Driven Brands : Q3 2023 Press Release

Driven Brands Holdings Inc. Reports Third Quarter Results

--Revenue increased 12% powered by 6% same-store sales growth and 6% net store growth--

--Reaffirms fiscal year 2023 financial outlook--

Charlotte, N.C. (November 1, 2023) - Driven Brands Holdings Inc. (NASDAQ: DRVN) ("Driven Brands" or the "Company") today reported financial results for the third quarter ended September 30, 2023.

For the third quarter, Driven Brands delivered revenue of $581.0 million, up 12 percent versus the prior year. System-wide sales were $1.6 billion, up 10 percent versus the prior year driven by 6 percent same-store sales growth and 6 percent net store growth. The Company added 55 net new stores in the quarter.

During the third quarter, we had an $851 million non-cash goodwill impairment in the Car Wash segment as well as $111 million in non-cash asset impairment charges and lease terminations. This drove a Net Loss of $799.3 million or a Net Loss of $4.83 per diluted share versus Net Income of $38.4 million in the prior year. Adjusted Net Income1 decreased 39 percent to $33.7 million or $0.20 per diluted share1, and Adjusted EBITDA1 decreased 2 percent to $127.2 million. Cash provided by operating activities for the nine months ended September 30, 2023, increased 26 percent to $212.0 million compared to $167.7 million in the prior year.

"This quarter, we continued to see meaningful growth and strong operational performance across our portfolio excluding our US Car Wash and Glass businesses. I'm delighted to report we recently opened our 300th franchised Take 5 Oil Change location and I'm looking forward to celebrating our 1,000th location in the fourth quarter," said Jonathan Fitzpatrick, President and Chief Executive Officer.

"As discussed at our Investor Day on September 20, we remain focused on operational improvements in the US Car Wash business, while making steady progress on the US Glass integration. Given continued weak consumer demand and increasing competition in the US Car Wash sector, we are strategically pausing capital investment in this business. Looking ahead to 2024, the Driven Brands team is prioritizing continued progress in our US Car Wash and US Glass businesses, disciplined deployment of capital, and generating free cash flow, which will primarily be used to pay down debt."

Third Quarter 2023 Key Performance Indicators by Segment

	System-wide Sales	Store Count	Same-Store		Revenue		Segment Adjusted
		(in millions)		Sales		(in millions)		EBITDA1
								(in millions)
Maintenance	$	502.5	1,732	9.1 %	$	244.4	$	86.5
Car Wash		141.7	1,133	(4.0) %		142.8		24.4
Paint, Collision & Glass		845.6	1,920	8.6 %		129.4		32.8
Platform Services		119.2	208	(4.6) %		55.9		22.4
Corporate / Other		N/A	N/A	N/A		8.5
Total	$	1,609.0	4,993	6.4 %	$	581.0

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Capital and Liquidity

The Company ended the third quarter with total liquidity of $386.8 million consisting of $211.3 million in cash and cash equivalents, and $175.5 million of undrawn capacity on its variable funding securitization senior notes and revolving credit facility. This does not include the additional $135.0 million Series 2022 Class A-1 Notes that expand the Company's variable funding note borrowing capacity when the Company elects to exercise it, assuming certain conditions continue to be met.

Share Repurchase Program

During the three months ended September 30, 2023, the Company repurchased 3,601,694 shares of its common stock for approximately $50 million at an average price of $13.87, completing the repurchase authorization approved by the Board of Directors in August 2023. All repurchases were made on the open market.

Fiscal Year 2023 Outlook

The Company reaffirms its financial outlook for fiscal year 2023.

	Current Outlook
Revenue	~$2.30 billion
Adjusted EBITDA1	~$535 million
Adjusted EPS1	~$0.92

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

___________

1 Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are non-GAAP financial measures. See "Reconciliation of Non-GAAP Financial Measures" for additional information on non-GAAP financial measures and a reconciliation to the most comparable GAAP measures. Forward-looking estimates of Adjusted EBITDA and Adjusted EPS are made in a manner consistent with the relevant definitions and assumptions noted herein.

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Conference Call

Driven Brands will host a conference call to discuss third quarter 2023 results today, Wednesday, November 1, 2023, at 8:30am ET. The call will be available by webcast and can be accessed by visiting Driven Brands' Investor Relations website at investors.drivenbrands.com. A replay of the call will be available for three months.

