America. Robert Ohmes Thank you. So maybe for Mike, just the the store expense pressures and the SG&A pressures you talked about, maybe a little more color on what you're seeing in SG&A pressures and how we should think about that in 2Q and also 2H? Michael Diamond Yeah. I would start by saying, we view ourselves as a growth company. And obviously, one of the things you need to do, even in periods of economic uncertainty, is to continue to grow. I've looked at numerous studies that show those that create long term comparative shareholder value are those that are able to invest regardless of the economic cycle. And so really, what you're seeing in some of our G&A increases are just a willingness to invest in some of those growth initiatives. To give you a couple of examples, Driven Advantage continues to be a growth lever for us. We see a big opportunity longer term for us to be able to add third parties to that platform and really drive additional longer term performance. We also have a strong fleet business that has the opportunity to continue to drive that red thread across all of our driven portfolio. Obviously, that's a discretionary area that we can investigate if and when or if results become more tight. But we think we have a good growth platform, not only with Take 5, but some of these other business opportunities. And we want to make sure we continue to give it the support it deserves. Robert Ohmes Thank you. And then just to -- discretionary has come up a few times in the Q&A, can you remind us if the environment gets more challenging in the U.S. and inflation goes up because of tariffs or whatever and new car sales weaken, when you look across the U.S. businesses, is that more of a negative for you guys or are there some areas that would strengthen in that outlook? Daniel Rivera Hey Robbie. This is Danny. First and foremost, I guess I'd highlight, the vast majority of the services that we provide are non-discretionary in nature, right? So discretionary has come up only from the perspective of Maaco's experiencing a little bit of softness. But the vast majority of the portfolio is non-discretionary in nature which, obviously, if you're going into economic uncertainty, that's a good thing. We believe that at the end of the day, our customers need their vehicles, in good times and in bad. And presumably, in bad times, you need it even more, right? Because you want to make sure that you keep your livelihood intact. So that's number one. And then, yeah, in a world where consumers back off of buying new cars, that would be a tailwind for Driven Brands, right? At the end of the day, an aging car park is a good thing for us. It means more repairs and more services for the sweet spot of customers that we serve. Robert Ohmes That's really helpful. Thank you. Operator Kate McShane, Goldman Sachs. Good morning. This is [Mark Jordan], on for Kate. Thank you for taking our question. We're thinking about Take 5 at a great comp during the quarter. Can you maybe talk about how performance trended by month and maybe if you can, what you might be seeing to-date? Michael Diamond We're not going to break out specific month-by-month other than to say, in general, if you think about Q1 and Q4, results were somewhat similar. And so I would say Take 5 continues to be a fairly consistent performer. Our reiteration of our full-year outlook reflects performance for all of our brands through the month of April. And what I mentioned earlier, to answer the unasked question is, as we preach a little bit more moderation in the Take 5 longer term growth, it's more just a recognition that that powerhouse of growth from a unit perspective ultimately creates a larger base. And so even stronger growth over a larger base ends up (inaudible) down to a slightly lower number. Okay. Thank you very much. Operator Christian Carlino, J.P. Morgan. Christian Carlino Good morning. Thanks for taking our question. I was wondering if you've seen any quick (inaudible) competitors get more price competitive given the oil prices are falling in a more subdued consumer backdrop. I know it's a historically rational industry in terms of pricing and promotions and things like that, but I'm curious if you've seen anyone sort of opportunistically go after share just given the moment in time. Daniel Rivera Hey Christian. This is Danny. Look, I would say nothing material worth mentioning, right? Here and there, certain markets, certain pockets, based on kind of local dynamics whether it's a certain competitor opening more stores or something in a certain (inaudible) and maybe they're getting a little aggressive, but from a macro perspective, I'd say there's been really nothing material worth talking about. Christian Carlino Got it. That's helpful. And you've talked about serving maybe the medium income consumer and given Take 5 is a premium service, while you can only defer maintenance for so long, I was wondering how you've contemplated the risk maybe that consumers shift their oil change spending to other channels, whether that's their repair and maintenance mechanic or one of the retailer club offerings, just given they felt a lot of inflation over the past couple of years and could potentially see more significant inflation in other areas of the wallet. Thanks. Daniel