Driven Brands Holdings Inc. Reports Record Year of Revenue and Profitability in Fiscal 2022; Issues Fiscal 2023 Guidance

• Fiscal 2022 revenue increased 39 percent powered by 14 percent same-store sales growth and 9 percent net store growth
• Momentum continued in fourth quarter with the seventh consecutive quarter of double-digit same store-sales growth
• Fiscal 2023 guidance reflects powerful customer value proposition and resilient needs-based industry

CHARLOTTE, N.C., Feb. 22, 2023 /PRNewswire/ -- Driven Brands Holdings Inc. (NASDAQ: DRVN) ("Driven Brands" or the "Company") today reported financial results for the fourth quarter and fiscal year ended December 31, 2022.

For the fiscal year, Driven Brands delivered revenue of $2.0 billion, up 39 percent versus the prior year. System-wide sales were $5.6 billion, up 24 percent versus the prior year with 14 percent same-store sales growth and 9 percent net store growth. 

Net income increased $33.6 million versus the prior year to $43.2 million or $0.25 per diluted share inclusive of a $125.5 million one-time non-cash impairment charge related to intangible assets in the second quarter as a result of the Company's decision to re-brand its U.S. car wash business. Adjusted Net Income¹ increased 41 percent to $207.9 million or $1.22 per diluted share¹, while Adjusted EBITDA¹ increased 42 percent from the prior year to $513.8 million.

"2022 was a year of record performance and significant strategic progress for Driven Brands.  We deepened our competitive moat as our differentiated offering resonated with our customers," said Jonathan Fitzpatrick, President and Chief Executive Officer. "We gained significant market share in this large and growing $350 billion needs-based automotive services category, and we are leveraging our proven playbook to drive long-term, sustainable growth. 

"Building on our strong performance last year, we entered the first quarter of 2023 with momentum, excellent visibility into our expense base and a robust development pipeline that provides us with strong line of sight to multi-year growth. Our guidance reflects that momentum, our continued confidence in our business model, the resilience of the category, and a track record of execution." 

For the fourth quarter, Driven Brands delivered revenue of $539.7 million, up 38 percent versus the prior year. System-wide sales were $1.5 billion, up 24 percent versus the prior year with 11 percent same-store sales growth and 9 percent net store growth.

Net income increased $66.2 million versus the prior year to $27.4 million or $0.16 per diluted share. Adjusted Net Income¹ increased 35 percent to $42.2 million or $0.25 per diluted share¹, while Adjusted EBITDA¹ increased 54 percent from the prior year to $130.5 million.

Fiscal Year 2022 Highlights²
Comparisons are fiscal year 2022 ended December 31, 2022 versus fiscal year 2021 ended December 25, 2021 unless otherwise noted

• Revenue increased 39 percent to $2.0 billion, driven by same-store sales and net store growth.
• Consolidated same-store sales increased 14 percent.
• The Company added 393 net new stores during the year.
• Net income increased $33.6 million to $43.2 million or $0.25 per diluted share.
• Adjusted Net Income¹ increased 41 percent to $207.9 million or $1.22 per diluted share¹.
• Adjusted EBITDA¹ increased 42 percent to $513.8 million.

Fiscal Year 2022 Key Performance Indicators by Segment

*Car Wash same-store sales declined 3.9 percent in fiscal year 2022. Foreign exchange rate movement had a 440 basis point negative impact. The impact of foreign exchange rate movement on the remaining segments was not significant.

Fourth Quarter 2022 Highlights²
Comparisons are fourth quarter 2022 ended December 31, 2022 versus fourth quarter 2021 ended December 25, 2021 unless otherwise noted

• Revenue increased 38 percent to $539.7 million, driven by same-store sales and net store growth.
• Consolidated same-store sales increased 11 percent.
• The Company added 98 net new stores during the quarter.
• Net income increased $66.2 million to $27.4 million or $0.16 per diluted share.
• Adjusted Net Income¹ increased 35 percent to $42.2 million or $0.25 per diluted share¹.
• Adjusted EBITDA¹ increased 54 percent to $130.5 million.

