Driven Brands Holdings Inc. Reports Fourth Quarter and Fiscal Year 2023 Results
--Fiscal 2023 revenue increased 13% powered by 7% same-store sales growth and 4% net store growth--
--Achieved 12 consecutive quarters of same store sales growth--
--Issues fiscal year 2024 financial outlook--
CHARLOTTE, N.C., Feb. 22, 2024 /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 30, 2023.
Fiscal Year 2023 Highlights
For the fiscal year, Driven Brands delivered revenue of $2.3 billion, up 13% versus the prior year. System-wide sales were $6.3 billion, up 12% versus the prior year driven by 7% same-store sales growth and 4% net store growth. The Company added 183 net new stores during fiscal 2023.
During the fiscal year, the Company recognized an $851.0 million non-cash goodwill impairment in the Car Wash segment as well as $132.9 million in non-cash asset impairment charges and lease terminations. These drove a Net Loss of $745.0 million or a Net Loss of $4.53 per diluted share versus Net Income of $43.2 million or Net Income of $0.25 per diluted share in the prior year. Adjusted Net Income1 was $155.9 million and Adjusted EPS1 was $0.93, a decrease of 25% and 24%, respectively from the prior year. Adjusted EBITDA1 was $535.1 million, up 4% versus the prior year. Cash provided by operating activities increased 19% to $235.2 million compared to $197.2 million in the prior year.
"We are happy to announce that we delivered on our updated 2023 outlook for all financial metrics, while also pivoting our strategy and adapting to the dynamic market. In the fourth quarter, our performance was driven by strong execution in our Maintenance segment, specifically in our industry-leading Take 5 Oil Change business, and we're encouraged by the progress made in our U.S. Glass and U.S. Car Wash businesses," said Jonathan Fitzpatrick, President and Chief Executive Officer.
"Our goals in the second half of 2023 were to deliver on our full-year outlook and set ourselves up for a successful 2024, and we did just that. In 2024, we are focused on accelerating growth, reducing debt, and making sure that Driven has the right assets to execute on both our short- and long-term goals," Fitzpatrick concluded.
Fourth Quarter 2023 Highlights
For the fourth quarter, Driven Brands delivered revenue of $553.7 million, up 3% versus the prior year. System-wide sales were $1.5 billion, up 3% versus the prior year driven by 4% same-store sales growth. Net Loss was $13.1 million or a Net Loss of $0.08 per diluted share versus Net Income of $27.4 million, or $0.16 per diluted share in the prior year. Adjusted Net Income was $30.7 million and Adjusted EPS was $0.19, a decrease of 27% and 24%, respectively from the prior year. Adjusted EBITDA was $129.0 million, down 1% versus the prior year.
Fiscal Year 2023 Key Performance Indicators by Segment | |||||
System-wide Sales | Store Count | Same-Store | Revenue (in millions) | Segment Adjusted (in millions) | |
Maintenance | $ 1,899.8 | 1,786 | 9.2 % | $ 960.4 | $ 332.8 |
Car Wash | 591.8 | 1,108 | (5.6) % | 597.7 | 143.0 |
Paint, Collision & Glass | 3,389.6 | 1,888 | 11.4 % | 500.4 | 141.5 |
Platform Services2 | 402.6 | 206 | N/A | 216.0 | 80.6 |
Corporate / Other | N/A | N/A | N/A | 29.5 | |
Total | $ 6,283.7 | 4,988 | 7.4 % | $ 2,304.0 | |
Fourth Quarter 2023 Key Performance Indicators by Segment | |||||
System-wide Sales | Store Count | Same-Store | Revenue (in millions) | Segment Adjusted (in millions) | |
Maintenance | $ 470.8 | 1,786 | 4.7 % | $ 246.0 | $ 87.5 |
Car Wash | 131.9 | 1,108 | (3.3) % | 133.2 | 31.0 |
Paint, Collision & Glass | 835.3 | 1,888 | 6.4 % | 117.0 | 31.7 |
Platform Services2 | 74.7 | 206 | N/A | 50.7 | 18.6 |
Corporate / Other | N/A | N/A | N/A | 6.7 | |
Total | $ 1,512.7 | 4,988 | 3.9 % | $ 553.7 | |
Capital and Liquidity
The Company ended the fourth quarter with total liquidity of $319.0 million consisting of $176.5 million in cash and cash equivalents and $142.5 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 them, assuming certain conditions continue to be met.