Rivera Yeah. It's a great question. Look, I mean, at the end of the day, Take 5 creates and delivers great value to the consumer, right? Value can be defined in different ways. So at the end of the day, we're the only oil change provider of any kind of scale that can deliver stay-in-your-car 10-minute oil change with MPS scores in the 70s, right? And consumers like what we do, they like how we go to market, as evidenced by the fact if you look at comps for the quarter, 8% is obviously a pretty good print. So the reality is, Christian, we're just not seeing it from a growth perspective. We don't break out volume versus average check, but we're quite happy with both sides of that equation. And we're really happy with what we're seeing from a demand generation and from a loyalty perspective sitting here today. Christian Carlino Got it. Thank you very much. Best of luck. And congratulations, Jonathan. Operator (Operator Instructions) Phillip Blee, William Blair. Phillip Blee Good morning, guys. Thanks for the question. You talked about EBITDA margin contract in the Franchise brand segment this quarter. Is that entirely driven by the comp decline or there are other drivers here? And then is there a certain level of comp that we should be thinking about that's necessary in this segment to drive leverage here? Thank you. Michael Diamond You hit the nail on the head. The margin pressure in this quarter was driven by sales decline. The beauty of a franchise system is that there isn't a lot of -- as I mentioned, there's not a lot of additional levers, but there's also not of additional cost. So you start to gain leverage pretty quickly once sales grow. And so as we talked about earlier, while we think there may be some continued short term softness, particularly in our most discretionary focus on Maaco, in general, we feel comfortable in that business's trajectory over the medium to longer term. And that's part of what drove the confidence in the reiteration of the guide. Phillip Blee Okay. Great. Very helpful. And then can you just talk about a little bit about your outlook assuming the broader health of the consumer? Appreciate the vast majority of your business is defensive here, but I'm sure you can appreciate we're just modeling out different scenarios. So any color, I guess, if there's any other areas in the model outside of Maaco that could be softer upon a broader downturn? Maybe how those have performed during prior periods of volatility? And then how quickly you typically see a rebound there? Thank you. Michael Diamond I mean, I don't want to speculate too broadly and wouldn't be wise for you to trust me if I did just because given how uncertain the overall economic environment is. But let me offer you a couple of data points, right? So if you think about oil changes, one, it is not optional, it is necessary for a car. Danny mentioned the stats around COVID and the fact that Take 5 was able to generate positive same-store sales growth. We've looked as far back as the global financial crisis and know that even during the GFC, overall, oil changes across the industry were flat to up during that period. And so that gives us confidence that even in uncertain economic times, oil changes will remain steady. And as Danny has mentioned, we think as the only national stay-in- your-car 10-minute oil change with an NPS above 70, we are poised to benefit from, that volume maintaining or increasing. As you then think about the rest of our portfolio, one could argue that even in periods of economic uncertainty or pressure, what happens is an aging car park, which I would argue can benefit us as you think through people choosing to stay in their own cars as opposed to go find new cars. And so, again, I'm not promising that. I think one of the beauties of the underlying driven model is its diversification and the fact that its pieces move so well together both operationally, but in times of potential economic dislocation, we have natural built-in hedges across several of our brands that provide us some comfort and some ballast as we think about how the overall numbers will perform. Phillip Blee Very helpful. I appreciate it. Best of luck. Operator There are no further questions at this time. I will now turn the call over to Jonathan Fitzpatrick, President and CEO, for closing remarks. Jonathan Fitzpatrick Thank you. And as this is my final earnings call after 13 years as CEO, I wanted to take a moment to thank all of our franchisees and Driven employees for making my time here an unforgettable journey. I'm excited to stay on the board as Chair and look forward to continuing to support Danny in his well-deserved new role in the future growth of Driven. With that, operator, we will close the call. Thank you. Operator Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Yahoo
06-05-2025
- Automotive
- Yahoo
Driven Brands's (NASDAQ:DRVN) Q1 Sales Top Estimates
