Driven Brands (DRVN) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2024, Driven Brands reported revenue of $564 million, a 2% increase year-over-year, with adjusted EBITDA of$ 130.7 million and diluted adjusted EPS of $0.30 [10][11][50] - For the full fiscal year 2024, revenue reached$ 2.3 billion, with adjusted EBITDA of $553 million, reflecting a 2% and 7% increase respectively compared to the previous year [11][56] - The company achieved a net leverage ratio of 4.4x in Q4, down from 4.5x in Q3, with a total debt paydown of approximately$ 248 million for the year [19][54] Business Line Data and Key Metrics Changes - The Take 5 Oil Change segment experienced 9.2% same-store sales growth in Q4, contributing to a total of 174 net new stores for the fiscal year [21][43] - The Paint, Collision & Glass segment generated revenue of $97.3 million with adjusted EBITDA of$ 33 million, while the Platform Services segment reported revenue of $40.2 million and adjusted EBITDA of$ 16.3 million [39][40] - The Car Wash segment reported revenue of $143.4 million and adjusted EBITDA of$ 28.7 million, with same-store sales growth of 7.9% [40] Market Data and Key Metrics Changes - Driven Brands noted that the ongoing inflationary environment is expected to pressure consumer spending, particularly among lower-income households, but anticipates some mitigation from strong performance in commercial and needs-based businesses [12][60] - The company reported system-wide sales growth of 3.6% to $6.5 billion for the full year, driven by same-store sales growth of 1.3% and net unit growth of 191 units [56] Company Strategy and Development Direction - The company plans to focus on three key priorities for 2025: delivering the 2025 outlook, utilizing cash flow to reduce debt, and active portfolio management [9][27] - A definitive agreement has been made to sell the U.S. car wash business, with the transaction expected to close in Q2 2025 [13][41] - The company will adopt a simplified segment structure starting Q1 2025, with Take 5 Oil Change as a stand-alone segment to enhance clarity for investors [14][66] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the dynamic macroeconomic environment, emphasizing the strength of the Take 5 Oil Change brand as a growth engine [12][27] - The company anticipates a more normalized level of same-store sales growth in 2025, following a particularly strong Q4 [36][86] - Management highlighted the importance of investing in frontline employees and maintaining high customer loyalty through service excellence [37][102] Other Important Information - The company has sold approximately$ 208 million in assets during fiscal year 2024, with over 75% of the divestiture process completed [18][54] - The company plans to provide quarterly unaudited pro forma results for FY 2024 in the new segment structure starting in mid-March 2025 [68] Q&A Session Summary Question: Can you provide color on the 2025 outlook and expected growth? - Management indicated that the U.S. car wash business contributed approximately $50 million of adjusted EBITDA, and the growth in 2025 will primarily come from Take 5 Oil Change, which has a strong unit pipeline and customer engagement [73][74] Question: What is the expected breakdown of unit growth between segments? - The majority of the expected net unit growth of 175 to 200 units will come from the Take 5 pipeline, with a historical trend of 2/3 being franchise stores and 1/3 company-owned [105][108] Question: What drove the increase in corporate costs in Q4? - The increase was attributed to performance-based compensation and share-based compensation related to IPO grants, reflecting strong company performance [102][103] Question: What is the plan for the International Car Wash segment? - The International Car Wash business will continue to be owned and operated, with stable performance expected, and management remains active in assessing its components [126] Question: Is there an appetite for M&A following the car wash sale? - While historically acquisitive, the company is currently focused on organic growth but remains open to accretive opportunities in the automotive aftermarket space [128]