Fiscal Year 2024 Outlook
Beginning in fiscal 2024, the Company changed its definitions for Adjusted Net Income, Adjusted EPS, and Adjusted EBITDA. Specifically, the Company will no longer include straight-line rent adjustments in its non-GAAP adjustments. See "Reconciliation of Non-GAAP Financial Measures" below for additional details of these changes and a reconciliation of the definitions prior to fiscal 2024 to allow for like-for-like comparisons to the new definitions for all periods presented.
The table below sets forth the Company's fiscal year 2023 results and 2024 outlook using the revised methodology to calculate Adjusted EBITDA, and Adjusted EPS.
2023 Results | 2024 Outlook | |
Revenue | $2.30 billion | ~$2.35 - $2.45 billion |
Adjusted EBITDA1 | $516.9 million | ~$535 - $565 million |
Adjusted EPS1 | $0.85 | ~$0.88 - $1.00 |
The Company also expects:
- Same-store sales growth of 3% to 5%
- Net new store growth of approximately 205 to 220
- Maintenance: approximately 165 to 185 stores of which approximately 65% will be franchise and 35% company-operated
- Car Wash: approximately 5 to 10 stores all from the international business
- Paint Collision & Glass: approximately 25 to 35 stores of which approximately 85% will be franchise and 15% company-operated
- Maintenance: approximately 165 to 185 stores of which approximately 65% will be franchise and 35% company-operated
The Company has not included future M&A in its outlook for fiscal year 2024.
___________
1 Adjusted Net Income, Adjusted EPS, and Adjusted EBITDA are non-GAAP financial measures. Beginning in fiscal 2024, the company has made certain changes to how it defines these metrics that impact the comparability to prior periods. See "Reconciliation of Non-GAAP Financial Measures" for additional information on changes to these non-GAAP financial measures, a reconciliation to the most comparable GAAP measures, and a reconciliation between the differences in metric definitions for all periods presented. Forward-looking estimates of Adjusted EBITDA and Adjusted EPS are made in a manner consistent with the relevant definitions and assumptions noted herein.
2 Platform Services same store sales were removed as a Key Performance Indicator as sales included within the calculation represented less than 20% of Platform Services revenue.
Conference Call
Driven Brands will host a conference call to discuss fourth quarter and year-end 2023 results today, Thursday, February 22, 2024, at 8:30 a.m. 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 at least three months.
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 approximately 5,000 locations across 13 countries, and services over 70 million vehicles annually. Driven Brands' network generates approximately $2.3 billion in annual revenue from approximately $6.3 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, trends, plans, objectives of management, impact of accounting standards and outlook, 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.
