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Driven Brands Holdings Inc. Reports Second Quarter Results
Источник: Nasdaq GlobeNewswire / 28 июл 2021 06:00:02 America/Chicago
Delivers Strong Same-Store Sales Growth and Adds 70 Net New Stores
Reports Robust Operating Income and Earnings per Share Growth
Raises Fiscal Year 2021 GuidanceCHARLOTTE, N.C., July 28, 2021 (GLOBE NEWSWIRE) -- Driven Brands Holdings Inc. (NASDAQ: DRVN) (“Driven Brands” or “the Company”) today reported financial results for the second quarter ended June 26, 2021.
For the second quarter, revenue was $374.8 million, an increase of 123% versus the prior year. System-wide sales hit a record $1.2 billion, an increase of 65% versus the prior year, with 34% net store growth and an increase in consolidated same-store sales of 38.7%. On a two-year basis, same-store sales increased 19.1%.
Earnings per share was $0.21 for the second quarter, an increase of 600% versus the prior year.
Adjusted earnings per share2 was $0.25, an increase of 79% versus the prior year.
“The power of Driven Brands is evident in our continued strong operating results,” said Jonathan Fitzpatrick, president and chief executive officer. “While this quarter laps the depths of COVID-19 in the prior year, our strong two-year trend indicates continued momentum in the fundamentals of our business.
“Initiatives we implemented last year, coupled with strong execution from employees and franchisees drove compounding same-store sales and store growth. We continued to capitalize on opportunities as consumers drove more in the second quarter,” Fitzpatrick added.
“Given our scale, the significant whitespace in this fragmented and needs-based industry, and our robust cash generation, our business model remains well-positioned to maximize long-term value for all of our stakeholders.”
Second Quarter Highlights
- Revenue increased 123% versus the prior year, driven primarily by the acquisition of International Car Wash Group (“ICWG”) in the third quarter of 2020 as well as organic growth across all segments from positive same-store sales growth and net store growth.
- Consolidated same-store sales increased 38.7% for the quarter and increased 19.1% on a two-year basis.
- Same-store sales increased across all segments on both a one- and two-year basis.
- The Company added 70 net new stores during the quarter.
- The Company recorded net income in the second quarter of $35.2 million, an increase of 1051% versus the prior year.
- Adjusted Net Income1 was $41.9 million, an increase of 233% versus the prior year.
- Adjusted EBITDA3 was $100.8 million, an increase of 152% versus the prior year.
Second Quarter 2021 Key Performance Indicators by Segment
System-wide Sales
(in millions)Store Count Same-Store Sales* Revenue
(in millions)Segment Adjusted EBITDA4
(in millions)Maintenance $ 321.2 1,485 41.9 % $ 145.0 $ 44.6 Car Wash 122.1 979 35.2 % 123.9 43.1 Paint, Collision & Glass 597.6 1,655 37.3 % 50.6 21.9 Platform Services 117.5 200 37.2 % 44.8 17.6 Corporate / Other N/A N/A N/A 10.5 Total $ 1,158.3 4,319 38.7 % $ 374.8 *Car Wash will not be included in consolidated same-store sales until the one-year anniversary of the ICWG acquisition in the third quarter of 2021.
Capital and Liquidity
In May 2021, the Company closed on a new $300 million revolving credit facility. Borrowings under this facility, in conjunction with the variable funding note associated with the Company’s whole business securitization and cash on hand, will be utilized to fuel further growth and for general corporate purposes. From time-to-time, the Company expects to supplement liquidity with long-term borrowings under its whole business securitization structure.
The Company ended the second quarter with total liquidity of $468.2 million, which includes $147.4 million in cash, cash equivalents, and restricted cash, as well as $320.8 million of undrawn capacity on its revolving credit facilities.
Guidance
The Company has raised its guidance for fiscal year 2021 to account for the strong operating performance in the second quarter and an updated outlook for the remainder of the year. The following guidance reflects the Company’s current expectations for the fiscal year ending December 25, 2021:
- Revenue of approximately $1.4 billion
- Adjusted EBITDA3 of approximately $345 million
- Adjusted Earnings per Share2 of approximately $0.83
- Low double-digit same-store sales growth with positive same-store sales across all segments
- 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 by company-operated store growth; and
- Paint, Collision & Glass: 60 to 70 stores; driven by franchise store growth.
