UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended March 29, 2025
OR
Commission file number: 001-39898
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | ||
| (I.R.S. Employer Identification No.) | ||
| (Address of principal executive offices) | ||
| (Zip Code) | ||
Registrant’s telephone number, including area code: (704 ) 377-8855
| Title of each class | ||
| Trading Symbol | ||
| Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Non-accelerated filer ☐ | ||
Accelerated filer ☐ | ||
Small reporting company | ||
Emerging growth company | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of May 5, 2025, the Registrant had 164,275,359 shares of Common Stock outstanding.
Driven Brands Holdings Inc.
Table of Contents
| Page | |||||
PART I. FINANCIAL INFORMATION | |||||
PART II. OTHER INFORMATION | |||||
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, trends, plans, objectives of management, impact of accounting standards and guidance, impairments, and expected market growth are forward-looking statements. In particular, forward-looking statements include, among other things, statements relating to: (i) our ability to realize the value of the note received as partial payment in the sale of our U.S. Car Wash business; (ii) potential post-closing obligations and liabilities relating to the sale of our U.S. Car Wash business; (iii) the current geopolitical environment, including the impact, both direct and indirect, of government actions, such as proposed and enacted tariffs; (iv) our strategy, outlook, and growth prospects; (v) our operational and financial targets and dividend policy; (vi) general economic trends and trends in the industry and markets; (vii) the risks and costs associated with the integration of, and or ability to integrate, our stores and business units successfully; (viii) the proper application of generally accepted accounting principles, which are highly complex and involve many subjective assumptions, estimates, and judgments; and (ix) 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. Given these uncertainties, you should not place undue reliance on these 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 28, 2024 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.
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.
2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
| Three Months Ended | |||||||||||
| (in thousands, except per share amounts) | March 29, 2025 | March 30, 2024 | |||||||||
| Net revenue: | |||||||||||
| Franchise royalties and fees | $ | $ | |||||||||
| Company-operated store sales | |||||||||||
| Independently-operated store sales | |||||||||||
| Advertising contributions | |||||||||||
| Supply and other revenue | |||||||||||
| Total net revenue | |||||||||||
| Operating Expenses: | |||||||||||
| Company-operated store expenses | |||||||||||
| Independently-operated store expenses | |||||||||||
| Advertising expenses | |||||||||||
| Supply and other expenses | |||||||||||
| Selling, general, and administrative expenses | |||||||||||
| Depreciation and amortization | |||||||||||
| Total operating expenses | |||||||||||
| Operating income | |||||||||||
| Other expenses, net: | |||||||||||
| Interest expense, net | |||||||||||
| Foreign currency transaction loss, net | |||||||||||
| Other expenses, net | |||||||||||
| Income before taxes from continuing operations | |||||||||||
| Income tax expense | |||||||||||
| Net income from continuing operations | $ | $ | |||||||||
| Net loss from discontinued operations, net of tax | $ | ( | $ | ( | |||||||
| Net income | $ | $ | |||||||||
| Basic earnings (loss) per share: | |||||||||||
| Continuing Operations | $ | $ | |||||||||
| Discontinued Operations | ( | ( | |||||||||
| Net basic earnings per share | $ | $ | |||||||||
| Diluted earnings (loss) per share: | |||||||||||
| Continuing Operations | $ | $ | |||||||||
| Discontinued Operations | ( | ( | |||||||||
| Net diluted earnings per share | $ | $ | |||||||||
| Weighted average shares outstanding | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
| Three Months Ended | |||||||||||
| (in thousands) | March 29, 2025 | March 30, 2024 | |||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income: | |||||||||||
| Foreign currency translation adjustments | ( | ||||||||||
Unrealized loss from cash flow hedges, net of tax expense of $ | ( | ( | |||||||||
Actuarial (loss) gain of defined pension plan, net of tax expense of $ | ( | ||||||||||
| Other comprehensive income (loss), net | ( | ||||||||||
| Total comprehensive income (loss) | ( | ||||||||||
| Comprehensive income attributable to non-controlling interests | |||||||||||
| Comprehensive income (loss) attributable to Driven Brands Holdings Inc. | $ | $ | ( | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share and per share amounts) | March 29, 2025 | December 28, 2024 | |||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Accounts and notes receivable, net | |||||||||||
| Inventory | |||||||||||
| Prepaid and other assets | |||||||||||
| Income tax receivable | |||||||||||
| Advertising fund assets, restricted | |||||||||||
| Assets held for sale | |||||||||||
| Current assets of discontinued operations | |||||||||||
| Total current assets | |||||||||||
| Other assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Deferred commissions | |||||||||||
| Intangibles, net | |||||||||||
| Goodwill | |||||||||||
| Deferred tax assets | |||||||||||
| Non-current assets of discontinued operations | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and shareholders' equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses and other liabilities | |||||||||||
| Income tax payable | |||||||||||
| Current portion of long-term debt | |||||||||||
| Income tax receivable liability | |||||||||||
| Advertising fund liabilities | |||||||||||
| Current liabilities of discontinued operations | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred tax liabilities | |||||||||||
| Operating lease liabilities | |||||||||||
| Income tax receivable liability | |||||||||||
| Deferred revenue | |||||||||||
| Long-term accrued expenses and other liabilities | |||||||||||
| Non-current liabilities of discontinued operations | |||||||||||
| Total liabilities | |||||||||||
5
Commitments and contingencies (Note 12) | |||||||||||
Preferred Stock $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total shareholders’ equity | |||||||||||
| Total liabilities and shareholders' equity | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
| Three Months Ended | |||||||||||||||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||||||||||||||
| (in thousands, except share amounts) | Shares | Amount | Shares | Amount | |||||||||||||||||||
Preferred stock, $ | $ | $ | |||||||||||||||||||||
Common stock, $ | |||||||||||||||||||||||
| Balance at beginning of period | $ | $ | |||||||||||||||||||||
| Stock issued relating to Employee Stock Purchase Plan | — | ||||||||||||||||||||||
| Shares issued for exercise/vesting of share-based compensation awards | |||||||||||||||||||||||
| Forfeiture of restricted stock awards | ( | — | ( | ( | |||||||||||||||||||
| Balance at end of period | $ | $ | |||||||||||||||||||||
| Additional paid-in capital | |||||||||||||||||||||||
| Balance at beginning of period | $ | $ | |||||||||||||||||||||
| Share-based compensation expense | |||||||||||||||||||||||
| Stock issued relating to Employee Stock Purchase Plan | |||||||||||||||||||||||
| Tax obligations for share-based compensation | ( | — | |||||||||||||||||||||
| Balance at end of period | $ | $ | |||||||||||||||||||||
| (Accumulated deficit) retained earnings | |||||||||||||||||||||||
| Balance at beginning of period | $ | ( | $ | ( | |||||||||||||||||||
| Net income | |||||||||||||||||||||||
| Balance at end of period | $ | ( | $ | ( | |||||||||||||||||||
| Accumulated other comprehensive loss | |||||||||||||||||||||||
| Balance at beginning of period | $ | ( | $ | ( | |||||||||||||||||||
| Other comprehensive (loss) income | ( | ||||||||||||||||||||||
| Balance at end of period | $ | ( | $ | ( | |||||||||||||||||||
| Non-controlling interests | |||||||||||||||||||||||
| Balance at beginning of period | $ | $ | |||||||||||||||||||||
| Acquisition of non-controlling interest | — | — | |||||||||||||||||||||
| Balance at end of period | $ | $ | |||||||||||||||||||||
| Total shareholders’ equity | $ | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| Three Months Ended | |||||||||||
| (in thousands) | March 29, 2025 | March 30, 2024 | |||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Share-based compensation expense | |||||||||||
| (Gain) loss on foreign denominated transactions | ( | ||||||||||
| Loss (gain) on foreign currency derivatives | ( | ||||||||||
| Loss (gain) on sale and disposal of businesses, fixed assets, and sale leaseback transactions | |||||||||||
| Reclassification of interest rate hedge to income | ( | ( | |||||||||
| Bad debt expense | |||||||||||
| Asset impairment charges and lease terminations | |||||||||||
| Amortization of deferred financing costs and bond discounts | |||||||||||
| Amortization of cloud computing | |||||||||||
| Provision (benefit) for deferred income taxes | ( | ||||||||||
| Other, net | ( | ||||||||||
| Changes in operating assets and liabilities, net of acquisitions: | |||||||||||
| Accounts and notes receivable, net | ( | ( | |||||||||
| Inventory | ( | ||||||||||
| Prepaid and other assets | ( | ( | |||||||||
| Advertising fund assets and liabilities, restricted | ( | ||||||||||
| Other assets | ( | ( | |||||||||
| Deferred commissions | ( | ||||||||||
| Deferred revenue | ( | ||||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other liabilities | |||||||||||
| Income tax receivable | ( | ||||||||||
| Cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Cash used in business acquisitions, net of cash acquired | ( | ||||||||||
| Proceeds from sale leaseback transactions | |||||||||||
| Proceeds from sale or disposal of businesses and fixed assets | |||||||||||
| Cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Payment of debt extinguishment and issuance costs | ( | ||||||||||
| Repayment of long-term debt | ( | ( | |||||||||
| Proceeds from revolving lines of credit and short-term debt | |||||||||||
| Repayment of revolving lines of credit and short-term debt | ( | ( | |||||||||
| Repayment of principal portion of finance lease liability | ( | ( | |||||||||
| Payment of Tax Receivable Agreement | ( | ||||||||||
| Tax obligations for share-based compensation | ( | ||||||||||
8
| Cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash | |||||||||||
| Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted | ( | ( | |||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash included in advertising fund assets, restricted, beginning of period | |||||||||||
| Restricted cash, beginning of period | |||||||||||
| Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | |||||||||||
| Cash included in advertising fund assets, restricted, end of period | |||||||||||
| Restricted cash, end of period | |||||||||||
| Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period | $ | $ | |||||||||
| Supplemental cash flow disclosures - non-cash items: | |||||||||||
| Capital expenditures included in accrued expenses and other liabilities | $ | $ | |||||||||
| Deferred consideration included in accrued expenses and other liabilities | |||||||||||
| Supplemental cash flow disclosures - cash paid for: | |||||||||||
| Interest | $ | $ | |||||||||
| Income taxes | |||||||||||
Cash flows from discontinued operations are included in the above amounts and explained in Note 2 and Note 13.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
9
DRIVEN BRANDS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1—Description of Business
Description of Business
Driven Brands Holdings Inc. together with its subsidiaries (collectively, the “Company”) is a Delaware corporation and is the parent holding company of Driven Brands, Inc. and Shine Holdco (UK) Limited (collectively, “Driven Brands”). Driven Brands is the largest automotive services company in North America with a growing and highly-franchised base of approximately 4,800 franchised, independently-operated, and company-operated locations across 49 states in the U.S. and 13 other countries. The Company has a portfolio of highly recognized brands, including Take 5 Oil Change®, Meineke Car Care Centers®, MAACO®, CARSTAR®, AutoGlassNow®, Fix Auto, IMO®, and 1-800-Radiator & A/C® that compete in the automotive services industry.