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES | |||||||
Three Months Ended | Year Ended | ||||||
(in thousands, except per share amounts) | December 30, | December 31, | December 30, 2023 | December 31, | |||
Revenue: | |||||||
Franchise royalties and fees | $ 49,685 | $ 43,434 | $ 190,367 | $ 171,734 | |||
Company-operated store sales | 366,668 | 366,921 | 1,526,353 | 1,324,408 | |||
Independently-operated store sales | 38,748 | 36,657 | 196,395 | 195,157 | |||
Advertising contributions | 25,303 | 23,943 | 98,850 | 87,750 | |||
Supply and other revenue | 73,273 | 68,698 | 292,064 | 254,145 | |||
Total revenue | 553,677 | 539,653 | 2,304,029 | 2,033,194 | |||
Operating Expenses: | |||||||
Company-operated store expenses | 241,741 | 231,894 | 1,004,472 | 812,262 | |||
Independently-operated store expenses | 21,983 | 22,544 | 109,078 | 107,940 | |||
Advertising expenses | 23,743 | 24,179 | 97,290 | 87,986 | |||
Supply and other expenses | 40,248 | 35,865 | 158,436 | 145,481 | |||
Selling, general, and administrative expenses | 110,957 | 110,821 | 443,112 | 383,478 | |||
Acquisition related costs | 5,910 | 5,323 | 13,174 | 15,304 | |||
Store opening costs | 2,057 | 953 | 5,831 | 2,878 | |||
Depreciation and amortization | 46,040 | 39,528 | 175,296 | 147,156 | |||
Goodwill impairment | — | — | 850,970 | — | |||
Trade name impairment | — | — | — | 125,450 | |||
Asset impairment charges and lease terminations | 15,453 | 2,745 | 132,903 | 5,655 | |||
Total operating expenses | 508,132 | 473,852 | 2,990,562 | 1,833,590 | |||
Operating (loss) income | 45,545 | 65,801 | (686,533) | 199,604 | |||
Other expenses, net: | |||||||
Interest expense, net | 43,892 | 35,150 | 164,196 | 114,096 | |||
(Gain) loss on foreign currency transactions | (3,081) | (13,322) | (3,078) | 17,168 | |||
Other expense, net | 40,811 | 21,828 | 161,118 | 131,264 | |||
(Loss) income before taxes | 4,734 | 43,973 | (847,651) | 68,340 | |||
Income tax (benefit) expense | 17,883 | 16,575 | (102,689) | 25,167 | |||
Net (loss) income | (13,149) | 27,398 | (744,962) | 43,173 | |||
Net loss attributable to non-controlling interest | — | — | — | (15) | |||
Net (loss) income attributable to Driven | $ (13,149) | $ 27,398 | $ (744,962) | $ 43,188 | |||
(Loss) earnings per share: | |||||||
Basic | $ (0.08) | $ 0.16 | $ (4.50) | $ 0.26 | |||
Diluted | $ (0.08) | $ 0.16 | $ (4.53) | $ 0.25 | |||
Weighted average shares outstanding | |||||||
Basic | 159,573 | 162,744 | 161,917 | 162,762 | |||
Diluted | 159,573 | 166,810 | 161,917 | 166,743 | |||
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) | |||
(in thousands, except share and per share amounts) | December 30, 2023 | December 31, | |
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ 176,522 | $ 227,110 | |
Restricted cash | 657 | 792 | |
Accounts and notes receivable, net | 151,259 | 179,888 | |
Inventory | 83,171 | 72,040 | |
Prepaid and other assets | 46,714 | 40,084 | |
Income tax receivable | 15,928 | 15,075 | |
Assets held for sale | 301,229 | — | |
Advertising fund assets, restricted | 45,627 | 36,421 | |
Total current assets | 821,107 | 571,410 | |
Other assets | 56,565 | 30,561 | |
Property and equipment, net | 1,438,496 | 1,545,738 | |
Operating lease right-of-use assets | 1,389,316 | 1,299,189 | |
Deferred commissions | 6,312 | 7,121 | |
Intangibles, net | 739,402 | 765,903 | |
Goodwill | 1,455,946 | 2,277,065 | |
Deferred tax assets | 3,660 | 2,911 | |
Total assets | $ 5,910,804 | $ 6,499,898 | |
Liabilities and shareholders' equity | |||
Current liabilities: | |||
