Driven Brands Holdings Inc. Reports Second Quarter Results

Charlotte, North Carolina, UNITED STATES


Delivers Strong Same-Store Sales Growth and Adds 70 Net New Stores
Reports Robust Operating Income and Earnings per Share Growth
Raises Fiscal Year 2021 Guidance

CHARLOTTE, N.C., July 28, 2021 (GLOBE NEWSWIRE) -- Driven Brands Holdings Inc. (NASDAQ: DRVN) (“Driven Brands” or “the Company”) today reported financial results for the second quarter ended June 26, 2021.

For the second quarter, revenue was $374.8 million, an increase of 123% versus the prior year. System-wide sales hit a record $1.2 billion, an increase of 65% versus the prior year, with 34% net store growth and an increase in consolidated same-store sales of 38.7%. On a two-year basis, same-store sales increased 19.1%.

Earnings per share was $0.21 for the second quarter, an increase of 600% versus the prior year.

Adjusted earnings per share2 was $0.25, an increase of 79% versus the prior year.

“The power of Driven Brands is evident in our continued strong operating results,” said Jonathan Fitzpatrick, president and chief executive officer. “While this quarter laps the depths of COVID-19 in the prior year, our strong two-year trend indicates continued momentum in the fundamentals of our business.

“Initiatives we implemented last year, coupled with strong execution from employees and franchisees drove compounding same-store sales and store growth. We continued to capitalize on opportunities as consumers drove more in the second quarter,” Fitzpatrick added.

“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.”

Second Quarter Highlights

  • Revenue increased 123% versus the prior year, driven primarily by the acquisition of International Car Wash Group (“ICWG”) in the third quarter of 2020 as well as organic growth across all segments from positive same-store sales growth and net store growth.
  • Consolidated same-store sales increased 38.7% for the quarter and increased 19.1% on a two-year basis.
  • Same-store sales increased across all segments on both a one- and two-year basis.
  • The Company added 70 net new stores during the quarter.
  • The Company recorded net income in the second quarter of $35.2 million, an increase of 1051% versus the prior year.
  • Adjusted Net Income1 was $41.9 million, an increase of 233% versus the prior year.
  • Adjusted EBITDA3 was $100.8 million, an increase of 152% versus the prior year.

Second Quarter 2021 Key Performance Indicators by Segment

 System-wide Sales
(in millions)
Store CountSame-Store Sales*Revenue
(in millions)
Segment Adjusted EBITDA4
(in millions)
Maintenance$321.2 1,48541.9%$145.0 $44.6 
Car Wash122.1 97935.2%123.9 43.1 
Paint, Collision & Glass597.6 1,65537.3%50.6 21.9 
Platform Services117.5 20037.2%44.8 17.6 
Corporate / OtherN/A N/AN/A 10.5  
Total$1,158.3  4,31938.7 %$374.8  

*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.

Capital and Liquidity

In May 2021, the Company closed on a new $300 million revolving credit facility. Borrowings under this facility, in conjunction with the variable funding note associated with the Company’s whole business securitization and cash on hand, will be utilized to fuel further growth and for general corporate purposes. From time-to-time, the Company expects to supplement liquidity with long-term borrowings under its whole business securitization structure.

The Company ended the second quarter with total liquidity of $468.2 million, which includes $147.4 million in cash, cash equivalents, and restricted cash, as well as $320.8 million of undrawn capacity on its revolving credit facilities.

Guidance

The Company has raised its guidance for fiscal year 2021 to account for the strong operating performance in the second quarter and an updated outlook for the remainder of the year. The following guidance reflects the Company’s current expectations for the fiscal year ending December 25, 2021:

  • Revenue of approximately $1.4 billion
  • Adjusted EBITDA3 of approximately $345 million
  • Adjusted Earnings per Share2 of approximately $0.83
  • Low double-digit same-store sales growth with positive same-store sales 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 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 second quarter 2021 results today, Wednesday, July 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 October 26, 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 4,300 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 WebbMedia
rachel.webb@drivenbrands.commedia@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 Six months ended
(in thousands, except per share amounts) June 26,
2021
 June 27,
2020
 June 26,
2021
 June 27,
2020
Revenue:        
Franchise royalties and fees $37,873  $28,282  $68,287  $57,694 
Company-operated store sales 206,198  87,660  390,053  182,551 
Independently-operated store sales 56,379    112,542   
Advertising contributions 19,648  12,619  36,903  27,502 
Supply and other revenue 54,730  39,262  96,462  80,183 
Total revenue 374,828  167,823  704,247  347,930 
Operating expenses:        
Company-operated store expenses 123,820  53,373  236,575  116,665 
Independently-operated store expenses 30,792    61,900   
Advertising expenses 19,648  12,619  36,903  27,502 
Supply and other expenses 29,598  21,295  52,087  44,354 
Selling, general and administrative expenses 77,935  45,456  146,984  96,521 
Acquisition costs 389  1,016  2,038  1,211 
Store opening costs 405  627  694  1,802 
Depreciation and amortization 26,423  8,636  50,275  16,435 
Asset impairment charges 2,178  3,499  3,431  6,411 
Total operating expenses 311,188  146,521  590,887  310,901 
Operating income 63,640  21,302  113,360  37,029 
Other expenses, net:        
Interest expense, net 16,612  17,863  34,702  35,379 
(Gain) / loss on foreign currency transactions, net (5,229) (1,194) 5,282  2,285 
Loss on debt extinguishment 78    45,576   
Total other expenses, net 11,461  16,669  85,560  37,664 
Net income (loss) before taxes 52,179  4,633  27,800  (635)
Income tax expense 17,011  1,542  12,565  221 
Net income (loss) $35,168  $3,091  $15,235  $(856)
Net income (loss) attributable to non-controlling interests $(36) $33  $(30) $(66)
Net income (loss) attributable to Driven Brands Holdings Inc. $35,204  $3,058  $15,265  $(790)
         