Tax Receivable Agreement
The Company expects to be able to utilize certain tax benefits which are related to periods prior to the effective date of the Company’s IPO and are attributed to our pre-IPO shareholders. The Company previously entered into a Tax Receivable Agreement which provides our pre-IPO shareholders with the right to receive payment of 85 % of the amount of cash savings, if any, in U.S. and Canadian federal, state, local, and provincial income tax that the Company will actually realize or divests. The Tax Receivable Agreement was effective as of the date of the Company’s IPO. The Company recorded a current income tax receivable liability of $23 111 25 million under the Tax Receivable Agreement in January 2024. No payments were made during the three months ended March 29, 2025.
Note 2—Summary of Significant Accounting Policies
Fiscal Year
The Company operates and reports financial information on a 52- or 53-week year with the fiscal year ending on the last Saturday in December and fiscal quarters ending on the 13th Saturday of each quarter (or 14th Saturday when applicable with respect to the fourth fiscal quarter). The three months ended March 29, 2025 and March 30, 2024 each consisted of 13 weeks. The Car Wash segment is consolidated based on a calendar month end.
Basis of Presentation
The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, the unaudited interim financial data includes all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement of the results of operations, balance sheet, cash flows, and shareholders’ equity for the interim periods presented. The adjustments include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
On February 24, 2025, the Company entered into a definitive agreement to sell its U.S. Car Wash business to Express Wash Operations, LLC dba Whistle Express Car Wash. On April 10, 2025, the Company completed the sale. The net assets and operations of the disposal group met the criteria to be classified as “discontinued operations” and are reported as such in all periods presented unless otherwise noted. The consolidated statements of cash flows include cash flows from discontinued operations. Refer to Note 13 for more information.
These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 28, 2024. Certain information and note disclosures normally included in the unaudited financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three months ended March 29, 2025 may not be indicative of the results to be expected for any other interim period or the year ending December 27, 2025.
The three months ended March 30, 2024 includes an adjustment to the consolidated statement of operations that originated in the prior year. The adjustment increased loss from discontinued operations, net of tax by $3 million on the unaudited consolidated statement of operations. The Company evaluated the materiality of the adjustment on prior period financial
10
statements, recorded the adjustment in the period, and concluded the effect of the adjustment was immaterial to the financial statements.
Certain prior year amounts have been reclassified to conform to current year presentation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and the related notes to the consolidated financial statements. Significant items that are subject to estimates and assumptions include, but are not limited to: valuation of intangible assets and goodwill, income taxes, allowances for credit losses, valuation of derivatives, self-insurance claims, and share-based compensation. Management evaluates its estimates on an ongoing basis and may employ outside experts to assist in its evaluations. Changes in such estimates, based on historical experience, current conditions, and various other additional information, may affect amounts reported in future periods. Actual results could differ due to uncertainty inherent in the nature of these estimates.
Fair Value of Financial Instruments
Financial assets and liabilities are categorized, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. Observable market data, when available, is required to be used in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
The Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; or
Level 3: Unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
The Company estimates the fair value of financial instruments using available market information and appropriate valuation methodologies. The carrying amount for cash and cash equivalents, restricted cash, accounts receivable, inventory, other current assets, accounts payable and accrued expenses approximate fair value because of their short maturities. The notes receivable carrying value also approximates fair value due to interest rates that approximate market rates for agreements with similar maturities and credit quality. The fair value of the Company’s foreign currency derivative instruments is derived from valuation models, which use Level 2 observable inputs such as quoted market prices, interest rates, and forward yield curves. The fair value of long-term debt is estimated based on Level 2 inputs using discounted cash flows and market-based expectations for interest rates, credit risk and contractual terms of the debt agreements.
Financial assets and liabilities measured at fair value on a recurring basis as of March 29, 2025 and December 28, 2024 are summarized as follows:
Items Measured at Fair Value at March 29, 2025 | |||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Total | ||||||||||||||
| Derivative assets, recorded in Other assets | $ | $ | $ | ||||||||||||||
| Derivative liabilities, recorded in Accrued expenses and other liabilities | $ | $ | $ | ||||||||||||||
Items Measured at Fair Value at December 28, 2024 | |||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Total | ||||||||||||||
| Derivative assets, recorded in Other assets | $ | $ | $ | ||||||||||||||
| Derivative liabilities, recorded in Accrued expenses and other liabilities | $ | $ | $ | ||||||||||||||
11
The carrying value and estimated fair value of total long-term debt were as follows:
| March 29, 2025 | December 28, 2024 | ||||||||||||||||||||||
| (in thousands) | Carrying value | Estimated fair value | Carrying value | Estimated fair value | |||||||||||||||||||
| Long-term debt | $ | $ | $ | $ | |||||||||||||||||||
Recently Issued Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. This ASU improves the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the tax rate reconciliation as well as disaggregation of income taxes paid by jurisdiction. This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU includes amendments that require entities to bifurcate specified expense line items on the income statement into underlying components, including purchases of inventory, employee compensation, depreciation, intangible asset amortization and depletion, as applicable. Qualitative descriptions of the remaining components are required. These enhanced disclosures are required for both interim and annual periods. Selling expenses must also be separately disclosed for both interim and annual periods, along with an annual qualitative description of the composition of selling expenses. In January 2025, the FASB subsequently issued ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This ASU provides clarification on the ASU's effective date. The new standard is effective for fiscal years beginning after December 15, 2026 on a prospective basis with the option to apply it retrospectively, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
Note 3—Acquisitions and Divestitures
The Company strategically acquires companies and assets to increase its footprint and offer products and services that diversify its existing offerings, primarily through asset purchase agreements. These acquisitions are accounted for as business combinations using the acquisition method, whereby the purchase price is allocated to the assets acquired and liabilities assumed, based on their fair values as of the date of the acquisition with the remaining amount recorded in goodwill.
The Company completed one acquisition within the Take 5 segment and one non-U.S. acquisition in the Car Wash segment during the three months ended March 30, 2024, representing two sites and one site, respectively, for an aggregate cash consideration, net of cash acquired and liabilities assumed, of less than $2 million.
Divestitures
During the three months ended March 30, 2024, the Company sold nine company-operated stores within the Franchise Brands segment to a franchisee at a sale price of $18 million resulting in a gain of $6 million on the sale of businesses within selling, general, and administrative expenses on the consolidated statement of operations during the three months ended March 30, 2024.
12
Note 4—Segment Information
In the first quarter of 2025, the Company reorganized its operating segments to simplify the reporting structure, align with the Company’s current business model, and increase transparency for our investors, which resulted in a change to the reportable segments. As a result, the Company has the following reportable segments: Take 5, Franchise Brands, and Car Wash.
The Take 5 segment is primarily composed of the Company and franchise-operated Take 5 Oil Change business, and revenue is primarily derived from the performance of maintenance services, including oil changes and regularly scheduled and as-needed automotive maintenance services. Take 5 segment revenue also includes franchise royalties and fees and supply and other product sales.
The Franchise Brands segment is primarily composed of the Company’s portfolio of franchise brands, which include: CARSTAR, Meineke, Maaco, and 1-800 Radiator, along with other smaller brands and services for both retail and commercial customers such as commercial fleet operators and insurance carriers.
The Car Wash segment operates under the IMO brand across Europe and Australia, providing express-style conveyor car wash services to both retail and commercial customers.
The Company’s consolidated financial results include “Corporate and Other” activity. Corporate and Other includes revenue and costs associated with the AutoGlassNow businesses, which provide glass replacement and calibration services to commercial, retail and insurance customers. In addition, advertising fund contribution revenue and related costs as well as shared service costs, which are related to finance, IT, human resources, legal, supply chain, and other support services are recorded within Corporate and Other. Corporate and Other activity includes the adjustments necessary to eliminate certain intercompany transactions, namely supply sales fulfilled by the Take 5 segment to the Franchise Brands segment.
The Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer. The CODM evaluates segment performance and allocates resources, including capital expenditures and variable compensation, to each segment primarily as part of the annual budget process based on Adjusted EBITDA. The CODM reviews budget-to-actual results to assess performance and adjust resource allocations as necessary.
Adjusted EBITDA is defined as earnings from continuing operations before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition related costs, cloud computing amortization, equity compensation, loss on debt extinguishment, and certain non-recurring, non-core, infrequent or unusual charges. Adjusted EBITDA is a supplemental measure of the operating performance of our segments and may not be comparable to similar measures reported by other companies. Other segment items primarily include, but not limited to, payroll and payroll related costs, costs of inventory and supply costs, utilities, and rent expense as well as marketing costs associated with non-franchised businesses within the reportable segments. No asset information has been provided for these reportable segments as the Chief Operating Decision Maker does not regularly review asset information by reportable segment.
Certain information within the tables below have been revised to conform to current year presentation to reflect financial results for continuing operations and segment changes.