Accounts payable | $ 67,526 | $ 60,606 | |
Accrued expenses and other liabilities | 242,171 | 317,318 | |
Income tax payable | 5,404 | 4,454 | |
Current portion of long-term debt | 32,673 | 32,986 | |
Income tax receivable liability | 56,001 | 53,328 | |
Advertising fund liabilities | 23,392 | 36,726 | |
Total current liabilities | 427,167 | 505,418 | |
Long-term debt | 2,910,812 | 2,705,281 | |
Deferred tax liabilities | 154,742 | 276,749 | |
Operating lease liabilities | 1,332,519 | 1,177,501 | |
Income tax receivable liability | 117,915 | 117,915 | |
Deferred revenue | 30,507 | 30,046 | |
Long-term accrued expenses and other liabilities | 30,419 | 33,419 | |
Total liabilities | 5,004,081 | 4,846,329 | |
Preferred Stock $0.01 par value; 100,000,000 shares authorized; none issued or outstanding | — | — | |
Common stock, $0.01 par value, 900,000,000 shares authorized: and 163,965,231 and | 1,640 | 1,674 | |
Additional paid-in capital | 1,652,401 | 1,628,904 | |
Retained (deficit) earnings | (710,087) | 84,795 | |
Accumulated other comprehensive loss | (37,875) | (62,435) | |
Total shareholders' equity attributable to Driven Brands Holdings Inc. | 906,079 | 1,652,938 | |
Non-controlling interests | 644 | 631 | |
Total shareholders' equity | 906,723 | 1,653,569 | |
Total liabilities and shareholders' equity | $ 5,910,804 | $ 6,499,898 | |
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | |||
Year Ended | |||
(in thousands) | Year ended | Year ended | |
Net (loss) income | $ (744,962) | $ 43,173 | |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||
Depreciation and amortization | 175,296 | 147,156 | |
Goodwill impairment | 850,970 | — | |
Trade name impairment | — | 125,450 | |
Equity-based compensation expense | 15,300 | 20,583 | |
(Gain) loss on foreign denominated transactions | (2,022) | 17,147 | |
(Gain) loss on foreign currency derivatives | (1,056) | 21 | |
Loss (gain) on sale and disposal of businesses, fixed assets, and sale-leaseback transactions | 4,909 | (34,854) | |
Reclassification of interest rate hedge to income | (2,077) | (542) | |
Bad debt expense | 1,938 | 5,777 | |
Asset impairment costs | 132,903 | 5,655 | |
Amortization of deferred financing costs and bond discounts | 10,307 | 8,450 | |
Benefit for deferred income taxes | (125,804) | 20,567 | |
Other, net | 24,243 | (21) | |
Changes in assets and liabilities, net of acquisitions: | |||
Accounts and notes receivable, net | 13,561 | (58,837) | |
Inventory | (11,731) | (22,712) | |
Prepaid and other assets | (6,877) | (30,418) | |
Advertising fund assets and liabilities, restricted | (16,861) | 12,698 | |
Other Assets | (39,814) | (23,378) | |
Deferred commissions | 418 | 3,407 | |
Deferred revenue | 1,937 | 1,925 | |
Accounts payable | 7,390 | (34,634) | |
Accrued expenses and other liabilities | (52,854) | 2,898 | |
Income tax receivable | 53 | (12,335) | |
Cash provided by operating activities | 235,167 | 197,176 | |
Cash flows from investing activities: | |||
Capital expenditures | (596,478) | (436,205) | |
Cash used in business acquisitions, net of cash acquired | (59,574) | (763,061) | |
Proceeds from sale-leaseback transactions | 194,658 | 333,798 | |
Proceeds from sale or disposal of businesses and fixed assets | 9,987 | 25,188 | |
Cash used in investing activities | (451,407) | (840,280) | |
Cash flows from financing activities: | |||
Payment of debt extinguishment and issuance costs | — | (7,172) | |
Proceeds from the issuance of long-term debt | — | 365,000 | |
Repayment of long-term debt | (27,971) | (23,912) | |
