Driven Brands (DRVN) - 2024 Q3 - Quarterly Results

Executive Summary Q3 2024 Financial Highlights Driven Brands achieved its 15th consecutive quarter of same-store sales growth, with revenue up 2% to $592 million and Adjusted EBITDA up 14%, significantly reducing net loss - 15th consecutive quarter of same-store sales growth[1][3] | Metric | Q3 2024 (Millions) | Q3 2023 (Millions) | Change (%) | | :---------------------- | :----------------- | :----------------- | :--------- | | Revenue | $592 | $581 | 2% | | System-wide Sales | $1,641.8 | $1,609.0 | 2% | | Net Loss | $(14.9) | $(799.3) | N/A | | Adjusted Net Income | $41.8 | $29.9 | 40% | | Adjusted EBITDA | $138.8 | $122.1 | 14% | | Diluted EPS | $(0.09) | $(4.83) | N/A | | Adjusted Diluted EPS | $0.26 | $0.18 | 44% | Operational Highlights Take 5 Oil Change drove growth with 15% revenue and 5% same-store sales growth, supported by steady legacy franchise brands - Take 5 Oil Change delivered 15% revenue growth and 5% same-store sales growth[1][3] - Performance was supplemented by steady results of legacy franchise brands[3] Strategic Outlook and Deleveraging Achieved net leverage target of 4.5x ahead of schedule, the company commits to further deleveraging and continued growth - Achieved net leverage target of 4.5x ahead of schedule and committed to further deleveraging[4] - Company looks to continue momentum by delivering financial outlook and positioning for continued growth[4] Third Quarter 2024 Financial Results Consolidated Financial Performance Total net revenue increased 2% to $591.7 million, with operating income improving to $39.5 million from a prior-year loss | Metric (in thousands) | Q3 2024 | Q3 2023 | Change (%) | | :------------------------------ | :---------- | :------------ | :--------- | | Total Net Revenue | $591,679 | $581,034 | 1.8% | | Operating Income (Loss) | $39,507 | $(906,857) | N/A | | Net (Loss) Income | $(14,947) | $(799,311) | N/A | | Basic EPS | $(0.09) | $(4.82) | N/A | | Diluted EPS | $(0.09) | $(4.83) | N/A | - Significant improvement in Net (Loss) Income from $(799.3) million in Q3 2023 to $(14.9) million in Q3 2024, largely due to the absence of a goodwill impairment charge ($850.97 million in Q3 2023)[3][13] Segment Performance All segments contributed to system-wide sales growth, with Maintenance leading in Adjusted EBITDA, driven by Take 5 Oil Change | Segment | System-wide Sales (Q3 2024, millions) | Same-Store Sales (Q3 2024) | Revenue (Q3 2024, millions) | Segment Adjusted EBITDA (Q3 2024, millions) | | :------------------------- | :------------------------------------ | :------------------------- | :-------------------------- | :------------------------------------------ | | Maintenance | $535.9 | 3.0% | $278.2 | $96.7 | | Car Wash | $140.4 | 1.8% | $142.2 | $25.6 | | Paint, Collision & Glass | $857.2 | 1.3% | $109.0 | $34.7 | | Platform Services | $108.2 | N/A | $52.2 | $22.5 | | Total | $1,641.8 | 1.1% | $591.7 | $138.8 | - Take 5 Oil Change, a key brand in the Maintenance segment, delivered 15% revenue growth and 5% same-store sales growth[1][3] Capital and Liquidity The company maintained strong liquidity of $655.3 million at Q3 2024, comprising cash and undrawn capacity on credit facilities | Metric (in millions) | Q3 2024 | | :------------------- | :------ | | Total Liquidity | $655.3 | | Cash & Equivalents | $204.2 | | Undrawn Capacity | $451.1 | - Additional $135.0 million Series 2022 Class A-1 Notes available to expand borrowing capacity if conditions are met[6] Fiscal Year 2024 Outlook Revised Financial Outlook FY24 outlook adjusted for Canadian distribution business sale, expecting revenue $2.33-$2.43 billion and Adjusted EBITDA $529-$559 million - Sale of Canadian distribution business expected to reduce full-year revenue by ~$18 million and Adjusted EBITDA by ~$6 million[7] | Metric | Original Outlook | Outlook Adjusted for Disposition | Current Range Expectations | | :------------------ | :------------------------- | :------------------------------- | :------------------------- | | Revenue | ~$2.35 - $2.45 billion | ~$2.33 - $2.43 billion | Low-end | | Adjusted EBITDA | ~$535 - $565 million | ~$529 - $559 million | Mid - to High-end | | Adjusted EPS | ~$0.88 - $1.00 | ~$0.88 - $1.00 | High-end | Operational Expectations For FY24, the company anticipates same-store sales growth of 1% to 3% and net store growth of approximately 205 to 220 units - Same-store sales growth expected to be 1% to 3%[8] - Net store growth expected to be approximately 205 to 220 units[8] - Outlook does not include potential future M&A[8] Company Information About Driven Brands North America's largest automotive services company, operating over 5,100 locations across 14 countries, servicing ~70 million vehicles annually - Largest automotive services company in North America, providing paint, collision, glass, vehicle repair, oil change, maintenance, and car wash services[10] - Operates over 5,100 locations across 14 countries, servicing ~70 million vehicles annually[10] - Generates approximately $2.3 billion in annual revenue from ~$6.4 billion in system-wide sales[10] Conference Call Details Driven Brands hosted a conference call on October 31, 2024, to discuss Q3 2024 results, with webcast and replay available online - Conference call held on October 31, 2024, at 8:30 a.m. ET[9] - Webcast and replay available on investors.drivenbrands.com for at least three months[9] Forward-Looking Statements & Contacts Press release includes forward-looking statements subject to risks detailed in SEC filings, with contact information for inquiries provided - Press release contains forward-looking statements identified by terms like 'anticipate,' 'expect,' 'will,' etc., subject to risks outlined in SEC filings[11][12] - Shareholder/Analyst inquiries: Dawn Francfort, ICR, Inc. (investors@drivenbrands.com, (203) 682-8200)[13] - Media inquiries: Taylor Blanchard (taylor.blanchard@drivenbrands.com, (704) 644-8129)[13] Consolidated Financial Statements (Unaudited) Consolidated Statements of Operations Total net revenue increased to $591.7 million, operating income improved to $39.5 million (from a loss), with a net loss of $14.9 million | Metric (in thousands) | Three Months Ended Sep 28, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 28, 2024 | Nine Months Ended Sep 30, 2023 | | :---------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Net Revenue | $591,679 | $581,034 | $1,775,471 | $1,750,352 | | Operating Income (Loss) | $39,507 | $(906,857) | $178,532 | $(732,078) | | Net (Loss) Income | $(14,947) | $(799,311) | $19,473 | $(731,813) | | Diluted Earnings Per Share | $(0.09) | $(4.83) | $0.12 | $(4.41) | - Goodwill impairment charge of $850.97 million in Q3 2023 was absent in Q3 2024, significantly impacting operating income and net loss[13] Consolidated Balance Sheets Total assets decreased to $5.76 billion due to reduced assets held for sale and goodwill, while total shareholders' equity increased | Metric (in thousands) | Sep 28, 2024 | Dec 30, 2023 | | :-------------------------------- | :----------- | :----------- | | Total Assets | $5,759,816 | $5,910,804 | | Total Liabilities | $4,797,009 | $5,004,081 | | Total Shareholders' Equity | $962,807 | $906,723 | | Cash and Cash Equivalents | $204,181 | $176,522 | | Assets Held for Sale | $185,985 | $301,229 | | Long-term Debt | $2,732,572 | $2,910,812 | - Decrease in Assets held for sale from $301.2 million to $186.0 million[14] - Decrease in Goodwill from $1,455.9 million to $1,427.5 million[14] Consolidated Statements of Cash Flows Net cash from operating activities decreased to $174.7 million, investing activities provided $85.3 million, and financing used $226.7 million | Metric (in thousands) | Nine Months Ended Sep 28, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | $174,654 | $212,033 | | Cash Provided by (Used in) Investing Activities | $85,280 | $(361,207) | | Cash (Used in) Provided by Financing Activities | $(226,661) | $147,850 | | Net Change in Cash, Cash Equivalents, etc. | $33,344 | $(959) | - Proceeds from sale or disposal of businesses and fixed