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Driven Brands Holdings Inc. Reports First Quarter Results
Source: Nasdaq GlobeNewswire / 27 Apr 2022 06:00:37 America/Chicago
Delivers Strong Same-Store Sales and Net Store Growth
Reports Robust Operating Income and Earnings Per Share Growth
CHARLOTTE, N.C., April 27, 2022 (GLOBE NEWSWIRE) -- Driven Brands Holdings Inc. (NASDAQ: DRVN) (“Driven Brands” or the “Company”) today reported financial results for the first quarter ended March 26, 2022.
For the first quarter, revenue was $468.3 million, an increase of 42% versus the prior year. System-wide sales were $1.3 billion, an increase of 26% versus the prior year, with 8% net store growth and an increase in consolidated same-store sales of 15.6%.
Earnings per diluted share was $0.20 for the first quarter.
Adjusted earnings per diluted share2 was $0.28, an increase of 47% versus the prior year.
“Driven Brands posted strong first quarter results despite a challenging macroeconomic landscape. Our scale and sophistication allowed us to navigate continued supply chain challenges and an accelerating inflationary environment. This scale and sophistication, coupled with our proven playbook for growth, allowed us to once again outperform expectations,” said Jonathan Fitzpatrick, president and CEO. “This would not be possible without the hard work of the entire team, from our employees to franchisees. Their relentless focus on operational excellence delivered quality results,” Fitzpatrick added.
“We continue to be enthusiastic about fiscal 2022. With our scale, the significant whitespace in this fragmented and needs-based industry, and our robust cash generation engine, our business model remains well-positioned to maximize long-term value for all of our stakeholders.”
First Quarter Highlights
- Revenue increased 42% versus the prior year, driven by same-store sales and net store growth.
- Consolidated same-store sales increased 15.6% for the quarter, and all segments posted positive same-store sales.
- The Company added 114 net new stores during the quarter.
- Net income in the first quarter was $34.4 million.
- Adjusted Net Income1 was $47.8 million, an increase of 57% versus the prior year.
- Adjusted EBITDA3 was $118.5 million, an increase of 52% versus the prior year.
First Quarter 2022 Key Performance Indicators by Segment
System-wide Sales
(in millions)Store Count Same-Store
SalesRevenue
(in millions)Segment Adjusted
EBITDA4
(in millions)Maintenance $ 357.1 1,531 19.2 % $ 178.7 $ 52.5 Car Wash 157.6 1,063 6.6 % 159.3 55.7 Paint, Collision & Glass 659.0 1,730 13.7 % 79.4 29.0 Platform Services 90.8 202 30.9 % 43.2 14.2 Corporate / Other N/A N/A N/A 7.7 Total $ 1,264.5 4,526 15.6 % $ 468.3
Capital and LiquidityThe Company ended the first quarter with total liquidity of $667.9 million, consisting of $270.7 million in cash and cash equivalents, and $397.2 million of undrawn capacity on its variable funding securitization senior notes and revolving credit facility.
Fiscal Year 2022 Guidance
The Company provided the following guidance5 for the fiscal year ending December 31, 2022 on February 16, 2022 and will provide updated guidance in connection with the release of its second quarter results:
- Revenue of approximately $1.9 billion.
- Adjusted EBITDA3 of approximately $465 million.
- Adjusted Earnings per Share2 of approximately $1.04.
The above guidance includes the impact of the 79 acquired Auto Glass Now stores and the 53rd week in fiscal year 2022. The impact of the extra week is expected to yield approximately $16 million in revenue, $4 million in Adjusted EBITDA3 and approximately $0.02 in Adjusted Earnings Per Share2.
The Company also expects:
- Mid-single-digit same-store sales growth.
- Net store growth of approximately 225:
- Maintenance: approximately 145 stores of which 65% will be franchised and 35% will be company-operated
- Car Wash: approximately 45 stores which will be company-operated
- Paint, Collision & Glass: approximately 35 stores which will be company-operated.
The Company has not included future M&A in its guidance for fiscal year 2022.