With $2.28 billion in revenue over the past 12 months, Driven Brands is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it's working from a smaller revenue base. Reviewing a company's long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. With approximately 5,000 locations across 49 U.S. states and 13 other countries, Driven Brands (NASDAQ:DRVN) operates a network of automotive service centers offering maintenance, car washes, paint, collision repair, and glass services across North America. 'We delivered another strong quarter, led by the sustained momentum of our Take 5 Oil Change business, which achieved its 19th consecutive quarter of same store sales growth. Additionally, we successfully completed the sale of our U.S. car wash business in early April, primarily using the proceeds to reduce our debt. While the economic environment is fluid, our diversified portfolio, anchored by non-discretionary services, demonstrates resilience and positions us well for the long term. We are confident in our ability to deliver on our 2025 outlook and remain committed to paying down debt as we grow the business,' said Jonathan Fitzpatrick, President and Chief Executive Officer. Same-Store Sales were flat year on year, in line with the same quarter last year Free Cash Flow was $18.9 million, up from -$29.2 million in the same quarter last year EBITDA guidance for the full year is $535 million at the midpoint, below analyst estimates of $542.3 million The company reconfirmed its revenue guidance for the full year of $2.1 billion at the midpoint Is now the time to buy Driven Brands? Find out in our full research report . Automotive services company Driven Brands (NASDAQ:DRVN) beat Wall Street's revenue expectations in Q1 CY2025, but sales fell by 9.8% year on year to $516.2 million. The company expects the full year's revenue to be around $2.1 billion, close to analysts' estimates. Its non-GAAP profit of $0.27 per share was 12.9% above analysts' consensus estimates. Story Continues As you can see below, Driven Brands's sales grew at an incredible 28.4% compounded annual growth rate over the last five years. This shows it had high demand, a useful starting point for our analysis. Driven Brands Quarterly Revenue We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Driven Brands's recent performance shows its demand has slowed significantly as its annualized revenue growth of 3.6% over the last two years was well below its five-year trend. Driven Brands Year-On-Year Revenue Growth We can better understand the company's revenue dynamics by analyzing its same-store sales, which show how much revenue its established locations generate. Over the last two years, Driven Brands's same-store sales averaged 3.2% year-on-year growth. This number doesn't surprise us as it's in line with its revenue growth. Driven Brands Same-Store Sales Growth This quarter, Driven Brands's revenue fell by 9.8% year on year to $516.2 million but beat Wall Street's estimates by 2.8%. Looking ahead, sell-side analysts expect revenue to decline by 4.3% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will face some demand challenges. Software is eating the world and there is virtually no industry left that has been untouched by it. That drives increasing demand for tools helping software developers do their jobs, whether it be monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming. Click here to access a free report on our 3 favorite stocks to play this generational megatrend. Operating Margin Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D. Although Driven Brands was profitable this quarter from an operational perspective, it's generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 3.3% over the last five years. Unprofitable business services companies require extra attention because they could get caught swimming naked when the tide goes out. It's hard to trust that the business can endure a full cycle. Looking at the trend in its profitability, Driven Brands's operating margin decreased by 18.2 percentage points over the last five years. This raises questions about the company's expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Driven Brands's performance was poor no matter how you look at it - it shows that costs were rising and it couldn't pass them onto its customers. Driven Brands Trailing 12-Month Operating Margin (GAAP) This quarter, Driven Brands generated an operating profit margin of 11.9%, up 1.6 percentage points year on year. This increase was a welcome development, especially since its revenue fell, showing it was more efficient because it scaled down its expenses. Earnings Per Share Revenue trends explain a company's historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions. Driven Brands's astounding 28.8% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded. Driven Brands Trailing 12-Month EPS (Non-GAAP) In Q1, Driven Brands reported EPS at $0.27, up from $0.24 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Driven Brands's full-year EPS of $1.19 to grow 7.8%. Key Takeaways from Driven Brands's Q1 Results We enjoyed seeing Driven Brands beat analysts' EPS expectations this quarter. We were also glad its revenue outperformed Wall Street's estimates. On the other hand, its full-year EPS guidance slightly missed and its same-store sales fell slightly short of Wall Street's estimates. Overall, this print was mixed but still had some key positives. The stock traded up 1.1% to $17.52 immediately after reporting. Sure, Driven Brands had a solid quarter, but if we look at the bigger picture, is this stock a buy? If you're making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it's free.