13
Segment results for the three months ended March 29, 2025 and March 30, 2024 are as follows:
| Three Months Ended March 29, 2025 | |||||||||||||||||||||||
| (in thousands) | Take 5 | Franchise Brands | Car Wash | Total | |||||||||||||||||||
| Franchise royalties and fees | $ | $ | $ | $ | |||||||||||||||||||
| Company-operated store sales | |||||||||||||||||||||||
| Independently-operated store sales | |||||||||||||||||||||||
| Supply and other revenue | |||||||||||||||||||||||
| Total segment net revenue | $ | $ | $ | $ | |||||||||||||||||||
| Corporate and Other revenue | |||||||||||||||||||||||
| Total consolidated net revenue | $ | ||||||||||||||||||||||
| Other segment items | |||||||||||||||||||||||
| Reportable segment Adjusted EBITDA | $ | $ | $ | $ | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Corporate and Other loss | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
Acquisition related costs(a) | |||||||||||||||||||||||
Non-core items and project costs, net(b) | |||||||||||||||||||||||
Cloud computing amortization(c) | |||||||||||||||||||||||
Share-based compensation expense(d) | |||||||||||||||||||||||
Foreign currency transaction loss, net(e) | |||||||||||||||||||||||
Asset sale leaseback (gain) loss, net, impairment, and closed store expenses(f) | |||||||||||||||||||||||
| Income before taxes from continuing operations | $ | ||||||||||||||||||||||
14
| Three Months Ended March 30, 2024 | |||||||||||||||||||||||
| (in thousands) | Take 5 | Franchise Brands | Car Wash | Total | |||||||||||||||||||
| Franchise royalties and fees | $ | $ | $ | $ | |||||||||||||||||||
| Company-operated store sales | |||||||||||||||||||||||
| Independently-operated store sales | |||||||||||||||||||||||
| Supply and other revenue | |||||||||||||||||||||||
| Total segment net revenue | $ | $ | $ | $ | |||||||||||||||||||
| Corporate and Other revenue | |||||||||||||||||||||||
| Total consolidated net revenue | $ | ||||||||||||||||||||||
| Other segment items | |||||||||||||||||||||||
| Reportable segment Adjusted EBITDA | $ | $ | $ | $ | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Corporate and Other loss | $ | ||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
Acquisition related costs(a) | |||||||||||||||||||||||
Non-core items and project costs, net(b) | |||||||||||||||||||||||
Cloud computing amortization(c) | |||||||||||||||||||||||
Share-based compensation expense(d) | |||||||||||||||||||||||
Foreign currency transaction loss, net(e) | |||||||||||||||||||||||
Asset sale leaseback (gain) loss, net, impairment, and closed store expenses(f) | |||||||||||||||||||||||
| Income before taxes from continuing operations | $ | ||||||||||||||||||||||
(a)Consists of acquisition costs as reflected within the 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.
(b)Consists of discrete items and project costs, including third party professional costs associated with strategic transformation initiatives and non-recurring payroll-related costs.
(c)Includes non-cash amortization expenses relating cloud computing arrangements.
(d)Represents non-cash share-based compensation expense.
(e)Represents foreign currency transaction losses, net that primarily related to the remeasurement of our intercompany loans as well as gains and losses on cross currency swaps and forward contracts.
15
Note 5—Assets Held For Sale
The changes in assets held for sale for the three months ended March 29, 2025 were as follows:
| (in thousands) | |||||
Balance at December 28, 2024 | $ | ||||
| Additions | |||||
| Loss on sale, net | ( | ||||
| Sales and disposals | ( | ||||
Balance at March 29, 2025 | $ | ||||
During the three months ended March 29, 2025 and March 30, 2024, management continued to enhance properties included within held for sale resulting in an increase to assets held for sale of less than $1 million and $39 million, respectively. During the three months ended March 29, 2025 and March 30, 2024, the Company recognized a net loss on sale of $4 million and $9 million, respectively, within selling, general, and administrative expenses on the unaudited consolidated statement of operations. Loss on sale, net includes the sale of 2 locations and 13 locations, respectively, and adjustment in fair values during both periods. The Company will continue to evaluate the fair value of assets held for sale, which may result in additional net losses on sales.
Note 6—Goodwill
As a result of the Company’s change to its reportable segments outlined in Note 4, the Company’s operating segments and reporting units also changed during the three months ended March 29, 2025. The Company performed quantitative impairment assessments of goodwill immediately prior to the change in reporting units and immediately after the change on its new reporting units. The Company used the relative fair value method to reallocate the goodwill to the associated reporting units impacted by the change in reporting units in the quarter.
In performing a quantitative test for impairment of goodwill, we primarily used the income approach method of valuation that includes the discounted cash flow method and the market approach that includes the guideline public company method to determine the fair value of reporting units. Significant assumptions used by management in estimating fair value under the discounted cash flow model include revenue growth rates, long-term revenue growth rates, discount rates, EBITDA margins, capital expenditures, and tax rates. Other assumptions include operating expenses and overhead expenses. Assumptions used to determine fair value under the guideline public company method include the selection of guideline companies and the valuation multiples applied. No impairment charges were recorded during the three months ended March 29, 2025.
Changes in the carrying amount of goodwill resulting from the change in reportable segments for the three months ended March 29, 2025 are detailed below:
| (in thousands) | Balance at December 28, 2024 | Resegmentation allocation | Foreign exchange | Balance at March 29, 2025 | |||||||||||||||||||
| Maintenance | $ | $ | ( | $ | $ | ||||||||||||||||||
| Paint, Collision & Glass | ( | ||||||||||||||||||||||
| Platform Services | ( | ||||||||||||||||||||||
| Car Wash | |||||||||||||||||||||||
| Take 5 | |||||||||||||||||||||||
| Franchise Brands | |||||||||||||||||||||||
| Corporate and Other | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
16
Note 7—Long-Term Debt
The Company’s long-term debt obligations consist of the following:
| (in thousands) | March 29, 2025 | December 28, 2024 | |||||||||
| Series 2019-1 Securitization Senior Notes, Class A-2 | $ | $ | |||||||||
| Series 2019-2 Securitization Senior Notes, Class A-2 | |||||||||||
| Series 2020-1 Securitization Senior Notes, Class A-2 | |||||||||||
| Series 2020-2 Securitization Senior Notes, Class A-2 | |||||||||||
| Series 2021-1 Securitization Senior Notes, Class A-2 | |||||||||||
| Series 2022-1 Securitization Senior Notes, Class A-2 | |||||||||||
| Series 2024-1 Securitization Senior Notes, Class A-2 | |||||||||||
| Term Loan Facility | |||||||||||
| Revolving Credit Facility | |||||||||||
Other debt (a) | |||||||||||
| Total debt | |||||||||||
| Less: unamortized debt issuance costs | ( | ( | |||||||||
| Less: current portion of long-term debt | ( | ( | |||||||||
| Total long-term debt, net | $ | $ | |||||||||
2022-1 Securitization Senior Notes
In conjunction with the issuance of the 2022-1 Securitization Senior Notes, Driven Brands Funding, LLC (“the Issuer”) and Driven Brands Canada Funding Corporation (together “the Co-Issuers”) also issued Series 2022-1 Class A-1 Notes in the amount of $135 million, which can be accessed at the Co-Issuers’ option if certain conditions are met.
Series 2024-1 Variable Funding Securitization Senior Notes
In July 2024, the Co-Issuers issued Series 2024-1 Variable Funding Senior Notes, Class A-1 (the “2024 VFN”) in the revolving amount of $400 million. The 2024 VFN have a final legal maturity date in October 2054. The commitment under the 2024 VFN is set to expire in October 2029, with the option of two one-year extensions. The 2024 VFN are secured by substantially all assets of the Co-Issuers and are guaranteed by the Co-Issuers and each of their respective subsidiaries. Borrowings incur interest at the Base Rate plus an applicable margin or SOFR plus an applicable margin. As of March 29, 2025, there were no amounts outstanding under the 2024 VFN and $26 million of outstanding letters of credit which reduced the borrowing availability under the 2024 VFN.
Driven Holdings Revolving Credit Facility
In May 2021, Driven Holdings, LLC, (the “Borrower”) a Delaware limited liability company and indirect wholly-owned subsidiary of Driven Brands Holdings Inc., entered into a credit agreement to secure a revolving line of credit with a group of financial institutions (the “Revolving Credit Facility”), which provides for an aggregate amount of up to $300 million, and had a maturity date in May 2026 (the “Credit Agreement”). In February 2025, the Borrower entered into an amendment extending the Credit Agreement maturity date to February 2030, subject to a springing maturity in September 2028, in the event that (i) more than $100 million of the Company’s term loans are outstanding as of September 2028 and (ii) as of September 2028, the maturity date of such term loans has not been extended to a date that is after the latest revolving maturity date. Borrowings will incur interest at a rate equal to SOFR plus an applicable term adjustment between 2.00 % and 2.25 %. The Revolving Credit Facility also includes periodic commitment fees based on the available unused balance and a quarterly administrative fee.
There was $180 million outstanding on the Revolving Credit Facility as of March 29, 2025 with $33 million of borrowings and $43 million of repayments made during the three months ended March 29, 2025.
Term Loan Facility
In December 2021, the Borrower amended the Credit Agreement to provide for a new term loan credit facility (the “Term Loan Facility”), which has an initial aggregate commitment of $500 million, with loans and other extensions of credit thereunder maturing in December 2028. In April 2025, the Company made repayments of $246 million, primarily from proceeds received through the sale of the U.S. Car Wash business.
17
The Company’s debt agreements are subject to certain quantitative and qualitative covenants. As of March 29, 2025, the Company and its subsidiaries were in material compliance with such covenants.
Note 8—Leases
During the three months ended March 29, 2025, the Company sold four maintenance properties and one non-U.S. car wash property for a total of $9 million. During the three months ended March 30, 2024, the Company sold three maintenance properties for a total of $4 million. Concurrently with the closing of these sales, the Company entered into various operating lease agreements pursuant to which the Company leased back the properties. These lease agreements each have an initial term of 20 to 27 years. The Company does not include option periods in its determination of the lease term unless renewals are deemed reasonably certain to be exercised. The Company recorded an operating lease right-of-use asset and operating lease liability of $7 million and $7 million, respectively, as of March 29, 2025, and $3 million and $3 million, respectively, as of March 30, 2024 related to these lease arrangements. The Company recorded a gain of $1 million for the three months ended March 29, 2025, and a gain 1 million for the three months ended March 30, 2024.
Supplemental cash flow information related to the Company’s lease arrangements for the three months ended March 29, 2025 and March 30, 2024, respectively, was as follows:
| Three Months Ended | |||||||||||
| (in thousands) | March 29, 2025 | March 30, 2024 | |||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows used in operating leases | $ | $ | |||||||||
| Operating cash flows used in finance leases | |||||||||||
| Financing cash flows used in finance leases | |||||||||||
Note 9—Share-based Compensation
The Company granted new awards during the three months ended March 29, 2025, consisting of 541,052 restricted stock units (“RSUs”) and 664,383 performance stock units (“PSUs”).
Awards are eligible to vest provided that the employee remains in continuous service on each vesting date. The RSUs vest ratably each year on the anniversary date generally over a -or three-year period. The PSUs vest after a three-year performance period. The number of PSUs that vest is contingent on the Company achieving certain performance goals, one being a performance condition and the other being a market condition. The number of PSU shares that vest may range from 0 % to 200 % of the original grant, based upon the level of performance. Certain awards are considered probable of meeting vesting requirements, and therefore, the Company has started recognizing expense. For both RSUs and PSUs, if the grantee’s continuous service terminates for any reason, the grantee shall forfeit all rights, title, and interest in any unvested units as of the termination date.