Conference Call
Driven Brands will host a conference call to discuss second quarter 2021 results today, Wednesday, July 28, 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 October 26, 2021.About Driven Brands
Driven Brands™, headquartered in Charlotte, NC, is the largest automotive services company in North America, providing a range of consumer and commercial automotive needs, including paint, collision, glass, vehicle repair, oil change, maintenance and car wash. Driven Brands is the parent company of some of North America’s leading automotive service businesses including Take 5 Oil Change®, Meineke Car Care Centers®, Maaco®, 1-800-Radiator & A/C®, and CARSTAR®. Driven Brands has more than 4,300 locations across 15 countries, and services over 50 million vehicles annually. Driven Brands’ network generates more than $1 billion in revenue from more than $3 billion in system-wide sales.Contacts Shareholder/Analyst inquiries: Media inquiries: Rachel Webb Media rachel.webb@drivenbrands.com media@drivenbrands.com (704) 644-8125 (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 Annual Report on Form 10-K for the fiscal year ended December 26, 2020, and in our other filings with the Securities and Exchange Commission, which are available on its website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Forward-looking statements represent our estimates and assumptions only as of the date on which they are made, and we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Disclosure Regarding Non-GAAP Financial Measures
In addition to the financial measures presented in this release in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company has included certain non-GAAP financial measures in this release, including Adjusted Net Income1, Adjusted Earnings Per Share2, and Adjusted EBITDA3. Management believes these non-GAAP financial measures are useful because they enable management, investors, and others to assess the operating performance of the Company and its segments. Please refer to the Reconciliation of Non-GAAP Financial Information tables located in the financial supplement in this release.
This release includes forward-looking guidance for certain non-GAAP financial measures, including Adjusted Earnings Per Share2 and Adjusted EBITDA3. These measures will differ from net income, determined in accordance with GAAP, in ways similar to those described in the 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 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.DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended Six months ended (in thousands, except per share amounts) June 26,
2021June 27,
2020June 26,
2021June 27,
2020Revenue: Franchise royalties and fees $ 37,873 $ 28,282 $ 68,287 $ 57,694 Company-operated store sales 206,198 87,660 390,053 182,551 Independently-operated store sales 56,379 — 112,542 — Advertising contributions 19,648 12,619 36,903 27,502 Supply and other revenue 54,730 39,262 96,462 80,183 Total revenue 374,828 167,823 704,247 347,930 Operating expenses: Company-operated store expenses 123,820 53,373 236,575 116,665 Independently-operated store expenses 30,792 — 61,900 — Advertising expenses 19,648 12,619 36,903 27,502 Supply and other expenses 29,598 21,295 52,087 44,354 Selling, general and administrative expenses 77,935 45,456 146,984 96,521 Acquisition costs 389 1,016 2,038 1,211 Store opening costs 405 627 694 1,802 Depreciation and amortization 26,423 8,636 50,275 16,435 Asset impairment charges 2,178 3,499 3,431 6,411 Total operating expenses 311,188 146,521 590,887 310,901 Operating income 63,640 21,302 113,360 37,029 Other expenses, net: Interest expense, net 16,612 17,863 34,702 35,379 (Gain) / loss on foreign currency transactions, net (5,229 ) (1,194 ) 5,282 2,285 Loss on debt extinguishment 78 — 45,576 — Total other expenses, net 11,461 16,669 85,560 37,664 Net income (loss) before taxes 52,179 4,633 27,800 (635 ) Income tax expense 17,011 1,542 12,565 221 Net income (loss) $ 35,168 $ 3,091 $ 15,235 $ (856 ) Net income (loss) attributable to non-controlling interests $ (36 ) $ 33 $ (30 ) $ (66 ) Net income (loss) attributable to Driven Brands Holdings Inc. $ 35,204 $ 3,058 $ 15,265 $ (790 ) Earnings (loss) per share(1): Basic $ 0.21 $ 0.03 $ 0.09 $ (0.01 ) Diluted $ 0.21 $ 0.03 $ 0.09 $ (0.01 ) Weighted average shares outstanding(1): Basic 162,626 88,990 158,727 88,990 Diluted 166,512 88,990 162,271 88,990 (1) Share and per share amounts for the three and six months ended June 27, 2020 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) June 26,
