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Driven Brands Holdings Inc. Reports First Quarter Results

Driven Brands Holdings Inc.
Driven Brands Holdings Inc.

Delivers Strong Same-Store Sales and Net Store Growth

Reports Robust Operating Income and Earnings Per Share Growth

CHARLOTTE, N.C., April 27, 2022 (GLOBE NEWSWIRE) -- Driven Brands Holdings Inc. (NASDAQ: DRVN) (“Driven Brands” or the “Company”) today reported financial results for the first quarter ended March 26, 2022.

For the first quarter, revenue was $468.3 million, an increase of 42% versus the prior year. System-wide sales were $1.3 billion, an increase of 26% versus the prior year, with 8% net store growth and an increase in consolidated same-store sales of 15.6%.

Earnings per diluted share was $0.20 for the first quarter.

Adjusted earnings per diluted share2 was $0.28, an increase of 47% versus the prior year.

“Driven Brands posted strong first quarter results despite a challenging macroeconomic landscape. Our scale and sophistication allowed us to navigate continued supply chain challenges and an accelerating inflationary environment. This scale and sophistication, coupled with our proven playbook for growth, allowed us to once again outperform expectations,” said Jonathan Fitzpatrick, president and CEO. “This would not be possible without the hard work of the entire team, from our employees to franchisees. Their relentless focus on operational excellence delivered quality results,” Fitzpatrick added.

“We continue to be enthusiastic about fiscal 2022. With our scale, the significant whitespace in this fragmented and needs-based industry, and our robust cash generation engine, our business model remains well-positioned to maximize long-term value for all of our stakeholders.”

First Quarter Highlights

  • Revenue increased 42% versus the prior year, driven by same-store sales and net store growth.

  • Consolidated same-store sales increased 15.6% for the quarter, and all segments posted positive same-store sales.

  • The Company added 114 net new stores during the quarter.

  • Net income in the first quarter was $34.4 million.

  • Adjusted Net Income1 was $47.8 million, an increase of 57% versus the prior year.

  • Adjusted EBITDA3 was $118.5 million, an increase of 52% versus the prior year.

First Quarter 2022 Key Performance Indicators by Segment

System-wide Sales
(in millions)

Store Count

Same-Store
Sales

Revenue
(in millions)

Segment Adjusted
EBITDA
4
(in millions)

Maintenance

$

357.1

1,531

19.2

%

$

178.7

$

52.5

Car Wash

157.6

1,063

6.6

%

159.3

55.7

Paint, Collision & Glass

659.0

1,730

13.7

%

79.4

29.0

Platform Services

90.8

202

30.9

%

43.2

14.2

Corporate / Other

N/A

N/A

N/A

7.7

Total

$

1,264.5

4,526

15.6

%

$

468.3


Capital and Liquidity

The Company ended the first quarter with total liquidity of $667.9 million, consisting of $270.7 million in cash and cash equivalents, and $397.2 million of undrawn capacity on its variable funding securitization senior notes and revolving credit facility.

Fiscal Year 2022 Guidance

The Company provided the following guidance5 for the fiscal year ending December 31, 2022 on February 16, 2022 and will provide updated guidance in connection with the release of its second quarter results:

  • Revenue of approximately $1.9 billion.

  • Adjusted EBITDA3 of approximately $465 million.

  • Adjusted Earnings per Share2 of approximately $1.04.

The above guidance includes the impact of the 79 acquired Auto Glass Now stores and the 53rd week in fiscal year 2022. The impact of the extra week is expected to yield approximately $16 million in revenue, $4 million in Adjusted EBITDA3 and approximately $0.02 in Adjusted Earnings Per Share2.

The Company also expects:

  • Mid-single-digit same-store sales growth.

  • Net store growth of approximately 225:

    • Maintenance: approximately 145 stores of which 65% will be franchised and 35% will be company-operated

    • Car Wash: approximately 45 stores which will be company-operated

    • Paint, Collision & Glass: approximately 35 stores which will be company-operated.

