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Driven Brands (DRVN) - 2024 Q3 - Earnings Call Transcript
DRVNDriven Brands (DRVN)2024-11-02 07:39
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Financial Data and Key Metrics Changes - For Q3 2024, Driven Brands reported revenue of 592million,a2592 million, a 2% increase year-over-year, with adjusted EBITDA of 138.8 million and diluted adjusted EPS of 0.26pershare[11][54]−Thecompanyachievedits15thconsecutivequarterofpositivesame−storesalesgrowth,withagrowthrateof1.10.26 per share [11][54] - The company achieved its 15th consecutive quarter of positive same-store sales growth, with a growth rate of 1.1% [11][50] - Operating income for Q3 was 40 million, with adjusted EBITDA margin increasing by approximately 250 basis points to 23.5% [53] Business Line Data and Key Metrics Changes - The Take 5 Oil Change segment saw revenue growth of 15% and adjusted EBITDA growth of 14% compared to Q3 2023, marking its 17th consecutive quarter of positive same-store sales growth [17][34] - The PC&G segment reported revenue of 109millionandadjustedEBITDAof109 million and adjusted EBITDA of 34.7 million, with same-store sales up 1.3% [40] - The Car Wash segment generated 142.2millioninrevenueand142.2 million in revenue and 25.6 million in adjusted EBITDA, with same-store sales increasing by 1.8% despite weather challenges [43] Market Data and Key Metrics Changes - The company faced significant challenges from four hurricanes in Q3, impacting over 500 locations and resulting in an estimated system-wide sales loss of up to 10million[32][44]−TheinternationalCarWashbusinessperformedwell,helpingtooffsetthenegativeimpactsfacedbytheU.S.CarWashbusiness[43]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedonthreekeypriorities:deliveringthe2024outlook,utilizingexcessfreecashflowtoreducedebt,andactiveportfoliomanagement[9][28]−DrivenBrandsaimstoachieveanetleverageratiooflessthanthreetimesbytheendof2026,havingalreadyreachedaleverageratioof4.5timesinQ3[16][56]−Thecompanyisactivelyevaluatingopportunitiesforportfoliomanagement,includingthedivestitureofnon−corebusinesses[15][102]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementacknowledgedongoinginflationarypressuresaffectingconsumerspending,particularlyamonglower−incomehouseholds,butexpressedconfidenceinthestrengthoftheircommercialbusiness[13][28]−Thecompanyreiterateditsguidancefortheremainderof2024,expectingrevenuebetween10 million [32][44] - The international Car Wash business performed well, helping to offset the negative impacts faced by the U.S. Car Wash business [43] Company Strategy and Development Direction - The company is focused on three key priorities: delivering the 2024 outlook, utilizing excess free cash flow to reduce debt, and active portfolio management [9][28] - Driven Brands aims to achieve a net leverage ratio of less than three times by the end of 2026, having already reached a leverage ratio of 4.5 times in Q3 [16][56] - The company is actively evaluating opportunities for portfolio management, including the divestiture of non-core businesses [15][102] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing inflationary pressures affecting consumer spending, particularly among lower-income households, but expressed confidence in the strength of their commercial business [13][28] - The company reiterated its guidance for the remainder of 2024, expecting revenue between 2.33 billion and 2.43billion,andadjustedEBITDAbetween2.43 billion, and adjusted EBITDA between 529 million and 559million[60][61]OtherImportantInformation−DrivenBrandshassoldapproximately559 million [60][61] Other Important Information - Driven Brands has sold approximately 160 million in assets year-to-date, exceeding its previous full-year estimate of $150 million [55] - The company has a robust pipeline of approximately 1,000 sites for future growth, with a target of at least 2,000 locations for Take 5 Oil Change [19][20] Q&A Session Summary Question: Can you speak to ticket versus traffic in car wash specifically and within ticket, how is pricing trending there? - Management indicated satisfaction with both ticket and traffic growth, with Take 5 Oil Change delivering strong performance [63] Question: Can you talk about the retail flow post-hurricane within the U.S. car wash business? - Management emphasized a focus on membership growth, noting that they have surpassed one million members in the U.S. [68][69] Question: Can you discuss the maintenance segment margins and trends around mature store comps in Take 5 Oil? - Management acknowledged some margin degradation due to hurricanes but expressed satisfaction with both mature and new store performance [70][72] Question: How do you think about ticket and an opportunity to add more services in Take 5? - Management sees significant potential for ticket growth and plans to introduce more services in the future [76][78] Question: Can you provide context on the glass business and its growth potential? - Management clarified that they are focused on building the glass business and have secured new partnerships that will contribute to growth [80][88] Question: What is the current competitive landscape and trends in the commercial side? - Management noted ongoing consolidation in the industry and emphasized the importance of long-term commercial partnerships [100][101] Question: How much of the strategy to reach three times leverage by 2026 is dependent on debt paydown versus EBITDA growth? - Management indicated that both debt paydown and EBITDA growth will contribute to achieving the leverage target [102]