Business Wire
06-05-2025
- Automotive
- Business Wire
Driven Brands Holdings Inc. Reports First Quarter 2025 Results
CHARLOTTE, N.C.--(BUSINESS WIRE)--Driven Brands Holdings Inc. (NASDAQ: DRVN) ('Driven Brands' or the 'Company') today reported financial results for the first quarter ending March 29, 2025. For the first quarter, Driven Brands delivered revenue of $516.2 million, an increase of 7% versus the prior year. System-wide sales increased 2% to $1.5 billion, driven by a 1% increase in same store sales and 4% increase in store count versus the prior year. Net income was $6 million or $0.04 per diluted share versus net income of $4 million or $0.02 per diluted share in the prior year. Adjusted Net Income 1 was $44 million or $0.27 per diluted share versus $40 million or $0.25 per diluted share in the prior year. Adjusted EBITDA 1 was $125 million, up 2% versus the prior year. 'We delivered another strong quarter, led by the sustained momentum of our Take 5 Oil Change business, which achieved its 19th consecutive quarter of same store sales growth. Additionally, we successfully completed the sale of our U.S. car wash business in early April, primarily using the proceeds to reduce our debt. While the economic environment is fluid, our diversified portfolio, anchored by non-discretionary services, demonstrates resilience and positions us well for the long term. We are confident in our ability to deliver on our 2025 outlook and remain committed to paying down debt as we grow the business,' said Jonathan Fitzpatrick, President and Chief Executive Officer. 'I would like to congratulate Danny Rivera as he steps into the role of CEO. I am pleased to remain on the board as Chair and look forward to supporting Danny in his well-deserved new role and the continued growth of Driven Brands,' Fitzpatrick concluded. First Quarter 2025 Key Performance Indicators by Segment Capital and Liquidity The Company ended the first quarter with total liquidity of $640.8 million consisting of $152.0 million in cash and cash equivalents and $488.7 million of undrawn capacity on its variable funding securitization senior notes and revolving credit facility. This did not include the additional $135.0 million Series 2022 Class A-1 Notes that expand the Company's variable funding note borrowing capacity if the Company elects to exercise them, assuming certain conditions continue to be met. Fiscal Year 2025 Outlook The Company reaffirms its financial outlook for fiscal year 2025 ending December 27, 2025. The Company also expects: Same store sales growth of 1% - 3% Net store growth of approximately 175 - 200 Note: 2025 Outlook excludes the impact of any potential M&A and divestitures other than the completed sale of the U.S. car wash business. 1 Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are non-GAAP financial measures. See 'Reconciliation of Non-GAAP Financial Measures' for additional information on non-GAAP financial measures and a reconciliation to the most comparable GAAP measures. Forward-looking estimates of Adjusted EBITDA and Adjusted EPS are made in a manner consistent with the relevant definitions and assumptions noted herein. 2 The Company does not provide same store sales results for Corporate and Other as it is a non-reportable segment. The same store sales results for any applicable businesses within Corporate and Other are included in the Company's overall same store sales results. Conference Call Driven Brands will host a conference call to discuss first quarter 2025 results today, Tuesday, May 6, at 8:30 a.m. ET. The call will be available by webcast and can be accessed by visiting Driven Brands' Investor Relations website at A replay of the call will be available for at least three months. About Driven Brands Driven Brands ™, headquartered in Charlotte, NC, is the largest automotive services company in North America, providing a range of consumer and commercial automotive services, including paint, collision, glass, vehicle repair, oil change, maintenance and car wash. Driven Brands is the parent company of some of North America's leading automotive service businesses including Take 5 Oil Change ®, Meineke Car Care Centers ®, Maaco ®, 1-800-Radiator & A/C ®, Auto Glass Now ®, and CARSTAR ®. Driven Brands has approximately 4,800 locations across the United States and 13 other countries, and services tens of millions of vehicles annually. Driven Brands' network generates approximately $2.0 billion in annual revenue from approximately $6.1 billion in system-wide sales. Disclosure Regarding Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms 'anticipate,' 'believe,' 'continue,' 'could,' 'estimate,' 'expect,' 'intend,' 'likely,' 'may,' 'plan,' 'possible,' 'potential,' 'predict,' 'project,' 'should,' 'target,' 'will,' 'would' and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Press Release, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, trends, plans, objectives