About Driven Brands

Driven Brands™, headquartered in Charlotte, NC, is the largest automotive services company in North America, providing a range of consumer and commercial automotive needs, including paint, collision, glass, vehicle repair, oil change, maintenance and car wash. Driven Brands is the parent company of some of North America's leading automotive service businesses including Take 5 Oil Change®, Take 5 Car Wash®, Meineke Car Care Centers®, Maaco®, 1-800-Radiator

• A/C®, Auto Glass Now®, and CARSTAR®. Driven Brands has more than 4,900 locations across 14 countries, and services over 70 million vehicles annually. Driven Brands' network generates approximately $2.3 billion in annual revenue from approximately $6.2 billion in system-wide sales.

Disclosure Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "likely," "may," "plan," "possible," "potential," "predict," "project," "should," "target," "will," "would" and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this 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 strategy, outlook and growth prospects; (ii) our operational and financial targets and dividend policy; (iii) general economic trends and trends in the industry and markets; (iv) the risks and costs associated with the integration of, and our ability to integrate, our stores and business units successfully to achieve anticipated synergies; (v) the proper application of generally accepted accounting principles, which are highly complex and involve many subjective assumptions, estimates, and judgments and (vi) the competitive environment in which we operate. Forward-looking statements are not based on historical facts, but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions, and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. It is not possible to predict or identify all such risks. These risks include, but are not limited to, the risk

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factors that are described under the section titled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as well as in our other filings with the Securities and Exchange Commission, which are available on its website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Contacts

Shareholder/Analyst inquiries:

Dawn Francfort

ICR, Inc. [e-mail] [phone]

Media inquiries: Taylor Blanchard [e-mail] [phone]

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DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

			Three months ended		Nine months ended
(in thousands, except per share amounts)	September 30,	September 24,	September 30,	September 24,
	2023		2022		2023		2022
	Revenue:
	Franchise royalties and fees	$	47,362	$	45,562	$	140,682	$	128,300
	Company-operated store sales		389,041		341,211		1,159,685		957,487
	Independently-operated store sales		43,582		40,469		157,647		158,500
	Advertising contributions		27,121		22,018		73,547		63,807
	Supply and other revenue		73,928		67,334		218,791		185,447
	Total revenue		581,034		516,594		1,750,352		1,493,541
Operating Expenses:
	Company-operated store expenses		262,282		209,562		762,731		580,368
	Independently-operated store expenses		25,773		23,254		87,095		85,396
	Advertising expenses		27,121		22,018		73,547		63,807
	Supply and other expenses		38,816		41,042		118,188		109,616
	Selling, general, and administrative		123,012		82,460		332,155		272,657
	expenses
	Acquisition related costs		1,667		2,325		7,264		9,981
	Store opening costs		1,372		753		3,774		1,925
	Depreciation and amortization		45,639		36,518		129,256		107,628
	Goodwill impairment		850,970		-		850,970		-
	Trade name impairment		-		-		-		125,450
	Asset impairment charges and lease		111,239		2,894		117,450		2,910
	terminations
	Total operating expenses		1,487,891		420,826		2,482,430		1,359,738
	Operating (loss) income		(906,857)		95,768		(732,078)		133,803
Other expenses, net:
	Interest expense, net		41,292		27,323		120,304		78,946
	Loss on foreign currency transactions		2,980		15,582		3		30,490
	Other expense, net		44,272		42,905		120,307		109,436
(Loss) income before taxes		(951,129)		52,863		(852,385)		24,367
	Income tax (benefit) expense		(151,818)		14,472		(120,572)		8,592
	Net (loss) income		(799,311)		38,391		(731,813)		15,775
	Net loss attributable to non-controlling interest		-		-		-		(15)
	Net (loss) income attributable to Driven	$	(799,311)	$	38,391	$	(731,813)	$	15,790
Brands Holdings Inc.
	(Loss) earnings per share:
	Basic	$	(4.82)	$	0.23	$	(4.40)	$	0.10
	Diluted	$	(4.83)	$	0.23	$	(4.41)	$	0.09
	Weighted average shares outstanding
	Basic		162,398		162,760		162,698		162,768
	Diluted		162,398		166,831		162,698		166,663

