Driven Brands Holdings Inc. Reports Fourth Quarter and Fiscal Year 2020 Results

March 10, 2021 7:00 AM EST
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CHARLOTTE, N.C., March 10, 2021 (GLOBE NEWSWIRE) -- Driven Brands Holdings Inc. (NASDAQ: DRVN) (“Driven Brands” or “the Company”) today reported financial results for the fourth quarter and fiscal year ended December 26, 2020.

For the fourth quarter, system-wide sales were $935.1 million, an increase of 24% versus the prior year, with 36% net store growth and a decline in same-store sales of 3.4%. Revenue was $288.5 million, an increase of 58% versus the prior year. Loss per share was $(0.06) for the fourth quarter, while adjusted earnings per share2 was $0.01.

For fiscal year 2020, system-wide sales were $3.4 billion, an increase of 16% versus the prior year, with 36% net store growth and a decline in same-store sales of 5.6%. Revenue was $904.2 million, an increase of 51% versus the prior year. Loss per share was $(0.04) for the fiscal year, while adjusted earnings per share2 was $0.42.

“Our fourth quarter results are a testament to the strength and diversity of the Driven Brands portfolio and the hard work the team has demonstrated throughout 2020,” said Jonathan Fitzpatrick, president and chief executive officer. “Our employees and franchisees continued to adapt to the ever-changing needs of the past year, meeting our expectations and delivering industry-leading results.

“Given our scale, the significant whitespace in this fragmented and needs-based industry, and our robust cash generation, I am confident that we are well positioned for growth in 2021 and to maximize long-term value for all of our stakeholders.”

Fourth Quarter Highlights

  • The Company added 42 net new stores during the quarter, with the addition of 23 stores in the Maintenance segment, 13 stores in the Car Wash segment, and 6 stores in the Paint, Collision, and Glass segment.  
  • Same-store sales declined 3.4% for the quarter. Same-store sales increased in the Maintenance and Platform Services segments, while same-store sales declined in the Paint, Collision, and Glass segment as roadways were less congested due to the COVID-19 pandemic, which resulted in fewer accidents and therefore fewer collision repairs. This compares with consolidated same-store sales growth of 5.4% in the fourth quarter of 2019.
  • Revenue increased 58% versus the prior year, primarily driven by the acquisition of International Car Wash Group (“ICWG”) in the third quarter of 2020, which added 939 stores to the portfolio.
  • The Company recorded a net loss in the fourth quarter of $(7.5) million.
  • Adjusted Net Income1 was $1.6 million, an increase of 3% versus the prior year.
  • Adjusted EBITDA3 was $65.9 million, more than double that of the prior year.

Key Fourth Quarter 2020 Performance Indicators by Segment

 System-wide Sales(in millions) Store CountSame-Store SalesRevenue(in millions)Segment Adjusted EBITDA4(in millions)
Maintenance$247.8 1,394 1.2%$111.0 $32.2 
Car Wash88.0 952 N/A* 90.5 25.4 
Paint, Collision, and Glass537.2 1,682 (7.3)%44.4 16.2 
Platform Services62.1 199 9.5%32.8 12.7 
Corporate / Other N/A N/A N/A 9.8  
Total$935.1 4,227 (3.4)%$288.5  

*Car Wash will not be included in same-store sales until the one-year anniversary of the ICWG acquisition in the third quarter of 2021.

Capital and LiquidityThe Company ended the fourth quarter with $188.4 million in cash, cash equivalents, and restricted cash, as well as $155.8 million of undrawn capacity on its revolving credit facilities.

In January 2021, the Company sold 31.8 million shares of its common stock in its initial public offering and received net proceeds of $651.6 million. Those proceeds, together with cash on hand, were used to repay $721.9 million of outstanding debt assumed in the ICWG acquisition. The remaining long-term debt portfolio totals $1.5 billion, and has a weighted average fixed annual interest rate of 4.0% and a weighted average remaining term of six years.

In February 2021, the Company’s underwriters exercised their over-allotment option to purchase 4.8 million additional shares of common stock. The Company received net proceeds of $99.2 million, and used $43.0 million of such proceeds to purchase 2.1 million shares of common stock from existing stockholders. The Company intends to use the remaining net proceeds of $56.2 million for general corporate purposes.