of management, impact of accounting standards and outlook, impairments, and expected market growth are forward-looking statements. In particular, forward-looking statements include, among other things, statements relating to: (i) our ability to realize the value of the note received as partial payment in the sale of our U.S. Car Wash business; (ii) potential post-closing obligations and liabilities relating to the sale of our U.S. Car Wash business; (iii) the current geopolitical environment, including the impact, both direct and indirect, of government actions, such as proposed and enacted tariffs; (iv) our strategy, outlook, and growth prospects; (v) our operational and financial targets and dividend policy; (vi) general economic trends and trends in the industry and markets; (vii) the risks and costs associated with the integration of, and or ability to integrate, our stores and business units successfully; (viii) the proper application of generally accepted accounting principles, which are highly complex and involve many subjective assumptions, estimates, and judgments; and (ix) the competitive environment in which we operate. Forward-looking statements are not based on historical facts, but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions, and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. It is not possible to predict or identify all such risks. These risks include, but are not limited to, the risk factors that are described under the section titled 'Risk Factors' in our Annual Report on Form 10-K for the fiscal year ended December 28, 2024 as well as in our other filings with the Securities and Exchange Commission, which are available on its website at Given these uncertainties, you should not place undue reliance on these forward-looking statements. DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES (in thousands, except share and per share amounts) March 29, 2025 December 28, 2024 Assets Current assets: Cash and cash equivalents $ 152,042 $ 149,573 Restricted cash 332 358 Accounts and notes receivable, net 201,217 177,654 Inventory 63,829 66,539 Prepaid and other assets 47,771 37,841 Income tax receivable 12,917 14,294 Advertising fund assets, restricted 55,140 49,716 Assets held for sale 70,691 77,616 Current assets of discontinued operations 67,442 83,847 Total current assets 671,381 657,438 Other assets 127,278 125,422 Property and equipment, net 734,511 711,505 Operating lease right-of-use assets 535,242 524,442 Deferred commissions 7,315 7,246 Intangibles, net 662,417 665,896 Goodwill 1,413,298 1,403,056 Deferred tax assets 8,363 8,206 Non-current assets of discontinued operations 1,141,846 1,158,576 Total assets $ 5,301,651 $ 5,261,787 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 110,377 $ 85,843 Accrued expenses and other liabilities 201,955 193,638 Income tax payable 1,518 6,860 Current portion of long-term debt 32,234 32,232 Income tax receivable liability 22,674 22,676 Advertising fund liabilities 24,058 22,030 Current liabilities of discontinued operations 64,490 70,616 Total current liabilities 457,306 433,895 Long-term debt 2,616,272 2,656,308 Deferred tax liabilities 94,165 87,485 Operating lease liabilities 505,980 491,282 Income tax receivable liability 110,907 110,935 Deferred revenue 31,060 31,314 Long-term accrued expenses and other liabilities 19,867 20,122 Non-current liabilities of discontinued operations 822,851 823,112 Total liabilities 4,658,408 4,654,453 Preferred Stock $0.01 par value; 100,000,000 shares authorized; none issued or outstanding — — Common stock, $0.01 par value, 900,000,000 shares authorized: and 164,274,617 and 163,842,248 shares outstanding; respectively 1,643 1,638 Additional paid-in capital 1,709,580 1,699,851 Accumulated deficit (997,077 ) (1,002,583 ) Accumulated other comprehensive loss (70,903 ) (91,572 ) Total shareholders' equity 643,243 607,334 Total liabilities and shareholders' equity $ 5,301,651 $ 5,261,787 Expand DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES Three Months Ended (in thousands) March 29, 2025 March 30, 2024 Net income $ 5,506 $ 4,261 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 35,355 43,229 Share-based compensation expense 11,788 11,861 (Gain) loss on foreign denominated transactions (132 ) 7,574 Loss (gain) on foreign currency derivatives 342 (3,253 ) Loss (gain) on sale and disposal of businesses, fixed assets, and sale leaseback transactions 12,933 5,434 Reclassification of interest rate hedge to income (514 ) (519 ) Bad debt expense 4,510 2,070 Asset impairment charges and lease terminations 5,813 979 Amortization of deferred financing costs and bond discounts 3,089 1,954 Amortization of cloud computing 1,881 1,345 Provision (benefit) for deferred income taxes 4,540 (2,807 ) Other, net (6,985 ) 10,669 Changes in operating assets and liabilities, net of acquisitions: Accounts and notes