The fair value of the total RSUs, performance-based PSUs, and market-based PSUs granted during the three months ended March 29, 2025 were $9 million, $7 million, and $4 million, respectively. The Company based the fair value of the RSUs and performance-based PSUs on the Company’s stock price on the grant date.
The range of assumptions used for issued PSUs with a market condition valued using the Monte Carlo model were as follows:
| Three Months Ended | |||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||
| Annual dividend yield | |||||||||||
| Expected term (years) | |||||||||||
| Risk-free interest rate | |||||||||||
| Expected volatility | |||||||||||
| Correlation to the index peer group | |||||||||||
18
Note 10—Earnings (Loss) Per Share
The Company calculates basic and diluted earnings (loss) per share using the two-class method. The following table sets forth the computation of basic and diluted earnings per share attributable to common shareholders:
| Three Months Ended | |||||||||||
| (in thousands, except per share amounts) | March 29, 2025 | March 30, 2024 | |||||||||
| Basic earnings (loss) per share: | |||||||||||
| Net income from continuing operations | $ | $ | |||||||||
| Less: Net income attributable to participating securities, continuing operations | |||||||||||
| Net income after participating securities, continuing operations | |||||||||||
| Net loss from discontinued operations, net of tax | ( | ( | |||||||||
| Less: Net loss attributable to participating securities, discontinued operations | ( | ( | |||||||||
| Net loss after participating securities, discontinued operations | ( | ( | |||||||||
| Weighted-average common shares outstanding | |||||||||||
| Continuing operations | |||||||||||
| Discontinued operations | ( | ( | |||||||||
| Net basic earnings per share | $ | $ | |||||||||
| Three Months Ended | |||||||||||
| (in thousands, except per share amounts) | March 29, 2025 | March 30, 2024 | |||||||||
| Diluted earnings (loss) per share: | |||||||||||
| Net income from continuing operations | $ | $ | |||||||||
| Less: Net income attributable to participating securities, continuing operations | |||||||||||
| Net income after participating securities, continuing operations | |||||||||||
| Net loss from discontinued operations, net of tax | ( | ( | |||||||||
| Less: Net loss attributable to participating securities, discontinued operations | ( | ( | |||||||||
| Net loss after participating securities, discontinued operations | ( | ( | |||||||||
| Weighted-average common shares outstanding | |||||||||||
| Dilutive effect of share-based awards | |||||||||||
| Weighted-average common shares outstanding, as adjusted | |||||||||||
| Continuing operations | |||||||||||
| Discontinued operations | ( | ( | |||||||||
| Net diluted earnings per share | $ | $ | |||||||||
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. In addition, the Company’s participating securities are related to certain restricted stock awards issued to Section 16 officers, which include non-forfeitable dividend rights.
The Company has performance awards that are contingent on performance conditions which have not yet been met and therefore were excluded from the computation of weighted average shares of 2,092,091 and 2,067,468 shares for the three months ended March 29, 2025 and March 30, 2024, respectively.
19
The following securities were not included in the computation of diluted shares outstanding because the effect would be antidilutive:
| Three Months Ended | ||||||||||||||||||||
Number of securities (in thousands) | March 29, 2025 | March 30, 2024 | ||||||||||||||||||
| Restricted stock units | ||||||||||||||||||||
| Stock Options | ||||||||||||||||||||
| Total | ||||||||||||||||||||
Note 11—Income Taxes
The Company’s tax provision is comprised of the most recent estimated annual effective tax rate applied to year-to-date ordinary income before taxes. The tax impacts of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are recorded discretely in the interim period in which they occur.
Note 12—Commitments and Contingencies
The Company is subject to various lawsuits, administrative proceedings, audits, and claims. Some of these lawsuits purport to be class actions and/or seek substantial damages. The Company is required to record an accrual for litigation loss contingencies that are both probable and reasonably estimable. Management regularly assesses our insurance deductibles, analyzes litigation information with our attorneys, and evaluates our loss experience in connection with pending legal proceedings. The Company records its best estimate of a loss when the loss is considered probable and the amount of such loss can be reasonably estimated. When a loss is probable and there is a range of estimated loss with no best estimate within the range, the minimum estimated liability related to the lawsuit or claim is recorded. As additional information becomes available, the potential liability and revise our accruals is reassessed, if necessary. Legal fees and expenses associated with the defense of all of our litigation are expensed as such fees and expenses are incurred. Because of uncertainties related to the resolution of lawsuits and claims, the ultimate outcome may differ materially from our estimates.
Genesee County Employees’ Retirement System v. Driven Brands Holdings Inc., et al. – On December 22, 2023, Genesee County Employees’ Retirement System filed a putative class action lawsuit in the U.S. District Court for the Western District of North Carolina (the “Court”) against the Company as well as CEO Jonathan Fitzpatrick and former CFO Tiffany Mason (the “Individual Defendants”) alleging violations of Section 10(b) and Rule 10b-5 of the Exchange Act by the Company, as well as violations of Section 20(a) of the Exchange Act by the Individual Defendants. The Court appointed Genesee County Employees’ Retirement System, Oakland County Employees’ Retirement System, and Oakland County Voluntary Employees’ Beneficiary Association (collectively the “Michigan Funds”), as lead plaintiffs on May 31, 2024. Then, the Michigan Funds filed an amended complaint on October 14, 2024, which the Company and the Individual Defendants subsequently moved to dismiss. The Court denied the motion to dismiss on February 20, 2025, and the Company and Individual Defendants moved on March 6, 2025 for reconsideration of the Court’s order or, in the alternative, requested that the Court certify its decision for interlocutory appeal. The Court has yet to rule on the motion. The Company disputes the allegations of wrongdoing and intends to vigorously defend against the action. No assessment as to the likelihood or range of any potential adverse outcome has been made as of the date of this filing.
Terwilliger v. Fitzpatrick, et al. – On January 10, 2025, Daniel Terwilliger filed a purported derivative complaint in the United States District Court for the Western District of North Carolina against certain current and former Company executive officers and board members, including Jonathan Fitzpatrick, Tiffany Mason, Neal Aronson, Catherine Halligan, Chadwick Hume, Rick Puckett, Karen Stroup, Peter Swinburn, Michael Thompson, and Jose Tomas (collectively, “Defendants”). The Terwilliger complaint makes largely the same allegations as those in Genessee Complaint, namely, that the Company failed to disclose information, which allegedly resulted in material misstatements about the Company’s business and prospects in its quarterly filings, and purports to state claims for (i) breach of fiduciary duty; (ii) unjust enrichment; (iii) abuse of control; (iv) gross mismanagement; (v) waste of corporate assets; and (vi) violations of Sections 10(b) and 21D of the Exchange Act. On April 30 2025, the Court granted the Parties’ joint motion for a stay of proceedings, pending the completion of discovery in the
20
underlying securities class action. The Company disputes the allegations of wrongdoing and intends to vigorously defend against the action. No assessment as to the likelihood or range of any potential adverse outcome has been made as of the date of this filing.
Gaiman v. Fitzpatrick, et al. – On April 30, 2025, Jonathan Gaiman filed a purported derivative complaint in the United States District Court for the Western District of North Carolina against certain current and former Company executive officers and board members, including Jonathan Fitzpatrick, Tiffany Mason, Neal Aronson, Catherine Halligan, Chadwick Hume, Rick Puckett, Karen Stroup, Peter Swinburn, Michael Thompson, and Jose Tomás. The Gaiman complaint makes largely the same allegations as those in the Genessee and Terwilliger complaints, namely, that the Company failed to disclose information, which allegedly resulted in material misstatements about the Company’s business and prospects in its quarterly filings, and purports to state claims for (i) breach of fiduciary duty; (ii) aiding and abetting breaches of fiduciary duty; (iii) unjust enrichment; (iv) waste of corporate assets; (v) violations of Sections 10(b) and 21D of the Exchange Act; and (vi) violations of Sections 14(a) and Rule 14a-9 of the Exchange Act. The Company disputes the allegations of wrongdoing and intends to vigorously defend against the action. No assessment as to the likelihood or range of any potential adverse outcome has been made as of the date of this filing.
Other than the matters described above, as of March 29, 2025, there are no current proceedings or litigation matters involving the Company or its property that we believe would have a material adverse effect on our consolidated financial position or cash flows, although they could have a material adverse effect on our operating results for a particular reporting period.
Note 13—Discontinued Operations
U.S. Car Wash Divestiture
On February 24, 2025, the Company entered into a definitive agreement to sell its U.S. Car Wash business to Express Wash Operations, LLC dba Whistle Express Car Wash (the “Buyer”) for an aggregate purchase price of $385 million, subject to customary adjustments for cash, indebtedness, working capital, and transaction expenses. Under the terms of the agreement, the Buyer agreed to pay the Company $255 million in cash and deliver to the Company an interest-bearing seller note evidencing a loan in the initial principal amount of $130 million, subject to customary adjustments.
This divestiture qualified as discontinued operations as of February 24, 2025 as it represents a strategic shift relating to our car wash footprint and services offered within the U.S. and has a major effect on our consolidated results of operations. Accordingly, the results of operations for the U.S. Car Wash disposal group and certain transaction related costs have been classified as discontinued operations within the unaudited consolidated statement of operations. Results outlined below were historically reflected within the Car Wash Segment within our previously filed financial statements, prior to the Company resegmenting in the current period.
In conjunction with the sale of the U.S. Car Wash business, we entered into a Transition Services Agreement (“TSA”) to provide certain support services for up to 12 months or less from the closing date of the sale. These services include, among others, accounting, information technology, treasury, human resources, and marketing services. In addition, the Company entered into an Employee Services Leasing Agreement (“ESLA”) outlining certain U.S. Car Wash operational employees may be leased from the date of sale through December 31, 2025. Costs associated with the ESLA will be reimbursed by the Buyer.