Guidance

Long-term TargetsThe following long-term targets reflect the Company’s expectations through 2024:

  • Same-store sales: Low-single-digit growth
  • Revenue: Low-double-digit growth
  • Adjusted EBITDA3: Low-double-digit growth
  • Adjusted Net Income1: Mid-to-high teens growth

Fiscal Year 2021The Company is providing the following guidance for the fiscal year ending December 25, 2021:

  • Net Store Growth:• Maintenance: 80 to 90 stores; driven by roughly equal parts franchise and company-operated store growth;• Car Wash: 20 to 30 stores; driven primarily by company-operated store growth; and• Paint, Collision, and Glass: 60 to 70 stores; driven by franchise store growth.
  • Positive same-store sales growth
  • Adjusted EBITDA3 as a percentage of revenue of approximately 23%, consistent with fiscal year 2020.

Conference CallDriven Brands will host a conference call to discuss fourth quarter and fiscal year 2020 results and its guidance for fiscal year 2021 today, Wednesday, March 10, 2021 at 9:00am ET. The call will be available by webcast and can be accessed by visiting Driven Brands’ Investor Relations website at investors.drivenbrands.com. A replay of the call will be available until April 27, 2021.

About Driven BrandsDriven Brands™, headquartered in Charlotte, NC, is the largest automotive services company in North America, providing a range of consumer and commercial automotive needs, including paint, collision, glass, vehicle repair, oil change, maintenance and car wash. Driven Brands is the parent company of some of North America’s leading automotive service businesses including Take 5 Oil Change®, Meineke Car Care Centers®, Maaco®, 1-800-Radiator & A/C®, and CARSTAR®. Driven Brands has more than 4,200 locations across 15 countries, and services over 50 million vehicles annually. Driven Brands’ network generates more than $900 million in revenue from more than $3 billion in system-wide sales.

Contacts

Shareholder/Analyst inquiries:Rachel Webbrachel.webb@drivenbrands.com(704) 644-8125              Media inquiries:media@drivenbrands.com(704) 644-8129
   

Disclosure Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this press release, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, and expected market growth are forward-looking statements. In particular, forward-looking statements include, among other things, statements relating to: (i) our strategy, outlook and growth prospects; (ii) our operational and financial targets and dividend policy; (iii) general economic trends and trends in the industry and markets; and (iv) the competitive environment in which we operate. Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions, and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. It is not possible to predict or identify all such risks. These risks include, but are not limited to, the risk factors that are described under the section titled “Risk Factors” in our final prospectus filed with the Securities and Exchange Commission on January 19, 2021 pursuant to Rule 424(b) under the Securities Act of 1933, as amended, and in our other filings with the Securities and Exchange Commission, which are available on its website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Forward-looking statements represent our estimates and assumptions only as of the date on which they are made, and we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Disclosure Regarding Non-GAAP Financial Measures

In addition to the financial measures presented in this release in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company has included certain non-GAAP financial measures in this release, including Adjusted Net Income1, Adjusted Earnings Per Share2, Adjusted EBITDA3 and Acquisition Adjusted EBITDA5. Management believes these non-GAAP financial measures are useful because they enable management, investors, and others to assess the operating performance of the Company and its segments. Please refer to the Reconciliation of Non-GAAP Financial Information tables located in the financial supplement in this release.

This release includes forward-looking guidance for certain non-GAAP financial measures, including Adjusted Net Income1 and Adjusted EBITDA3. These measures will differ from net income, determined in accordance with GAAP, in ways similar to those described in the reconciliations at the end of this release. We do not provide guidance for net income, determined in accordance with GAAP, or a reconciliation of guidance for Adjusted Net Income1 or Adjusted EBITDA3 to the most directly comparable GAAP measure because the Company is not able to predict with reasonable certainty the amount or nature of all items that will be included in net income.