The Company has not included future M&A in its guidance for fiscal year 2022.
__________________

5 See Disclosure Regarding Non-GAAP Financial Measures

Conference Call

Driven Brands will host a conference call to discuss first quarter 2022 results today, Wednesday, April 27, 2022 at 9:00am ET. The call will be available by webcast and can be accessed by visiting Driven Brands’ Investor Relations website at investors.drivenbrands.com. A replay of the call will be available until July 26, 2022.

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 needs, 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®, and CARSTAR®. Driven Brands has more than 4,500 locations across 15 countries, and services over 50 million vehicles annually. Driven Brands’ network generates more than $1.6 billion in annual revenue from more than $4.7 billion in system-wide sales.

Contacts

Shareholder/Analyst inquiries:
Rachel Webb
rachel.webb@drivenbrands.com
(704) 644-8125

Media inquiries:
Taylor Blanchard
taylor.blanchard@drivenbrands.com
(704) 644-8129



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, plans, objectives of management, and expected market growth are forward-looking statements. In particular, forward-looking statements include, among other things, statements relating to: (i) our strategy, outlook and growth prospects; (ii) our operational and financial targets and dividend policy; (iii) general economic trends and trends in the industry and markets; and (iv) 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 25, 2021 and in our other filings with the Securities and Exchange Commission, which are available on its website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Forward-looking statements represent our estimates and assumptions only as of the date on which they are made, and we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Disclosure Regarding Non-GAAP Financial Measures

In addition to the financial measures presented in this release in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company has included certain non-GAAP financial measures in this release, including Adjusted Net Income1, Adjusted Earnings Per Share2, and Adjusted EBITDA3. Management believes these non-GAAP financial measures are useful because they enable management, investors, and others to assess the operating performance of the Company and its segments. Please refer to the Reconciliation of Non-GAAP Financial Information tables located in the financial supplement in this release.

This release includes forward-looking guidance for certain non-GAAP financial measures, including Adjusted Earnings Per Share2 and Adjusted EBITDA3. These measures will differ from net income, determined in accordance with GAAP, in ways similar to those described in the Reconciliation of Non-GAAP Financial Information tables in this release. We do not provide guidance for net income, determined in accordance with GAAP, or a reconciliation of guidance for Adjusted EBITDA3 to the most directly comparable GAAP measure because the Company is not able to predict with reasonable certainty the amount or nature of all items that will be included in net income.

___________
1 “Adjusted Net Income” is calculated by eliminating from net income the adjustments described for Adjusted EBITDA, amortization related to acquired intangible assets and the tax effect of the adjustments. Please refer to Reconciliation of Non-GAAP Information tables located in the financial supplement in this release.
2 “Adjusted Earnings Per Share” represents Adjusted Net Income divided by weighted average shares (basic and diluted). Please refer to Reconciliation of Non-GAAP Information tables located in the financial supplement in this release.
3 “Adjusted EBITDA” represents earnings before interest expense, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, straight-line rent, equity compensation, loss on debt extinguishment and certain non-recurring, non-core, infrequent or unusual charges. Please refer to Reconciliation of Non-GAAP Information tables located in the financial supplement in this release.
4 “Segment Adjusted EBITDA” is defined as Adjusted EBITDA with a further adjustment for store opening costs. Corporate & Other costs are not allocated across segments. Segment Adjusted EBITDA is a supplemental measure of operating performance of our segments and may not be comparable to similar measures reported by other companies. Please refer to Adjusted EBITDA and Segment Adjusted EBITDA Reconciliation located in the financial supplement in this release.


