CHARLOTTE, N.C., Feb. 6, 2024 /PRNewswire/ -- Driven Brands Holdings Inc. (NASDAQ: DRVN) will release its fourth quarter and year-end 2023 earnings before the market opens on Thursday, February 22, 2024. Following the release, management will host a conference call at 8:30 a.m. ET to review the company's financial and operating performance. The conference call will be available via live webcast on Driven Brands' Investor Relations webpage at investors.drivenbrands.com. An archived replay of the conference c ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements, management's discussion, market risk, and controls [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents unaudited consolidated financial statements, including operations, balance sheets, cash flows, and detailed notes [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, expenses, and net loss or income over specific periods | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 24, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 24, 2022 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Revenue | $581,034 | $516,594 | $1,750,352 | $1,493,541 | | Total Operating Expenses| $1,487,891 | $420,826 | $2,482,430 | $1,359,738 | | Operating (Loss) Income | $(906,857) | $95,768 | $(732,078) | $133,803 | | Net (Loss) Income | $(799,311) | $38,391 | $(731,813) | $15,775 | | Basic EPS | $(4.82) | $0.23 | $(4.40) | $0.10 | | Diluted EPS | $(4.83) | $0.23 | $(4.41) | $0.09 | - The company reported a significant **net loss of $799.3 million** for the three months ended **September 30, 2023**, compared to a **net income of $38.4 million** in the prior year, primarily due to a **goodwill impairment charge of $851.0 million** and **asset impairment charges of $111.2 million**[12](index=12&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This statement presents net income or loss and other comprehensive income or loss components | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 24, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 24, 2022 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net (loss) income | $(799,311) | $38,391 | $(731,813) | $15,775 | | Other comprehensive loss, net | $(26,351) | $(62,452) | $(8,801) | $(110,226) | | Total comprehensive loss| $(825,662) | $(24,061) | $(740,614) | $(94,451) | - Total comprehensive loss for the three months ended **September 30, 2023**, was **$-825.7 million**, significantly higher than **$-24.1 million** in the prior year, mainly due to the **net loss**[13](index=13&type=chunk) [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time | Metric (in thousands) | September 30, 2023 | December 31, 2022 | | :---------------------- | :----------------- | :---------------- | | Total current assets | $857,771 | $571,410 | | Total assets | $5,887,794 | $6,499,898 | | Total current liabilities | $475,334 | $505,418 | | Total liabilities | $5,006,867 | $4,846,329 | | Total shareholders' equity | $880,927 | $1,653,569 | - **Total assets decreased** from **$6.5 billion** at **December 31, 2022**, to **$5.9 billion** at **September 30, 2023**, primarily due to a significant reduction in goodwill from **$2.3 billion** to **$1.4 billion**[16](index=16&type=chunk) - **Assets held for sale increased** to **$271.0 million** as of **September 30, 2023**, from zero at **December 31, 2022**, reflecting the strategic review of U.S. **car wash operations**[16](index=16&type=chunk) [Consolidated Statements of Shareholders'/Members' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders'%2FMembers'%20Equity) This statement details changes in equity, including common stock, retained earnings, and comprehensive loss | Metric (in thousands) | Sep 30, 2023 (3 Months) | Sep 24, 2022 (3 Months) | Sep 30, 2023 (9 Months) | Sep 24, 2022 (9 Months) | | :---------------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | Common stock, end of period | $1,639 | $1,674 | $1,639 | $1,674 | | Additional paid-in capital, end of period | $1,646,831 | $1,620,480 | $1,646,831 | $1,620,480 | | Retained (deficit) earnings, end of period | $(696,938) | $57,397 | $(696,938) | $57,397 | | Accumulated other comprehensive loss, end of period | $(71,236) | $(115,233) | $(71,236) | $(115,233) | | Total shareholders' equity, end of period | $880,927 | $1,564,949 | $880,927 | $1,564,949 | - **Retained earnings shifted** from a positive balance of **$84.8 million** at the beginning of the nine-month period to a deficit of **$-696.9 million** by **September 30, 2023**, primarily due to the **net loss** incurred[19](index=19&type=chunk) - The company **repurchased 3,601,694 shares** of common stock for approximately **$50.0 million** during the nine months ended **September 30, 2023**[19](index=19&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities | Metric (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 24, 2022 | | :---------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $212,033 | $167,652 | | Net cash used in investing activities | $(361,207) | $(771,768) | | Net cash provided by financing activities | $147,850 | $282,580 | | Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted | $(959) | $(329,241) | - **Net cash provided by operating activities increased** by **$44.4 million** to **$212.0 million** for the nine months ended **September 30, 2023**, compared to the prior year, despite a **net loss**, due to non-cash adjustments like **goodwill impairment**[22](index=22&type=chunk) - **Net cash used in investing activities significantly decreased** by **$410.6 million** to **$361.2 million**, primarily due to a **$598.0 million** decrease in cash paid for acquisitions, partially offset by a **$206.0 million** increase in capital expenditures[22](index=22&type=chunk) [Notes to the Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the consolidated financial statements [Note 1—Description of Business](index=11&type=section&id=Note%201%E2%80%94Description%20of%20Business) Describes the company's business operations, brands, and geographic presence in the automotive services industry - **Driven Brands Holdings Inc.** is North America's largest automotive services company, operating **approximately 5,000** franchised, independently-operated, and company-operated locations across **49 U.S. states** and **13 other countries**[26](index=26&type=chunk) - The company's portfolio includes recognized brands such as Take 5 Oil Change, Take 5 Car Wash, Meineke Car Care Centers, MAACO, CARSTAR, Auto Glass Now, and 1-800-Radiator & A/C[26](index=26&type=chunk) - **Approximately 74%** of the company's locations are franchised or independently-operated[26](index=26&type=chunk) [Note 2— Summary of Significant Accounting Policies](index=11&type=section&id=Note%202%E2%80%94%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the key accounting principles and methods used in preparing the financial statements - The company operates on a 52- or 53-week fiscal year, with fiscal quarters ending on the 13th or 14th Saturday[28](index=28&type=chunk) - Financial statements are prepared in accordance with U.S. GAAP for interim financial information, including normal recurring adjustments[29](index=29&type=chunk) - The company transitioned its LIBOR-based loans to the Secured Overnight Financing Rate (SOFR) on **July 1, 2023**, which did not have a material impact[39](index=39&type=chunk) [Note 3—Acquisitions and Dispositions](index=13&type=section&id=Note%203%E2%80%94Acquisitions%20and%20Dispositions) Details the company's acquisition activities and any significant dispositions during the reporting period - In the nine months ended **September 30, 2023**, the company completed **ten acquisitions** across its **Maintenance (5 sites)**, **Car Wash (4 sites)**, and **Paint, Collision & Glass (2 sites)** segments[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) | Segment | Sites Acquired | Aggregate Cash Consideration (in millions) | | :-------- | :------------- | :--------------------------------------- | | Maintenance | 5 | ~$8 | | Car Wash | 4 | ~$15 | | Paint, Collision & Glass | 2 | ~$6 | - Goodwill from these acquisitions was allocated to the **Car Wash**, **Maintenance**, and **Paint, Collision & Glass** segments and is