__________________5 See Disclosure Regarding Non-GAAP Financial Measures
Conference Call
Driven Brands will host a conference call to discuss first quarter 2022 results today, Wednesday, April 27, 2022 at 9:00am 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 until July 26, 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®, Meineke Car Care Centers®, Maaco®, 1-800-Radiator & A/C®, and CARSTAR®. Driven Brands has more than 4,500 locations across 15 countries, and services over 50 million vehicles annually. Driven Brands’ network generates more than $1.6 billion in annual revenue from more than $4.7 billion in system-wide sales.
Contacts
Shareholder/Analyst inquiries:
Rachel Webb
rachel.webb@drivenbrands.com
(704) 644-8125Media inquiries:
Taylor Blanchard
taylor.blanchard@drivenbrands.com
(704) 644-8129Disclosure 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 press release, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, 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; and (iv) 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 25, 2021 and 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.
Forward-looking statements represent our estimates and assumptions only as of the date on which they are made, and we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Disclosure Regarding Non-GAAP Financial Measures
In addition to the financial measures presented in this release in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company has included certain non-GAAP financial measures in this release, including Adjusted Net Income1, Adjusted Earnings Per Share2, and Adjusted EBITDA3. Management believes these non-GAAP financial measures are useful because they enable management, investors, and others to assess the operating performance of the Company and its segments. Please refer to the Reconciliation of Non-GAAP Financial Information tables located in the financial supplement in this release.
This release includes forward-looking guidance for certain non-GAAP financial measures, including Adjusted Earnings Per Share2 and Adjusted EBITDA3. These measures will differ from net income, determined in accordance with GAAP, in ways similar to those described in the Reconciliation of Non-GAAP Financial Information tables in this release. We do not provide guidance for net income, determined in accordance with GAAP, or a reconciliation of guidance for Adjusted EBITDA3 to the most directly comparable GAAP measure because the Company is not able to predict with reasonable certainty the amount or nature of all items that will be included in net income.
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1 “Adjusted Net Income” is calculated by eliminating from net income the adjustments described for Adjusted EBITDA, amortization related to acquired intangible assets and the tax effect of the adjustments. Please refer to Reconciliation of Non-GAAP Information tables located in the financial supplement in this release.
2 “Adjusted Earnings Per Share” represents Adjusted Net Income divided by weighted average shares (basic and diluted). Please refer to Reconciliation of Non-GAAP Information tables located in the financial supplement in this release.
3 “Adjusted EBITDA” represents earnings before interest expense, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, straight-line rent, equity compensation, loss on debt extinguishment and certain non-recurring, non-core, infrequent or unusual charges. Please refer to Reconciliation of Non-GAAP Information tables located in the financial supplement in this release.
4 “Segment Adjusted EBITDA” is defined as Adjusted EBITDA with a further adjustment for store opening costs. Corporate & Other costs are not allocated across segments. Segment Adjusted EBITDA is a supplemental measure of operating performance of our segments and may not be comparable to similar measures reported by other companies. Please refer to Adjusted EBITDA and Segment Adjusted EBITDA Reconciliation located in the financial supplement in this release.DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)Three months ended (in thousands, except per share amounts) March 26, 2022 March 27, 2021 Revenue: Franchise royalties and fees $ 37,888 $ 30,414 Company-operated store sales 292,391 183,855 Independently-operated store sales 63,089 56,163 Advertising contributions 19,698 17,255 Supply and other revenue 55,257 41,733 Total revenue 468,323 329,420 Operating