Fourth Quarter 2022 Key Performance Indicators by Segment

*Car Wash same-store sales declined 10.1 percent in the fourth quarter. Foreign exchange rate movement had a 400 basis point negative impact. The impact of foreign exchange rate movement on the remaining segments was not significant.

Capital and Liquidity

During the fourth quarter, the Company closed on a $365 million whole business securitization transaction. Proceeds from the offering were used for general corporate purposes, including the repayment of the revolving credit facilities creating capacity to invest in continued growth.

The Company ended the fiscal year with total liquidity of $617.6 million, consisting of $227.1 million in cash and cash equivalents, and $390.5 million of undrawn capacity on its variable funding securitization senior notes and revolving credit facility. This does not include the additional $135 million Series 2022 Class A-1 Notes that expand our variable funding note borrowing capacity when the company elects to exercise it, assuming certain conditions continue to be met.

Fiscal Year 2023 Guidance

The following guidance reflects the Company's expectations for fiscal year 2023 ending December 30, 2023:

• Revenue of approximately $2.35 billion.
• Adjusted EBITDA¹ of approximately $590 million.
• Adjusted Earnings Per Share¹ of approximately $1.21.

The Company also expects:

• Same-store sales growth of 5 to7 percent.
• Net store growth of approximately 365:
• Maintenance: approximately 170 stores of which 70% will be franchised and 30% will be Company-operated     
• Car Wash: approximately 65 stores which will be Company-operated
• Paint, Collision & Glass: approximately 130 stores of which 25% will be franchised and 75% will be Company-operated.

The Company has not included future M&A in its guidance for fiscal year 2023.

¹ Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share are non-GAAP financial measures. See "Reconciliation of Non-GAAP Financial Measures" for additional information on non-GAAP financial measures and a reconciliation to the most comparable GAAP measures.  Forward-looking estimates of Adjusted EBITDA and Adjusted Earnings Per Share are made in a manner consistent with the relevant definitions and assumptions noted herein.
² The fourth quarter and fiscal year 2022 results include the impact of the 53rd week in fiscal year 2022, which contributed $25 million in revenue, $6 million in Adjusted EBITDA¹ and $0.02 in Adjusted Earnings Per Share¹_.                                                                                                                                                                                                                                                                                                                      

Conference Call

Driven Brands will host a conference call to discuss fourth quarter and fiscal year 2022 results today, Wednesday, February 22, 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 until May 2, 2023.

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 4,800 locations across 13 countries, and services over 70 million vehicles annually. Driven Brands' network generates approximately $2.0 billion in annual revenue from more than $5.6 billion in system-wide sales.

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, our Quarterly Report on Form 10-Q for the fiscal quarter ended September 24, 2022, 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.

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.

The tables below reflect the calculation of Adjusted Net Income and Adjusted Earnings Per Share for the fourth quarter and fiscal year ended December 31, 2022 compared to the fourth quarter and fiscal year ended December 25, 2021.

Adjusted EBITDA

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 25, 2021 filed with the SEC on March 18, 2022 for additional information on Adjusted EBITDA. The tables below reflect the calculation of Adjusted EBITDA for the fourth quarter and fiscal year ended December 31, 2022 compared to the fourth quarter and fiscal year ended December 25, 2021.

Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share Footnotes

a.  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.

b.  Consists of discrete items and project costs, including third-party consulting and professional fees associated with strategic transformation initiatives, as well as a $15 million change in estimate related to the Tax Receivable Agreement that we entered into at the IPO related to the filing of our 2021 tax returns in the fourth quarter 2022.

c.  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.

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

e.  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.

f.  Represents the recovery of previously uncollectible receivables outside of normal operations.

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

h.  Relates to net (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. 

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

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

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

l.  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.

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SOURCE Driven Brands