substantially deductible for income tax purposes[48](index=48&type=chunk) [Note 4— Revenue from Contracts with Customers](index=15&type=section&id=Note%204%E2%80%94%20Revenue%20from%20Contracts%20with%20Customers) Explains the company's revenue recognition policies and contract-related balances - Capitalized costs to obtain contracts (deferred commissions) were **$6.0 million** as of **September 30, 2023**, down from **$7.0 million** at **December 31, 2022**[53](index=53&type=chunk) - Contract liabilities (deferred revenue) were **$31.0 million** as of **September 30, 2023**, up from **$29.0 million** at **December 31, 2022**[54](index=54&type=chunk) - The company recognized **$4.0 million** of revenue relating to contract liabilities during the nine months ended **September 30, 2023**[54](index=54&type=chunk) [Note 5—Segment Information](index=15&type=section&id=Note%205%E2%80%94Segment%20Information) Provides financial data and performance metrics for the company's distinct operating segments - The company operates in **four reportable segments**: **Maintenance**, **Car Wash**, **Paint, Collision & Glass**, and **Platform Services**[55](index=55&type=chunk) | Segment (in thousands) | Total Revenue (3 Months Ended Sep 30, 2023) | Segment Adjusted EBITDA (3 Months Ended Sep 30, 2023) | | :----------------------- | :------------------------------------------ | :---------------------------------------------------- | | Maintenance | $244,359 | $86,493 | | Car Wash | $142,813 | $24,429 | | Paint, Collision & Glass | $129,414 | $32,763 | | Platform Services | $55,934 | $22,417 | | Corporate and Other | $8,514 | $(37,487) | | Total | $581,034 | $128,615 | | Segment (in thousands) | Total Revenue (9 Months Ended Sep 30, 2023) | Segment Adjusted EBITDA (9 Months Ended Sep 30, 2023) | | :----------------------- | :------------------------------------------ | :---------------------------------------------------- | | Maintenance | $714,354 | $245,232 | | Car Wash | $464,548 | $112,001 | | Paint, Collision & Glass | $383,375 | $109,724 | | Platform Services | $165,305 | $61,984 | | Corporate and Other | $22,770 | $(119,088) | | Total | $1,750,352 | $409,853 | [Note 6 — Asset Impairment Charges](index=18&type=section&id=Note%206%20%E2%80%94%20Asset%20Impairment%20Charges) Details significant impairment charges recognized on goodwill and other assets during the period - During **Q3 2023**, management's strategic review of U.S. **car wash operations** led to the approval of **29 store closures**, halting new company-operated store openings, and marketing property for sale[60](index=60&type=chunk) - These actions resulted in **$111.0 million** in **impairment charges** for property and equipment and right-of-use assets, and the transfer of **$271.0 million** of assets to 'assets held for sale'[60](index=60&type=chunk) - A full **goodwill impairment charge of $851.0 million** was recorded for the U.S. **Car Wash** reporting unit due to its carrying value exceeding fair value, triggered by the strategic review and a decline in stock price[61](index=61&type=chunk) [Note 7 — Long-Term Debt](index=19&type=section&id=Note%207%20%E2%80%94%20Long-Term%20Debt) Provides information on the company's long-term debt obligations, including changes and terms | Debt Type (in thousands) | September 30, 2023 | December 31, 2022 | | :----------------------- | :----------------- | :---------------- | | Total debt | $2,945,675 | $2,784,175 | | Less: unamortized debt issuance costs | $(36,747) | $(45,908) | | Less: current portion of long-term debt | $(31,869) | $(32,986) | | Total long-term debt, net | $2,877,059 | $2,705,281 | - **Total debt increased** by **$161.5 million** to **$2.9 billion** as of **September 30, 2023**, compared to **December 31, 2022**[64](index=64&type=chunk) - The company exercised the first of three one-year extension options for the 2019 VFN in **July 2023**, with no amounts outstanding as of **September 30, 2023**, but **$25.0 million** in outstanding letters of credit[65](index=65&type=chunk) [Note 8 — Leases](index=19&type=section&id=Note%208%20%E2%80%94%20Leases) Details the company's lease arrangements, including right-of-use assets, liabilities, and related transactions - During the nine months ended **September 30, 2023**, the company sold **48 properties** (**10 maintenance**, **38 car wash**) for **$171.0 million**, resulting in a **$25.0 million** net gain, and leased them back with initial terms of 16-20 years[68](index=68&type=chunk) - Operating lease right-of-use assets and liabilities of **$132.0 million** were recorded for these new lease arrangements[69](index=69&type=chunk) - The company **impaired $62.0 million** of right-of-use assets related to **28 leased stores** approved for closure or underperforming during **Q3 2023**[71](index=71&type=chunk) [Note 9 — Shareholders' Equity](index=20&type=section&id=Note%209%20%E2%80%94%20Shareholders'%20Equity) Describes changes in shareholders' equity, including share repurchases and capital transactions - In **August 2023**, the Board authorized a **$50.0 million share repurchase program**, which was completed by **September 30, 2023**[72](index=72&type=chunk) - The company **repurchased 3,601,694 shares** of common stock at an average price of **$13.87 per share**[72](index=72&type=chunk) [Note 10 — Equity-based Compensation](index=20&type=section&id=Note%2010%20%E2%80%94%20Equity-based%20Compensation) Details the company's equity-based compensation plans, grants, and related expenses - During the nine months ended **September 30, 2023**, the company granted **388,878 Restricted Stock Units (RSUs)** and **647,359 Performance Stock Units (PSUs)**[73](index=73&type=chunk) - **Equity-based compensation expense** was **$3.0 million** for the three months and **$10.0 million** for the nine months ended **September 30, 2023**[76](index=76&type=chunk) [Note 11—(Loss) Earnings Per Share](index=21&type=section&id=Note%2011%E2%80%94(Loss)%20Earnings%20Per%20Share) Presents the calculation of basic and diluted earnings per share, including factors affecting dilution | Metric (in thousands, except per share) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 24, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 24, 2022 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic (loss) earnings per share | $(4.82) | $0.23 | $(4.40) | $0.10 | | Diluted (loss) earnings per share | $(4.83) | $0.23 | $(4.41) | $0.09 | | Weighted-average common shares outstanding (Basic) | 162,398 | 162,760 | 162,698 | 162,768 | | Weighted-average common shares outstanding (Diluted) | 162,398 | 166,831 | 162,698 | 166,663 | - Due to **net losses** from operations for the three and nine months ended **September 30, 2023**, no potentially dilutive securities were included in the diluted EPS computation as their inclusion would be antidilutive[79](index=79&type=chunk) [Note 12—Income Taxes](index=22&type=section&id=Note%2012%E2%80%94Income%20Taxes) Provides information on income tax expense or benefit, effective tax rates, and deferred tax balances | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 24, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 24, 2022 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Income tax (benefit) expense | $(151,818) | $14,472 | $(120,572) | $8,592 | | Effective income tax rate | 16.0% | 27.4% | 14.1% | 35.3% | - The company recorded an **income tax benefit of $151.8 million** for the three months and **$120.6 million** for the nine months ended **September 30, 2023**, primarily driven by the significant **impairment charges**[81](index=81&type=chunk)[82](index=82&type=chunk) [Note 13—Subsequent Events](index=22&type=section&id=Note%2013%E2%80%94Subsequent%20Events) Discloses significant events that occurred after the balance sheet date but before financial statement issuance - On **October 30, 2023**, the company converted **2,438,643 options** and **2,963,829 restricted stock awards**, originally tied to sponsor returns, into time-based awards vesting on **April 30, 2025**[83](index=83&type=chunk) - The **fair value** of these modified options and restricted stock awards was approximately **$10.0 million** and **$33.0 million**, respectively, with