expenses: Company-operated store expenses 177,867 112,756 Independently-operated store expenses 33,299 31,108 Advertising expenses 19,698 17,255 Supply and other expenses 32,774 22,489 Selling, general and administrative expenses 92,220 69,050 Acquisition costs 4,318 1,646 Store opening costs 506 289 Depreciation and amortization 33,023 23,852 Asset impairment charges and lease terminations 898 1,253 Total operating expenses 394,603 279,698 Operating income 73,720 49,722 Other expenses, net: Interest expense, net 25,353 18,091 Loss on foreign currency transactions, net 971 10,511 Loss on debt extinguishment — 45,498 Total other expenses, net 26,324 74,100 Net income (loss) before taxes 47,396 (24,378 ) Income tax expense (benefit) 12,968 (4,446 ) Net income (loss) $ 34,428 $ (19,932 ) Net income (loss) attributable to non-controlling interests $ (15 ) $ 7 Net income (loss) attributable to Driven Brands Holdings Inc. $ 34,443 $ (19,939 ) Earnings per share(1): Basic $ 0.21 $ (0.13 ) Diluted $ 0.20 $ (0.13 ) Weighted average shares outstanding(1): Basic 162,762 154,827 Diluted 166,748 154,827 DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands) March 26, 2022 December 25, 2021 Assets Current assets: Cash and cash equivalents $ 270,681 $ 523,414 Restricted cash 792 792 Accounts and notes receivable, net 133,809 117,903 Inventory 48,883 46,990 Prepaid and other assets 24,640 24,326 Income tax receivable 5,070 6,867 Advertising fund assets, restricted 51,281 45,360 Assets held for sale 3,275 3,275 Total current assets 538,431 768,927 Notes receivable, net 8,918 3,182 Property and equipment, net 1,384,770 1,350,984 Operating lease right-of-use assets 1,026,537 995,625 Deferred commissions 10,623 10,567 Intangibles, net 862,761 816,183 Goodwill 2,044,594 1,910,392 Deferred tax assets 1,477 1,509 Total assets $ 5,878,111 $ 5,857,369 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 85,468 $ 83,033 Accrued expenses and other liabilities 241,730 297,620 Income taxes payable 20,642 11,054 Current portion of long-term debt 22,969 26,044 Income tax receivable liability 24,255 24,255 Advertising fund liabilities 29,022 26,441 Total current liabilities 424,086 468,447 Long-term debt, net 2,358,379 2,356,320 Deferred tax liability 256,535 257,067 Operating lease liabilities 961,182 931,604 Income tax receivable liability 131,715 131,715 Deferred revenue 39,541 37,576 Accrued expenses and other long-term liabilities 28,181 29,398 Total liabilities 4,199,619 4,212,127 Common stock 1,675 1,674 Additional paid-in capital 1,610,585 1,605,890 Retained earnings 76,050 41,607 Accumulated other comprehensive loss (10,483 ) (5,028 ) Total shareholders' equity attributable to Driven Brands Holdings Inc. 1,677,827 1,644,143 Non-controlling interests 665 1,099 Total shareholders' equity 1,678,492 1,645,242 Total liabilities and shareholders' equity $ 5,878,111 $ 5,857,369 DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended (in thousands) March 26, 2022 March 27, 2021 Net income (loss) $ 34,428 $ (19,932 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 33,023 23,852 Non-cash lease cost 17,002 20,028 Loss on foreign denominated transactions 970 13,000 Gain on derivatives not designed as hedges — (2,489 ) Bad debt expense 372 657 Asset impairment costs 898 1,253 Amortization of deferred financing costs and bond discounts 2,224 2,139 Benefit (provision) for deferred income taxes 132 (8,018 ) Loss on extinguishment of debt — 45,498 Other, net 1,597 (749 ) Changes in assets and liabilities, net of acquisitions: Accounts and notes receivable, net (21,123 ) (19,693 ) Inventory (1,787 ) 135 Prepaid and other assets 397 (8,184 ) Advertising fund assets and liabilities, restricted (1,204 ) 2,621 Deferred commissions (39 ) (573 ) Deferred revenue 455 1,551 Accounts payable 509 638 Accrued expenses and other liabilities (61,624 ) (6,451 ) Income tax receivable 11,476 3,061 Operating lease liabilities (8,666 ) (15,758 ) Cash provided by operating activities 9,040 32,586 Cash flows from investing activities: — Capital expenditures (68,967 ) (23,280 ) Cash used in business acquisitions, net of cash acquired (224,526 ) (26,732 ) Proceeds from sale-leaseback transactions 37,781 41,023 Proceeds from sale of company-operated stores — 4,481 Proceeds from disposition of Denmark car wash operation 1,577 — Proceeds from disposal of property and equipment 803 — Cash used in investing activities (253,332 ) (4,508 ) Cash flows from financing activities: Repayment of long-term debt (4,820 ) (707,384 ) Proceeds from revolving lines of credit and short-term debt — 114,800 Repayments of revolving lines of credit and short-term debt — (132,800 ) Repayment of principal portion of finance lease liability (879 ) (409 ) Proceeds from initial public offering, net of underwriting discounts — 661,500 Net proceeds from underwriters' exercise of over-allotment option — 99,225 Repurchases of common stock — (42,977 ) Payment for termination of interest rate swaps — (21,826 ) Other, net (20 ) — Cash provided by financing activities (5,719 ) (29,871 ) Effect of exchange rate changes on cash (592 ) 650 Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted (250,603 ) (1,143 ) Cash and cash equivalents, beginning of period 523,414 172,611 Cash included in advertising fund assets, restricted, beginning of period 38,586 19,369 Restricted cash, beginning of period 792 15,827 Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period 562,792 207,807 Cash and cash equivalents, end of period 270,681 175,371 Cash included in advertising fund assets, restricted, end of period 40,716 21,160 Restricted cash, end of period 792 10,133 Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period $ 312,189 $ 206,664 DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)
Adjusted Net Income and Adjusted Earnings Per Share Three months ended (in thousands, except per share amounts) March 26, 2022 March 27, 2021 Net income (loss) $ 34,428 $ (19,932 ) Acquisition related costs(a) 4,318 1,646 Non-core items and project costs, net(b) 866 32 Straight-line rent adjustment(c) 4,093 2,485 Equity-based compensation expense(d) 2,618 983 Foreign currency transaction (gain) loss, net(e) 971 10,511 Asset sale leaseback (gain) loss, impairment and closed store expenses(f) (124 ) (786 ) Loss on debt extinguishment(g) — 45,498 Amortization related to acquired intangible assets(h) 5,142 3,652 Provision for uncertain tax positions(i) 76 — Adjusted net income before tax impact of adjustments 52,388 44,089 Tax impact of adjustments(j) (4,612 ) (13,641 ) Adjusted net income 47,776 30,448 Net (loss) income attributable to non-controlling interest (15 ) 7 Adjusted net income attributable to Driven Brands Holdings Inc. $ 47,791 $ 30,441 Adjusted earnings per share Basic(1) $ 0.29 $ 0.19 Diluted(1) $ 0.28 $ 0.19 Weighted average shares outstanding Basic 162,762 154,827 Diluted 166,748 158,761 (1) Adjusted earnings per share is calculated under the two-class method. Under the two-class method, adjusted earnings per share is calculated using adjusted net income attributable to common shares, which is derived by reducing adjusted net income by the amount attributable to participating securities. Adjusted net income attributable to participating securities used in the basic earnings per share calculation was $1.0 million and $0.7 million for the three months ended March 26, 2022 and March 27, 2021, respectively, and adjusted net income attributable to participating securities used in the diluted earnings per share calculation was $0.9 million and $0.7 million for the three months ended March 26, 2022 and March 27, 2021, respectively. DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)
Net Income (Loss) to Adjusted EBITDA Reconciliation Three months ended (in thousands) March 26, 2022 March 27, 2021 Net income (loss) 34,428 $ (19,932 ) Income tax expense 12,968 (4,446 ) Interest expense, net 25,353 18,091 Depreciation and amortization 33,023 23,852 EBITDA 105,772 17,565 Acquisition related costs(a) 4,318 1,646 Non-core items and project costs, net(b) 866 32 Straight-line rent adjustment(c) 4,093 2,485 Equity-based compensation expense(d) 2,618 983 Foreign currency transaction loss, net(e) 971 10,511 Asset sale leaseback (gain) loss, impairment and closed store expenses(f) (124 ) (786 ) Loss on debt extinguishment(g) — 45,498 Adjusted EBITDA $ 118,514 $ 77,934 - Consists of acquisition costs as reflected within the consolidated statement of operations, including legal, consulting and other fees and expenses incurred in connection with acquisitions completed during the applicable period, as well as inventory rationalization expenses incurred in connection with acquisitions. We expect to incur similar costs in connection with other acquisitions in the future and, under U.S. GAAP, such costs relating to acquisitions are expensed as incurred and not capitalized.