Financial Information of Discontinued Operations
The following table summarizes the results of operations of the U.S. Car Wash business that are being reported as discontinued operations within the unaudited consolidated statement of operations:
21
| Three Months Ended | |||||||||||
| (in thousands) | March 29, 2025 | March 30, 2024 | |||||||||
| Net revenue: | |||||||||||
| Company-operated store sales | $ | $ | |||||||||
| Supply and other revenue | |||||||||||
| Total net revenue | |||||||||||
| Operating Expenses: | |||||||||||
| Company-operated store expenses | |||||||||||
| Supply and other expenses | |||||||||||
| Selling, general, and administrative expenses | |||||||||||
| Depreciation and amortization | |||||||||||
| Total operating expenses | |||||||||||
| Operating loss | ( | ( | |||||||||
| Other expenses, net: | |||||||||||
| Interest expense, net | |||||||||||
| Loss before taxes from discontinued operations | ( | ( | |||||||||
| Income tax benefit | ( | ( | |||||||||
| Net loss from discontinued operations | $ | ( | $ | ( | |||||||
The Company recorded $5 million related to transaction costs associated with the U.S. Car Wash divestiture during the three months ended March 29, 2025 within selling, general and administrative expenses on the unaudited consolidated statement of operations from discontinued operations above.
The following tables summarizes the U.S. Car Wash business assets and liabilities classified as discontinued operations within the unaudited consolidated balance sheets:
| (in thousands) | March 29, 2025 | December 28, 2024 | |||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts and notes receivable, net | |||||||||||
| Inventory | |||||||||||
| Prepaid and other assets | |||||||||||
| Income tax receivable | |||||||||||
| Assets held for sale | |||||||||||
| Total current assets of discontinued operations | |||||||||||
| Other assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Total assets of discontinued operations | $ | $ | |||||||||
| Liabilities | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses and other liabilities | |||||||||||
| Current portion of long-term debt | |||||||||||
| Total current liabilities of discontinued operations | |||||||||||
| Long-term debt | |||||||||||
| Operating lease liabilities | |||||||||||
| Long-term accrued expenses and other liabilities | |||||||||||
| Total liabilities of discontinued operations | $ | $ | |||||||||
22
The cash flows related to discontinued operations have not been segregated and are included within the unaudited statement of cash flows. The following table presents cash flow and non-cash information related to discontinued operations:
| (in thousands) | March 29, 2025 | March 30, 2024 | |||||||||
| Depreciation and amortization | $ | $ | |||||||||
| Capital expenditures | |||||||||||
| Loss (gain) on sale or disposal of assets | |||||||||||
23
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis for Driven Brands Holdings Inc. and Subsidiaries (“Driven Brands,” “the Company,” “we,” “us,” or “our”) should be read in conjunction with our consolidated financial statements and the related notes to our consolidated financial statements included elsewhere in this Quarterly Report. We operate on a 52-or 53-week fiscal year, which ends on the last Saturday in December. The three months ended March 29, 2025 and March 30, 2024 were both 13 week periods.
Overview
Driven Brands is the largest automotive services company in North America with a growing and highly-franchised base of approximately 4,800 locations across 49 states in the U.S. and 13 other countries. Our scaled, diversified platform fulfills an extensive range of core retail and commercial automotive needs, including paint, collision, glass, and repair services, as well as a variety of more frequent services, such as oil changes and car washes. We have continued to grow our base of consistent recurring revenue through same store sales and adding new franchised and company-operated stores. Driven Brands generated net revenue of approximately $516.2 million during the three months ended March 29, 2025, an increase of 7% compared to the prior year period, and system-wide sales of approximately $1.5 billion during the three months ended March 29, 2025, an increase of 2% from the prior year period.
We have experienced same store sales growth for 17 consecutive quarters, which we attribute to our diversified customer base and service offerings. However, we have experienced and expect to continue experiencing softening demand across several of our segments, primarily as a result of tariffs, inflationary pressures, increased competition, industry dynamics, and negative weather patterns.
Resegmentation
In the first quarter of 2025, the Company reorganized its operating segments to simplify the reporting structure, align with the Company’s current business model, and increase transparency for our investors, which resulted in a change to the reportable segments. As a result, the Company has the following reportable segments: Take 5, Franchise Brands, and Car Wash. Prior period information has been recast to reflect the current reportable segments.
Discontinued Operations
As previously disclosed in the Company’s 2024 Form 10-K, on February 24, 2025, the Company entered into a definitive agreement to sell its U.S. Car Wash business to Express Wash Operations, LLC dba Whistle Express Car Wash (the “Buyer”) for an aggregate purchase price of $385 million, subject to customary adjustments. Under the terms of the agreement, the Buyer agreed to pay the Company $255 million in cash and deliver to the Company an interest-bearing seller note evidencing a loan in the initial principal amount of $130 million. The transaction was completed on April 10, 2025.
The net assets and operations of the disposal group met the criteria to be classified as “discontinued operations” and are reported as such in all periods. Unless otherwise noted, the discussion throughout Part I Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q, including the various metrics cited, excludes the U.S. Car Wash business and pertains only to our continuing operations. For information on discontinued operations, refer to Note 2 and Note 13 to our consolidated financial statements.
Q1 2025 Highlights and Key Performance Indicators
(as compared to same period in the prior year, unless otherwise noted)
•Net revenue increased 7% to $516.2 million, driven by company-operated store revenue, primarily due to net new store growth within our Take 5 segment and same store sales growth within our Take 5 and Car Wash segments.
•Consolidated same store sales increased 0.7%.
•Net income from continuing operations increased 51% to $17 million or $0.11 per diluted share. The increase primarily relates to continued same store sales growth, improved operating margins within the Car Wash segment, lower interest expense, and reduction in foreign currency transaction losses in the current period, primarily relating to intercompany activity. These increases were partially offset by losses on the sale or disposal of fixed assets, increased selling, general, and administrative costs reflective of the Company’s growth, the non-recurrence of earnings relating to the sale of our Canadian distribution business in the third quarter of 2024, and reduced operating margins within the Take 5 and Franchise Brands segments.
24
•Adjusted Net Income (non-GAAP) increased 10% to $44 million or $0.27 per diluted share. The increase was primarily due to continued same store sales growth, improved operating margins within the Car Wash segment, and lower interest expense, partially offset by increased selling, general, and administrative costs reflective of the Company’s growth, the non-recurrence of earnings relating to the sale of our Canadian distribution business in the third quarter of 2024, and reduced operating margins within the Take 5 and Franchise Brands segments.
•Adjusted EBITDA (non-GAAP) increased 2% to $125 million. The increase was primarily due to continued same store sales growth and improved operating margins within the Car Wash segment, partially offset by increased selling, general, and administrative costs reflective of the Company’s growth, the non-recurrence of earnings relating to the sale of our Canadian distribution business in the third quarter of 2024, and reduced operating margins within the Take 5 and Franchise Brands segments.
•Net new stores in the quarter remained consistent with the prior quarter and grew 177 over the prior year period.
Key Performance Indicators
Key measures that we use in assessing our business and evaluating our segments include the following:
System-wide sales. System-wide sales represent the total of net sales for our franchised, independently-operated, and company-operated stores. This measure allows management to better assess the total size and health of each segment, our overall store performance, and the strength of our market position relative to competitors. Sales at franchised stores are not included as revenue in our results from continuing operations, but rather, we include franchise royalties and fees that are derived from sales at franchised stores.
Store count. Store count reflects the number of franchised, independently-operated, and company-operated stores open at the end of the reporting period. Management reviews the number of new, closed, acquired, and divested stores to assess net unit growth and drivers of trends in system-wide sales, franchise royalties and fees revenue, company-operated store sales, and independently-operated store sales.
Same store sales. Same store sales reflect the change in sales year-over-year for the same store base. We define the same store base to include all franchised, independently-operated, and company-operated stores open for comparable weeks during the given fiscal period in both the current and prior year, which may be different from how others define similar terms. This measure highlights the performance of existing stores, while excluding the impact of new store openings and closures and acquisitions and divestitures.
Adjusted EBITDA. We define Adjusted EBITDA as earnings from continuing operations before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition related costs, equity compensation, loss on debt extinguishment, foreign currency transaction related gains or losses, cloud computing amortization, and certain non-recurring and non-core, infrequent or unusual charges. Adjusted EBITDA is a supplemental measure of operating performance of our segments and may not be comparable to similar measures reported by other companies. Adjusted EBITDA is a performance metric utilized by our Chief Operating Decision Maker to allocate resources to and assess performance of our segments. Refer to Note 4 in our consolidated financial statements for a reconciliation of reportable segment Adjusted EBITDA to income from continuing operations before taxes for the three months ended March 29, 2025 and March 30, 2024.
25
The following table sets forth our key performance indicators for the three months ended March 29, 2025 and March 30, 2024:
| Three Months Ended | ||||||||||||||
| (in thousands, except store count or as otherwise noted) | March 29, 2025 | March 30, 2024 | ||||||||||||
| System-Wide Sales | ||||||||||||||
| System-Wide Sales: | ||||||||||||||
| Take 5 | $ | 387,488 | $ | 326,427 | ||||||||||
| Franchise Brands | 1,033,366 | 1,074,541 | ||||||||||||
| Car Wash | 66,640 | 53,047 | ||||||||||||
| Corporate and Other | 59,339 | 58,889 | ||||||||||||
| Total | $ | 1,546,833 | $ | 1,512,904 | ||||||||||
| System-Wide Sales by Business Model: | ||||||||||||||
| Franchised Stores | $ | 1,166,062 | $ | 1,175,628 | ||||||||||
| Company-Operated Stores | 314,131 | 284,229 | ||||||||||||
| Independently-Operated Stores | 66,640 | 53,047 | ||||||||||||
| Total | $ | 1,546,833 | $ | 1,512,904 | ||||||||||
| Store Count | ||||||||||||||
| Store Count: | ||||||||||||||
| Take 5 | 1,203 | 1,035 | ||||||||||||
| Franchise Brands | 2,660 | 2,647 | ||||||||||||
| Car Wash | 718 | 718 | ||||||||||||
| Corporate and Other | 216 | 220 | ||||||||||||
| Total | 4,797 | 4,620 | ||||||||||||
| Store Count by Business Model: | ||||||||||||||
| Franchised Stores | 3,115 | 3,007 | ||||||||||||
| Company-Operated Stores | 964 | 895 | ||||||||||||
| Independently-Operated Stores | 718 | 718 | ||||||||||||
| Total | 4,797 | 4,620 | ||||||||||||
| Same Store Sales % by segment | ||||||||||||||
| Take 5 | 8.0 | % | 6.7 | % | ||||||||||
| Franchise Brands | (2.9 | %) | 1.5 | % | ||||||||||
| Car Wash | 26.2 | % | 0.4 | % | ||||||||||
| Total consolidated | 0.7 | % | 1.6 | % | ||||||||||
| Adjusted EBITDA by segment | ||||||||||||||
| Take 5 | $ | 100,918 | $ | 88,888 | ||||||||||
| Franchise Brands | 44,383 | 47,589 | ||||||||||||
| Car Wash | 24,388 | 17,985 | ||||||||||||
| Adjusted EBITDA margin by segment | ||||||||||||||
| Take 5 | 34.4 | % | 34.9 | % | ||||||||||
| Franchise Brands | 61.9 | % | 62.3 | % | ||||||||||
| Car Wash | 35.9 | % | 33.0 | % | ||||||||||
| Total consolidated | 24.2 | % | 25.5 | % | ||||||||||
26
Reconciliation of Non-GAAP Financial Information
To supplement our consolidated financial statements prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures throughout this Quarterly Report, as described further below, to provide investors with additional useful information about our financial performance, to enhance the overall understanding of our past performance and future prospects and to allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making.