receivable, net (26,449 ) (17,351 ) Inventory 3,310 (1,005 ) Prepaid and other assets (5,079 ) (4,270 ) Advertising fund assets and liabilities, restricted (4,091 ) 7,650 Other assets (2,584 ) (33,300 ) Deferred commissions 69 (331 ) Deferred revenue (255 ) 1,659 Accounts payable 20,847 14,165 Accrued expenses and other liabilities 18,122 6,293 Income tax receivable (6,885 ) 3,976 Cash provided by operating activities 75,131 60,283 Cash flows from investing activities: Capital expenditures (56,227 ) (89,483 ) Cash used in business acquisitions, net of cash acquired — (2,024 ) Proceeds from sale leaseback transactions 8,696 4,550 Proceeds from sale or disposal of businesses and fixed assets 3,519 52,677 Cash used in investing activities (44,012 ) (34,280 ) Cash flows from financing activities: Payment of debt extinguishment and issuance costs (1,414 ) — Repayment of long-term debt (32,418 ) (7,616 ) Proceeds from revolving lines of credit and short-term debt 33,000 46,000 Repayment of revolving lines of credit and short-term debt (43,000 ) (46,000 ) Repayment of principal portion of finance lease liability (1,353 ) (886 ) Payment of Tax Receivable Agreement — (24,718 ) Tax obligations for share-based compensation (2,582 ) — Cash used in financing activities (47,767 ) (33,220 ) Effect of exchange rate changes on cash 1,549 1,133 Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted (15,099 ) (6,084 ) Cash and cash equivalents, beginning of period 169,954 176,522 Cash included in advertising fund assets, restricted, beginning of period 38,930 38,537 Restricted cash, beginning of period 358 657 Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period 209,242 215,716 Cash and cash equivalents, end of period 155,584 165,513 Cash included in advertising fund assets, restricted, end of period 38,227 43,462 Restricted cash, end of period 332 657 Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period $ 194,143 $ 209,632 Expand RECONCILIATION OF NON-GAAP FINANCIAL MEASURES The following information provides definitions and reconciliations of the non-GAAP financial measures presented in this earnings release to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP). The Company has provided this non-GAAP financial information, which is not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in this earnings release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in this earnings release. The non-GAAP financial measures in this earnings release may differ from similarly titled measures used by other companies. Non-GAAP Financial Measures in Outlook Driven Brands includes Adjusted Earnings Before Interest, Tax, Depreciation and Amortization ('Adjusted EBITDA') and Adjusted Earnings per Share ('Adjusted EPS') in the Company's Fiscal Year 2025 Outlook. Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures and have not been reconciled to the most comparable GAAP financial measures because it is not possible to do so without unreasonable efforts due to the uncertainty and potential variability of reconciling items, which are dependent on future events and often outside of management's control and which could be significant. Because such items cannot be reasonably predicted with the level of precision required, we are unable to provide an outlook for the comparable GAAP measures. Forward-looking estimates of Adjusted EBITDA and Adjusted EPS are made in a manner consistent with the relevant definitions and assumptions noted herein and in our filings with the SEC. Adjusted Net Income and Adjusted Earnings Per Share Adjusted Net Income and Adjusted EPS are considered non-GAAP financial measures under the SEC's rules because they exclude certain amounts included in the net income attributable to Driven Brands common stockholders and diluted earnings per share attributable to Driven Brands common stockholders calculated in accordance with GAAP. Management believes that Adjusted Net Income and Adjusted EPS are meaningful measures to share with investors because they facilitate comparison of the current period performance with that of the comparable prior period. In addition, Adjusted Net Income and Adjusted EPS afford investors a view of what management considers to be Driven Brands' core earnings performance as well as the ability to make a more informed assessment of such earnings performance with that of the prior period. The tables below reflect the calculation of Adjusted Net Income and Adjusted Earnings Per Share for the three months ended March 29, 2025, compared to the three months ended March 30, 2024. (1) Adjusted Earnings Per Share is calculated under the two-class method. Under the two-class method, adjusted earnings per share is calculated using adjusted net income attributable to common shares, which is derived by reducing adjusted net income by the amount attributable to participating securities. Adjusted Net Income attributable to participating