compensation expense to be recognized ratably over the vesting period[83](index=83&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of financial condition, results of operations, and key performance indicators [Overview](index=23&type=section&id=Overview) Provides a high-level summary of the company's business, market position, and strategic initiatives - **Driven Brands** is the largest automotive services company in North America with **approximately 5,000 locations**, offering a wide range of consumer and commercial automotive needs[86](index=86&type=chunk) | Metric (in millions) | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2023 | | :--------------------- | :-------------------------- | :-------------------------- | | Revenue | **$581.0 million** (Up 12% **YoY**) | **$1.8 billion** (Up 17% **YoY**) | | System-wide sales | **$1.6 billion** (Up 10% **YoY**) | **$4.8 billion** (Up 15% **YoY**) | - A strategic review of U.S. **car wash operations** led to the closure of **29 stores**, a halt in new company-operated store openings, and **$111.0 million** in **asset impairment charges**, along with an **$851.0 million goodwill impairment charge** for the U.S. **Car Wash** reporting unit[87](index=87&type=chunk)[88](index=88&type=chunk) [Q3 2023 Three Months Ended Highlights and Key Performance Indicators](index=23&type=section&id=Q3%202023%20Three%20Months%20Ended%20Highlights%20and%20Key%20Performance%20Indicators) Summarizes key financial highlights and performance indicators for the three months ended September 30, 2023 | Metric | Q3 2023 (YoY Change) | | :------- | :------------------- | | Revenue | +12% to $581 million | | Consolidated Same-Store Sales | +6% | | Net New Stores | +55 | | Net Loss | $799 million (vs. $38 million Net Income prior year) | | Adjusted Net Income (non-GAAP) | -39% to $34 million | | Adjusted EBITDA (non-GAAP) | -2% to $127 million | - The **net loss** was primarily due to **impairment charges**, while **Adjusted Net Income** and **Adjusted EBITDA decreased** due to reduced margins in **Car Wash** and **Paint, Collision & Glass** segments, partially offset by improvements in **Maintenance** and **Platform Services**[89](index=89&type=chunk) [Q3 2023 Nine Months Ended Highlights and Key Performance Indicators](index=24&type=section&id=Q3%202023%20Nine%20Months%20Ended%20Highlights%20and%20Key%20Performance%20Indicators) Summarizes key financial highlights and performance indicators for the nine months ended September 30, 2023 | Metric | 9 Months Ended Sep 30, 2023 (YoY Change) | | :------- | :--------------------------------------- | | Revenue | +17% to $1,750 million | | Consolidated Same-Store Sales | +9% | | Net New Stores | +188 | | Net Loss | $732 million (vs. $16 million Net Income prior year) | | Adjusted Net Income (non-GAAP) | -23% to $125 million | | Adjusted EBITDA (non-GAAP) | +6% to $406 million | - The **net loss** for the nine-month period was primarily driven by **impairment charges**. **Adjusted EBITDA increased** due to improved margins in **Maintenance** and **Platform Services**, despite decreased margins in **Car Wash** and **Paint, Collision & Glass**[94](index=94&type=chunk) [Key Performance Indicators](index=24&type=section&id=Key%20Performance%20Indicators) Presents key metrics used to evaluate the company's operational and financial performance - Key measures include **System-wide sales**, **Store count**, **Same store sales**, and **Segment Adjusted EBITDA**, used to assess business health and segment performance[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) | KPI | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 24, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 24, 2022 | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total System-Wide Sales | $1,609,039 | $1,462,106 | $4,771,016 | $4,138,357 | | Total Store Count | 4,993 | 4,707 | 4,993 | 4,707 | | Total Same Store Sales % | 6.4% | 11.9% | 8.6% | 14.7% | | Total Segment Adjusted EBITDA | $128,615 | $130,108 | $409,853 | $385,215 | - **Car Wash segment** experienced **negative same store sales** of **(4.0%)** for the three months and **(6.7%)** for the nine months ended **September 30, 2023**, a significant decline from the prior year[95](index=95&type=chunk) [Reconciliation of Non-GAAP Financial Information](index=26&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Information) Reconciles non-GAAP financial measures to their most directly comparable GAAP financial measures - **Non-GAAP financial measures** like **Adjusted Net Income** and **Adjusted EBITDA** are used to provide additional insights into financial performance, excluding certain non-recurring or non-cash items[96](index=96&type=chunk)[98](index=98&type=chunk)[100](index=100&type=chunk) | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 24, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 24, 2022 | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net (loss) income | $(799,311) | $38,391 | $(731,813) | $15,775 | | Adjusted net income | $33,720 | $54,964 | $125,203 | $162,413 | | Adjusted EBITDA | $127,243 | $129,355 | $406,079 | $383,290 | - **Adjusted Net Income decreased** by **39%** for the three months and **23%** for the nine months ended **September 30, 2023**, primarily due to decreased margins in **Car Wash** and **Paint, Collision & Glass**, and increased interest and depreciation expenses[89](index=89&type=chunk)[94](index=94&type=chunk) [Results of Operations for the Three Months Ended September 30, 2023 Compared to the Three Months Ended September 24, 2022](index=29&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20September%2030,%202023%20Compared%20to%20the%20Three%20Months%20Ended%20September%2024,%202022) Net loss of $799 million due to impairment charges, with decreased Adjusted Net Income and EBITDA from reduced margins and higher expenses - **Net loss of $799.3 million** (or **$4.83 diluted EPS**) in **Q3 2023**, compared to **net income of $38.4 million** (or **$0.23 diluted EPS**) in **Q3 2022**, driven by **$851.0 million goodwill impairment** and **$111.2 million asset impairment charges**[105](index=105&type=chunk) - **Adjusted net income decreased** by **$21.0 million** to **$33.7 million**, and **Adjusted EBITDA decreased** by **$2.0 million** to **$127.2 million**, mainly due to reduced operating margins in **Car Wash** and **Paint, Collision & Glass**, and higher interest and depreciation expenses[106](index=106&type=chunk)[107](index=107&type=chunk) [Revenue](index=29&type=section&id=Revenue) Analyzes revenue streams, growth drivers, and changes in sales composition | Revenue Type (in thousands) | Sep 30, 2023 | % of Net Revenues | Sep 24, 2022 | % of Net Revenues | | :-------------------------- | :----------- | :---------------- | :----------- | :---------------- | | Franchise royalties and fees | $47,362 | 8.1% | $45,562 | 8.8% | | Company-operated store sales | $389,041 | 67.0% | $341,211 | 66.1% | | Independently-operated store sales | $43,582 | 7.5% | $40,469 | 7.8% | | Advertising fund contributions | $27,121 | 4.7% | $22,018 | 4.3% | | Supply and other revenue | $73,928 | 12.7% | $67,334 | 13.0% | | Total revenue | $581,034 | 100.0% | $516,594 | 100.0% | - **Total revenue increased** by **$64.0 million** (**12%**) to **$581.0 million**, driven by a **14%** increase in **company-operated store sales** and a **4%** increase in **franchise royalties and fees**[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) - **Company-operated store sales increased** by **$48.0 million**, with **Maintenance** and **Paint, Collision & Glass** segments contributing **$32.0 million** and **$16.0 million**, respectively, while **Car Wash** sales remained flat despite new store additions due to decreased **same-store sales**[111](index=111&type=chunk) [Operating Expenses](index=31&type=section&id=Operating%20Expenses) Details the components of operating expenses and their impact on profitability | Expense Type (in thousands) | Sep 30, 2023 | % of Net Revenues | Sep 24, 2022 | % of Net Revenues | | :-------------------------- | :----------- | :---------------- | :----------- | :---------------- | | Company-operated store expenses | $262,282 | 45.1% | $209,562 | 