- Consists of discrete items and project costs, including (i) third-party consulting and professional fees associated with strategic transformation initiatives, and (ii) other miscellaneous expenses, including non-capitalizable expenses relating to the Company’s initial public offering and other strategic transactions
- Consists of the non-cash portion of rent expense, which reflects the extent to which our straight-line rent expense recognized under U.S. GAAP exceeds or is less than our cash rent payments.
- Represents non-cash equity-based compensation expense.
- Represents foreign currency transaction gains/losses, net that primarily related to the remeasurement of our intercompany loans. These losses are partially offset by unrealized gains/losses on remeasurement of cross currency swaps and forward contracts.
- Relates to (gain) loss on sale leasebacks, the discontinuation of the use of a trade name, as well as impairment of certain fixed assets and operating lease right-of-use assets related to closed locations. Also represents lease exit costs and other costs associated with stores that were closed prior to the irrespective lease termination dates.
- Represents the write-off of debt issuance costs associated with early termination of debt.
- Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statements of operations.
- Represents uncertain tax positions recorded for tax positions, inclusive of interest and penalties.
- Represents the tax impact of adjustments associated with the reconciling items between net income and Adjusted Net Income, excluding the provision for uncertain tax positions and valuation allowance for certain deferred tax assets. To determine the tax impact of the deductible reconciling items, we utilized statutory income tax rates ranging from 9% to 36%, depending upon the tax attributes of each adjustment and the applicable jurisdiction.
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
ADJUSTED EBITDA AND SEGMENT ADJUSTED EBITDA RECONCILIATION (UNAUDITED)
Three months ended (in thousands) March 26, 2022 March 27, 2021 Segment Adjusted EBITDA: Maintenance $ 52,485 $ 40,440 Car Wash 55,720 34,155 Paint, Collision & Glass 29,012 17,639 Platform Services 14,165 11,008 Corporate and other (32,362 ) (25,019 ) Store opening costs (506 ) (289 ) Adjusted EBITDA $ 118,514 $ 77,934 DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
ADDITIONAL INFORMATION ON KEY PERFORMANCE INDICATORS (UNAUDITED)
Three months ended March 26, 2022 (in thousands) Maintenance Car Wash Paint,
Collision &
GlassPlatform
ServicesTotal System-wide Store sales Franchise stores $ 200,284 $ — 619,063 $ 89,643 $ 908,990 Company-operated stores 156,828 94,495 39,904 1,151 292,378 Independently operated Stores — 63,089 — — 63,089 Total System-wide Sales $ 357,112 $ 157,584 $ 658,967 $ 90,794 $ 1,264,457 Store Count (in whole numbers) Franchise stores 982 — 1,611 201 2,794 Company-operated stores 549 341 119 1 1,010 Independently operated Stores — 722 — — 722 Total Store Count 1,531 1,063 1,730 202 4,526 Three months ended March 27, 2021 (in thousands) Maintenance Car Wash Paint,
Collision &
GlassPlatform
ServicesTotal System-wide Store sales Franchise stores $ 163,817 $ — $ 530,503 $ 68,373 $ 762,693 Company-operated stores 114,067 57,048 $ 11,930 $ 983 184,028 Independently operated Stores — 56,163 — — 56,163 Total System-wide Sales $ 277,884 $ 113,211 $ 542,433 $ 69,356 $ 1,002,884 Store Count (in whole numbers) Franchise stores 975 — 1,594 197 2,766 Company-operated stores 495 220 33 1 749 Independently operated Stores — 734 — — 734 Total Store Count 1,470 954 1,627 198 4,249 62 Drive N Style stores are included in the Maintenance store count for the three months ended March 27, 2021 as previously reported, but none are included in store count for the three months ended March 26, 2022 as they are held for sale.