2021December 26,
2020Assets Current assets: Cash and cash equivalents $ 147,257 $ 172,611 Restricted cash 159 15,827 Accounts and notes receivable, net 106,846 84,805 Inventory 41,899 43,039 Prepaid and other assets 43,990 25,070 Income tax receivable 1,038 3,055 Advertising fund assets, restricted 40,084 29,276 Assets held for sale 990 — Total current assets 382,263 373,683 Notes receivable, net 3,594 3,828 Property and equipment, net 922,370 827,392 Operating lease right-of-use assets 906,066 884,927 Deferred commissions 9,508 8,661 Intangibles, net 827,357 829,308 Goodwill 1,768,244 1,727,351 Total assets $ 4,819,402 $ 4,655,150 Liabilities and shareholders’ equity Current liabilities: Accounts payable $ 79,238 $ 67,802 Accrued expenses and other liabilities 198,939 190,867 Income taxes payable 3,644 3,513 Current portion of long-term debt 17,793 22,988 Advertising fund liabilities 32,047 20,276 Total current liabilities 331,661 305,446 Long-term debt, net 1,503,957 2,102,219 Deferred tax liability 253,507 249,043 Operating lease liabilities 844,809 818,001 Income tax receivable liability 155,970 — Deferred revenue 23,837 20,757 Accrued expenses and other long-term liabilities 33,719 53,324 Total liabilities 3,147,460 3,548,790 Common stock 1,674 565 Additional paid-in capital 1,603,095 1,055,172 Retained earnings 47,240 31,975 Accumulated other comprehensive income 18,854 16,528 Total shareholders’ equity attributable to Driven Brands Holdings Inc. 1,670,863 1,104,240 Non-controlling interests 1,079 2,120 Total shareholders’ equity 1,671,942 1,106,360 Total liabilities and shareholders’ equity $ 4,819,402 $ 4,655,150 DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six months ended (in thousands) June 26,
2021June 27,
2020Net income $ 15,235 $ (856 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 50,275 16,435 Noncash lease cost 37,990 17,412 Gain on foreign denominated transactions 5,707 2,285 Bad debt expense 1,739 4,351 Asset impairment costs 3,431 6,411 Amortization of deferred financing costs and bond discounts 3,619 2,573 Loss on derivatives not designed as hedges (425 ) — Benefit (provision) for deferred income taxes 4,742 (1,471 ) Loss on extinguishment of debt 45,576 — Other, net 1,375 1,342 Changes in assets and liabilities: Accounts and notes receivable, net (24,174 ) (26,134 ) Inventory (396 ) (577 ) Prepaid and other assets (20,885 ) (9,643 ) Advertising fund assets and liabilities, restricted 12,548 4,165 Deferred commissions (809 ) (1,614 ) Deferred revenue 2,994 (2,780 ) Accounts payable 3,860 11,686 Accrued expenses and other liabilities 9,707 301 Income tax receivable 3,665 4,051 Operating lease liabilities (31,034 ) (14,427 ) Cash provided by operating activities 124,740 13,510 Cash flows from investing activities: Capital expenditures (47,274 ) (24,708 ) Cash used in business acquisitions, net of cash acquired (204,556 ) (28,490 ) Proceeds from sale-leaseback transactions 49,166 — Proceeds from sale of company-operated stores 5,775 — Cash used in investing activities (196,889 ) (53,198 ) Cash flows from financing activities: Payment of contingent consideration related to acquisitions — (1,783 ) Payment of debt extinguishment and issuance costs (2,408 ) (2,421 ) Repayment of long-term debt (712,649 ) (12,809 ) Repayments of revolving lines of credit and short-term debt (152,800 ) — Proceeds from revolving lines of credit and short-term debt 213,800 79,501 Repayment of principal portion of finance lease liability (1,127 ) (282 ) Proceeds from initial public offering, net of underwriting discounts 661,500 — Net proceeds from underwriters’ exercise of over-allotment option 99,225 — Repurchases of common stock (43,040 ) — Payment for termination of interest rate swaps (21,826 ) — Other, net 152 — Cash provided by financing activities 40,827 62,206 Effect of exchange rate changes on cash 1,374 (337 ) Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted (29,948 ) 22,181 Cash and cash equivalents, beginning of period 172,611 34,935 Cash included in advertising fund assets, restricted, beginning of period 19,369 23,091 Restricted cash, beginning of period 15,827 — Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period 207,807 58,026 Cash and cash equivalents, end of period 147,257 67,617 Cash included in advertising fund assets, restricted, end of period 30,882 12,590 Restricted cash, end of period 159 — Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period $ 178,298 $ 80,207 DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)