___________1 “Adjusted Net Income” is calculated by eliminating from net income the adjustments described for Adjusted EBITDA, amortization related to acquired intangible assets and the tax effect of the adjustments. Please refer to Non-GAAP reconciliation tables located in the financial supplement in this release.2 “Adjusted Earnings Per Share” represents Adjusted Net Income divided by weighted average shares (basic and diluted). Please refer to Non-GAAP reconciliation tables located in the financial supplement in this release.3 “Adjusted EBITDA” represents earnings before interest expense, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, straight-line rent, equity compensation, loss on debt extinguishment and certain non-recurring, non-core, infrequent or unusual charges. Please refer to Non-GAAP reconciliation tables located in the financial supplement in this release.4 “Segment Adjusted EBITDA” is defined as Adjusted EBITDA with a further adjustment for store opening costs. Corporate & Other costs are not allocated across segments. Segment Adjusted EBITDA is a supplemental measure of operating performance of our segments and may not be comparable to similar measures reported by other companies. Please refer to reconciliation to Adjusted EBITDA located in the financial supplement in this release.5 “Acquisition Adjusted EBITDA” represents Adjusted EBITDA for the applicable period as adjusted to give effect to management’s estimates of a full period of Adjusted EBITDA from any businesses acquired in such period as if such acquisitions had been completed on the first day of such period. Please refer to Non-GAAP reconciliation tables located in the financial supplement in this release.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 Three Months Ended Year Ended
(in thousands, except per share amounts)December 26, 2020 December 28, 2019 December 26, 2020 December 28, 2019
Revenue:       
Franchise royalties and fees$22,912  $24,285  $117,126  $111,170 
Company-operated store sales165,928  93,980  489,267  329,110 
Independently-operated store sales36,598    67,193   
Advertising contributions17,243  29,478  59,672  66,270 
Supply and other revenue45,827  34,957  170,942  93,723 
Total revenue288,508  182,700  904,200  600,273 
Operating expenses:       
Company-operated store expenses103,575  63,607  305,908  223,683 
Independently-operated store expenses23,056    41,051   
Advertising expenses19,560  32,987  61,989  69,779 
Supply and other expenses23,213  18,018  93,380  53,005 
Selling, general and administrative expenses65,170  43,785  218,277  142,249 
Acquisition costs2,395  7,303  15,682  11,595 
Store opening costs1,007  2,862  2,928  5,721 
Depreciation and amortization29,458  8,992  62,114  24,220 
Asset impairment charges1,410    8,142   
Total operating expenses268,844  177,554  809,471  530,252 
Operating income19,664  5,146  94,729  70,021 
Other income (expense), net:       
Interest expense, net(30,673) (17,023) (95,646) (56,846)
Gain of foreign currency transactions, net13,618    13,563   
Loss on debt extinguishment(4,817) (595) (5,490) (595)
Total other expenses, net(21,872) (17,618) (87,573) (57,441)
Income (loss) before taxes(2,208) (12,472) 7,156  12,580 
Income tax expense (benefit)5,263  (1,887) 11,372  4,830 
Net income (loss)(7,471) (10,585) (4,216) 7,750 
Net income (loss) attributable to non-controlling interests17  19  (17) 19 
Net income (loss) attributable to Driven Brands Holdings Inc.$(7,488) $(10,604) $(4,199) $7,731 
        
Earnings (loss) per share(1)       
Basic and diluted$(0.06) $(0.12) $(0.04) $0.09 
        
Weighted average shares outstanding(1)       
Basic and diluted127,256  88,990  104,318  88,990 
            

(1) Share and per share amounts have been adjusted to reflect an implied 88,990-for-one stock split that became effective on January 14, 2021.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)December 26, 2020 December 28, 2019
Assets   
Current assets:   
Cash and cash equivalents$172,611  $34,935 
Restricted cash15,827   
Accounts and notes receivable, net84,805  74,131 
Inventory43,039  26,149 
Prepaid and other assets25,071  14,491 
Income tax receivable5,924  4,607 
Advertising fund assets, restricted27,276  31,011 
Total current assets374,553  185,324 
Notes receivable, net3,828  7,178 
Property and equipment, net827,392  134,381 
Operating lease right-of-use assets884,927   
Deferred commissions8,661  6,721 
Intangibles, net829,308  672,017 
Goodwill1,727,351  870,619 
Total assets$4,656,020  $1,876,240 
Liabilities and shareholders'/members’ equity   
Current liabilities:   
Accounts payable$67,802  $58,917 
Accrued expenses and other liabilities190,867  66,035 
Income taxes payable6,383   
Current portion of long-term debt22,988  13,050 
Advertising fund liabilities18,276  20,825 
Total current liabilities306,316  158,827 
Long-term debt, net2,102,219  1,301,913 
Operating lease liabilities818,001   
Deferred tax liabilities249,043  111,355 
Deferred revenue20,757  14,267 
Accrued expenses and other long-term liabilities53,324   
Total liabilities3,549,660  1,586,362 
Shareholders'/Members’ equity1,087,712  284,788 
Accumulated other comprehensive income16,528  3,626 
Total shareholders'/members’ equity attributable to Driven Brands Holdings Inc.1,104,240  288,414 
Non-controlling interests2,120  1,464 
Total shareholders'/members’ equity1,106,360  289,878 
Total liabilities and shareholders'/members’ equity$4,656,020  $1,876,240 
        

