–Revenue increased 12% powered by 6% same-store sales growth and 6% net store growth–
–Reaffirms fiscal year 2023 financial outlook–
CHARLOTTE, N.C. — Driven Brands Holdings Inc. (NASDAQ: DRVN) (“Driven Brands” or the “Company”) today reported financial results for the third quarter ended September 30, 2023.
For the third quarter, Driven Brands delivered revenue of $581.0 million, up 12 percent versus the prior year. System-wide sales were $1.6 billion, up 10 percent versus the prior year driven by 6 percent same-store sales growth and 6 percent net store growth. The Company added 55 net new stores in the quarter.
During the third quarter, we had an $851 million non-cash goodwill impairment in the Car Wash segment as well as $111 million in non-cash asset impairment charges and lease terminations. This drove a Net Loss of $799.3 million or a Net Loss of $4.83 per diluted share versus Net Income of $38.4 million in the prior year. Adjusted Net Income1 decreased 39 percent to $33.7 million or $0.20 per diluted share1, and Adjusted EBITDA1 decreased 2 percent to $127.2 million. Cash provided by operating activities for the nine months ended September 30, 2023, increased 26 percent to $212.0 million compared to $167.7 million in the prior year.
“This quarter, we continued to see meaningful growth and strong operational performance across our portfolio excluding our US Car Wash and Glass businesses. I’m delighted to report we recently opened our 300th franchised Take 5 Oil Change location and I’m looking forward to celebrating our 1,000th location in the fourth quarter,” said Jonathan Fitzpatrick, President and Chief Executive Officer.
“As discussed at our Investor Day on September 20, we remain focused on operational improvements in the US Car Wash business, while making steady progress on the US Glass integration. Given continued weak consumer demand and increasing competition in the US Car Wash sector, we are strategically pausing capital investment in this business. Looking ahead to 2024, the Driven Brands team is prioritizing continued progress in our US Car Wash and US Glass businesses, disciplined deployment of capital, and generating free cash flow, which will primarily be used to pay down debt.”
Capital and Liquidity
The Company ended the third quarter with total liquidity of $386.8 million consisting of $211.3 million in cash and cash equivalents, and $175.5 million of undrawn capacity on its variable funding securitization senior notes and revolving credit facility. This does not include the additional $135.0 million Series 2022 Class A-1 Notes that expand the Company’s variable funding note borrowing capacity when the Company elects to exercise it, assuming certain conditions continue to be met.
Share Repurchase Program
During the three months ended September 30, 2023, the Company repurchased 3,601,694 shares of its common stock for approximately $50 million at an average price of $13.87, completing the repurchase authorization approved by the Board of Directors in August 2023. All repurchases were made on the open market.
Fiscal Year 2023 Outlook
The Company reaffirms its financial outlook for fiscal year 2023.
Driven Brands will host a conference call to discuss third quarter 2023 results today, Wednesday, November 1, 2023, at 8:30am ET. The call will be available by webcast and can be accessed by visiting Driven Brands’ Investor Relations website at investors.drivenbrands.com. A replay of the call will be available for three months.
Disclosure Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, trends, plans, objectives of management, impact of accounting standards and guidance, impairments, and expected market growth are forward-looking statements. In particular, forward-looking statements include, among other things, statements relating to: (i) our strategy, outlook and growth prospects; (ii) our operational and financial targets and dividend policy; (iii) general economic trends and trends in the industry and markets; (iv) the risks and costs associated with the integration of, and our ability to integrate, our stores and business units successfully to achieve anticipated synergies; (v) the proper application of generally accepted accounting principles, which are highly complex and involve many subjective assumptions, estimates, and judgments and (vi) the competitive environment in which we operate. Forward-looking statements are not based on historical facts, but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions, and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. It is not possible to predict or identify all such risks. These risks include, but are not limited to, the risk factors that are described under the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as well as in our other filings with the Securities and Exchange Commission, which are available on its website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
The following information provides definitions and reconciliations of the non-GAAP financial measures presented in this earnings release to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP). The Company has provided this non-GAAP financial information, which is not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in this earnings release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in this earnings release. The non-GAAP financial measures in this earnings release may differ from similarly titled measures used by other companies.
Non-GAAP Financial Measures in Guidance
Driven Brands includes Adjusted EBITDA and Adjusted EPS in the Company’s Fiscal Year 2023 Guidance. Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures and have not been reconciled to the most comparable GAAP outlook because it is not possible to do so without unreasonable efforts due to the uncertainty and potential variability of reconciling items, which are dependent on future events and often outside of management’s control and which could be significant. Because such items cannot be reasonably predicted with the level of precision required, we are unable to provide outlook for the comparable GAAP measures. Forward-looking estimates of Adjusted EBITDA and Adjusted EPS are made in a manner consistent with the relevant definitions and assumptions noted herein and in our filings with the SEC.
Adjusted Net Income and Adjusted Earnings Per Share
Adjusted net income attributable to Driven Brands Holdings Inc. (“Adjusted Net Income”) and Adjusted diluted earnings per share attributable to Driven Brands common stockholders (“Adjusted Earnings Per Share”) are considered non-GAAP financial measures under the SEC’s rules because they exclude certain amounts included in the net income attributable to Driven Brands common stockholders and diluted earnings per share attributable to Driven Brands common stockholders calculated in accordance with GAAP. Management believes that Adjusted Net Income and Adjusted EPS are meaningful measures to share with investors because they facilitate comparison of the current period performance with that of the comparable prior period. In addition, Adjusted Net Income and Adjusted Earnings Per Share afford investors a view of what management considers to be Driven Brands’ core earnings performance as well as the ability to make a more informed assessment of such earnings performance with that of the prior period.
Adjusted EBITDA is considered a non-GAAP financial measure under the Securities and Exchange Commission’s (“SEC”) rules because it excludes certain amounts included in net income calculated in accordance with GAAP. Management believes that Adjusted EBITDA is a meaningful measure to share with investors because it facilitates comparison of the current period performance with that of the comparable prior period. In addition, Adjusted EBITDA affords investors a view of what management considers to be Driven Brand’s core operating performance as well as the ability to make a more informed assessment of such operating performance as compared with that of the prior period.
Please see the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023, for additional information on Adjusted EBITDA. The tables below reflect the calculation of Adjusted EBITDA for the three and nine months ended September 30, 2023, compared to the three and nine months ended September 24, 2022.
About Driven Brands
Driven Brands™, headquartered in Charlotte, NC, is the largest automotive services company in North America, providing a range of consumer and commercial automotive needs, including paint, collision, glass, vehicle repair, oil change, maintenance and car wash. Driven Brands is the parent company of some of North America’s leading automotive service businesses including Take 5 Oil Change®, Take 5 Car Wash®, Meineke Car Care Centers®, Maaco®, 1-800-Radiator & A/C®, Auto Glass Now®, and CARSTAR®. Driven Brands has more than 4,900 locations across 14 countries, and services over 70 million vehicles annually. Driven Brands’ network generates approximately $2.3 billion in annual revenue from approximately $6.2 billion in system-wide sales.