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three months ended

(in thousands, except per share amounts)

March 26, 2022

March 27, 2021

Revenue:

Franchise royalties and fees

$

37,888

$

30,414

Company-operated store sales

292,391

183,855

Independently-operated store sales

63,089

56,163

Advertising contributions

19,698

17,255

Supply and other revenue

55,257

41,733

Total revenue

468,323

329,420

Operating expenses:

Company-operated store expenses

177,867

112,756

Independently-operated store expenses

33,299

31,108

Advertising expenses

19,698

17,255

Supply and other expenses

32,774

22,489

Selling, general and administrative expenses

92,220

69,050

Acquisition costs

4,318

1,646

Store opening costs

506

289

Depreciation and amortization

33,023

23,852

Asset impairment charges and lease terminations

898

1,253

Total operating expenses

394,603

279,698

Operating income

73,720

49,722

Other expenses, net:

Interest expense, net

25,353

18,091

Loss on foreign currency transactions, net

971

10,511

Loss on debt extinguishment

45,498

Total other expenses, net

26,324

74,100

Net income (loss) before taxes

47,396

(24,378

)

Income tax expense (benefit)

12,968

(4,446

)

Net income (loss)

$

34,428

$

(19,932

)

Net income (loss) attributable to non-controlling interests

$

(15

)

$

7

Net income (loss) attributable to Driven Brands Holdings Inc.

$

34,443

$

(19,939

)

Earnings per share(1):

Basic

$

0.21

$

(0.13

)

Diluted

$

0.20

$

(0.13

)

Weighted average shares outstanding(1):

Basic

162,762

154,827

Diluted

166,748

154,827


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

March 26, 2022

December 25, 2021

Assets

Current assets:

Cash and cash equivalents

$

270,681

$

523,414

Restricted cash

792

792

Accounts and notes receivable, net

133,809

117,903

Inventory

48,883

46,990

Prepaid and other assets

24,640

24,326

Income tax receivable

5,070

6,867

Advertising fund assets, restricted

51,281

45,360

Assets held for sale

3,275

3,275

Total current assets

538,431

768,927

Notes receivable, net

8,918

3,182

Property and equipment, net

1,384,770

1,350,984

Operating lease right-of-use assets

1,026,537

995,625

Deferred commissions

10,623

10,567

Intangibles, net

862,761

816,183

Goodwill

2,044,594

1,910,392

Deferred tax assets

1,477

1,509

Total assets

$

5,878,111

$

5,857,369

Liabilities and shareholders' equity

Current liabilities:

Accounts payable

$

85,468

$

83,033

Accrued expenses and other liabilities

241,730

297,620

Income taxes payable

20,642

11,054

Current portion of long-term debt

22,969

26,044

Income tax receivable liability

24,255

24,255

Advertising fund liabilities

29,022

26,441

Total current liabilities

424,086

468,447

Long-term debt, net

2,358,379

2,356,320

Deferred tax liability

256,535

257,067

Operating lease liabilities

961,182

931,604

Income tax receivable liability

131,715

131,715

Deferred revenue

39,541

37,576

Accrued expenses and other long-term liabilities

28,181

29,398

Total liabilities

4,199,619

4,212,127

Common stock

1,675

1,674

Additional paid-in capital

1,610,585

1,605,890

Retained earnings

76,050

41,607

Accumulated other comprehensive loss

(10,483

)

(5,028

)

Total shareholders' equity attributable to Driven Brands Holdings Inc.

1,677,827

1,644,143

Non-controlling interests

665

1,099

Total shareholders' equity

1,678,492

1,645,242

Total liabilities and shareholders' equity

$

5,878,111

$

5,857,369


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three months ended

(in thousands)

March 26, 2022

March 27, 2021

Net income (loss)

$

34,428

$

(19,932

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

33,023

23,852

Non-cash lease cost

17,002

20,028

Loss on foreign denominated transactions

970

13,000

Gain on derivatives not designed as hedges

(2,489

)

Bad debt expense

372

657

Asset impairment costs

898

1,253

Amortization of deferred financing costs and bond discounts

2,224

2,139

Benefit (provision) for deferred income taxes

132

(8,018

)

Loss on extinguishment of debt

45,498

Other, net

1,597

(749

)

Changes in assets and liabilities, net of acquisitions:

Accounts and notes receivable, net

(21,123

)

(19,693

)

Inventory

(1,787

)

135

Prepaid and other assets

397

(8,184

)

Advertising fund assets and liabilities, restricted

(1,204

)