Proceeds from revolving lines of credit and short-term debt | 378,000 | 435,000 | |
Repayments of revolving lines of credit and short-term debt | (130,000) | (435,000) | |
Repayment of principal portion of finance lease liability | (5,165) | (3,369) | |
Share repurchases | (49,956) | — | |
Purchase of equity securities | (224) | — | |
Proceeds from the termination of interest rate swap | — | 10,870 | |
Stock option exercises | 6,117 | 340 | |
Other, net | (102) | 1,611 | |
Cash provided by financing activities | 170,699 | 343,368 | |
Effect of exchange rate changes on cash | 484 | (2,283) | |
Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund | (45,057) | (302,019) | |
Cash and cash equivalents, beginning of period | 227,110 | 523,414 | |
Cash included in advertising fund assets, restricted, beginning of period | 32,871 | 38,586 | |
Restricted cash, beginning of period | 792 | 792 | |
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, | 260,773 | 562,792 | |
Cash and cash equivalents, end of period | 176,522 | 227,110 | |
Cash included in advertising fund assets, restricted, end of period | 38,537 | 32,871 | |
Restricted cash, end of period | 657 | 792 | |
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, | $ 215,716 | $ 260,773 | |
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 Outlook
Driven Brands includes Adjusted Earnings Before Interest, Tax, Depreciation and Amortization ("Adjusted EBITDA") and Adjusted Earnings per Share ("Adjusted EPS") in the Company's Fiscal Year 2024 Outlook. Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures and have not been reconciled to the most comparable GAAP financial measures 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 an 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.
Changes in Non-GAAP Definitions and Fiscal 2024 Outlook
Beginning in fiscal 2024, the Company has made certain changes to its definitions for Adjusted net income attributable to Driven Brands Holdings Inc. ("Adjusted Net Income"), Adjusted EPS, and Adjusted EBITDA, that impact the comparability of the metrics to prior periods. Specifically, the Company will no longer include straight-line rent adjustments in its non-GAAP adjustments. Accordingly, the Company's 2024 Adjusted EBITDA and Adjusted EPS outlook reflects the Company's updated definition of Adjusted EBITDA and Adjusted EPS. See "Reconciliation of Non-GAAP Financial Measures" below for a reconciliation of the definitions prior to fiscal 2024 to allow for like-for-like comparisons to the new definitions for all periods presented.
Adjusted Net Income and Adjusted Earnings Per Share
Adjusted Net Income and Adjusted EPS 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 EPS 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 three months and year ended December 30, 2023, compared to the three months and year ended December 31, 2022.
Net (Loss) Income to Adjusted Net Income and Adjusted Earnings Per Share (Unaudited) | |||||||
Three months ended | Year Ended | ||||||
(in thousands, except per share amounts) | December 30, | December 31, | December 30, | December 31, | |||
Net (loss) income | $ (13,149) | $ 27,398 | $ (744,962) | $ 43,173 | |||
Acquisition related costs(a) | 5,910 | 5,323 | 13,174 | 15,304 | |||
Non-core items and project costs, net(b) | 1,230 | 16,805 | 7,343 | 20,241 | |||
Straight-line rent adjustment(c) | 4,022 | 3,435 | 18,218 | 14,965 | |||
Cloud computing amortization(d) | 932 | — | 1,923 | — | |||
Equity-based compensation expense(e) | 5,570 | 8,424 | 15,300 | 20,583 | |||