Non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. As a result, non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, our consolidated financial statements prepared and presented in accordance with GAAP.
Adjusted Net Income/Adjusted Earnings per Share. We define Adjusted Net Income as net income from continuing operations calculated in accordance with GAAP, adjusted for acquisition related costs, equity compensation, loss on debt extinguishment, cloud computing amortization, and certain non-recurring, non-core, infrequent or unusual charges, amortization related to acquired intangible assets, and the tax effect of the adjustments. Adjusted Earnings Per Share is calculated by dividing Adjusted Net Income by the weighted average shares outstanding. Management believes this non-GAAP financial measure is useful because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans, and make strategic decisions.
The following table provides a reconciliation of Net Income from continuing operations to Adjusted Net Income and Adjusted Earnings per Share:
| Three Months Ended | |||||||||||
| (in thousands, except per share data) | March 29, 2025 | March 30, 2024 | |||||||||
| Net income from continuing operations | $ | 17,490 | $ | 11,552 | |||||||
| Adjustments: | |||||||||||
Acquisition related costs(a) | 15 | 1,701 | |||||||||
Non-core items and project costs, net(b) | 5,244 | 4,711 | |||||||||
Cloud computing amortization(c) | 1,881 | 1,345 | |||||||||
Share-based compensation expense(d) | 11,788 | 11,861 | |||||||||
Foreign currency transaction loss, net(e) | 210 | 4,321 | |||||||||
Asset sale leaseback (gain) loss, net, impairment and closed store expenses(f) | 11,753 | 3,976 | |||||||||
Amortization related to acquired intangible assets(g) | 4,659 | 6,415 | |||||||||
Valuation allowance for deferred tax asset(h) | 299 | 1,134 | |||||||||
| Adjusted net income before tax impact of adjustments | 53,339 | 47,016 | |||||||||
Tax impact of adjustments(i) | (9,160) | (7,004) | |||||||||
| Adjusted net income from continuing operations | $ | 44,179 | $ | 40,012 | |||||||
| Basic earnings per share from continuing operations | $ | 0.11 | $ | 0.07 | |||||||
| Diluted earnings per share from continuing operations | $ | 0.11 | $ | 0.07 | |||||||
| Adjusted basic earnings per share from continuing operations | $ | 0.27 | $ | 0.25 | |||||||
| Adjusted diluted earnings per share from continuing operations | $ | 0.27 | $ | 0.25 | |||||||
| Weighted average shares outstanding | |||||||||||
| Basic | 160,568 | 159,631 | |||||||||
| Diluted | 161,818 | 160,604 | |||||||||
Adjusted EBITDA. We define Adjusted EBITDA as earnings from continuing operations before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition related costs, equity compensation, loss on debt extinguishment, cloud computing amortization, and certain non-recurring, non-core, infrequent or unusual charges. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies due to differences in methods of
27
calculation. Management believes this non-GAAP financial measure is useful because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans, and make strategic decisions.
The following table provides a reconciliation of Net income from continuing operations to Adjusted EBITDA:
| Three Months Ended | |||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||
| Net income from continuing operations | $ | 17,490 | $ | 11,552 | |||||||
| Income tax benefit | 7,031 | 8,458 | |||||||||
| Interest expense, net | 36,534 | 43,751 | |||||||||
| Depreciation and amortization | 33,152 | 31,116 | |||||||||
| EBITDA | 94,207 | 94,877 | |||||||||
Acquisition related costs(a) | 15 | 1,701 | |||||||||
Non-core items and project costs, net(b) | 5,244 | 4,711 | |||||||||
Cloud computing amortization(c) | 1,881 | 1,345 | |||||||||
Share-based compensation expense(d) | 11,788 | 11,861 | |||||||||
Foreign currency transaction loss, net(e) | 210 | 4,321 | |||||||||
Asset sale leaseback (gain) loss, net, impairment and closed store expenses(f) | 11,753 | 3,976 | |||||||||
| Adjusted EBITDA | $ | 125,098 | $ | 122,792 | |||||||
(a) Consists of acquisition costs as reflected within the 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 GAAP, such costs relating to acquisitions are expensed as incurred and not capitalized.
(b) Consists of discrete items and project costs, including third-party professional costs associated with strategic transformation initiatives as well as non-recurring payroll-related costs.
(c) Includes non-cash amortization expenses relating to cloud computing arrangements.
(d) Represents non-cash share-based compensation expense.
(e) Represents foreign currency transaction losses, net that primarily related to the remeasurement of our intercompany loans as well as gains and losses on cross currency swaps and forward contracts.
(f) Consists of the following items (i) (gains) losses, net on sale leasebacks, disposal of assets, or sale of business; (ii) net losses (gains) on sale for assets held for sale; and (iii) impairment of certain fixed assets and operating lease right-of-use assets related to closed and underperforming locations, lease exit costs and other costs associated with stores that were closed prior to the respective lease termination dates.
(g) Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statement of operations.
(h) Represents valuation allowances on income tax carryforwards in certain domestic jurisdictions that are not more likely than not to be realized.
(i) Represents the tax impact of adjustments associated with the reconciling items between net income from continuing operations 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.
28
Results of Operations for the Three Months Ended March 29, 2025 Compared to the Three Months Ended March 30, 2024
Net Income From Continuing Operations
We recognized net income from continuing operations of $17 million, or $0.11 per diluted share, for the three months ended March 29, 2025, compared to $12 million, or $0.07 per diluted share, for the three months ended March 30, 2024. The increase of approximately $6 million was primarily due to the following:
•same store sales growth;
•increased operating margins within the Car Wash segment;
•decreased interest expense of $7 million, primarily related to decreased borrowings on the Revolving Credit Facility and Term Loan Facility in the current period, partially offset by increased interest rates associated with the Series 2024-1 Securitization Senior Notes issued during the third quarter of 2024; and
•a reduction in foreign currency transaction losses in the current period, primarily relating to intercompany activity.
These positive factors were partially offset by:
•increased loss on sale of assets and impairment charges $7 million, primarily relating to the non-recurrence of a gain associated with the sale of nine company-operated stores to a franchisee and activity relating to assets held for sale and sale leaseback transactions;
•higher selling, general, and administrative costs reflective of the Company’s growth;
•the non-recurrence of earnings relating to the sale of our Canadian distribution business in the third quarter of 2024; and
•decreased operating margins within the Take 5 and Franchise Brands segments.
Adjusted Net Income
Adjusted net income was $44 million for the three months ended March 29, 2025 compared to $40 million for the three months ended March 30, 2024. This increase of approximately $4 million was primarily due to the following:
•same store sales growth;
•increased operating margins within the Car Wash segment; and
•decreased interest expense of $7 million, primarily relating to decreased borrowings on the Revolving Credit Facility and Term Loan Facility in the current period, partially offset by increased interest rates associated with the Series 2024-1 Securitization Senior Notes issued during the third quarter of 2024.
The positive factors were partially offset by:
•higher selling, general, and administrative costs reflective of the Company’s growth;
•the non-recurrence of earnings relating to the sale of our Canadian distribution business in the third quarter of 2024; and
•decreased operating margins within the Take 5 and Franchise Brands segments.
Adjusted EBITDA
Adjusted EBITDA was $125 million for the three months ended March 29, 2025 compared to $123 million for the three months ended March 30, 2024. The increase of approximately $2 million was primarily due to:
•same store sales growth; and
•increased operating margins within the Car Wash segment.
The positive factors were partially offset by:
•higher selling, general, and administrative costs reflective of the Company’s growth;
•the non-recurrence of earnings relating to the sale of our Canadian distribution business in the third quarter of 2024; and
•decreased operating margins within the Take 5 and Franchise Brands segments.
29
To facilitate the review of our results of operations, the following tables set forth our financial results for the periods indicated. All information is derived from the consolidated statements of operations. Certain percentages presented have been rounded to the nearest number, therefore, totals may not equal the sum of the line items in the tables below.
Net Revenue
| Three Months Ended | |||||||||||||||||||||||
(in thousands) | March 29, 2025 | % of Net Revenues | March 30, 2024 | % of Net Revenues | |||||||||||||||||||
| Franchise royalties and fees | $ | 44,710 | 8.7 | % | $ | 45,045 | 9.3 | % | |||||||||||||||
| Company-operated store sales | 314,131 | 60.9 | % | 284,229 | 59.0 | % | |||||||||||||||||
| Independently-operated store sales | 66,640 | 12.9 | % | 53,047 | 11.0 | % | |||||||||||||||||
| Advertising fund contributions | 25,325 | 4.9 | % | 24,070 | 5.0 | % | |||||||||||||||||
| Supply and other revenue | 65,357 | 12.6 | % | 75,601 | 15.7 | % | |||||||||||||||||
| Total net revenue | $ | 516,163 | 100.0 | % | $ | 481,992 | 100.0 | % | |||||||||||||||
Franchise Royalties and Fees
Franchise royalties and fees decreased less than $1 million, or 1%, primarily due to a decrease in franchise system-wide sales of $10 million, or 1%, primarily related to volume.
Company-Operated Store Sales
Company-operated store sales increased $30 million, or 11%, of which $30 million related to an increase in the Take 5 segment. The increase was primarily due to same store sales growth and 74 net new company-operated stores.
Independently-Operated Store Sales
Independently-operated store sales (comprised entirely of sales from the international car wash locations) increased $14 million, or 26%, due to same store sales growth resulting from increased volume and revenue per wash.
Advertising Fund Contributions
Advertising fund contributions increased by $1 million, or 5%, primarily due to changes in the mix of system-wide sales among franchised brands. Our franchise agreements typically require the franchisee to pay continuing advertising fund fees based on a percentage of the franchisee’s gross sales or a stated fee.
