Driven Brands Holdings Inc. Q1 FY2025 earnings call

• Acknowledged the hard work of over 7,500 team members and franchisees in a dynamic macroeconomic environment. - Completed the sale of U.S. Car Wash business on April 10, using proceeds to repay debt. - Take 5 Oil Change continues to be a strong growth engine with 168 net new openings over the past year and 19th consecutive quarter of positive same-store sales. - Franchise segment, despite softness in Maaco, maintained a solid adjusted EBITDA margin of 62%. - International Car Wash had a very strong quarter with strong revenue and adjusted EBITDA growth. - Deleveraging remains a key priority, on track to reduce net leverage to 3 times by end of 2026. - Discussed tariffs, noting diversified sourcing and pricing power to mitigate risks, and essential nature of offerings.

Take 5 Oil Change: Same-store sales grew 8% for the quarter, marking its 19th consecutive quarter of positive same-store sales. Revenue growth was 15.3%, adjusted EBITDA was $100.9 million with a margin of 34.4%. Franchise Brands: Same-store sales declined 2.9%, segment revenue declined $4.6 million or 6.1%, adjusted EBITDA declined $3.2 million to $44.4 million with a margin of 61.9%. International Car Wash: Same-store sales grew 26.2%, adjusted EBITDA increased $6.4 million to $24.4 million, with a margin of 35.9%.

• Reiterated fiscal 2025 outlook, expecting Take 5 growth to moderate as it grows on a larger base, Car Wash business to have more moderate growth, and Maaco to continue softness. - Full year revenue and adjusted EBITDA expected in the low 50s for the second half of 2025. - Focus on reducing net leverage to 3 times by the end of 2026, with majority of free cash flow earmarked for debt reduction.

• Potential impact of worsening consumer sentiment affecting discretionary segments like Maaco. - Tariff uncertainties and their potential impact on margins and demand. - Need for supply chain adjustments due to changing tariff conditions.

Q: About Take 5 EBITDA margin decline, how to manage and potential margin recovery?

A: Michael Diamond said key drivers were repair/maintenance and rent expenses, but team is managing costs and confident in top line performance.

Q: Franchise Brands comp softness, can EBITDA be driven up?

A: Michael Diamond said franchise business has fewer levers but stable cash flow, and long-term trajectory is good.

Q: International Car Wash performance, differences from U.S. business?

A: Daniel Rivera said International Car Wash is an independent owner model, is industry leader in Europe, and benefited from weather, but comps expected to normalize.

Q: Take 5 franchise unit growth in quarter, why lower?

A: Daniel Rivera said Q1 may be lighter traditionally as Q4 is heavier in openings, but long-term growth outlook remains strong.

Q: Tariffs impact on franchisee unit openings?

A: Michael Diamond said no current concern on cost of builds, Daniel Rivera said franchisees are happy with growth and return on investment.

Q: Maaco and collision business dynamic, insurance claims?

A: Daniel Rivera said Maaco is more discretionary, CARSTAR is more insurance based, and Maaco has a plan to get back on track.

Q: SG&A pressures and growth initiatives?

A: Michael Diamond said SG&A increases are for growth initiatives like Driven Advantage and fleet business.

Q: Broader consumer environment impact on other segments?

A: Michael Diamond said oil changes are necessary, and aging car park can benefit business.

Q: Franchise Brands EBITDA margin contraction, drivers and leverage?

A: Michael Diamond said margin pressure was from sales decline, but franchise business has few levers but gains leverage quickly with sales growth.

Q: Broader downturn impact on other segments?

A: Michael Diamond said oil changes are non-optional, and aging car park can benefit business, citing past performance during economic downturns.