assets significantly increased to $255.5 million (YTD 2024) from $2.8 million (YTD 2023)[15] - Repayment of long-term debt increased to $422.5 million (YTD 2024) from $21.0 million (YTD 2023)[15] Non-GAAP Financial Measures Reconciliation Adjusted Net Income and Adjusted EPS Reconciliation Adjusted Net Income was $41.8 million (up from $29.9 million) and Adjusted Diluted EPS was $0.26 (up from $0.18) - Adjusted Net Income and Adjusted EPS are non-GAAP measures used to facilitate comparison of core earnings performance[19] | Metric (in thousands, except per share) | Three Months Ended Sep 28, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 28, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net (Loss) Income | $(14,947) | $(799,311) | $19,473 | $(731,813) | | Adjustments (Total) | $55,859 | $196,189 | $166,433 | $286,459 | | Tax Impact of Adjustments | $(14,100) | $(166,320) | $(28,543) | $(171,783) | | Adjusted Net Income | $41,759 | $29,869 | $137,890 | $114,676 | | Adjusted Diluted EPS | $0.26 | $0.18 | $0.84 | $0.68 | Adjusted EBITDA Reconciliation Adjusted EBITDA increased 14% to $138.8 million for Q3 2024, and to $422.0 million for the nine months - Adjusted EBITDA is a non-GAAP measure to assess core operating performance and facilitate period-over-period comparison[22] | Metric (in thousands) | Three Months Ended Sep 28, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 28, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net (Loss) Income | $(14,947) | $(799,311) | $19,473 | $(731,813) | | EBITDA | $81,894 | $(864,198) | $303,779 | $(602,825) | | Total Adjustments | $56,885 | $986,248 | $118,236 | $994,708 | | Adjusted EBITDA | $138,779 | $122,050 | $422,015 | $391,883 | Footnotes for Non-GAAP Adjustments Detailed explanations for non-GAAP adjustments include acquisition costs, share-based compensation, goodwill impairment, and amortization of acquired intangibles - Adjustments include acquisition-related costs, non-core items, cloud computing amortization, share-based compensation, foreign currency transaction loss, goodwill impairment, asset sale leaseback (gain) loss, loss on debt extinguishment, amortization of acquired intangible assets, and valuation allowance for deferred tax assets[25] - Tax impact of adjustments is calculated using statutory income tax rates ranging from 9% to 36%[25] Additional Key Performance Indicators System-wide Sales and Store Count by Segment (Q3) Total system-wide sales increased to $1.64 billion, driven by Maintenance and Paint, Collision & Glass, with store count at 5,109 | Segment | Q3 2024 System-wide Sales (thousands) | Q3 2023 System-wide Sales (thousands) | Q3 2024 Store Count | Q3 2023 Store Count | | :------------------------- | :------------------------------------ | :------------------------------------ | :------------------ | :------------------ | | Maintenance | $535,942 | $502,482 | 1,899 | 1,732 | | Car Wash | $140,410 | $141,714 | 1,107 | 1,133 | | Paint, Collision & Glass | $857,210 | $845,644 | 1,897 | 1,920 | | Platform Services | $108,194 | $119,199 | 206 | 208 | | Total | $1,641,756 | $1,609,039 | 5,109 | 4,993 | - Total store count increased by 116 units year-over-year in Q3[29][30] System-wide Sales and Store Count by Segment (YTD) Total system-wide sales reached $4.91 billion for the nine months, driven by Maintenance and Paint, Collision & Glass, with 5,109 stores | Segment | YTD 2024 System-wide Sales (thousands) | YTD 2023 System-wide Sales (thousands) | YTD 2024 Store Count | YTD 2023 Store Count | | :------------------------- | :------------------------------------- | :------------------------------------- | :------------------- | :------------------- | | Maintenance | $1,571,046 | $1,429,049 | 1,899 | 1,732 | | Car Wash | $439,175 | $459,840 | 1,107 | 1,133 | | Paint, Collision & Glass | $2,601,490 | $2,554,216 | 1,897 | 1,920 | | Platform Services | $301,982 | $327,911 | 206 | 208 | | Total | $4,913,693 | $4,771,016 | 5,109 | 4,993 | - Total system-wide sales for the nine months increased by 3% year-over-year[32][34]