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Driven Brands Holdings Inc. Reports First Quarter Results

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  • DRVN

Delivers Positive Same-Store Sales and Strong Operating Income
Raises Fiscal Year 2021 Guidance

CHARLOTTE, N.C., April 28, 2021 (GLOBE NEWSWIRE) -- Driven Brands Holdings Inc. (NASDAQ: DRVN) (“Driven Brands” or “the Company”) today reported financial results for the first quarter ended March 27, 2021.

For the first quarter, revenue was $329.4 million, an increase of 83% versus the prior year. System-wide sales hit a record $1.0 billion, an increase of 28% versus the prior year, with 37% net store growth and an increase in consolidated same-store sales of 0.5%.

Loss per share was $(0.13) for the first quarter, driven by a $(0.23) per share impact from the one-time non-cash loss on debt extinguishment from proceeds associated with the Company’s initial public offering.

Adjusted earnings per share2 was $0.19, an increase of 138% versus the prior year.

“The power of Driven Brands is evident in our strong operating results this quarter,” said Jonathan Fitzpatrick, president and chief executive officer. “Our employees and franchisees were well-positioned to capitalize on the beginning of reopening trends in the first quarter and I am confident that we will continue to do so throughout 2021 as consumers drive more.

“Given our scale, the significant whitespace in this fragmented and needs-based industry, and our robust cash generation, our business model remains well-positioned to maximize long-term value for all of our stakeholders.”

First Quarter Highlights

  • Revenue increased 83% versus the prior year, primarily driven by the acquisition of International Car Wash Group (“ICWG”) in the third quarter of 2020, as well as organic growth from positive same-store sales and net store growth.

  • The Company recorded a net loss in the first quarter of $(19.9) million, driven by a $45.5 million one-time non-cash loss on debt extinguishment from proceeds associated with the Company’s initial public offering. This compares to a net loss of $(3.8) million in the prior year.

  • Adjusted Net Income1 was $30.4 million, an increase of $23.4 million versus the prior year.

  • Adjusted EBITDA3 was $77.9 million, more than double that of the prior year.

  • The Company added 22 net new stores during the quarter.

  • Consolidated same-store sales increased 0.5% for the quarter, increasing 2.7% on a two-year basis.

  • Same-store sales increased 16.5% in the Maintenance segment and 22.0% in the Platform Services segment. Same-store sales declined (9.4)% in the Paint, Collision & Glass segment, as roadways continued to be less congested year-over-year, which resulted in fewer accidents and therefore fewer collision repairs.

  • The Company ended the first quarter with $185.5 million in cash, cash equivalents, and restricted cash, as well as $99.8 million of undrawn capacity on its revolving credit facility.

First Quarter 2021 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

$

277.9

1,470

16.5

%

$

128.2

$

40.4

Car Wash

114.8

954

27.8

%

114.7

34.2

Paint, Collision & Glass

542.4

1,627

(9.4

)%

43.9

17.6

Platform Services

69.4

198

22.0

%

34.6

11.0

Corporate / Other

N/A

N/A

N/A

8.0

Total

$

1,004.5

4,249

0.5

%**

$

329.4

*62 stores were reclassified from Paint, Collision & Glass to Maintenance in the first quarter of 2021.
**Car Wash will not be included in consolidated same-store sales until the one-year anniversary of the ICWG acquisition in the third quarter of 2021.

Guidance

The Company has raised its guidance for fiscal year 2021 to account for the strong operating performance in the first quarter. The following guidance reflects the Company’s current expectations for the fiscal year ending December 25, 2021:

  • Revenue of approximately $1.3 billion

  • Adjusted EBITDA3 of approximately $305 million

  • Adjusted Earnings per Share2 of approximately $0.65

  • Positive same-store sales growth across all segments

  • Net Store Growth:

    • Maintenance: 80 to 90 stores; driven by roughly equal parts franchise and company-operated store growth;

    • Car Wash: 20 to 30 stores; driven primarily by company-operated store growth; and

    • Paint, Collision & Glass: 60 to 70 stores; driven by franchise store growth.

Conference Call

Driven Brands will host a conference call to discuss first quarter 2021 results today, Wednesday, April 28, 2021 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 27, 2021.

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 4,200 locations across 15 countries, and services over 50 million vehicles annually. Driven Brands’ network generates more than $1 billion in revenue from more than $3 billion in system-wide sales.