40.6% | | Selling, general, and administrative expenses | $123,012 | 21.2% | $82,460 | 16.0% | | Depreciation and amortization | $45,639 | 7.9% | $36,518 | 7.1% | | Goodwill impairment | $850,970 | 146.5% | $0 | 0.0% | | Asset impairment charges and lease terminations | $111,239 | 19.1% | $2,894 | 0.6% | | Total operating expenses | $1,487,891 | 256.1% | $420,826 | 81.5% | - **Total operating expenses surged** by **$1.1 billion**, primarily due to the **$851.0 million goodwill impairment** and **$108.0 million** increase in **asset impairment charges** related to the **Car Wash segment**[116](index=116&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) - **Selling, general and administrative expenses increased** by **$41.0 million** (**49%**), partly due to a **$14.0 million** loss on sale/disposal of fixed assets in the current period versus a **$17.0 million** gain in the prior year[121](index=121&type=chunk) [Interest Expense, Net](index=32&type=section&id=Interest%20Expense,%20Net) Discusses net interest expense, including factors influencing its changes | Metric (in thousands) | Sep 30, 2023 | % of Net Revenues | Sep 24, 2022 | % of Net Revenues | | :---------------------- | :----------- | :---------------- | :----------- | :---------------- | | Interest expense, net | $41,292 | 7.1% | $27,323 | 5.3% | - **Net interest expense increased** by **$14.0 million** (**51%**) to **$41.3 million**, driven by higher variable interest rates on the Term Loan Facility and borrowings under the Series 2022-1 Class A-2 Securitization Senior Notes[127](index=127&type=chunk) [Loss on Foreign Currency Transactions, Net](index=32&type=section&id=Loss%20on%20Foreign%20Currency%20Transactions,%20Net) Reports net gains or losses from foreign currency transactions and hedging activities | Metric (in thousands) | Sep 30, 2023 | % of Net Revenues | Sep 24, 2022 | % of Net Revenues | | :---------------------- | :----------- | :---------------- | :----------- | :---------------- | | Loss on foreign currency transactions, net | $2,980 | 0.5% | $15,582 | 3.0% | - **Net loss on foreign currency transactions decreased** by **$12.6 million** to **$3.0 million**, primarily due to lower transaction losses in foreign operations and gains on foreign currency hedges[128](index=128&type=chunk) [Income Tax (Benefit) Expense](index=32&type=section&id=Income%20Tax%20(Benefit)%20Expense) Analyzes income tax expense or benefit and the effective tax rate | Metric (in thousands) | Sep 30, 2023 | % of Net Revenues | Sep 24, 2022 | % of Net Revenues | | :---------------------- | :----------- | :---------------- | :----------- | :---------------- | | Income tax (benefit) expense | $(151,818) | (26.1%) | $14,472 | 2.8% | - The company recorded an **income tax benefit of $151.8 million**, a decrease of **$166.0 million** from the prior year's expense, with the **effective tax rate** falling to **16.0%** from **27.4%**, primarily due to the **impairment charges**[129](index=129&type=chunk) [Results of Operations for the Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 24, 2022](index=33&type=section&id=Results%20of%20Operations%20for%20the%20Nine%20Months%20Ended%20September%2030,%202023%20Compared%20to%20the%20Nine%20Months%20Ended%20September%2024,%202022) Net loss of $732 million driven by impairment charges, with decreased Adjusted Net Income and increased Adjusted EBITDA from mixed segment performance - **Net loss of $731.8 million** (or **$4.41 diluted EPS**) for the nine months ended **September 30, 2023**, compared to **net income of $15.8 million** (or **$0.09 diluted EPS**) in the prior year, primarily due to **$851.0 million goodwill impairment** and **$117.5 million asset impairment charges**[130](index=130&type=chunk) - **Adjusted net income decreased** by **$37.0 million** to **$125.2 million**, while **Adjusted EBITDA increased** by **$23.0 million** to **$406.1 million**, driven by revenue growth and improved margins in **Maintenance** and **Platform Services**, partially offset by declines in **Car Wash** and **Paint, Collision & Glass**[131](index=131&type=chunk)[132](index=132&type=chunk) [Revenue](index=33&type=section&id=Revenue) Analyzes revenue streams, growth drivers, and changes in sales composition | Revenue Type (in thousands) | Sep 30, 2023 | % of Net Revenues | Sep 24, 2022 | % of Net Revenues | | :-------------------------- | :----------- | :---------------- | :----------- | :---------------- | | Franchise royalties and fees | $140,682 | 8.0% | $128,300 | 8.6% | | Company-operated store sales | $1,159,685 | 66.3% | $957,487 | 64.1% | | Independently-operated store sales | $157,647 | 9.0% | $158,500 | 10.6% | | Advertising fund contributions | $73,547 | 4.2% | $63,807 | 4.3% | | Supply and other revenue | $218,791 | 12.5% | $185,447 | 12.4% | | Total revenue | $1,750,352 | 100.0% | $1,493,541 | 100.0% | - **Total revenue increased** by **$257.0 million** (**17%**) to **$1.8 billion**, driven by a **$202.0 million** (**21%**) increase in **company-operated store sales** and a **$12.0 million** (**10%**) increase in **franchise royalties and fees**[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) - **Company-operated store sales** growth was led by **Maintenance** (**$108.0 million**) and **Paint, Collision & Glass** (**$87.0 million**), while **Car Wash** sales increased by **$8.0 million** despite a decrease in **same-store sales**[136](index=136&type=chunk)[137](index=137&type=chunk) [Operating Expenses](index=34&type=section&id=Operating%20Expenses) Details the components of operating expenses and their impact on profitability | Expense Type (in thousands) | Sep 30, 2023 | % of Net Revenues | Sep 24, 2022 | % of Net Revenues | | :-------------------------- | :----------- | :---------------- | :----------- | :---------------- | | Company-operated store expenses | $762,731 | 43.6% | $580,368 | 38.9% | | Selling, general, and administrative expenses | $332,155 | 19.0% | $272,657 | 18.3% | | Depreciation and amortization | $129,256 | 7.4% | $107,628 | 7.2% | | Goodwill impairment | $850,970 | 48.6% | $0 | 0.0% | | Trade name impairment charges | $0 | 0.0% | $125,450 | 8.4% | | Asset impairment charges | $117,450 | 6.7% | $2,910 | 0.2% | | Total operating expenses | $2,482,430 | 141.8% | $1,359,738 | 91.0% | - **Total operating expenses increased** by **$1.1 billion**, primarily due to the **$851.0 million goodwill impairment** and **$115.0 million** increase in **asset impairment charges**, partially offset by the absence of the **$125.0 million** trade name impairment from the prior year[141](index=141&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) - **Selling, general and administrative expenses increased** by **$59.0 million** (**22%**), partly due to a **$2.0 million** loss on sale/disposal of fixed assets in the current period versus a **$23.0 million** gain in the prior year[146](index=146&type=chunk) [Interest Expense, Net](index=35&type=section&id=Interest%20Expense,%20Net) Discusses net interest expense, including factors influencing its changes | Metric (in thousands) | Sep 30, 2023 | % of Net Revenues | Sep 24, 2022 | % of Net Revenues | | :---------------------- | :----------- | :---------------- | :----------- | :---------------- | | Interest expense, net | $120,304 | 6.9% | $78,946 | 5.3% | - **Net interest expense increased** by **$41.0 million** (**52%**) to **$120.3 million**, driven by higher variable interest rates on the Term Loan Facility and borrowings under the Series 2022-1 Class A-2 Securitization Senior Notes[153](index=153&type=chunk) [Loss on Foreign Currency Transactions, Net](index=36&type=section&id=Loss%20on%20Foreign%20Currency%20Transactions,%20Net) Reports net gains or losses from foreign currency transactions and hedging activities | Metric (in thousands) | Sep 30, 2023 | % of Net Revenues | Sep 24, 2022 | % of Net Revenues | | :---------------------- | :----------- | :---------------- | :----------- | :---------------- | | Loss on foreign currency transactions, net | $3 | 0.0% | $30,490 | 2.0% | - **Net loss on foreign currency transactions significantly decreased** by **$30.5 million** to **$3.0 thousand**, primarily due to lower net remeasurement losses on non-U.S. dollar