2,621

Deferred commissions

(39

)

(573

)

Deferred revenue

455

1,551

Accounts payable

509

638

Accrued expenses and other liabilities

(61,624

)

(6,451

)

Income tax receivable

11,476

3,061

Operating lease liabilities

(8,666

)

(15,758

)

Cash provided by operating activities

9,040

32,586

Cash flows from investing activities:

Capital expenditures

(68,967

)

(23,280

)

Cash used in business acquisitions, net of cash acquired

(224,526

)

(26,732

)

Proceeds from sale-leaseback transactions

37,781

41,023

Proceeds from sale of company-operated stores

4,481

Proceeds from disposition of Denmark car wash operation

1,577

Proceeds from disposal of property and equipment

803

Cash used in investing activities

(253,332

)

(4,508

)

Cash flows from financing activities:

Repayment of long-term debt

(4,820

)

(707,384

)

Proceeds from revolving lines of credit and short-term debt

114,800

Repayments of revolving lines of credit and short-term debt

(132,800

)

Repayment of principal portion of finance lease liability

(879

)

(409

)

Proceeds from initial public offering, net of underwriting discounts

661,500

Net proceeds from underwriters' exercise of over-allotment option

99,225

Repurchases of common stock

(42,977

)

Payment for termination of interest rate swaps

(21,826

)

Other, net

(20

)

Cash provided by financing activities

(5,719

)

(29,871

)

Effect of exchange rate changes on cash

(592

)

650

Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted

(250,603

)

(1,143

)

Cash and cash equivalents, beginning of period

523,414

172,611

Cash included in advertising fund assets, restricted, beginning of period

38,586

19,369

Restricted cash, beginning of period

792

15,827

Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period

562,792

207,807

Cash and cash equivalents, end of period

270,681

175,371

Cash included in advertising fund assets, restricted, end of period

40,716

21,160

Restricted cash, end of period

792

10,133

Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period

$

312,189

$

206,664


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

Adjusted Net Income and Adjusted Earnings Per Share

Three months ended

(in thousands, except per share amounts)

March 26, 2022

March 27, 2021

Net income (loss)

$

34,428

$

(19,932

)

Acquisition related costs(a)

4,318

1,646

Non-core items and project costs, net(b)

866

32

Straight-line rent adjustment(c)

4,093

2,485

Equity-based compensation expense(d)

2,618

983

Foreign currency transaction (gain) loss, net(e)

971

10,511

Asset sale leaseback (gain) loss, impairment and closed store expenses(f)

(124

)

(786

)

Loss on debt extinguishment(g)

45,498

Amortization related to acquired intangible assets(h)

5,142

3,652

Provision for uncertain tax positions(i)

76

Adjusted net income before tax impact of adjustments

52,388

44,089

Tax impact of adjustments(j)

(4,612

)

(13,641

)

Adjusted net income

47,776

30,448

Net (loss) income attributable to non-controlling interest

(15

)

7

Adjusted net income attributable to Driven Brands Holdings Inc.

$

47,791

$

30,441

Adjusted earnings per share

Basic(1)

$

0.29

$

0.19

Diluted(1)

$

0.28

$

0.19

Weighted average shares outstanding

Basic

162,762

154,827

Diluted

166,748

158,761


(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 earnings per share calculation was $1.0 million and $0.7 million for the three months ended March 26, 2022 and March 27, 2021, respectively, and adjusted net income attributable to participating securities used in the diluted earnings per share calculation was $0.9 million and $0.7 million for the three months ended March 26, 2022 and March 27, 2021, respectively.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

Net Income (Loss) to Adjusted EBITDA Reconciliation

Three months ended

(in thousands)

March 26, 2022

March 27, 2021

Net income (loss)

34,428

$

(19,932

)

Income tax expense

12,968

(4,446

)

Interest expense, net

25,353

18,091

Depreciation and amortization

33,023

23,852

EBITDA

105,772

17,565

Acquisition related costs(a)

4,318

1,646

Non-core items and project costs, net(b)

866

32

Straight-line rent adjustment(c)

4,093

2,485

Equity-based compensation expense(d)

2,618

983

Foreign currency transaction loss, net(e)

971

10,511

Asset sale leaseback (gain) loss, impairment and closed store expenses(f)

(124

)

(786

)

Loss on debt extinguishment(g)

45,498

Adjusted EBITDA

$

118,514

$

77,934

  1. Consists of acquisition costs as reflected within the consolidated statement 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 U.S. GAAP, such costs relating to acquisitions are expensed as incurred and not capitalized.

