Driven Brands (US:DRVN)2024-02-22 22:00Financial Data and Key Metrics Changes - For fiscal year 2023, the company achieved 13% revenue growth compared to the prior year, supported by 7% same-store sales growth and 4% net store growth, with adjusted diluted EPS of $0.93 [9][36] - System-wide sales for the year were $6.3 billion, up 12.1% year-over-year, driven by the addition of 183 net new stores and 7.4% same-store sales growth [36] - Reported revenue for the year was $2.3 billion, an increase of 13.3%, with adjusted EBITDA of $535.1 million, reflecting a 4.2% increase [36][41] - In Q4 2023, system-wide sales were $1.5 billion, representing a 3% increase from the prior year, with reported revenue of $554 million, an increase of 2.6% [43] Business Line Data and Key Metrics Changes - Take 5 Oil Change delivered over 9% revenue growth in Q4, with same-store sales growth of about 7% and adjusted EBITDA growth of almost 14% [19] - The Car Wash segment experienced a same-store sales decline of 3.3% in Q4, with total segment revenue decreasing by 1% [46] - The Platform Services segment saw revenue increase by 5.6% year-over-year, with adjusted EBITDA margin decreasing to 36.7% from 37.6% in Q4 2022 [47] Market Data and Key Metrics Changes - The company noted that January 2024 sales were impacted by multiple storms, flooding, and freezing temperatures across many markets, which could negatively affect Q1 performance [13] - The US Glass business integration is complete, and the focus is now on improving performance and positioning for future growth [15][96] Company Strategy and Development Direction - The company aims to focus on delivering guidance, reducing debt, and active portfolio management to ensure the right assets are in place for short, medium, and long-term goals [15] - The company has a pipeline of over 1,000 stores expected to open in the coming years, with approximately 75% of those being franchised [11] - The company plans to hold off on opening new US Car Wash stores until the base business meets performance expectations [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the overall health of retail customers, noting no significant stress observed in the US consumer market [121] - The company expects same-store sales growth of 3% to 5% for 2024, primarily driven by the maintenance segment, with net store growth of approximately 205 to 220 stores [49] - Management anticipates that adjusted EBITDA will peak in Q2 and then decline sequentially throughout the remainder of the year [59] Other Important Information - The company will no longer add back straight-line rent to arrive at adjusted EBITDA, which will impact the reported figures moving forward [31] - The company expects to generate approximately $235 million in cash flow from operating activities, an increase of 19.3% compared to 2022 [42] Q&A Session Summary Question: Can you break down the 2024 EBITDA guidance? - Management indicated that most growth is expected from the maintenance segment, with US Car Wash and US Glass also contributing as the year progresses [64] Question: What is the expected capital from monetizing the Car Wash pipeline? - Management expects to generate north of $100 million from divesting pipeline sites throughout the year [67] Question: Can you elaborate on the maintenance segment's profitability? - Management highlighted effective labor management and commodity cost control as key drivers of profitability in the maintenance segment [72] Question: What is the outlook for the Car Wash segment? - Management is focused on maintaining variable cost structure improvements and driving predictable revenue in 2024 [86] Question: How is membership penetration tracking in the Car Wash business? - Management reported growth in membership and is focused on optimizing the membership structure for better performance [94] Question: What is the path forward for the Glass segment? - Management is optimistic about growth in retail, commercial, and insurance sides of the Glass business, particularly with regional insurance opportunities [96]