Driven Brands Holdings saw its net loss widen from $7.47 million to $38.79 million on a year-over-year basis in the fourth quarter of 2021, largely related to a $56-million, one-time transaction expense associated with the December 2021 acquisition of Auto Glass Now (AGN).
However, the company’s adjusted net income climbed from $1.57 million to $31.16 million, and its adjusted EBITDA rose 28.9% to $84.95 million despite supply chain disruptions and inflationary pressures as well as the effects of another COVID-19 variant.
Driven Brands’ total revenue grew 35.8% to $391.86 million in the fourth quarter of 2021. This breaks down as …
• $239.84 million in company-operated store sales — up 44.5%.
• $52.18 million in supply and other revenue — up 13.9%.
• $43.76 million in independently operated store sales — up 19.6%.
• $37.17 million in franchise royalties and fees — up 66.2%.
• $18.93 million in advertising fund contributions — up 9.8%.
Driven Brands’ total system-wide sales topped $1.18 billion in the fourth quarter of 2021 — an increase of 26.4% compared to the prior year with 6% net store growth and an increase in consolidated same-store sales of 16.4%. Comp-store sales were relatively consistent across all three months, according to management, and positive car count and average ticket drove the comp increase.
MAINENANCE SEGMENT … Maintenance system-wide sales grew 33.5% to $330.77 million with same-store sales up 25.7%. This breaks down as franchise stores’ system-wide sales up 28.7% to $192.77 million and company-operated stores’ system-wide sales up 40.9% to $138.00 million.
Segment adjusted EBITDA rose 43.5% to $46.18 million.
“Maintenance continues to benefit from more targeted digital marketing, which led to an increase in car count from both new and repeat customers in the quarter,” Executive Vice President and CFO Tiffany Mason said on Driven’s Feb. 16 earnings call. “We were able to pass along a price increase while maintaining our premium oil mix, which drove average ticket.
“From a profitability perspective, segment adjusted EBITDA margin year-over-year was flat. However, margin contracted from the third quarter to the fourth quarter due to a combination of product cost increases in excess of retail price increases and alternative supply costs incurred to mitigate oil supply constraints. The overall impact was approximately 200 basis points. By Q4, we had largely overcome the effects of the national labor shortage, which has provided a margin benefit in Q2 and Q3 as we ran leaner on labor than intended.”
Driven’s Maintenance segment includes Meineke Car Care Centers, Take 5 Oil Change, Merlin 200,00 Miles and Econo Lube N’ Tune & Brakes.
PLATFORM SERVICES … Platform services system-wide sales grew 35.2% to $84.05 million with same-store sales up 35.2%. Segment adjusted EBITDA decreased 4.6% to $12.09 million.
Mason pointed out to analysts that platform services is the company segment most exposed to supply chain pressures. “As you well know, every aspect of the supply chain is challenged right now, from manufacturing to the port to trucking,” she said. “We have leveraged our scale and leadership in the industry to turn this into a strength and differentiator for Driven.
“We contract with multiple suppliers, while most of our competitors — 80% of the industry that is independent operators — rely on just one primary supplier. We leverage the strength of our balance sheet to place orders earlier and we have the team dedicated to relationship management and ensuring we keep close watch on every step of the supply chain,” Mason stated. “This has translated into more inventory in stock at 1-800-Radiator than many of our competitors, and customers have been willing to pay a premium, driving continued record sales levels within the quarter.”
Driven’s Platform Services segment includes 1-800 Radiator, PH Vitres d’Autos and the Automotive Training Institute.
ELSEWHERE … Paint, collision and glass (PC&G) system-wide sales increased 19.8% to $643.40 million with same-store sales up 11.4%. Segment adjusted EBITDA grew 31.2% to $21.20 million.
Driven’s PC&G segment includes Maaco, Carstar, ABRA, VitroPlus, Uniglass, Docteur du Pare-brise and Go Glass.
Car wash system-wide sales rose 41.0% to $124.02 million with same-store sales up 6.2%. Segment adjusted EBITDA rose 49.0% to $37.84 million.
Driven’s Car Wash segment includes Car Wash USA Express, Goo-Goo 3 Minute Express Wash, Supersonic and IMO.
LOOKING BACK … “As I take a step back to reflect on the how and why of 2021, so much of this success is attributable to our benefits of scale in this highly fragmented industry. Despite COVID, suppressed vehicle miles traveled, supply chain disruption and labor challenges, we grew and took share,” President and CEO Jonathan Fitzpatrick said on the call. “We had product when others didn’t because of our supply chain capabilities, which then allows us to take price to offset commodity and people costs.
“We staffed our locations. We could market when others didn’t have the people or funds to do so. We grew our real estate and licensed pipeline significantly, and we acquired new stores at accretive prices. This is the power of the growing scale and sophistication of Driven Brands in a world where 80% of our competition remains small chains and independents. Scale is truly a compounding, long-term, sustainable competitive advantage, which most of the industry will never achieve.”
LOOKING AHEAD … Management anticipates that Driven will come through with roughly $1.90 billion in revenue for 2022 — up 29.5% compared to the $1.47 billion the company reported for 2021. Adjusted EBITDA is expected to be $465 million — up 28.6% compared to the $361.69 million Driven reported for 2021.
This guidance includes the impact of the 79 acquired AGN stores as well as the impact of a 53rd week in fiscal year 2022. The impact of the extra week is expected to yield approximately $16 million in revenue and $4 million in adjusted EBITDA.
The company also expects mid-single-digit same-store sales growth and net store growth of approximately 225 locations in 2022 — 145 stores on the maintenance side (of which 65% will be franchised and 35% will be company-operated), 45 stores on the car wash side (which will be company-operated) and 35 stores on the PC&G (which will be company-operated).
It should be noted that management has not included future mergers and acquisition in its guidance for 2022.
Driven’s highest-growth priorities for 2022 lie in the quick lube, car wash and glass markets. “These businesses share several unique characteristics: simple operating models, highly fragmented competition, significant white space in terms of unit growth and very strong unit-level economics,” Fitzpatrick told analysts on the call. “These highest-growth businesses are supported by the rest of our highly cash-generative and asset-light businesses. This is what makes Driven such a powerful engine: growth and cash.”
MISCELLANEOUS … Other items of interest from Driven’s quarterly report and conference call …
• Driven is in the process of selling its Drive N Style mobile reconditioning business. “In fiscal 2021, Drive N Style generated approximately $250,000 of revenue but posted a loss,” Mason said the call. “This business is not core to our strategy, and we are actively marketing it.”
• In December, the company closed on a $500 million term loan. The proceeds from the issuance are to be used for general corporate purposes, including acquisitions.
• Driven added 102 net new stores in the fourth quarter of 2021. — Marc Vincent