Foreign currency transaction (gain) loss, | (3,081) | (13,322) | (3,078) | 17,168 | |||
Bad debt recovery(g) | — | — | — | (449) | |||
Goodwill impairment(h) | — | — | 850,970 | — | |||
Trade name impairment(i) | — | — | — | 125,450 | |||
Asset sale leaseback (gain) loss, impairment | 19,777 | (8,835) | 139,414 | (29,083) | |||
Amortization related to acquired intangible | 5,192 | 8,775 | 28,756 | 27,059 | |||
Provision for uncertain tax positions(l) | (354) | (224) | (354) | (148) | |||
Valuation allowance for deferred tax asset(m) | 17,729 | 3,051 | 17,729 | 3,051 | |||
Adjusted net income before tax impact of | 43,778 | 50,830 | 344,433 | 257,314 | |||
Tax impact of adjustments(n) | (13,092) | (8,641) | (188,544) | (49,437) | |||
Adjusted net income | 30,686 | 42,189 | 155,889 | 207,877 | |||
Net loss attributable to non-controlling | — | — | — | (15) | |||
Adjusted Net Income attributable to | $ 30,686 | $ 42,189 | $ 155,889 | $ 207,892 | |||
Straight-line rent adjustment(c) | $ (4,022) | $ (3,435) | $ (18,218) | $ (14,965) | |||
Income tax effect of above item | $ 1,121 | $ 1,043 | $ 4,790 | $ 3,870 | |||
Adjusted Net Income attributable to | $ 27,785 | $ 39,797 | $ 142,461 | $ 196,797 | |||
Adjusted Earnings Per Share, as defined | |||||||
Basic1 | $ 0.19 | $ 0.25 | $ 0.94 | $ 1.25 | |||
Diluted1 | $ 0.19 | $ 0.25 | $ 0.93 | $ 1.22 | |||
Adjusted Earnings Per Share, as defined | |||||||
Basic1 | $ 0.17 | $ 0.24 | $ 0.86 | $ 1.18 | |||
Diluted1 | $ 0.17 | $ 0.23 | $ 0.85 | $ 1.16 | |||
Weighted average shares outstanding | |||||||
Basic | 159,573 | 162,744 | 161,917 | 162,762 | |||
Diluted | 161,361 | 166,810 | 164,100 | 166,743 | |||
(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 less than $1 million and $3 million for the three months and year ended December 30, 2023, respectively, and Adjusted Net Income attributable to participating securities used in the diluted earnings per share calculation was less than $1 million and $2 million for the three months and year ended December 30, 2023, respectively. |
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 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 months and year ended December 30, 2023, compared to the three months and year ended December 31, 2022.
Net Income (Loss) to Adjusted EBITDA Reconciliation (Unaudited) | |||||||
Three months ended | Year Ended | ||||||
(in thousands) | December 30, | December 31, | December 30, | December 31, | |||
Net (loss) income | $ (13,149) | $ 27,398 | $ (744,962) | $ 43,173 | |||
Income tax (benefit) expense | 17,883 | 16,575 | (102,689) | 25,167 | |||
Interest expense, net | 43,892 | 35,150 | 164,196 | 114,096 | |||
Depreciation and amortization | 46,040 | 39,528 | 175,296 | 147,156 | |||
EBITDA | 94,666 | 118,651 | (508,159) | 329,592 | |||
Acquisition related costs(a) | 5,910 | 5,323 | 13,174 | 15,304 | |||
Non-core items and project costs, net(b) | 1,230 | 16,805 | 7,343 | 20,241 | |||
Straight-line rent adjustment(c) | 4,022 | 3,435 | 18,218 | 14,965 | |||
Cloud computing amortization(d) | 932 | — | 1,923 | — | |||
Equity-based compensation expense(e) | 5,570 | 8,424 | 15,300 | 20,583 | |||
Foreign currency transaction (gain) loss, net(f) | (3,081) | (13,322) | (3,078) | 17,168 | |||
Bad debt recovery(g) | — | — | — | (449) | |||
Goodwill impairment(h) | — | — | 850,970 | — | |||
Trade name impairment(i) | — | — | — | 125,450 | |||
Asset sale leaseback (gain) loss, impairment | 19,777 | (8,835) | 139,414 | (29,083) | |||
Adjusted EBITDA, as defined through fiscal | $ 129,026 | $ 130,481 | $ 535,105 | $ 513,771 | |||