Earnings (loss) per share(1):        
Basic $0.21  $0.03  $0.09  $(0.01)
Diluted $0.21  $0.03  $0.09  $(0.01)
Weighted average shares outstanding(1):        
Basic 162,626  88,990  158,727  88,990 
Diluted 166,512  88,990  162,271  88,990 

(1) Share and per share amounts for the three and six months ended June 27, 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)June 26,
2021
 December 26,
2020
Assets   
Current assets:   
Cash and cash equivalents$147,257  $172,611 
Restricted cash159  15,827 
Accounts and notes receivable, net106,846  84,805 
Inventory41,899  43,039 
Prepaid and other assets43,990  25,070 
Income tax receivable1,038  3,055 
Advertising fund assets, restricted40,084  29,276 
Assets held for sale990   
Total current assets382,263  373,683 
Notes receivable, net3,594  3,828 
Property and equipment, net922,370  827,392 
Operating lease right-of-use assets906,066  884,927 
Deferred commissions9,508  8,661 
Intangibles, net827,357  829,308 
Goodwill1,768,244  1,727,351 
Total assets$4,819,402  $4,655,150 
Liabilities and shareholders’ equity   
Current liabilities:   
Accounts payable$79,238  $67,802 
Accrued expenses and other liabilities198,939  190,867 
Income taxes payable3,644  3,513 
Current portion of long-term debt17,793  22,988 
Advertising fund liabilities32,047  20,276 
Total current liabilities331,661  305,446 
Long-term debt, net1,503,957  2,102,219 
Deferred tax liability253,507  249,043 
Operating lease liabilities844,809  818,001 
Income tax receivable liability155,970   
Deferred revenue23,837  20,757 
Accrued expenses and other long-term liabilities33,719  53,324 
Total liabilities3,147,460  3,548,790 
Common stock1,674  565 
Additional paid-in capital1,603,095  1,055,172 
Retained earnings47,240  31,975 
Accumulated other comprehensive income18,854  16,528 
Total shareholders’ equity attributable to Driven Brands Holdings Inc.1,670,863  1,104,240 
Non-controlling interests1,079  2,120 
Total shareholders’ equity1,671,942  1,106,360 
Total liabilities and shareholders’ equity$4,819,402  $4,655,150 


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 Six months ended
(in thousands)June 26,
2021
 June 27,
2020
Net income$15,235  $(856)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Depreciation and amortization50,275  16,435 
Noncash lease cost37,990  17,412 
Gain on foreign denominated transactions5,707  2,285 
Bad debt expense1,739  4,351 
Asset impairment costs3,431  6,411 
Amortization of deferred financing costs and bond discounts3,619  2,573 
Loss on derivatives not designed as hedges(425)  
Benefit (provision) for deferred income taxes4,742  (1,471)
Loss on extinguishment of debt45,576   
Other, net1,375  1,342 
Changes in assets and liabilities:   
Accounts and notes receivable, net(24,174) (26,134)
Inventory(396) (577)
Prepaid and other assets(20,885) (9,643)
Advertising fund assets and liabilities, restricted12,548  4,165 
Deferred commissions(809) (1,614)
Deferred revenue2,994  (2,780)
Accounts payable3,860  11,686 
Accrued expenses and other liabilities9,707  301 
Income tax receivable3,665  4,051 
Operating lease liabilities(31,034) (14,427)
Cash provided by operating activities124,740  13,510 
Cash flows from investing activities:   
Capital expenditures(47,274) (24,708)
Cash used in business acquisitions, net of cash acquired(204,556) (28,490)
Proceeds from sale-leaseback transactions49,166   
Proceeds from sale of company-operated stores5,775   
Cash used in investing activities(196,889) (53,198)
Cash flows from financing activities:   
Payment of contingent consideration related to acquisitions  (1,783)
Payment of debt extinguishment and issuance costs(2,408) (2,421)
Repayment of long-term debt(712,649) (12,809)
Repayments of revolving lines of credit and short-term debt(152,800)  
Proceeds from revolving lines of credit and short-term debt213,800  79,501 
Repayment of principal portion of finance lease liability(1,127) (282)
Proceeds from initial public offering, net of underwriting discounts661,500   
Net proceeds from underwriters’ exercise of over-allotment option99,225   
Repurchases of common stock(43,040)  
Payment for termination of interest rate swaps(21,826)  
Other, net152   
Cash provided by financing activities40,827  62,206 
Effect of exchange rate changes on cash1,374  (337)
Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted(29,948) 22,181 
Cash and cash equivalents, beginning of period172,611  34,935 
Cash included in advertising fund assets, restricted, beginning of period19,369  23,091 
Restricted cash, beginning of period15,827   
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period207,807  58,026 
Cash and cash equivalents, end of period147,257  67,617 
Cash included in advertising fund assets, restricted, end of period30,882  12,590 
Restricted cash, end of period159   
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period$178,298  $80,207 


