Delivers Strong Same-Store Sales and Net Store Growth

Reports Robust Operating Income Growth

Raises Fiscal Year 2022 Guidance

CHARLOTTE, N.C., July 27, 2022 (GLOBE NEWSWIRE) -- Driven Brands Holdings Inc. (NASDAQ: DRVN) (“Driven Brands” or the “Company”) today reported financial results for the second quarter ended June 25, 2022.

For the second quarter, revenue was $508.6 million, an increase of 36% versus the prior year. System-wide sales were $1.4 billion, an increase of 22% versus the prior year, with 7% net store growth and an increase in consolidated same-store sales of 13.2%.

The $(0.34) loss per diluted share in the second quarter was driven by a $125.5 million one-time non-cash impairment charge related to intangible assets as a result of the Company’s decision to re-brand its U.S. car wash business.

Adjusted earnings per diluted share² was $0.35.

“We delivered strong results in the second quarter. These results are a testament to the resilience of our needs-based service offering and our ability to drive sustainable growth and cash flow leveraging a proven playbook,” said Jonathan Fitzpatrick, president and CEO.

“We have significant momentum across our business capitalizing on the benefits of our scale, the quality of our offerings, the strength of our brands, our best-in-category data and marketing capabilities, and our ability to generate robust cash flow. We are delivering against our Dream Big plan of at least $850 million of adjusted EBITDA by the end of 2026, demonstrating our ability to drive significant shareholder value over time.”

Second Quarter Highlights

• Revenue increased 36% versus the prior year, driven by same-store sales and net store growth.

• Consolidated same-store sales increased 13.2% for the quarter.

• The Company added 80 net new stores during the quarter.

• The Company recorded a net loss in the second quarter of $(57.0) million, driven by a $125.5 million one-time non-cash impairment charge related to intangible assets as a result of the Company’s decision to re-brand its U.S. car wash business.

• Adjusted Net Income¹ was $59.7 million.

• Adjusted EBITDA³ was $135.4 million.

Second Quarter 2022 Key Performance Indicators by Segment

*Car Wash same-store sales declined 2.7% in the second quarter. Foreign exchange rate movement had a significant impact. Excluding the impact of foreign exchange, Car Wash same-store sales increased 2.6%. The impact of foreign exchange rate movement on the remaining segments was not significant.

Capital and Liquidity

The Company ended the second quarter with total liquidity of $488.2 million, consisting of $197.9 million in cash and cash equivalents, and $290.3 million of undrawn capacity on its variable funding securitization senior notes and revolving credit facility.

Fiscal Year 2022 Guidance

The Company has raised its guidance for the fiscal year to account for its strong operating performance and M&A activity in the first half of 2022, as well as an updated outlook for the remainder of the year. The following guidance reflects the Company’s current expectations for the fiscal year ending December 31, 2022:

• Revenue of approximately $2.0 billion.

• Adjusted EBITDA³ of approximately $495 million.

• Adjusted earnings per diluted share² of approximately $1.17.
  

The above guidance includes the impact of the 53rd week in fiscal year 2022. The impact of the extra week is expected to yield approximately $25 million in revenue, $5 million in Adjusted EBITDA³ and approximately $0.02 in Adjusted Earnings Per Share².

The Company also expects:

• Low-double-digit same-store sales growth.

• Net store growth of approximately 340:

  • Maintenance: approximately 140 stores of which 70% will be franchised and 30% will be company-operated

  • Car Wash: approximately 40 stores which will be company-operated

  • Paint, Collision & Glass: approximately 160 stores of which 5% will be franchised and 95% will be company-operated.
    

The Company has not included future M&A in its guidance for fiscal year 2022.                                                                                                               

Conference Call

Driven Brands will host a conference call to discuss second quarter 2022 results today, Wednesday, July 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 October 25, 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 $1.7 billion in annual revenue from more than $5.0 billion in system-wide sales.

Contacts

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 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)

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CONSOLIDATED BALANCE SHEETS (UNAUDITED)

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

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RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

(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 $1.3 million and $2.6 million for the three and six months ended June 25, 2022, respectively, and adjusted net income attributable to participating securities used in the diluted earnings per share calculation was $1.1 million and $2.3 million for the three and six months ended June 25, 2022, respectively.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

1. 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.

2. 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

3. 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.

4. Represents non-cash equity-based compensation expense.

5. 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.

6. Relates to an impairment of certain Car Wash trade names as the Company elected to discontinue their use.

7. 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 respective lease termination dates.

8. Represents the write-off of debt issuance costs associated with early termination of debt.

9. Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statements of operations.

10. Represents uncertain tax positions recorded for tax positions, inclusive of interest and penalties.

11. 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)

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

ADDITIONAL INFORMATION ON KEY PERFORMANCE INDICATORS (UNAUDITED)

62 Drive N Style stores are included in the Maintenance store count for the three months ended June 26, 2021 as previously reported, but none are included in store count for the three months ended June 25, 2022 as they are held for sale.

62 Drive N Style stores are included in the Maintenance store count for the six months ended June 26, 2021 as previously reported, but none are included in store count for the six months ended June 25, 2022 as they are held for sale.