Supply and Other Revenue
Supply and other revenue decreased $10 million, or 14%, primarily due to the inclusion of $15 million of supply and other revenue from our Canadian distribution business in the three months ended March 30, 2024 compared to no revenue in the current quarter as a result of the sale of that business in the third quarter of 2024, partially offset by increased supply sales within the Take 5 segment.
30
Operating Expenses
| Three Months Ended | |||||||||||||||||||||||
(in thousands) | March 29, 2025 | % of Net Revenues | March 30, 2024 | % of Net Revenues | |||||||||||||||||||
| Company-operated store expenses | $ | 181,866 | 35.2 | % | $ | 169,342 | 35.1 | % | |||||||||||||||
| Independently-operated store expenses | 36,475 | 7.1 | % | 29,355 | 6.1 | % | |||||||||||||||||
| Advertising fund expenses | 25,325 | 4.9 | % | 24,070 | 5.0 | % | |||||||||||||||||
| Supply and other expenses | 35,028 | 6.8 | % | 36,216 | 7.5 | % | |||||||||||||||||
Selling, general, and administrative expenses | 143,052 | 27.7 | % | 123,811 | 25.7 | % | |||||||||||||||||
| Depreciation and amortization | 33,152 | 6.4 | % | 31,116 | 6.5 | % | |||||||||||||||||
| Total operating expenses | $ | 454,898 | 88.1 | % | $ | 413,910 | 85.9 | % | |||||||||||||||
Company-Operated Store Expenses
Company-operated store expenses increased $13 million, or 7%, primarily due to variable costs associated with increased Take 5 company-operated store sales in the current period as well as increased rent expense and maintenance and repair charges.
Independently-Operated Store Expenses
Independently-operated store expenses (comprised entirely of expenses from the international car wash locations) increased $7 million, or 24%, primarily due to variable costs associated with the increase in sales.
Advertising Fund Expenses
Advertising fund expenses increased by $1 million, or 5%, which is commensurate with the increase to advertising fund contributions during the period. Advertising fund expenses generally trend consistent with advertising fund contributions.
Supply and Other Expenses
Supply and other expenses decreased $1 million, or 3%, primarily due to the inclusion of $10 million of supply and other expenses from our Canadian distribution business in the three months ended March 30, 2024 compared to no expense in the current quarter as a result of the sale of that business in the third quarter of 2024, partially offset by costs associated with increased Take 5 supply sales.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased $19 million, or 16%, primarily due to incremental losses on sale of assets and impairment charges $7 million, relating to the non-recurrence of a gain associated with the sale of nine company-operated stores to a franchisee and activity relating to assets held for sale and sale leaseback transactions as well as costs reflective of the Company’s growth.
Depreciation and Amortization
Depreciation and amortization expense increased $2 million, or 7%, primarily due to 69 net new company-operated store openings in the current year compared to the prior year.
Interest Expense, Net
| Three Months Ended | |||||||||||||||||||||||
(in thousands) | March 29, 2025 | % of Net Revenues | March 30, 2024 | % of Net Revenues | |||||||||||||||||||
| Interest expense, net | $ | 36,534 | 7.1 | % | $ | 43,751 | 9.1 | % | |||||||||||||||
Interest expense, net decreased $7 million, or 16%, primarily related to decreased borrowings on the Revolving Credit Facility and Term Loan Facility in the current period, partially offset by increased interest rates associated with the Series 2024-1 Securitization Senior Notes issued during the third quarter of 2024.
31
Foreign Currency Transactions Loss, Net
| Three Months Ended | |||||||||||||||||||||||
(in thousands) | March 29, 2025 | % of Net Revenues | March 30, 2024 | % of Net Revenues | |||||||||||||||||||
| Foreign currency transaction loss, net | $ | 210 | — | % | $ | 4,321 | 0.9 | % | |||||||||||||||
The foreign currency transaction loss for the three months ended March 29, 2025 was primarily comprised of a loss on foreign currency hedges of less than $1 million, partially offset by transaction remeasurement gains in our foreign operations of less than $1 million. The foreign currency transaction loss for the three months ended March 30, 2024 was primarily comprised of transaction losses in our foreign operations of $7 million, partially offset by a gain on foreign currency hedges of $3 million.
Income Tax Expense
| Three Months Ended | |||||||||||||||||||||||
(in thousands) | March 29, 2025 | % of Net Revenues | March 30, 2024 | % of Net Revenues | |||||||||||||||||||
| Income tax expense | $ | 7,031 | 1.4 | % | $ | 8,458 | 1.8 | % | |||||||||||||||
The effective tax rate for the three months ended March 29, 2025 was 28.7% compared to 42.3% for the three months ended March 30, 2024. The decrease was primarily driven by non-deductible share-based compensation, limitation on interest deduction in certain foreign jurisdictions, state taxes related to pre-tax income, and a reduction in U.S. tax impacts of its foreign operations.
32
Segment Results of Operations for the Three Months Ended March 29, 2025 Compared to the Three Months Ended March 30, 2024
We assess the performance of our segments based on Adjusted EBITDA, which is defined as earnings from continuing operations before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition related costs, store closure costs, equity compensation, loss on debt extinguishment, cloud computing amortization, and certain non-recurring, non-core, infrequent or unusual charges. Shared services costs are not allocated to these segments and are included in Corporate and Other. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation.
Take 5
| Three Months Ended | 2025 | 2024 | |||||||||||||||||||||
(in thousands, unless otherwise noted) | March 29, 2025 | March 30, 2024 | % Net Revenue For Segment | % Net Revenue For Segment | |||||||||||||||||||
| Franchise royalties and fees | $ | 8,357 | $ | 5,726 | 2.8 | % | 2.2 | % | |||||||||||||||
| Company-operated store sales | 250,800 | 220,871 | 85.5 | % | 86.8 | % | |||||||||||||||||
| Supply and other revenue | 34,285 | 27,864 | 11.7 | % | 11.0 | % | |||||||||||||||||
| Total net revenue | $ | 293,442 | $ | 254,461 | 100.0 | % | 100.0 | % | |||||||||||||||
Adjusted EBITDA | $ | 100,918 | $ | 88,888 | 34.4 | % | 34.9 | % | |||||||||||||||
| System-Wide Sales | Change | ||||||||||||||||||||||
| Franchised stores | $ | 136,688 | $ | 105,556 | $ | 31,132 | 29.5 | % | |||||||||||||||
| Company-operated stores | 250,800 | 220,871 | 29,929 | 13.6 | % | ||||||||||||||||||
| Total System-Wide Sales | $ | 387,488 | $ | 326,427 | $ | 61,061 | 18.7 | % | |||||||||||||||
Store Count (in whole numbers) | Change | ||||||||||||||||||||||
| Franchised stores | 468 | 374 | 94 | 25.1 | % | ||||||||||||||||||
| Company-operated stores | 735 | 661 | 74 | 11.2 | % | ||||||||||||||||||
| Total Store Count | 1,203 | 1,035 | 168 | 16.2 | % | ||||||||||||||||||
| Same Store Sales % | 8.0 | % | 6.7 | % | |||||||||||||||||||
Take 5 net revenue increased $39 million, or 15%, driven primarily by a $30 million increase in company-operated store sales from same store sales growth and 74 net new company-operated stores. Supply and other revenue increased by $6 million, or 23%, primarily due to higher system-wide sales. Franchise royalties and fees increased by $3 million, or 46%, primarily due to a $31 million, or 29%, increase in franchise system-wide sales from same store sales growth and 94 net new franchise stores.
Take 5 Adjusted EBITDA increased $12 million, or 14%, primarily due to net new store growth, same store sales growth, partially offset by higher repair and maintenance and rent expense as well as variable costs associated with the increased company-operated store sales.
33
Franchise Brands
| Three Months Ended | 2025 | 2024 | |||||||||||||||||||||
(in thousands, unless otherwise noted) | March 29, 2025 | March 30, 2024 | % Net Revenue For Segment | % Net Revenue For Segment | |||||||||||||||||||
| Franchise royalties and fees | $ | 36,353 | $ | 39,319 | 50.7 | % | 51.5 | % | |||||||||||||||
| Company-operated store sales | 3,992 | 4,469 | 5.6 | % | 5.9 | % | |||||||||||||||||
| Supply and other revenue | 31,338 | 32,540 | 43.7 | % | 42.6 | % | |||||||||||||||||
| Total net revenue | $ | 71,683 | $ | 76,328 | 100.0 | % | 100.0 | % | |||||||||||||||
Adjusted EBITDA | $ | 44,383 | $ | 47,589 | 61.9 | % | 62.3 | % | |||||||||||||||
| System-Wide Sales | Change | ||||||||||||||||||||||
| Franchised stores | $ | 1,029,374 | $ | 1,070,072 | $ | (40,698) | (3.8 | %) | |||||||||||||||
| Company-operated stores | 3,992 | 4,469 | (477) | (10.7 | %) | ||||||||||||||||||
| Total System-Wide Sales | $ | 1,033,366 | $ | 1,074,541 | $ | (41,175) | (3.8 | %) | |||||||||||||||
Store Count (in whole numbers) | Change | ||||||||||||||||||||||
| Franchised stores | 2,647 | 2,633 | 14 | 0.5 | % | ||||||||||||||||||
| Company-operated stores | 13 | 14 | (1) | (7.1 | %) | ||||||||||||||||||
| Total Store Count | 2,660 | 2,647 | 13 | 0.5 | % | ||||||||||||||||||
| Same Store Sales % | (2.9 | %) | 1.5 | % | |||||||||||||||||||
Franchise Brands net revenue decreased $5 million, or 6%, driven by a decrease in system-wide sales of $41 million, or 4%, primarily driven by lower volume in the current period.
Franchise Brands Adjusted EBITDA decreased $3 million, or 7%, primarily due to negative same store sales growth primarily due to lower volume in the current period.