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 Fiscal year ended
(in thousands)December 26, 2020 December 28, 2019
Net income (loss)$(4,216) $7,750 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Depreciation and amortization62,114  24,220 
Noncash lease cost38,232   
Gain on foreign denominated transactions(23,245)  
Bad debt expense7,059  1,685 
Asset impairment costs8,142   
Amortization of deferred financing costs and bond discounts10,890  3,682 
Loss on derivatives not designated as hedges10,033   
Provision for deferred income taxes5,989  3,169 
Loss on extinguishment of debt5,490  595 
Other, net1,408  1,757 
Changes in assets and liabilities:   
Accounts and notes receivable, net(11,782) (7,173)
Inventory(2,904) (5,452)
Prepaid and other assets(5,658) (2,313)
Advertising fund assets and liabilities, restricted(369) 6,492 
Deferred commissions(1,927) (1,958)
Deferred revenue6,278  2,524 
Accounts payable(6,778) 13,849 
Accrued expenses and other liabilities15,956  (7,617)
Income tax receivable3,734  162 
Operating lease liabilities(34,448)  
Cash provided by operating activities83,998  41,372 
Cash flows from investing activities:   
Capital expenditures(52,459) (28,230)
Cash used in business acquisitions, net of cash acquired(105,031) (454,193)
Proceeds from sale-leaseback transactions100,174   
Cash used in investing activities(57,316) (482,423)
Cash flows from financing activities:   
Payment of contingent consideration related to acquisitions(2,783)  
Payment of debt issuance cost(22,932) (14,056)
Proceeds from the issuance of long-term debt625,000  575,000 
Repayment of long-term debt(448,213) (10,988)
Repayments of revolving lines of credit and short-term debt(432,800) 59,499 
Proceeds from revolving lines of credit and short-term debt391,301   
Repayment of principal portion of finance lease liability(595)  
Distribution to Driven Investor LLC  (163,000)
Contributions  75 
Proceeds from failed sale-leaseback transactions5,633   
Proceeds from issuance of equity shares2,000   
Other, net2,032   
Cash provided by financing activities118,643  446,530 
Effect of exchange rate changes on cash4,456  (120)
Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted149,781  5,359 
Cash and cash equivalents, beginning of period34,935  37,530 
Cash included in advertising fund assets, restricted, beginning of period23,091  15,137 
Restricted cash, beginning of period   
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period58,026  52,667 
Cash and cash equivalents, end of period172,611  34,935 
Cash included in advertising fund assets, restricted, end of period19,369  23,091 
Restricted cash, end of period15,827   
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period$207,807  $58,026 
        

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

Adjusted Net Income/Adjusted Earnings Per Share  
        
 Three Months Ended Year Ended
(in thousands, except per share amounts)December 26, 2020 December 28, 2019 December 26, 2020 December 28, 2019
Net income (loss)$(7,471) $(10,585) $(4,216) $7,750 
Acquisition related costs(a)2,395  8,205  15,682  12,497 
Non-core items and project costs, net(b)6,962  1,259  6,036  6,644 
Sponsor management fees(c)543  538  5,900  2,496 
Straight-line rent adjustment(d)4,026  (143) 7,150  2,172 
Equity-based compensation expense(e)815  298  1,323  1,195 
Foreign currency transaction gain, net(f)(13,618)   (13,563)  
Bad debt expense(g)359    3,201   
Asset impairment and closed store expenses(h)1,690    9,311   
Loss on debt extinguishment(i)4,817  595  5,490  595 
Amortization related to acquired intangible assets(k)5,507  3,814  17,200  11,314 
Provision for uncertain tax positions(l)(696)   2,114   
Valuation allowance for deferred tax asset(m)668    668   
Adjusted net income before tax impact of adjustments5,997  3,981  56,296  44,663 
Tax impact of adjustments(n)(4,429) (2,459) (12,890) (8,046)
Adjusted net income1,568  1,522  43,406  36,617 
Net income (loss) attributable to non-controlling interest17  19  (17) 19 
Adjusted net income attributable to Driven Brands Holdings Inc.$1,551  $1,503  $43,423  $36,598 
        
Adjusted earnings per share(1)       
Basic and diluted$0.01  $0.02  $0.42  $0.41 
        
Weighted average shares outstanding(1)       
Basic and diluted127,256  88,990  104,318  88,990 
            

(1) Share and per share amounts have been adjusted to reflect an implied 88,990-for-one stock split that became effective on January 14, 2021.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