  2. Consists of discrete items and project costs, including (i) third-party consulting and professional fees associated with strategic transformation initiatives, and (ii) other miscellaneous expenses, including non-capitalizable expenses relating to the Company’s initial public offering and other strategic transactions

  3. Consists of the non-cash portion of rent expense, which reflects the extent to which our straight-line rent expense recognized under U.S. GAAP exceeds or is less than our cash rent payments.

  4. Represents non-cash equity-based compensation expense.

  5. Represents foreign currency transaction gains/losses, net that primarily related to the remeasurement of our intercompany loans. These losses are partially offset by unrealized gains/losses on remeasurement of cross currency swaps and forward contracts.

  6. Relates to (gain) loss on sale leasebacks, the discontinuation of the use of a trade name, as well as impairment of certain fixed assets and operating lease right-of-use assets related to closed locations. Also represents lease exit costs and other costs associated with stores that were closed prior to the irrespective lease termination dates.

  7. Represents the write-off of debt issuance costs associated with early termination of debt.

  8. Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statements of operations.

  9. Represents uncertain tax positions recorded for tax positions, inclusive of interest and penalties.

  10. Represents the tax impact of adjustments associated with the reconciling items between net income 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.


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

ADJUSTED EBITDA AND SEGMENT ADJUSTED EBITDA RECONCILIATION (UNAUDITED)

Three months ended

(in thousands)

March 26, 2022

March 27, 2021

Segment Adjusted EBITDA:

Maintenance

$

52,485

$

40,440

Car Wash

55,720

34,155

Paint, Collision & Glass

29,012

17,639

Platform Services

14,165

11,008

Corporate and other

(32,362

)

(25,019

)

Store opening costs

(506

)

(289

)

Adjusted EBITDA

$

118,514

$

77,934


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

ADDITIONAL INFORMATION ON KEY PERFORMANCE INDICATORS (UNAUDITED)

Three months ended March 26, 2022

(in thousands)

Maintenance

Car Wash

Paint,
Collision &
Glass

Platform
Services

Total

System-wide Store sales

Franchise stores

$

200,284

$

619,063

$

89,643

$

908,990

Company-operated stores

156,828

94,495

39,904

1,151

292,378

Independently operated Stores

63,089

63,089

Total System-wide Sales

$

357,112

$

157,584

$

658,967

$

90,794

$

1,264,457

Store Count (in whole numbers)

Franchise stores

982

1,611

201

2,794

Company-operated stores

549

341

119

1

1,010

Independently operated Stores

722

722

Total Store Count

1,531

1,063

1,730

202

4,526

Three months ended March 27, 2021

(in thousands)

Maintenance

Car Wash

Paint,
Collision &
Glass

Platform
Services

Total

System-wide Store sales

Franchise stores

$

163,817

$

$

530,503

$

68,373

$

762,693

Company-operated stores

114,067

57,048

$

11,930

$

983

184,028

Independently operated Stores

56,163

56,163

Total System-wide Sales

$

277,884

$

113,211

$

542,433

$

69,356

$

1,002,884

Store Count (in whole numbers)

Franchise stores

975

1,594

197

2,766

Company-operated stores

495

220

33

1

749

Independently operated Stores

734

734

Total Store Count

1,470

954

1,627

198

4,249

62 Drive N Style stores are included in the Maintenance store count for the three months ended March 27, 2021 as previously reported, but none are included in store count for the three months ended March 26, 2022 as they are held for sale.