Straight-line rent adjustment(c) | $ (4,022) | $ (3,435) | $ (18,218) | $ (14,965) | |||
Adjusted EBITDA, as defined beginning | $ 125,004 | $ 127,046 | $ 516,887 | $ 498,806 | |||
Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share Footnotes
(a) | Consists of acquisition costs as reflected within the unaudited consolidated statements 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 non-recurring payroll-related costs. 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 was recorded in the fourth quarter of 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) | Includes non-cash amortization expenses relating to the amortization of cloud computing arrangements. |
(e) | Represents non-cash equity-based compensation expense. |
(f) | Represents foreign currency transaction (gains) losses, net that primarily related to the remeasurement of our intercompany loans as well as unrealized gains and losses on remeasurement of cross currency swaps and forward contracts. |
(g) | Represents the recovery of previously uncollectible receivables outside of normal operations. |
(h) | Relates to goodwill impairment charges within the Car Wash segment. |
(i) | Certain indefinite-lived Car Wash trade names were impaired as the Company elected to discontinue their use. |
(j) | Relates to (gains) losses, net on sale leasebacks, impairment of certain fixed assets and operating lease right-of-use assets related to closed and underperforming locations, assets held for sale, and lease exit costs and other costs associated with stores that were closed prior to the respective lease termination dates. |
(k) | Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the unaudited consolidated statements of operations. |
(l) | Represents uncertain tax positions recorded for tax positions, inclusive of interest and penalties. |
(m) | Represents valuation allowances on income tax carryforwards in certain domestic and foreign jurisdictions that are not more likely than not to be realized |
(n) | 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. 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 | Year Ended | ||||||
(in thousands) | December 30, | December 31, | December 30, | December 31, | |||
Segment Adjusted EBITDA: | |||||||
Maintenance | $ 87,549 | $ 77,284 | $ 332,781 | $ 262,608 | |||
Car Wash | 31,042 | 36,222 | 143,043 | 184,717 | |||
Paint, Collision & Glass | 31,745 | 34,600 | 141,469 | 135,447 | |||
Platform Services | 18,586 | 18,067 | 80,570 | 72,538 | |||
Corporate and other | (37,839) | (34,739) | (156,927) | (138,661) | |||
Store opening costs | (2,057) | (953) | (5,831) | (2,878) | |||
Adjusted EBITDA, as defined through | $ 129,026 | $ 130,481 | $ 535,105 | $ 513,771 | |||
Three months ended | Year Ended | ||||||
(in thousands) | December 30, | December 31, | December 30, | December 31, | |||
Segment Adjusted EBITDA: | |||||||
Maintenance | $ 86,969 | $ 76,433 | $ 329,498 | $ 258,470 | |||
Car Wash | 27,694 | 33,824 | 128,996 | 175,326 | |||
Paint, Collision & Glass | 31,519 | 34,474 | 140,569 | 134,818 | |||
Platform Services | 18,569 | 18,034 | 80,492 | 72,383 | |||
Corporate and other | (37,690) | (34,766) | (156,837) | (139,313) | |||
Store opening costs | (2,057) | (953) | (5,831) | (2,878) | |||
Adjusted EBITDA, as defined beginning | $ 125,004 | $ 127,046 | $ 516,887 | $ 498,806 | |||
(1) For the three months ended April 1, 2023; July 1, 2023; and September 30, 2023, the Adjusted EBITDA, as defined beginning fiscal 2024, would have been $123,463; $146,370; and $122,049, respectively. |