entities and gains on foreign currency hedges[154](index=154&type=chunk) [Income Tax (Benefit) Expense](index=36&type=section&id=Income%20Tax%20(Benefit)%20Expense) Analyzes income tax expense or benefit and the effective tax rate | Metric (in thousands) | Sep 30, 2023 | % of Net Revenues | Sep 24, 2022 | % of Net Revenues | | :---------------------- | :----------- | :---------------- | :----------- | :---------------- | | Income tax (benefit) expense | $(120,572) | (6.9%) | $8,592 | 0.6% | - The company recorded an **income tax benefit of $120.6 million**, a decrease of **$129.0 million** from the prior year's expense, with the **effective tax rate** falling to **14.1%** from **35.3%**, primarily due to the increased **impairment charges**[155](index=155&type=chunk) [Segment Results of Operations for the Three Months Ended September 30, 2023 Compared to the Three Months Ended September 24, 2022](index=37&type=section&id=Segment%20Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20September%2030,%202023%20Compared%20to%20the%20Three%20Months%20Ended%20September%2024,%202022) Segment performance analysis for Q3 2023, highlighting mixed results with growth in Maintenance and Platform Services, and declines in Car Wash and PC&G [Maintenance](index=37&type=section&id=Maintenance) Details the financial performance of the Maintenance segment, including revenue and Adjusted EBITDA | Metric (in thousands) | Sep 30, 2023 | Sep 24, 2022 | Change (YoY) | | :---------------------- | :----------- | :----------- | :----------- | | Total revenue | $244,359 | $200,822 | +22% | | Segment Adjusted EBITDA | $86,493 | $68,763 | +26% | | System-Wide Sales | $502,482 | $411,452 | +22.1% | | Same Store Sales % | 9.1% | 14.4% | -5.3 pp | - **Maintenance segment revenue increased** by **$44.0 million** (**22%**), driven by a **25%** increase in franchised **system-wide sales** and a **19%** increase in **company-operated store sales**, both benefiting from **same-store sales** growth and new store additions[158](index=158&type=chunk) - **Segment Adjusted EBITDA increased** by **$18.0 million** (**26%**), attributed to revenue growth, cost management, and operational leverage from an efficient labor model[159](index=159&type=chunk) [Car Wash](index=38&type=section&id=Car%20Wash) Details the financial performance of the Car Wash segment, including revenue and Adjusted EBITDA | Metric (in thousands) | Sep 30, 2023 | Sep 24, 2022 | Change (YoY) | | :---------------------- | :----------- | :----------- | :----------- | | Total revenue | $142,813 | $140,303 | +2% | | Segment Adjusted EBITDA | $24,429 | $39,098 | -38% | | System-Wide Sales | $141,714 | $138,704 | +2.2% | | Same Store Sales % | (4.0%) | (9.0%) | +5.0 pp | - **Car Wash segment revenue increased** by **$3.0 million** (**2%**), driven by new company-operated stores and favorable foreign exchange, but partially offset by decreased **same-store sales** in company-operated stores[161](index=161&type=chunk) - **Segment Adjusted EBITDA decreased** by **$15.0 million** (**38%**), primarily due to decreased **same-store sales**, increased operating costs (rent, supplies, utilities), and higher labor costs for new stores[164](index=164&type=chunk) - **U.S. Car Wash locations faced softening retail demand, increased competitive pressures, and negative weather patterns**, contributing to **negative same-store sales**[162](index=162&type=chunk) [Paint, Collision & Glass](index=39&type=section&id=Paint,%20Collision%20%26%20Glass) Details the financial performance of the Paint, Collision & Glass segment, including revenue and Adjusted EBITDA | Metric (in thousands) | Sep 30, 2023 | Sep 24, 2022 | Change (YoY) | | :---------------------- | :----------- | :----------- | :----------- | | Total revenue | $129,414 | $113,220 | +14% | | Segment Adjusted EBITDA | $32,763 | $38,919 | -16% | | System-Wide Sales | $845,644 | $781,199 | +8.2% | | Same Store Sales % | 8.6% | 15.7% | -7.1 pp | - **Paint, Collision & Glass revenue increased** by **$16.0 million** (**14%**), primarily from U.S. glass acquisitions, despite flat franchise royalties and fees[166](index=166&type=chunk) - **Segment Adjusted EBITDA decreased** by **$6.0 million** (**16%**), mainly due to higher employee-related costs and reduced volume in company-operated stores, despite revenue growth[168](index=168&type=chunk) - **Integration of U.S. glass acquisitions has taken longer than planned**, resulting in lower-than-expected revenue and cost efficiencies[167](index=167&type=chunk) [Platform Services](index=40&type=section&id=Platform%20Services) Details the financial performance of the Platform Services segment, including revenue and Adjusted EBITDA | Metric (in thousands) | Sep 30, 2023 | Sep 24, 2022 | Change (YoY) | | :---------------------- | :----------- | :----------- | :----------- | | Total revenue | $55,934 | $51,999 | +8% | | Segment Adjusted EBITDA | $22,417 | $19,765 | +13% | | System-Wide Sales | $119,199 | $130,751 | -8.8% | | Same Store Sales % | (4.6%) | 8.7% | -13.3 pp | - **Platform Services revenue increased** by **$4.0 million** (**8%**), driven by increased total company **system-wide sales** and new product offerings[170](index=170&type=chunk) - **Segment Adjusted EBITDA increased** by **$3.0 million** (**13%**), primarily due to revenue growth, cost management, and operational leverage[171](index=171&type=chunk) [Segment Results of Operations for the Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 24, 2022](index=41&type=section&id=Segment%20Results%20of%20Operations%20for%20the%20Nine%20Months%20Ended%20September%2030,%202023%20Compared%20to%20the%20Nine%20Months%20Ended%20September%2024,%202022) Segment performance analysis for the nine months ended September 30, 2023, showing varied results across Maintenance, Car Wash, PC&G, and Platform Services [Maintenance](index=41&type=section&id=Maintenance) Details the financial performance of the Maintenance segment, including revenue and Adjusted EBITDA | Metric (in thousands) | Sep 30, 2023 | Sep 24, 2022 | Change (YoY) | | :---------------------- | :----------- | :----------- | :----------- | | Total revenue | $714,354 | $573,869 | +24% | | Segment Adjusted EBITDA | $245,232 | $185,324 | +32% | | System-Wide Sales | $1,429,049 | $1,167,717 | +22.4% | | Same Store Sales % | 10.8% | 16.0% | -5.2 pp | - **Maintenance segment revenue increased** by **$140.0 million** (**24%**), driven by a **$108.0 million** increase in **company-operated store sales** and a **$24.0 million** increase in supply and other revenue[174](index=174&type=chunk) - **Segment Adjusted EBITDA increased** by **$60.0 million** (**32%**), primarily due to revenue growth, cost management, and operational leverage from an efficient labor model[175](index=175&type=chunk) [Car Wash](index=42&type=section&id=Car%20Wash) Details the financial performance of the Car Wash segment, including revenue and Adjusted EBITDA | Metric (in thousands) | Sep 30, 2023 | Sep 24, 2022 | Change (YoY) | | :---------------------- | :----------- | :----------- | :----------- | | Total revenue | $464,548 | $458,157 | +1% | | Segment Adjusted EBITDA | $112,001 | $148,495 | -25% | | System-Wide Sales | $459,840 | $453,026 | +1.5% | | Same Store Sales % | (6.7%) | (1.8%) | -4.9 pp | - **Car Wash segment revenue increased** by **$6.0 million** (**1%**), driven by **49 net new company-operated stores**, but partially offset by a **6.7%** decrease in **same-store sales**[176](index=176&type=chunk) - **Segment Adjusted EBITDA decreased** by **$36.0 million** (**25%**), primarily due to decreased **same-store sales**, increased company-operated store costs (employee compensation, rent, supplies, utilities)[179](index=179&type=chunk) - **U.S. Car Wash locations continued to face softening retail demand, increased competitive pressures, and negative weather patterns**, contributing to **negative same-store sales**[177](index=177&type=chunk) [Paint, Collision & Glass](index=43&type=section&id=Paint,%20Collision%20%26%20Glass) Details the financial performance of the Paint, Collision & Glass segment, including revenue and Adjusted EBITDA | Metric (in thousands) | Sep 30, 2023 | Sep 24, 2022 | Change (YoY) | | :---------------------- | :----------- | :----------- | :----------- | | Total revenue | $383,375 | $287,950 | +33% | | Segment Adjusted EBITDA | $109,724 | $100,847 | +9% | | System-Wide Sales | $2,554,216 | $2,164,749 | +18.0% | | Same Store Sales % | 13.3% | 17.5% | -4.2 pp | - **Paint, Collision & Glass revenue increased** by **$95.0 million** (**33%**), primarily from a **$87.0 million** (**54%**) increase in company-operated store revenue due to U.S. glass acquisitions[180](index=180&type=chunk) - **Segment Adjusted EBITDA increased** by **$9.0 million** (**9%**), driven by revenue growth from acquisitions and **same-store sales**, despite higher employee-related costs and reduced volume[182](index=182&type=chunk) - **Integration of U.S. glass acquisitions continued to take longer than planned**, resulting in lower-than-expected revenue and cost efficiencies[181](index=181&type=chunk) [Platform Services](index=44&type=section&id=Platform%20Services) Details the financial performance of the Platform Services segment, including revenue and Adjusted EBITDA | Metric (in thousands) | Sep 30, 2023 | Sep 24, 2022 | Change (YoY) | | :---------------------- | :----------- | :----------- | :----------- | | Total revenue | $165,305 | $148,368 | +11% | | Segment Adjusted EBITDA | $61,984 | $54,471 | +14% | | System-Wide Sales | $327,911 | $352,865 | -7.1% | | Same Store Sales % | (7.2%) | 14.9% | -22.1 pp | - **Platform Services revenue increased** by **$17.0 million** (**11%**), primarily due to an increase in total company **system-wide sales** and increased product purchases[184](index=184&type=chunk) - **Segment Adjusted EBITDA increased** by **$8.0 million** (**14%**), primarily due to revenue growth, cost management, and operational leverage[185](index=185&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=45&type=section&id=Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) Discusses the company's financial position, liquidity, and capital management strategies - The company had **total liquidity of $387.0 million** as of **September 30, 2023**, including **$211.0 million** in cash and cash equivalents, and **$91.0 million** and **$85.0 million** of undrawn capacity on its 2019 VFN and Revolving Credit Facility, respectively[189](index=189&type=chunk) - **Net cash provided by operating activities increased** to **$212.0 million** for the nine months ended **September 30, 2023**, from **$167.7 million** in the prior year, despite higher net working capital[191](index=191&type=chunk) - **Net cash used in investing activities decreased significantly** to **$361.2 million** from **$771.8 million**, primarily due to a **$598.0 million** decrease in cash paid for acquisitions, partially offset by a **$206.0 million** increase in capital expenditures[192](index=192&type=chunk) [Critical Accounting Policies and Estimates](index=46&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Highlights key accounting policies and estimates requiring significant management judgment - The company's critical accounting policies include the **impairment of goodwill and other indefinite-lived intangible assets**, which are evaluated throughout the year for **impairment** indicators[198](index=198&type=chunk) - An **interim quantitative assessment of goodwill** as of **September 30, 2023**, resulted in a **full impairment charge to the U.S. Car Wash reporting unit**[201](index=201&type=chunk) - The **fair value of International Car Wash and Maintenance-Repair reporting units exceeded their carrying amounts by approximately 6% each**, with **sensitivity to a 1% increase in discount rate potentially causing impairments of $19.0 million and $11.0 million**, respectively[201](index=201&type=chunk)[202](index=202&type=chunk) [Application of New Accounting Standards](index=47&type=section&id=Application%20of%20New%20Accounting%20Standards) Summarizes the impact and application of recently issued accounting standards - The company refers to Note 2 of the consolidated unaudited financial statements for a discussion of recently issued accounting standards applicable to the Company[206](index=206&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk were reported compared to the prior fiscal year's Annual Report on Form 10-K - **No material changes in the company's market risk** were reported compared to the disclosures in the **Annual Report on Form 10-K** for the fiscal year ended **December 31, 2022**[207](index=207&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective, with no material changes in internal control over financial reporting during the quarter - Management, with CEO and CFO participation, concluded that **disclosure controls and procedures were designed effectively** as of **September 30, 2023**, providing reasonable assurance[209](index=209&type=chunk) - **No material changes in internal control over financial reporting** occurred during the quarter ended **September 30, 2023**[210](index=210&type=chunk) [PART II. OTHER INFORMATION](index=48&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional disclosures on legal proceedings, risk factors, equity sales, and other relevant information [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company faces various legal proceedings in the ordinary course of business, with no current expectation of material adverse impact - The company is subject to **various lawsuits, administrative proceedings, audits, and claims**, including potential class actions, arising in the ordinary course of business[212](index=212&type=chunk) - Management accrues for probable and reasonably estimable litigation loss contingencies and does not currently believe any existing legal proceedings will have a **no material adverse impact**[212](index=212&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) Refers to the Annual Report on Form 10-K for a comprehensive discussion of risk factors that could adversely affect the company - For a discussion of **risk factors**, readers are referred to Part I, Item 1A '**Risk Factors**' in the **Annual Report on Form 10-K** for the fiscal year ended **December 31, 2022**[213](index=213&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company completed its $50 million share repurchase program, repurchasing 3.6 million shares at an average price of $13.87 | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------------------- | :----------------------------- | :--------------------------- | | August 6, 2023-September 2, 2023 | 1,004,836 | $14.76 | | September 3, 2023-September 30, 2023 | 2,596,858 | $13.53 | | Total | 3,601,694 | $13.87 | - The company **completed its $50.0 million share repurchase program**, authorized in August 2023, by **September 30, 2023**[214](index=214&type=chunk) [Item 3. Defaults Upon Senior Securities](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the reporting period - **No defaults upon senior securities** were reported[215](index=215&type=chunk) [Item 5. Other Information](index=49&type=section&id=Item%205.%20Other%20Information) No director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - **No director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements** during the three months ended **September 30, 2023**[216](index=216&type=chunk) [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including CEO/CFO certifications and XBRL documents - Exhibits include **certifications from the Chief Executive Officer and Chief Financial Officer** pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[217](index=217&type=chunk) - **XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents**, along with the **Cover Page Interactive Data File**, are also filed as exhibits[217](index=217&type=chunk)

Driven Brands Holdings Inc. (NASDAQ:DRVN) Q3 2023 Earnings Conference Call November 1, 2023 8:30 AM ET Company Participants Joel Arnao - Senior Vice President-Finance Jonathan Fitzpatrick - President & Chief Executive Officer Danny Rivera - Executive Vice President & Chief Operating Officer Gary Ferrera - Executive Vice President & Chief Financial Officer Conference Call Participants Peter Benedict - Baird Seth Sigman - Barclays Simeon Gutman - Morgan Stanley Liz Suzuki - Bank of America Kate McShane - Gold ...