securities used in the basic and diluted earnings per share calculations was less than $1 million for the three months ended March 29, 2025 and March 30, 2024. Expand Adjusted EBITDA Adjusted EBITDA is considered a non-GAAP financial measure under the Securities and Exchange Commission's ('SEC') rules because it excludes certain amounts included in net income calculated in accordance with GAAP. Management believes that Adjusted EBITDA is a meaningful measure to share with investors because it facilitates comparison of the current period performance with that of the comparable prior period. In addition, Adjusted EBITDA affords investors a view of what management considers to be Driven Brand's core operating performance as well as the ability to make a more informed assessment of such operating performance as compared with that of the prior period. Please see the company's Annual Report on Form 10-K for the fiscal year ended December 28, 2024, filed with the SEC on February 28, 2024, for additional information on Adjusted EBITDA. The tables below reflect the calculation of Adjusted EBITDA for the three months ended March 29, 2025, compared to the three months ended March 30, 2024. Net Income to Adjusted EBITDA Reconciliation (Unaudited) Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share Footnotes (a) Consists of acquisition costs as reflected within the consolidated statements of operations, including legal, consulting and other fees, and expenses incurred in connection with acquisitions completed during the applicable period, as well as inventory rationalization expenses incurred in connection with acquisitions. We expect to incur similar costs in connection with other acquisitions in the future and, under GAAP, such costs relating to acquisitions are expensed as incurred and not capitalized. (b) Consists of discrete items and project costs, including third-party professional costs associated with strategic transformation initiatives as well as non-recurring payroll-related costs. (c) Includes non-cash amortization expenses relating to cloud computing arrangements. (d) Represents non-cash share-based compensation expense. (e) Represents foreign currency transaction losses, net that primarily related to the remeasurement of our intercompany loans as well as gains and losses on cross currency swaps and forward contracts. (f) Consists of the following items (i) (gains) losses, net on sale leasebacks, disposal of assets, or sale of business; (ii) net losses (gains) on sale for assets held for sale; and (iii) impairment of certain fixed assets and operating lease right-of-use assets related to closed and underperforming locations, lease exit costs and other costs associated with stores that were closed prior to the respective lease termination dates. (g) Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statement of operations. (h) Represents valuation allowances on income tax carryforwards in certain domestic jurisdictions that are not more likely than not to be realized. (i) Represents the tax impact of adjustments associated with the reconciling items between net income (loss) and Adjusted Net Income, excluding the provision for uncertain tax positions and valuation allowance for certain deferred tax assets. To determine the tax impact of the deductible reconciling items, we utilized statutory income tax rates ranging from 9% to 36% depending upon the tax attributes of each adjustment and the applicable jurisdiction. Expand DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES ADJUSTED EBITDA RECONCILIATION (UNAUDITED) Three Months Ended (in thousands) March 29, 2025 March 30, 2024 Take 5 $ 100,918 $ 88,888 Franchise Brands 44,383 47,589 Car Wash 24,388 17,985 Corporate and Other (44,591 ) (31,670 ) Adjusted EBITDA $ 125,098 $ 122,792 Expand DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES Three Months Ended March 29, 2025 (in thousands) Take 5 Franchise Brands Car Wash Corporate and Other Total System-wide Sales Franchise stores $ 136,688 $ 1,029,374 $ — $ — $ 1,166,062 Company-operated stores 250,800 3,992 — 59,339 314,131 Independently operated stores — — 66,640 — 66,640 Total System-wide Sales $ 387,488 $ 1,033,366 $ 66,640 $ 59,339 $ 1,546,833 Store Count (in whole numbers) Franchise stores 468 2,647 — — 3,115 Company-operated stores 735 13 — 216 964 Independently operated stores — — 718 — 718 Total Store Count 1,203 2,660 718 216 4,797 Three Months Ended March 30, 2024 System-wide Sales Franchise stores $ 105,556 $ 1,070,072 $ — $ — $ 1,175,628 Company-operated stores 220,871 4,469 — 58,889 284,229 Independently operated stores — — 53,047 — 53,047 Total System-wide Sales $ 326,427 $ 1,074,541 $ 53,047 $ 58,889 $ 1,512,904 Store Count (in whole numbers) Franchise stores 374 2,633 — — 3,007 Company-operated stores 661 14 — 220 895 Independently operated stores — — 718 — 718 Total Store Count 1,035 2,647 718 220 4,620 Expand