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DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	(in thousands, except share and per share amounts)		September 30, 2023		December 31, 2022
	Assets
	Current assets:
	Cash and cash equivalents		$	211,280			$	227,110
	Restricted cash			657				792
	Accounts and notes receivable, net			165,573				179,888
	Inventory			83,423				72,040
	Prepaid and other assets			42,208				40,084
	Income tax receivable			19,641				15,075
	Assets held for sale			271,006				-
	Advertising fund assets, restricted			63,983				36,421
	Total current assets			857,771				571,410
	Other assets			42,273				30,561
	Property and equipment, net			1,408,970				1,545,738
	Operating lease right-of-use assets			1,394,384				1,299,189
	Deferred commissions			6,072				7,121
	Intangibles, net			741,732				765,903
	Goodwill			1,433,775				2,277,065
	Deferred tax assets			2,817				2,911
	Total assets		$	5,887,794			$	6,499,898
	Liabilities and shareholders' equity
	Current liabilities:
	Accounts payable	$	90,440		$	60,606
	Accrued expenses and other liabilities			256,347				317,318
	Income tax payable			3,546				4,454
	Current portion of long-term debt			31,869				32,986
	Income tax receivable liability			54,791				53,328
	Advertising fund liabilities			38,341				36,726
	Total current liabilities			475,334				505,418
	Long-term debt			2,877,059				2,705,281
	Deferred tax liabilities			141,965				276,749
	Operating lease liabilities			1,334,539				1,177,501
	Income tax receivable liability			117,915				117,915
	Deferred revenue			30,525				30,046
	Long-term accrued expenses and other liabilities			29,530				33,419
	Total liabilities			5,006,867				4,846,329
	Preferred Stock $0.01 par value; 100,000,000 shares authorized; none issued or outstanding			-				-
	Common stock, $0.01 par value, 900,000,000 shares authorized: and 163,959,225 and			1,639				1,674
	167,404,047 shares outstanding; respectively
	Additional paid-in capital			1,646,831				1,628,904
	Retained (deficit) earnings			(696,938)				84,795
	Accumulated other comprehensive loss			(71,236)				(62,435)
	Total shareholders' equity attributable to Driven Brands Holdings Inc.			880,296				1,652,938
	Non-controlling interests			631				631
	Total shareholders' equity			880,927				1,653,569
	Total liabilities and shareholders' equity		$	5,887,794			$	6,499,898

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DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

			Nine Months Ended
	(in thousands)		September 30,			September 24,
		2023			2022
	Net (loss) income	$	(731,813)		$	15,775
	Adjustments to reconcile net (loss) income to net cash provided by operating activities:
	Depreciation and amortization		129,256			107,628
	Goodwill impairment		850,970			-
	Trade name impairment		-			125,450
	Equity-based compensation expense		9,730			12,159
	Loss on foreign denominated transactions		3,706			30,490
	Gain on foreign currency derivatives		(3,704)			(2,981)
	Loss (gain) on sale and disposal of businesses, fixed assets, and sale-leaseback transactions		1,730			(12,183)
	Reclassification of interest rate hedge to income		(1,358)			-
	Bad debt expense		1,244			1,011
	Asset impairment costs		117,450			2,910
	Amortization of deferred financing costs and bond discounts		6,287			6,807
	Benefit for deferred income taxes		(134,266)			(38,216)
	Other, net		24,422			15,620
	Changes in assets and liabilities, net of acquisitions:
	Accounts and notes receivable, net		2,464			(40,296)
	Inventory		(12,531)			(17,898)
	Prepaid and other assets		(3,909)			850
	Advertising fund assets and liabilities, restricted		(10,923)			(4,612)
	Other Assets		(29,210)			(3,767)
	Deferred commissions		658			917
	Deferred revenue		1,961			2,222
	Accounts payable		24,913			(12,321)
	Accrued expenses and other liabilities		(29,442)			(59,844)
	Income tax receivable		(5,612)			37,931
	Cash provided by operating activities		212,023			167,652
	Cash flows from investing activities:
	Capital expenditures		(482,633)			(276,222)
	Cash used in business acquisitions, net of cash acquired		(53,641)			(652,085)
	Proceeds from sale-leaseback transactions		172,230			150,112
	Proceeds from sale or disposal of businesses and fixed assets		2,837			6,427
	Cash used in investing activities		(361,207)			(771,768)
	Cash flows from financing activities:
	Repayment of long-term debt		(20,969)			(15,772)
	Proceeds from revolving lines of credit and short-term debt		335,000			300,000
	Repayments of revolving lines of credit and short-term debt		(120,000)			-
	Repayment of principal portion of finance lease liability		(2,020)			(2,229)
	Share repurchases		(49,945)			-
	Stock option exercises		6,117			-
	Other, net		(322)			581
	Cash provided by financing activities		147,861			282,580
	Effect of exchange rate changes on cash		365			(7,705)
	Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund		(958)			(329,241)
	assets, restricted
	Cash and cash equivalents, beginning of period		227,110			523,414
	Cash included in advertising fund assets, restricted, beginning of period		32,871			38,586

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	Restricted cash, beginning of period			792			792
	Cash, cash equivalents, restricted cash, and cash included in advertising fund assets,			260,773			562,792
	restricted, beginning of period
	Cash and cash equivalents, end of period			211,280			190,373
	Cash included in advertising fund assets, restricted, end of period			47,877			42,386
	Restricted cash, end of period			657			792
	Cash, cash equivalents, restricted cash, and cash included in advertising fund assets,	$	259,814	$	233,551
	restricted, end of period

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

The following information provides definitions and reconciliations of the non-GAAP financial measures presented in this earnings release to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP). The Company has provided this non-GAAP financial information, which is not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in this earnings release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in this earnings release. The non-GAAP financial measures in this earnings release may differ from similarly titled measures used by other companies.