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

Adjusted Net Income/Adjusted Earnings Per Share    
         
  Three months ended Six months ended
(in thousands, except per share amounts) June 26,
2021
 June 27,
2020
 June 26,
2021
 June 27,
2020
Net income (loss) $35,168  $3,091  $15,235  $(856)
Acquisition related costs(a) 389  1,016  2,038  1,211 
Non-core items and project costs, net(b) 2,522  509  2,553  1,764 
Sponsor management fees(c)   539    1,079 
Straight-line rent adjustment(d) 3,358  1,787  5,843  2,639 
Equity-based compensation expense(e) 1,028  791  2,011  690 
Foreign currency transaction (gain) / loss, net(f) (5,229) (1,194) 5,282  2,285 
Bad debt expense(g)   2,842    2,842 
Asset impairment and closed store expenses(h) 3,478  2,560  2,692  6,880 
Loss on debt extinguishment(i) 78    45,576   
Amortization related to acquired intangible assets(j) 5,558  3,685  9,210  7,650 
Adjusted net income before tax impact of adjustments 46,350  15,626  90,440  26,184 
Tax impact of adjustments(k) (4,441) (2,995) (18,082) (6,622)
Adjusted net income 41,909  12,631  72,358  19,562 
Net (loss) / income attributable to non-controlling interest (36) 33  (30) (66)
Adjusted net income attributable to Driven Brands Holdings Inc. $41,945  $12,598  $72,388  $19,628 
         
Adjusted earnings per share(1)        
Basic(2) $0.25  $0.14  $0.45  $0.22 
Diluted(2) $0.25  $0.14  $0.44  $0.22 
         
Weighted average shares outstanding(1)        
Basic 162,626  88,990  158,727  88,990 
Diluted 166,512  88,990  162,271  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 and six months ended June 26, 2021 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 $0.9 million and $1.6 million for the three and six months ended June 26, 2021, respectively, and adjusted net income attributable to participating securities used in the diluted earnings per share calculation was $0.8 million and $1.4 million for the three and six months ended June 26, 2021, respectively.


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

Adjusted EBITDA    
         
  Three months ended Six months ended
(in thousands) June 26,
2021
 June 27,
2020
 June 26,
2021
 June 27,
2020
Net income (loss) 35,168   $3,091   $15,235   $(856)
Income tax expense 17,011   1,542   12,565   221  
Interest expense, net 16,612   17,863   34,702   35,379  
Depreciation and amortization 26,423   8,636   50,275   16,435  
EBITDA 95,214   31,132   112,777   51,179  
Acquisition related costs(a) 389   1,016   2,038   1,211  
Non-core items and project costs, net(b) 2,522   509   2,553   1,764  
Sponsor management fees(c) —   539   —   1,079  
Straight-line rent adjustment(d) 3,358   1,787   5,843   2,639  
Equity-based compensation expense(e) 1,028   791   2,011   690  
Foreign currency transaction (gain)/loss, net(f) (5,229) (1,194) 5,282   2,285  
Bad debt expense(g) —   2,842   —   2,842  
Asset impairment and closed store expenses(h) 3,478   2,560   2,692   6,880  
Loss on debt extinguishment(i) 78   —   45,576   —  
Adjusted EBITDA $100,838   $39,982   $178,772   $70,569  
  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 gains/losses, net that primarily related to the remeasurement of our intercompany loans. For the six months ended June 26, 2021, these losses are offset by unrealized gains on remeasurement of cross currency swaps.
  7. Represents bad debt expense related to uncollectible receivables outside of normal operations.
  8. 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.
  9. Represents the write-off of debt issuance costs associated with early termination of debt.
  10. Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statements of operations.
  11. 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 Six months ended
(in thousands) June 26,
2021
 June 27,
2020
 June 26,
2021
 June 27,
2020
Segment Adjusted EBITDA:         
Maintenance $44,561  $26,339  $85,001  $47,805 
Car Wash 43,069    77,224   
Paint, Collision & Glass 21,856  11,011  39,495  26,888 
Platform Services 17,602  15,969  28,610  23,434 
Corporate and other (25,845) (12,710) (50,864) (25,756)
Store opening costs (405) (627) (694) (1,802)
Adjusted EBITDA $100,838  $39,982  $178,772  $70,569