Financial Data and Key Metrics Changes - The company reported a system-wide sales increase of 18% year-over-year, reaching $1.7 billion, driven by an 8% increase in same-store sales and 7% net store growth [36] - Revenue for Q2 2023 was $606.9 million, reflecting a 19% increase compared to Q2 2022, with adjusted diluted EPS of $0.29 per share [24][70] - Adjusted EBITDA for the quarter was $151 million, a 12% increase year-over-year, with an adjusted EBITDA margin of 24.9%, down approximately 170 basis points from the previous year [65][70] Business Line Data and Key Metrics Changes - The Maintenance segment, primarily driven by Take 5 Quick Lube, achieved positive same-store sales growth of 10.2%, with Take 5 Oil Change locations delivering same-store sales growth of 17% [37][27] - The Car Wash segment experienced negative same-store sales of 4%, although this was an improvement from a double-digit decline in Q1 [38] - The Paint, Collision & Glass segment saw positive same-store sales growth of 12%, despite integration challenges with the Auto Glass Now brand [68] Market Data and Key Metrics Changes - The company noted a significant increase in competitive unit growth in the Car Wash segment, with approximately 1,500 new locations added in the last two years, leading to market share decline [58] - Retail traffic softness was observed in the first half of 2023, impacting customer acquisition and margins, particularly in the Car Wash segment [15][30] Company Strategy and Development Direction - The company is focused on building national brands with Take 5 Oil Change and Car Wash, aiming to consolidate market share and drive long-term growth [26] - A unified tech stack is being developed across Car Wash locations to enhance customer loyalty and membership programs, expected to launch in late 2023 [18] - The company plans to continue its capital-light strategy through sale and leaseback activities to reduce investment capital and improve leverage [12][44] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the Car Wash and Glass segments due to competitive pressures and integration delays, but remains optimistic about long-term growth prospects [45][75] - The company anticipates double-digit revenue growth and mid-single-digit adjusted EBITDA growth for the full year, despite revising guidance downward [72][46] Other Important Information - The company has a robust pipeline for new locations, with approximately 900 units planned for Take 5 [14] - Liquidity at the end of Q2 was $493 million, comprising $212 million in cash and cash equivalents, and $281 million of undrawn capacity [42] Q&A Session Summary Question: What steps are being taken to improve the Glass business integration? - Management acknowledged the complexity of integrating 12 acquisitions and is assessing underperforming stores to improve overall performance [51][49] Question: How is the company addressing competitive pressures in the Car Wash segment? - The company is implementing cross-brand promotions and leveraging the Take 5 brand to drive customer acquisition [30][136] Question: What is the outlook for store count expansion? - The company remains on track for Quick Lube and Car Wash growth, but has adjusted Glass expansion plans from 130 to about 90 new stores for the year [97] Question: How is inflation impacting the business? - Inflation is still present, particularly in supply chain costs, but the company is able to pass on many of these costs to consumers [123] Question: What are the expectations for future EBITDA performance? - Management indicated that the revised EBITDA guidance reflects underperformance in the Car Wash and Glass segments, but long-term profitability remains intact [89][90]

Financial Data and Key Metrics Changes - The company reported a 20% revenue growth, supported by 9% same-store sales growth and 7% new-store growth [6][109] - Adjusted net income for the first quarter was $42 million, with adjusted EPS of $0.25 [14] - Adjusted EBITDA for the quarter was $128 million, an increase of 8%, with an adjusted EBITDA margin of 23%, about 260 basis points below the prior year [49][100] - The net leverage ratio was 4.7x at the end of the first quarter, with expectations to naturally delever to the low 4s due to projected growth in adjusted EBITDA [15] Business Line Data and Key Metrics Changes - The Maintenance segment posted positive same-store sales of 13%, driven by strong car count and higher average ticket due to price increases and ancillary product attachment rates [35] - The Car Wash segment experienced negative same-store sales of 11%, impacted by softer retail volume and foreign exchange rate movements [50] - The Paint, Collision & Glass segment posted positive same-store sales of 14%, with strong performance in Paint and Collision [110] Market Data and Key Metrics Changes - The company’s footprint grew over 20% year-over-year, with a robust pipeline of 950 units, primarily franchise locations [8] - The Car Wash business is seeing a rationalization of competitive intensity due to macroeconomic conditions, which is expected to impact future M&A activity [9][45] Company Strategy and Development Direction - The company is focused on three growth priorities: Take 5 Oil Change, Take 5 Car Wash, and Auto Glass Now, leveraging cash flow generation to invest in these areas [22] - The integration of acquisitions under the Auto Glass Now brand is expected to enhance long-term opportunities with commercial customers [52] - The company aims to grow its footprint by an additional 20% in 2023, largely driven by franchise store growth [8] Management's Comments on Operating Environment and Future Outlook - Management noted that the first quarter unfolded as anticipated, with resilience in the needs-based automotive services category [13][97] - The company expects continued momentum into the second quarter, with positive trends aligning with current expectations [77][134] - Management remains optimistic about the long-term potential of the Car Wash business despite current macroeconomic pressures [39][88] Other Important Information - The company ended the quarter with $466 million of liquidity, including $191 million in cash and $275 million of undrawn capacity on revolving credit facilities [34] - The company expects to deliver approximately $300 million of cash flow from operations for the year [37] Q&A Session Summary Question: Impact of weather on performance - Management acknowledged that poor weather conditions, particularly on weekends, have affected retail performance, alongside ongoing macroeconomic pressures [42] Question: Differences in performance between U.S. and international markets - Both U.S. and international businesses performed similarly on a constant currency basis, with a lag in international performance compared to the U.S. [55] Question: Expectations for Car Wash segment performance - Management expects improved performance in same-store sales and margins as the rebranding continues [58] Question: Financing sources for franchisees amid banking challenges - Franchisees use a mix of funding sources and are not heavily exposed to troubled banks, with a strong pipeline indicating continued growth [121][136] Question: Update on the glass business and commercial mix - The company is making progress in improving the commercial mix, with expectations for significant opportunities in late 2023 and early 2024 [139]

Tax Receivable Agreement - The company expects future payments under the Tax Receivable Agreement to aggregate between $160 million and $180 million, assuming no material changes in tax law and sufficient taxable income [199]. - The majority of the obligation under the Tax Receivable Agreement is expected to be repaid by the end of the 2025 fiscal year [199]. - Payments under the Tax Receivable Agreement could be substantial and may exceed actual cash tax savings if tax benefits are disallowed [198]. - The ability to make payments under the Tax Receivable Agreement is dependent on the subsidiaries' ability to make distributions, which may be restricted by existing debt agreements [202]. - The company has variable interest rate exposure in the Tax Receivable Agreement, with deferred payments accruing interest at LIBOR plus 1.00% or 5.00% per annum depending on the reason for non-payment [331]. Corporate Governance and Control - As of February 27, 2023, Principal Stockholders hold approximately 61% of the outstanding shares, significantly influencing corporate decisions [205]. - The company is classified as a "controlled company" under NASDAQ rules, allowing it to rely on exemptions from certain corporate governance requirements [206]. - The company’s organizational documents may impede or discourage a takeover, potentially depriving investors of premium share opportunities [207]. - The company’s certificate of incorporation restricts business combinations with interested stockholders for three years following their designation as such [209]. - The issuance of preferred stock could delay or prevent a change in control, as the board has the authority to issue shares without further stockholder approval [210]. - The exclusive forum provision in the certificate of incorporation limits stockholders' ability to obtain a favorable judicial forum for disputes [212]. - The company’s certificate of incorporation includes provisions that may limit stockholder actions and empower the board to fill vacancies, which could affect governance [215]. - The company has a board of directors consisting of eight members, three of whom are directors from Principal Stockholders, potentially leading to conflicts of interest [215]. - Future sales of common stock by Principal Stockholders could reduce stock prices, impacting market perception and trading conditions [216]. Financial Risks - The company is exposed to interest rate risk, with a hypothetical 1% increase or decrease in variable debt resulting in a $5 million change in interest expense as of December 31, 2022 [329]. - The company faces commodity risk due to fluctuating global prices for products like motor oil and paint, with attempts to mitigate this through contract renegotiations [332]. - Foreign exchange risk exists from operations in Canada, Europe, and Australia, impacting net income and cash flows, with hedging strategies in place using cross-currency interest rate swaps [333][334]. - Inflation did not significantly affect the company's annual results during 2022, 2021, or 2020, but severe inflation could adversely impact business operations [335]. Market Operations - The company’s common stock began trading on The Nasdaq Global Select Market on January 15, 2021, with outstanding shares including restricted securities eligible for sale under Rule 144 [216]. - The company does not engage in speculative transactions and aims to manage market risks as part of its ongoing business operations [328].

