Driven Brands Holdings Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights:

• Jonathan acknowledged team efforts in 2024, outlined 2025 priorities: delivering outlook, reducing debt, active portfolio management. Mentioned selling U.S. car wash business, to close in Q2, and new segment structure starting Q1 2025 with Take 5 as standalone segment, franchise businesses consolidated, etc.
• Danny discussed segment performances: Take 5's 18th consecutive quarter of same-store sales growth, marketing initiatives driving transactions; Paint, Collision & Glass segment's market share gain; Platform Services and Car Wash segment results.
• Mike detailed Q4 financial results, liquidity, leverage, full-year 2024 results, and 2025 outlook, including revenue, adjusted EBITDA, same-store sales, net store growth, capital expenditures, interest expense, tax rate, and segment changes.

Segment Performance:

• Maintenance segment: Take 5 Oil Change had 18th consecutive quarter of positive same-store sales growth. Q4 same-store sales growth 9.2%, full-year 6.8%. Added 174 net new stores in 2024. Revenue and adjusted EBITDA grew.
• Paint, Collision & Glass segment: Q4 revenue $97.3 million, adjusted EBITDA $33 million, adjusted EBITDA margins 33.9%. Collision business gained market share with expanding direct repair program partnerships.
• Platform Services segment: Q4 revenue $40.2 million, adjusted EBITDA $16.3 million, adjusted EBITDA margins 40.4%.
• Car Wash segment: Q4 revenue $143.4 million, adjusted EBITDA $28.7 million, same-store sales growth 7.9%.

Guidance:

• 2025 revenue between $2.05 billion to $2.15 billion.
• Adjusted EBITDA between $520 million to $550 million.
• Adjusted diluted EPS $1.15 to $1.25 per share.
• Same-store sales 1% to 3%.
• Net store growth 175 to 200 units.
• Net capital expenditures 6.5% to 7.5% of revenue.
• Interest expense $125 million to $130 million.
• Effective annual tax rate 26% to 27%.
• Aim to achieve net leverage target of 3x by end of 2026.

Risks:

• Ongoing inflationary environment likely to pressure consumer spending, especially lower income households.
• Uncertainty related to macro environment, including potential impact of tariffs.

Q: Your first question comes from Pedro Gil with Morgan Stanley about 2025 outlook and growth composition by segment.

A: Michael Diamond responded, highlighting Take 5 as growth engine, U.S. car wash business adjusted EBITDA, and noting 2024 had PH Vitres results not in 2025, and strong pipeline and momentum in Take 5.

Q: Justin Kleber with Baird asked about Take 5 incremental EBITDA and normalized same-store sales growth.

A: Michael Diamond said Take 5 is a powerful platform with growth potential, and normalization of same-store sales growth as Q4 was strong but not sustainable going forward.

Q: Brian McNamara with Canaccord Genuity asked about maintenance CapEx for U.S. car wash and collision comps trends.

A: Michael Diamond said U.S. car wash maintenance CapEx will be modest as business is discontinued, and Jonathan Fitzpatrick noted collision comps outpaced industry due to franchisee execution of direct repair programs.

Q: Chris O'Cull with Stifel asked about unit guidance breakdown and pipeline strength.

A: Michael Diamond said significant majority of unit growth will come from Take 5 pipeline, strong pipeline with over 1,000 sites, and prudent guidance given macro uncertainty.

Q: Vicky Liu with Bank of America Merrill Lynch asked about Auto Glass Now TPA materializing and PCG margin improvement.

A: Daniel Rivera said TPA deal became active in Q1 2025, and Danny Rivera discussed Auto Glass Now focus on growing insurance and commercial accounts, and PCG margin improvement due to franchisee execution.

Q: Phillip Blee with William Blair asked about car wash transaction separation and M&A appetite.

A: Jonathan Fitzpatrick said car wash business separation with Q2 closing, and focus on organic growth but will assess accretive M&A opportunities in automotive aftermarket.

Q: Christian Carlino with JPMorgan asked about Auto Glass Now growth, $850 million target, and AGN and Take 5 performance.

A: Jonathan Fitzpatrick said $850 million target is no longer relevant, focused on paying down debt and growing Take 5, and Michael Diamond discussed AGN incubation in Corporate and Other due to size and support needs.

Q: Tristan Thomas-Martin with BMO Capital Markets asked about AGN insurance partnerships and Take 5 marketing initiatives.

A: Daniel Rivera said AGN insurance partnerships grew both in number and expansion, and Take 5 uses broad reach brand strategy and data-driven local campaigns for marketing.