Driven Brands (US:DRVN)2023-05-06 05:09Financial 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]