34
Car Wash
| Three Months Ended | 2025 | 2024 | |||||||||||||||||||||
(in thousands, unless otherwise noted) | March 29, 2025 | March 30, 2024 | % Net Revenue For Segment | % Net Revenue For Segment | |||||||||||||||||||
| Independently-operated store sales | 66,640 | 53,047 | 98.0 | % | 97.4 | % | |||||||||||||||||
| Supply and other revenue | 1,386 | 1,441 | 2.0 | % | 2.6 | % | |||||||||||||||||
| Total net revenue | $ | 68,026 | $ | 54,488 | 100.0 | % | 100.0 | % | |||||||||||||||
Adjusted EBITDA | $ | 24,388 | $ | 17,985 | 35.9 | % | 33.0 | % | |||||||||||||||
| System-Wide Sales | Change | ||||||||||||||||||||||
| Independently-operated stores | 66,640 | 53,047 | 13,593 | 25.6 | % | ||||||||||||||||||
| Total System-Wide Sales | $ | 66,640 | $ | 53,047 | $ | 13,593 | 25.6 | % | |||||||||||||||
Store Count (in whole numbers) | Change | ||||||||||||||||||||||
| Independently-operated stores | 718 | 718 | — | — | % | ||||||||||||||||||
| Total Store Count | 718 | 718 | — | — | % | ||||||||||||||||||
| Same Store Sales % | 26.2 | % | 0.4 | % | |||||||||||||||||||
Car Wash segment net revenue increased $14 million, or 25%, driven primarily by a $14 million, or 26%, increase in independently-operated store sales due to same store sales growth as a result of increased volume and revenue per wash.
Car Wash Adjusted EBITDA increased by $6 million, or 36%, driven primarily by same store sales growth, partially offset by variable costs associated with increased sales.
35
Financial Condition, Liquidity and Capital Resources
Sources of Liquidity and Capital Resources
Cash flow from operations, supplemented with our long-term borrowings and Revolving Credit Facility, has been sufficient to fund our operations while allowing us to make strategic investments to grow our business. We believe that our sources of liquidity and capital resources will be adequate to fund our operations, acquisitions, company-operated store development, other general corporate needs, and the additional expenses we expect to incur for at least the next twelve months. We expect to continue to have access to the capital markets at acceptable terms. However, this could be adversely affected by many factors including macroeconomic factors, a downgrade of our credit rating, or a deterioration of certain financial ratios.
Driven Brands Funding, LLC (the “Issuer”), a wholly-owned subsidiary of the Company, and Driven Brands Canada Funding Corporation (along with the Issuer, the “Co-Issuers”) are subject to certain quantitative covenants related to debt service coverage and leverage ratios in connection with our securitization senior notes. Our Term Loan Facility and Revolving Credit Facility also have certain qualitative covenants. As of March 29, 2025, the Co-Issuers and Driven Holdings were in material compliance with all such covenants under their respective credit agreements.
In February 2025, Driven Holdings, LLC entered into an amendment extending the maturity date of the Revolving Credit Facility to February 2030, subject to certain terms and conditions. Refer to Note 7 for additional information.
The Company’s 2019-1 Notes and 2019-2 Notes have anticipated repayment dates in April 2026 and October 2026, respectively. The Company anticipates refinancing these notes prior to the anticipated repayment dates. As of the date of this filing, the Company has sufficient potential borrowing capacity under the Revolving Credit Facility and the Company’s variable funding notes to repay these notes.
At March 29, 2025, the Company had total liquidity of $641 million consisting of $152 million in cash and cash equivalents and $489 million of undrawn capacity on its variable funding securitization senior notes and Revolving Credit Facility. This did not include the additional $135 million Series 2022 Class A-1 Notes that expand the Company’s variable funding note borrowing capacity if the Company elects to exercise them, assuming certain conditions continue to be met.
On February 24, 2025, the Company entered into a definitive agreement to sell its U.S. Car Wash business to Express Wash Operations, LLC dba Whistle Express Car Wash (the “Buyer”) for an aggregate purchase price of $385 million, subject to customary adjustments. Under the terms of the agreement, the Buyer agreed to pay the Company $255 million in cash and deliver to the Company an interest-bearing seller note evidencing a loan in the initial principal amount of $130 million. The transaction was completed on April 10, 2025.
The following table illustrates the main components of our cash flows for the three months ended March 29, 2025 and March 30, 2024:
| Three Months Ended | |||||||||||
(in thousands) | March 29, 2025 | March 30, 2024 | |||||||||
| Net cash provided by operating activities | $ | 75,131 | $ | 60,283 | |||||||
| Net cash used in investing activities | (44,012) | (34,280) | |||||||||
| Net cash used in financing activities | (47,767) | (33,220) | |||||||||
| Effect of exchange rate changes on cash | 1,549 | 1,133 | |||||||||
| Net change in cash, cash equivalents, restricted cash, and restricted cash included in advertising fund assets | $ | (15,099) | $ | (6,084) | |||||||
Cash flow information is inclusive of cash flows from discontinued operations.
Operating Activities
Net cash provided by operating activities was $75 million for the three months ended March 29, 2025 compared to $60 million for the three months ended March 30, 2024. The increase in cash provided by operating activities was primarily due to increased net income, decreased interest expense, and working capital improvements, including reduced cloud computing arrangements expenditures, during the three months ended March 29, 2025.
Investing Activities
Net cash used in investing activities was $44 million for the three months ended March 29, 2025 compared to $34 million used in investing activities for the three months ended March 30, 2024. The increase was primarily due to reduced proceeds
36
from the sale of U.S. Car Wash assets held for sale in the current year and the sale of nine company-operated stores to a franchisee in the prior year, partially offset by a $33 million decrease in capital expenditures.
Financing Activities
Net cash used in financing activities was $48 million for the three months ended March 29, 2025 compared to $33 million used in financing activities for the three months ended March 30, 2024. The increase in cash used in financing activities was primarily related to an increase in net repayments of long-term debt, including finance leases, of $25 million, primarily associated with Term Loan Facility repayments, and net repayments on the Revolving Credit Facility of $10 million in the current year, partially offset by Tax Receivable Agreement payments of $25 million in the prior year. See Note 7 to our consolidated financial statements for additional information regarding the Company’s debt.
Tax Receivable Agreement
We expect to be able to utilize certain tax benefits which are related to periods prior to the effective date of the Company’s initial public offering, which we therefore attribute to our existing shareholders. We expect that these tax benefits (i.e., the Pre-IPO and IPO-Related Tax Benefits) will reduce the amount of tax that we and our subsidiaries would otherwise be required to pay in the future. We have entered into a Tax Receivable Agreement which provides our Pre-IPO shareholders with the right to receive payment by us of 85% of the amount of cash savings, if any, in U.S. and Canadian federal, state, local, and provincial income tax that we and our subsidiaries actually realize as a result of the utilization of the Pre-IPO and IPO-Related Tax Benefits or divestitures. The Company recorded a current income tax receivable liability of $23 million as of March 29, 2025 and December 28, 2024, respectively, and a non-current income tax receivable liability of $111 million as of March 29, 2025 and December 28, 2024, respectively, on the consolidated balance sheets. We made payments of approximately $25 million under the Tax Receivable Agreement in January 2024. No payments were made during the three months ended March 29, 2025.
For purposes of the Tax Receivable Agreement, cash savings in income tax will be computed by reference to the reduction in the liability for income taxes resulting from the utilization of the Pre-IPO and IPO-Related Tax Benefits. The term of the Tax Receivable Agreement commenced upon the effective date of the Company’s initial public offering and will continue until the Pre-IPO and IPO-Related Tax Benefits have been utilized, accelerated, or expired.
Because we are a holding company with no operations of our own, our ability to make payments under the Tax Receivable Agreement is dependent on the ability of our subsidiaries to make distributions to us. The securitized debt facility may restrict the ability of our subsidiaries to make distributions to us, which could affect our ability to make payments under the Tax Receivable Agreement. To the extent that we are unable to make payments under the Tax Receivable Agreement because of restrictions under our outstanding indebtedness, such payments will be deferred and will generally accrue interest. As of July 1, 2023, interest accrues at the Base Rate plus an applicable margin or SOFR plus an applicable term adjustment plus 1.0%. To the extent that we are unable to make payments under the Tax Receivable Agreement for any other reason, such payments will generally accrue interest at a rate of SOFR plus an applicable term adjustment plus 5.0% per annum until paid.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in Note 2 of the consolidated financial statements presented in our Form 10-K for the year ended December 28, 2024. There have been no material changes to our critical accounting policies from those disclosed in our Form 10-K for the year ended December 28, 2024.
Application of New Accounting Standards
See Note 2 of the consolidated financial statements for a discussion of recently issued accounting standards applicable to the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Refer to the Company’s annual report for the year ended December 28, 2024 for a complete discussion of the Company’s market risk. There have been no material changes in the Company’s market risk from those disclosed in the Company’s Form 10-K for the year ended December 28, 2024.
37
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our CEO and CFO, has evaluated the design effectiveness of our disclosure controls and procedures (as defined in Rules 13a--15(e) and 15d--15(e) under the Exchange Act), as of March 29, 2025. The term “disclosure controls and procedures,” means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on their evaluation of the design effectiveness of our disclosure controls and procedures as of March 29, 2025, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures were designed effectively and will provide a reasonable level of assurance.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the most recently completed quarter ended March 29, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
38
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Information relating to this item is included within Note 12 of our financial statements included elsewhere within this Form 10-Q.
Item 1A. Risk Factors
For a discussion of risk factors that could adversely affect our results of operations, financial condition, business reputation or business prospects, we refer you to Part I, Item 1A "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2024. There have been no material changes in the Company’s risk factors from those disclosed in the Company’s Form 10-K for the year ended December 28, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 5. Other Information
(c) Trading Plans
During the three months ended March 29, 2025, no director or Section 16 officer adopted terminated
39
Item 6. Exhibits.
| Exhibit Number | Exhibit Description | |||||||
| 10.1 | ||||||||
| 10.2* | ||||||||
| 10.3* | ||||||||
| 10.4† | ||||||||
| 31.1* | ||||||||
| 31.2* | ||||||||
| 32.1* | ||||||||
| 32.2* | ||||||||
| 101.INS* | XBRL Instance Document | |||||||
| 101.SCH* | XBRL Schema Document | |||||||
| 101.CAL* | XBRL Calculation Linkbase Document | |||||||
| 101.DEF* | XBRL Definition Linkbase Document | |||||||
| 101.LAB* | XBRL Label Linkbase Document | |||||||
| 101.PRE* | XBRL Presentation Linkbase Document | |||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | |||||||
| * | Filed herewith. | |||||||
| † | Indicates management contract or compensatory plan. | |||||||
40
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 8, 2025
| DRIVEN BRANDS HOLDINGS INC. | ||||||||||||||
| By: | /s/ Jonathan Fitzpatrick | |||||||||||||
| Name: | Jonathan Fitzpatrick | |||||||||||||
| Title: | President and Chief Executive Officer | |||||||||||||
| By: | /s/ Michael F. Diamond | |||||||||||||
| Name: | Michael F. Diamond | |||||||||||||
| Title: | Executive Vice President and Chief Financial Officer | |||||||||||||
41