Contacts

Shareholder/Analyst inquiries:

Media inquiries:

Rachel Webb

Katie Blixt

rachel.webb@drivenbrands.com

katie.blixt@drivenbrands.com

(704) 644-8125

(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 26, 2020, 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 reconciliations at the end of 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 Non-GAAP reconciliation 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 Non-GAAP reconciliation 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 Non-GAAP reconciliation 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 reconciliation to Adjusted EBITDA 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 27,
2021

March 28,
2020

Revenue:

Franchise royalties and fees

$

30,414

$

30,357

Company-operated store sales

183,855

94,891

Independently-operated store sales

56,163

Advertising contributions

17,255

14,883

Supply and other revenue

41,733

39,976

Total revenue

329,420

180,107

Operating expenses:

Company-operated store expenses

112,756

63,292

Independently-operated store expenses

31,108

Advertising expenses

17,255

14,883

Supply and other expenses

22,489

23,059

Selling, general and administrative expenses

69,050

51,065

Acquisition costs

1,646

195

Store opening costs

289

1,175

Depreciation and amortization

23,852

7,799

Asset impairment charges

1,253

2,912

Total operating expenses

279,698

164,380

Operating income

49,722

15,727

Other expense, net:

Interest expense, net

18,091

17,516

Loss on foreign currency transactions, net

10,511

3,479

Loss on debt extinguishment

45,498

Total other expenses, net

74,100

20,995

Loss before taxes

(24,378

)

(5,268

)

Income tax benefit

(4,446

)

(1,321

)

Net loss

(19,932

)

(3,947

)

Net income (loss) attributable to non-controlling interests

7

(99

)

Net loss attributable to Driven Brands Holdings Inc.

$

(19,939

)

$

(3,848

)

Loss per share(1)

Basic and diluted

$

(0.13

)

$

(0.04

)

Weighted average shares outstanding(1)

Basic and diluted

154,827

88,990

(1) Share and per share amounts for the three months ended March 28, 2020 have been adjusted to reflect an implied 88,990-for-one stock split that became effective on January 14, 2021.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

March 27,
2021

December 26,
2020

Assets

Current assets:

Cash and cash equivalents

$

175,371

$

172,611

Restricted cash

10,133

15,827

Accounts and notes receivable, net

104,373

84,805

Inventory

42,913

43,039

Prepaid and other assets

46,810

25,070

Income tax receivable

3,596

3,055

Advertising fund assets, restricted

31,072

29,276

Total current assets

414,268

373,683

Notes receivable, net

3,845

3,828

Property and equipment, net

766,511

827,392

Operating lease right-of-use assets

910,255

884,927

Deferred commissions

9,253

8,661

Intangibles, net

829,406

829,308

Goodwill

1,718,249

1,727,351

Total assets

$

4,651,787

$

4,655,150

Liabilities and shareholders’ equity

Current liabilities:

Accounts payable

$

67,229

$

67,802

Accrued expenses and other liabilities

185,417

190,867

Income taxes payable

5,927

3,513

Current portion of long-term debt

17,301

22,988

Advertising fund liabilities

22,906

20,276

Total current liabilities

298,780

305,446

Long-term debt, net

1,428,760

2,102,219

Deferred tax liability

241,305

249,043

Operating lease liabilities

846,360

818,001

Income tax receivable liability

155,970

Deferred revenue

22,350

20,757

Accrued expenses and other long-term liabilities

29,172

53,324

Total liabilities

3,022,697

3,548,790

Common stock

565

565

Additional paid-in capital

1,570,799

1,055,172

Retained earnings (accumulated deficit)

(3,193

)

31,975

Accumulated other comprehensive income

58,856

16,528

Total shareholders’ equity attributable to Driven Brands Holdings Inc.

1,627,027

1,104,240

Non-controlling interests

2,063

2,120

Total shareholders’ equity

1,629,090

1,106,360

Total liabilities and shareholders’ equity

$

4,651,787

$

4,655,150


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended

(in thousands)

March 27,
2021

March 28,
2020

Net loss

$

(19,932

)

$

(3,947

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

23,852

7,799

Noncash lease cost

13,689

Loss on foreign denominated transactions

13,000

3,479

Bad debt expense

657

523

Asset impairment costs

1,253

2,912

Amortization of deferred financing costs and bond discounts

2,139

1,140

Gain on foreign currency derivative

(2,489

)

Benefit for deferred income taxes

(8,018

)

(1,345

)

Loss on extinguishment of debt

45,498

Other, net

(518

)

39

Changes in assets and liabilities:

Accounts and notes receivable, net

(19,694

)

(14,067

)

Inventory

135

(1,851

)

Prepaid and other assets

(20,062)

2,435

Advertising fund assets and liabilities, restricted

2,621

4,890

Deferred commissions

(573

)

(428

)

Deferred revenue

1,551

(1,173

)

Accounts payable

6,063

21,404

Accrued expenses and other liabilities

(10,192

)

(15,920

)

Income tax receivable

2,202

(7

)

Operating lease liabilities

(8,304

)

Cash provided by operating activities

22,878

5,883

Cash flows from investing activities:

Capital expenditures

(25,157

)

(16,172

)

Cash used in business acquisitions, net of cash acquired

(25,911

)

(975

)

Proceeds from sale-leaseback transactions

41,023

Cash used in investing activities

(10,045

)

(17,147

)

Cash flows from financing activities:

Payment of contingent consideration related to acquisitions

(1,783

)

Payment of debt issuance cost

(104

)

Repayment of long-term debt

(707,384

)

(3,263

)

Repayments of revolving lines of credit and short-term debt

(18,000

)

39,501

Repayment of principal portion of finance lease liability

(409

)

Proceeds from initial public offering, net of underwriting discounts

661,500

Net proceeds from follow-on public offering

99,225

Repurchases of common stock

(42,977

)

Payment for termination of interest rate swaps

(18,510

)

Other, net

802

Cash provided by financing activities

(25,753

)

34,351

Effect of exchange rate changes on cash

11,777

3,850

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

(1,143

)

26,937

Cash and cash equivalents, beginning of period

172,611

34,935

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

19,369

23,091

Restricted cash, beginning of period

15,827

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

207,807

58,026

Cash and cash equivalents, end of period

175,371

60,154

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

21,160

24,809

Restricted cash, end of period

10,133

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

$

206,664

$

84,963


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

Adjusted Net Income/Adjusted Earnings Per Share

Three Months Ended

(in thousands, except per share amounts)

March 27,
2021

March 28,
2020

Net loss

$

(19,932

)

$

(3,947

)

Acquisition related costs(a)

1,646

195

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

32

1,256

Sponsor management fees(c)

539

Straight-line rent adjustment(d)

2,485

850

Equity-based compensation expense(e)

983

(101

)

Foreign currency transaction loss, net(f)

10,511

3,479

Asset impairment and closed store expenses(g)

(786

)

4,321

Loss on debt extinguishment(h)

45,498

Amortization related to acquired intangible assets(i)

3,652

3,965

Adjusted net income before tax impact of adjustments

44,089

10,557

Tax impact of adjustments(j)

(13,641

)

(3,626

)

Adjusted net income

30,448

6,931

Net income (loss) attributable to non-controlling interest

7

(99

)

Adjusted net income attributable to Driven Brands Holdings Inc.

$

30,441

$

7,030

Adjusted earnings per share(1)

Basic(2)

$

0.19

$

0.08

Diluted(2)

$

0.19

$

0.08

Weighted average shares outstanding(1)

Basic

154,827

88,990

Diluted

158,761

88,990

(1) Share and per share amounts have been adjusted to reflect an implied 88,990-for-one stock split that became effective on January 14, 2021.
(2) Adjusted earnings per share for the three months ended March 27, 2021 is calculated under the two-class method. Under the two-class method, adjusted earnings per share is calculated using adjusted net income allocable to common shares, which is derived by reducing adjusted net income by the amount allocable to participating securities. Adjusted net income allocable to common shares used in the basic and diluted earnings per share calculation was $0.7 million for the three months ended March 27, 2021.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

Adjusted EBITDA

Three Months Ended

(in thousands)

March 27,
2021

March 28,
2020

Net loss

$

(19,932

)

$

(3,947

)

Income tax benefit

(4,446

)

(1,321

)

Interest expense, net

18,091

17,516

Depreciation and amortization

23,852

7,799

EBITDA

17,565

20,047

Acquisition related costs(a)

1,646

195

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

32

1,256

Sponsor management fees(c)

539

Straight-line rent adjustment(d)

2,485

850

Equity-based compensation expense(e)

983

(101

)

Foreign currency transaction loss, net(f)

10,511

3,479

Asset impairment and closed store expenses(g)

(786

)

4,321

Loss on debt extinguishment(h)

45,498

Adjusted EBITDA

$

77,934

$

30,586

  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, (ii) wage subsidies received directly attributable to the COVID-19 pandemic and (iii) other miscellaneous expenses, including non-capitalizable expenses relating to the Company’s initial public offering and other strategic transactions.

  3. Includes management fees paid to Roark Capital Management, LLC.

  4. 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.

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

  6. Represents foreign currency transaction losses, net that primarily related to the remeasurement of our intercompany loans. These losses are slightly offset by unrealized gains on remeasurement of cross currency swaps.

  7. Relates to the 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 their respective lease termination dates.

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

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

  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 38%, 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 27,
2021

March 28,
2020

Segment Adjusted EBITDA:

Maintenance

$

40,440

$

21,466

Car Wash

34,155

Paint, Collision & Glass

17,639

15,877

Platform Services

11,008

7,465

Corporate and other

(25,019

)

(13,047

)

Store opening costs

(289

)

(1,175

)

Adjusted EBITDA

$

77,934

$

30,586