Adjusted Net Income/Adjusted Earnings Per Share Three months ended Six months ended (in thousands, except per share amounts) June 26,
2021June 27,
2020June 26,
2021June 27,
2020Net income (loss) $ 35,168 $ 3,091 $ 15,235 $ (856 ) Acquisition related costs(a) 389 1,016 2,038 1,211 Non-core items and project costs, net(b) 2,522 509 2,553 1,764 Sponsor management fees(c) — 539 — 1,079 Straight-line rent adjustment(d) 3,358 1,787 5,843 2,639 Equity-based compensation expense(e) 1,028 791 2,011 690 Foreign currency transaction (gain) / loss, net(f) (5,229 ) (1,194 ) 5,282 2,285 Bad debt expense(g) — 2,842 — 2,842 Asset impairment and closed store expenses(h) 3,478 2,560 2,692 6,880 Loss on debt extinguishment(i) 78 — 45,576 — Amortization related to acquired intangible assets(j) 5,558 3,685 9,210 7,650 Adjusted net income before tax impact of adjustments 46,350 15,626 90,440 26,184 Tax impact of adjustments(k) (4,441 ) (2,995 ) (18,082 ) (6,622 ) Adjusted net income 41,909 12,631 72,358 19,562 Net (loss) / income attributable to non-controlling interest (36 ) 33 (30 ) (66 ) Adjusted net income attributable to Driven Brands Holdings Inc. $ 41,945 $ 12,598 $ 72,388 $ 19,628 Adjusted earnings per share(1) Basic(2) $ 0.25 $ 0.14 $ 0.45 $ 0.22 Diluted(2) $ 0.25 $ 0.14 $ 0.44 $ 0.22 Weighted average shares outstanding(1) Basic 162,626 88,990 158,727 88,990 Diluted 166,512 88,990 162,271 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.
(2) Adjusted earnings per share for the three and six months ended June 26, 2021 is calculated under the two-class method. Under the two-class method, adjusted earnings per share is calculated using adjusted net income attributable to common shares, which is derived by reducing adjusted net income by the amount attributable to participating securities. Adjusted net income attributable to participating securities used in the basic earnings per share calculation was $0.9 million and $1.6 million for the three and six months ended June 26, 2021, respectively, and adjusted net income attributable to participating securities used in the diluted earnings per share calculation was $0.8 million and $1.4 million for the three and six months ended June 26, 2021, respectively.
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)
Adjusted EBITDA Three months ended Six months ended (in thousands) June 26,
2021June 27,
2020June 26,
2021June 27,
2020Net income (loss) 35,168 $ 3,091 $ 15,235 $ (856 ) Income tax expense 17,011 1,542 12,565 221 Interest expense, net 16,612 17,863 34,702 35,379 Depreciation and amortization 26,423 8,636 50,275 16,435 EBITDA 95,214 31,132 112,777 51,179 Acquisition related costs(a) 389 1,016 2,038 1,211 Non-core items and project costs, net(b) 2,522 509 2,553 1,764 Sponsor management fees(c) — 539 — 1,079 Straight-line rent adjustment(d) 3,358 1,787 5,843 2,639 Equity-based compensation expense(e) 1,028 791 2,011 690 Foreign currency transaction (gain)/loss, net(f) (5,229 ) (1,194 ) 5,282 2,285 Bad debt expense(g) — 2,842 — 2,842 Asset impairment and closed store expenses(h) 3,478 2,560 2,692 6,880 Loss on debt extinguishment(i) 78 — 45,576 — Adjusted EBITDA $ 100,838 $ 39,982 $ 178,772 $ 70,569 - 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.
- 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.
- Includes management fees paid to Roark Capital Management, LLC.
- 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.
- Represents non-cash equity-based compensation expense.
- Represents foreign currency transaction gains/losses, net that primarily related to the remeasurement of our intercompany loans. For the six months ended June 26, 2021, these losses are offset by unrealized gains on remeasurement of cross currency swaps.
- Represents bad debt expense related to uncollectible receivables outside of normal operations.
- Relates to the 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.
- Represents the write-off of debt issuance costs associated with early termination of debt.
- Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statements of operations.
- 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 Six months ended (in thousands) June 26,
2021June 27,
2020June 26,
2021June 27,
2020Segment Adjusted EBITDA: Maintenance $ 44,561 $ 26,339 $ 85,001 $ 47,805 Car Wash 43,069 — 77,224 — Paint, Collision & Glass 21,856 11,011 39,495 26,888 Platform Services 17,602 15,969 28,610 23,434 Corporate and other (25,845 ) (12,710 ) (50,864 ) (25,756 ) Store opening costs (405 ) (627 ) (694 ) (1,802 ) Adjusted EBITDA $ 100,838 $ 39,982 $ 178,772 $ 70,569 