Adjusted EBITDA and Acquisition Adjusted EBITDA  
        
 Three Months Ended Year Ended
(in thousands)December 26, 2020 December 28, 2019 December 26, 2020 December 28, 2019
Net income (loss)$(7,471) $(10,585) $(4,216) $7,750 
Income tax expense (benefit)5,263  (1,887) 11,372  4,830 
Interest expense, net30,673  17,023  95,646  56,846 
Depreciation and amortization29,458  8,992  62,114  24,220 
EBITDA57,923  13,543  164,916  93,646 
Acquisition related costs(a)2,395  8,205  15,682  12,497 
Non-core items and project costs, net(b)6,962  1,259  6,036  6,644 
Sponsor management fees(c)543  538  5,900  2,496 
Straight-line rent adjustment(d)4,026  (143) 7,150  2,172 
Equity-based compensation expense(e)815  298  1,323  1,195 
Foreign currency transaction gain, net(f)(13,618)   (13,563)  
Bad debt expense(g)359    3,201   
Asset impairment and closed store expenses(h)1,690    9,311   
Loss on debt extinguishment(i)4,817  595  5,490  595 
Adjusted EBITDA$65,912  $24,295  205,446  $119,245 
EBITDA adjustments related to acquisitions(j)    63,690   
Acquisition Adjusted EBITDA    $269,136   
          
  1. Consists of acquisition costs as reflected within the consolidated statement of operations, including legal, consulting and other fees and expenses incurred in connection with acquisitions completed during the applicable period, as well as inventory rationalization expenses incurred in connection with acquisitions. We expect to incur similar costs in connection with other acquisitions in the future and, under U.S. GAAP, such costs relating to acquisitions are expensed as incurred and not capitalized.
  2. Consists of discrete items and project costs, including (i) third-party consulting and professional fees associated with strategic transformation initiatives, (ii) wage subsidies received directly attributable to the COVID-19 pandemic and (iii) other miscellaneous expenses, including non-capitalizable expenses relating to the Company’s initial public offering and other strategic transactions.
  3. Includes management fees paid to Roark Capital Management, LLC.
  4. Consists of the non-cash portion of rent expense, which reflects the extent to which our straight-line rent expense recognized under U.S. GAAP exceeds or is less than our cash rent payments.
  5. Represents non-cash equity-based compensation expense.
  6. Represents foreign currency transaction gains, net that primarily related to the remeasurement of our intercompany loans. These gains are slightly offset by unrealized losses on remeasurement of cross currency swaps.
  7. Represents bad debt expense related to uncollectible receivables outside of normal operations.
  8. Relates to the discontinuation of the use of the Pro Oil trade name as those locations were transitioned to the Take 5 trade name, as well as impairment of certain fixed assets and operating lease right-of-use assets related to closed locations. Also represents lease exit costs and other costs associated with stores that were closed prior to their respective lease termination dates.
  9. Represents the write-off of debt issuance costs and prepayment penalties associated with early termination of debt.
  10. Represents our estimate of our anticipated annual operating results, including, without limitation, our estimates of the contribution of businesses acquired in 2020 if such acquisitions had occurred on the first day of the fiscal year.
  11. Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statements of operations.
  12. Represents uncertain tax positions recorded for prior year Canadian tax positions, inclusive of interest and penalties.
  13. Represents the establishment of a valuation allowance for certain deferred tax assets negatively impacted by strategic transactions.
  14. Represents the tax impact of adjustments associated with the reconciling items between net income and Adjusted Net Income, excluding the provision for uncertain tax positions and valuation allowance for certain deferred tax assets. To determine the tax impact of the deductible reconciling items, we utilized statutory income tax rates ranging from 9% to 38%, depending upon the tax attributes of each adjustment and the applicable jurisdiction.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

ADJUSTED EBITDA AND SEGMENT ADJUSTED EBITDA RECONCILIATION (UNAUDITED)

 Three Months Ended Year Ended
(in thousands)December 26, 2020 December 28, 2019 December 26, 2020 December 28, 2019
Segment Adjusted EBITDA:       
Maintenance$32,185  $19,342  $114,764  $81,732 
Car Wash25,398    43,137   
Paint, Collision & Glass16,157  15,072  66,276  60,444 
Platform Services12,668  6,991  49,408  26,413 
Corporate and other(19,489) (14,248) (65,211) (43,623)
Store opening costs(1,007) (2,862) (2,928) (5,721)
Adjusted EBITDA$65,912  $24,295  $205,446  $119,245 
                

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Source: Driven Brands Holdings Inc.


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