Driven Brands Holdings Inc. Reports First Quarter Results


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 CountSame-Store
Sales
Revenue
(in millions)
Segment Adjusted
EBITDA
4
(in millions)
Maintenance$357.11,53119.2%$178.7$52.5
Car Wash 157.61,0636.6% 159.3 55.7
Paint, Collision & Glass 659.01,73013.7% 79.4 29.0
Platform Services 90.820230.9% 43.2 14.2
Corporate / OtherN/AN/AN/A 7.7  
Total$1,264.54,52615.6%$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.