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES ADDITIONAL INFORMATION ON KEY PERFORMANCE INDICATORS (UNAUDITED) | ||||||||||
Three months ended December 30, 2023 | ||||||||||
(in thousands) | Maintenance | Car Wash | Paint, Collision & Glass | Platform Services | Total | |||||
System-wide Sales | ||||||||||
Franchise stores | $ 266,801 | $ — | $ 766,717 | $ 73,778 | $ 1,107,296 | |||||
Company-operated stores | 203,963 | 93,164 | 68,632 | 909 | 366,668 | |||||
Independently operated stores | — | 38,748 | — | — | 38,748 | |||||
Total System-wide Sales | $ 470,764 | $ 131,912 | $ 835,349 | $ 74,687 | $ 1,512,712 | |||||
Store Count (in whole numbers) | ||||||||||
Franchise stores | 1,134 | — | 1,647 | 205 | 2,986 | |||||
Company-operated stores | 652 | 391 | 241 | 1 | 1,285 | |||||
Independently operated stores | — | 717 | — | — | 717 | |||||
Total Store Count | 1,786 | 1,108 | 1,888 | 206 | 4,988 | |||||
Three months ended December 31, 2022 | ||||||||||
(in thousands) | Maintenance | Car Wash | Paint, Collision & Glass | Platform Services | Total | |||||
System-wide Sales | ||||||||||
Franchise stores | $ 253,074 | $ — | $ 719,646 | $ 91,801 | $ 1,064,521 | |||||
Company-operated stores | 195,309 | 95,976 | 74,576 | 1,060 | 366,921 | |||||
Independently operated stores | — | 36,657 | — | — | 36,657 | |||||
Total System-wide Sales | $ 448,383 | $ 132,633 | $ 794,222 | $ 92,861 | $ 1,468,099 | |||||
Store Count (in whole numbers) | ||||||||||
Franchise stores | 1,052 | — | 1,628 | 202 | 2,882 | |||||
Company-operated stores | 593 | 390 | 218 | 1 | 1,202 | |||||
Independently operated stores | — | 721 | — | — | 721 | |||||
Total Store Count | 1,645 | 1,111 | 1,846 | 203 | 4,805 | |||||
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES ADDITIONAL INFORMATION ON KEY PERFORMANCE INDICATORS (UNAUDITED) | ||||||||||
Year ended December 30, 2023 | ||||||||||
(in thousands) | Maintenance | Car Wash | Paint, Collision & Glass | Platform Services | Total | |||||
System-wide Sales | ||||||||||
Franchise stores | $ 1,090,457 | $ — | $ 3,072,137 | $ 398,386 | $ 4,560,980 | |||||
Company-operated stores | 809,356 | 395,357 | 317,428 | 4,212 | 1,526,353 | |||||
Independently operated stores | — | 196,395 | — | — | 196,395 | |||||
Total System-wide Sales | $ 1,899,813 | $ 591,752 | $ 3,389,565 | $ 402,598 | $ 6,283,728 | |||||
Store Count (in whole numbers) | ||||||||||
Franchise stores | 1,134 | — | 1,647 | 205 | 2,986 | |||||
Company-operated stores | 652 | 391 | 241 | 1 | 1,285 | |||||
Independently operated stores | — | 717 | — | — | 717 | |||||
Total Store Count | 1,786 | 1,108 | 1,888 | 206 | 4,988 | |||||
Year ended December 31, 2022 | ||||||||||
(in thousands) | Maintenance | Car Wash | Paint, Collision & Glass | Platform Services | Total | |||||
System-wide Sales | ||||||||||
Franchise stores | $ 923,153 | $ — | $ 2,723,047 | $ 440,691 | $ 4,086,891 | |||||
Company-operated stores | 692,947 | 390,502 | 235,924 | $ 5,035 | 1,324,408 | |||||
Independently operated stores | — | 195,157 | — | — | 195,157 | |||||
Total System-wide Sales | $ 1,616,100 | $ 585,659 | $ 2,958,971 | $ 445,726 | $ 5,606,456 | |||||
Store Count (in whole numbers) | ||||||||||
Franchise stores | 1,052 | — | 1,628 | 202 | 2,882 | |||||
Company-operated stores | 593 | 390 | 218 | 1 | 1,202 | |||||
Independently operated stores | — | 721 | — | — | 721 | |||||
Total Store Count | 1,645 | 1,111 | 1,846 | 203 | 4,805 | |||||
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SOURCE Driven Brands