Non-GAAP Financial Measures in Guidance

Driven Brands includes Adjusted EBITDA and Adjusted EPS in the Company's Fiscal Year 2023 Guidance. Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures and have not been reconciled to the most comparable GAAP outlook because it is not possible to do so without unreasonable efforts due to the uncertainty and potential variability of reconciling items, which are dependent on future events and often outside of management's control and which could be significant. Because such items cannot be reasonably predicted with the level of precision required, we are unable to provide outlook for the comparable GAAP measures. Forward-looking estimates of Adjusted EBITDA and Adjusted EPS are made in a manner consistent with the relevant definitions and assumptions noted herein and in our filings with the SEC.

Adjusted Net Income and Adjusted Earnings Per Share

Adjusted net income attributable to Driven Brands Holdings Inc. ("Adjusted Net Income") and Adjusted diluted earnings per share attributable to Driven Brands common stockholders ("Adjusted Earnings Per Share") are considered non-GAAP financial measures under the SEC's rules because they exclude certain amounts included in the net income attributable to Driven Brands common stockholders and diluted earnings per share attributable to Driven Brands common stockholders calculated in accordance with GAAP. Management believes that Adjusted Net Income and Adjusted EPS are meaningful measures to share with investors because they facilitate comparison of the current period performance with that of the comparable prior period. In addition, Adjusted Net Income and Adjusted Earnings Per Share afford investors a view of what management considers to be Driven Brands' core earnings performance as well as the ability to make a more informed assessment of such earnings performance with that of the prior period.

The tables below reflect the calculation of Adjusted Net Income and Adjusted Earnings Per Share for the three and nine months ended September 30, 2023, compared to the three and nine months ended September 24, 2022.

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Net (Loss) Income to Adjusted Net Income and Adjusted Earnings Per Share (Unaudited)

			Three months ended			Nine months ended
(in thousands, except per share amounts)	September 30,			September 24,		September 30,			September 24,
	2023			2022			2023			2022
	Net (loss) income	$	(799,311)		$	38,391	$	(731,813)	$	15,775
Acquisition related costs(a)		1,667			2,325			7,264			9,981
	Non-core items and project costs, net(b)		1,486			851			6,113			3,436
Straight-line rent adjustment(c)		5,193			3,220			14,196			11,530
	Cloud computing amortization(d)		991			-			991			-
Equity-based compensation expense(e)		2,681			5,308			9,730			12,159
	Foreign currency transaction (gain) loss,		2,980			15,582			3			30,490
	net(f)
Bad debt recovery(g)		-			(449)			-			(449)
	Goodwill impairment(h)		850,970			-			850,970			-
Trade name impairment(i)		-			-			-			125,450
	Asset sale leaseback (gain) loss,		125,473			(14,186)			119,637			(20,248)
	impairment and closed store expenses(j)
Amortization related to acquired		9,252			7,212			23,564			18,284
intangible assets(k)
	Provision for uncertain tax positions(l)		-			-			-			76
Adjusted net income before tax impact		201,382			58,254			300,655			206,484
of adjustments
	Tax impact of adjustments(m)		(167,662)			(3,290)			(175,452)			(44,086)
Adjusted net income		33,720			54,964			125,203			162,398
	Net loss attributable to non-controlling		-			-			-			(15)
	interest
Adjusted Net Income attributable to	$	33,720	$	54,964	$	125,203	$	162,413
Driven Brands Holdings Inc.
Adjusted Earnings Per Share
	Basic1	$	0.20		$	0.33	$	0.75	$	0.98
	Diluted1	$	0.20		$	0.32	$	0.74	$	0.96
	Weighted average shares outstanding
	Basic		162,398			162,760			162,698			162,768
	Diluted		165,850			166,831			166,557			166,663

1. Adjusted Earnings Per Share is calculated under the two-class method. Under the two-class method, adjusted earnings per share is calculated using adjusted net income attributable to common shares, which is derived by reducing adjusted net income by the amount attributable to participating securities. Adjusted Net Income attributable to participating securities used in the basic earnings per share calculation was $1 million and $3 million for the three and nine months ended September 30, 2023, respectively, and Adjusted Net Income attributable to participating securities used in the diluted earnings per share calculation was $1 million and $2 million for the three and nine months ended September 30, 2023, respectively.

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