Driven Brands Holdings Inc. (NASDAQ:DRVN) Q4 2022 Earnings Conference Call February 22, 2023 8:30 AM ET Company Participants Kristy Moser - Vice President of Investor Relations Jonathan Fitzpatrick - President and Chief Executive Officer Tiffany Mason - Executive Vice President and Chief Financial Officer Conference Call Participants Simeon Gutman - Morgan Stanley Seth Sigman - Barclays Christopher Horvers - J.P. Morgan Karen Short - Credit Suisse Liz Suzuki - Bank of America Sharon Zackfia - William Blair ...

Financial Data and Key Metrics Changes - Driven Brands reported a 39% revenue growth in Q3 2022, with adjusted EBITDA increasing by 32% to $129 million, and adjusted EPS at $0.32 [6][23][27] - System-wide sales reached $1.5 billion, driven by a 12% same-store sales growth and the addition of 101 net new stores [23][24] - Adjusted EBITDA margin was 25%, with four-wall margins at company-operated stores reaching 39% [26][27] Business Line Data and Key Metrics Changes - The Maintenance segment saw a 14% same-store sales growth, benefiting from digital marketing and retail pricing increases [29] - The Car Wash segment experienced a 9% decline in same-store sales, impacted by foreign exchange rates and softer retail volumes [31][32] - The Paint, Collision, and Glass segment posted a 16% same-store sales growth, with the glass business generating mid-30% four-wall EBITDA margins [35][36] Market Data and Key Metrics Changes - Driven Brands operates in a $350 billion automotive aftermarket industry, which continues to grow despite economic challenges [7][8] - The company has a customer database of 29 million unique customers, indicating strong market presence [7] - Vehicle miles traveled increased by approximately 1% year-to-date, with a positive forecast for Q4 [42] Company Strategy and Development Direction - The company aims to achieve at least $850 million of adjusted EBITDA by the end of 2026, with a focus on organic growth and acquisitions [9][22] - Driven Brands is expanding its footprint through a robust pipeline of new openings and acquisitions, with over 1,500 locations in development [19][41] - The company is leveraging its scale and shared service capabilities to enhance competitive advantages and drive growth [16][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating inflationary impacts and supply chain disruptions, highlighting the resilience of the automotive aftermarket [8][21] - The company remains optimistic about the balance of the year, with expectations for continued growth and market share gains [42][43] - Management noted that the operating environment may differ from initial expectations, but they are pleased with the current performance [21][43] Other Important Information - The company ended Q3 with $190 million in cash and equivalents, and $288 million in total liquidity [38][40] - A $365 million whole business securitization transaction was completed post-Q3, with proceeds used for debt repayment and general corporate purposes [39][41] - The pro forma weighted average interest rate of the debt portfolio is now 4.2%, with a net leverage ratio of 4.7 times [40] Q&A Session Summary Question: Car wash segment EBITDA performance - Management indicated that the contraction in car wash segment adjusted EBITDA was due to foreign exchange impacts, softer retail volumes, and promotional activity [46][47] Question: PC&G business incremental margins - Management explained that the contraction in the PC&G segment was influenced by the acquisition of company-owned stores, but the glass business is generating strong margins [48][49] Question: Impact of inflation on margins - Management noted effective management of inflationary impacts, with successful price increases in the Take 5 quick lube business [51][52] Question: Car wash decline in the U.S. - Management attributed the decline to FX impacts and softer retail volume, but highlighted the growth in the Wash Club program [53][54] Question: Clarification on guidance - Management clarified that the guidance reflects the impact of FX headwinds and includes M&A benefits, with expectations for organic growth to exceed prior guidance [56][57] Question: CapEx spending details - Management provided CapEx guidance of $400 million for the year, with a focus on unit development and corporate projects [61][62] Question: Glass business insurance opportunity - Management discussed the timing of unlocking insurance opportunities and the importance of calibration services in the glass business [64][65] Question: Labor constraints in the industry - Management highlighted structural advantages in labor efficiency and training, allowing the company to navigate hiring challenges effectively [67][70] Question: Commercial opportunity growth - Management expressed optimism about the commercial opportunity, emphasizing the stickiness of commercial customers [73][74] Question: Marketplace test details - Management described the upcoming marketplace test as a way to enhance procurement offerings for franchisees, aiming for increased profitability [75][76]

Driven Brands Holdings, Inc. (NASDAQ:DRVN) Q2 2022 Earnings Conference Call July 27, 2022 9:00 AM ET Company Participants Jonathan Fitzpatrick - President, CEO & Director Tiffany Mason - CFO & EVP Conference Call Participants Christopher O'Cull - Stifel, Nicolaus & Company Simeon Gutman - Morgan Stanley Elizabeth Suzuki - Bank of America Merrill Lynch Sharon Zackfia - William Blair & Company Peter Keith - Piper Sandler & Co. Christopher Horvers - JPMorgan Chase & Co. Peter Benedict - Robert W. Baird & Co. O ...

Driven Brands Holdings, Inc. (NASDAQ:DRVN) Q1 2022 Earnings Conference Call April 27, 2022 9:00 AM ET Company Participants Jonathan Fitzpatrick - CEO, President Tiffany Mason - CFO, EVP Rachel Webb - VP, IR Conference Call Participants Simeon Gutman - Morgan Stanley Christopher Horvers - JPMorgan Peter Benedict - Baird Liz Suzuki - Bank of America Kate McShane, - Goldman Sachs Chris OÂ'Cull - Stiefel Karen Short - Barclays Peter Keith - Piper Sandler Operator Good morning and welcome to Driven Brand's First ...