For the second quarter of 2024, Driven Brands Holdings reported $1.67 billion in total system-wide sales (up 0.6% year over year) and $611.57 million in total net revenue (up 0.8%). Management attributed the growth in net revenue to higher product and service revenue tied to an increase in system-wide sales as well as net new store growth.
Meanwhile, the company’s total consolidated same-store sales increased 0.5%. For Driven, it was the 14th consecutive quarter of same-store sales growth.
“We continue to be pleased by the performance of our Take 5 Oil Change and franchise businesses — all being key contributors to a solid Q2 2024. And, it is worth noting that, on a two-year basis, Driven delivered 8.1% same-store sales growth,” President and CEO Jonathan Fitzpatrick told analysts on Driven’s Aug. 1 earnings call. “Our [Paint, Collision & Glass] segment, which represents more than 50% of that comp, delivered a two-year comp of 11.7%, and Take 5 Oil Change, our biggest and fastest-growing business, delivered a two-year comp of 23.5%.”
It should be noted that — although the company has continued to report total same-store sales growth — Driven has experienced, and management expects the company to continue experiencing, softening demand across several of its segments. The primary drivers of this are inflationary pressures, increased competition, industry dynamics and negative weather patterns.
Regarding softening demand, Fitzpatrick said management believes that the ongoing inflationary environment will likely continue to pressure consumer spending throughout the balance of 2024 and that lower-income households will be the most impacted. “We saw that it impacted our Q2 results, and we’re taking this into account in our updated expectations,” he added. “We believe that this pressure will be somewhat offset by strength in our commercial business and our needs-based businesses. We remain focused on delivering our 2024 outlook despite this ongoing consumer uncertainty.”
Meanwhile, the company’s net income declined 20.1% to $30.16 million for the second quarter of 2024, primarily related to increased payroll and employee benefit costs, impairment charges, and reduced gains recognized relating to decreased sale leaseback activity in the current period. This was partially offset by lower interest expense and income tax expense.
However, its adjusted net income rose 26.9% to $58.01 million because of decreased interest expense in addition to positive same-store sales and margin improvements (primarily within Driven’s Maintenance segment) as well as net new store openings that occurred in the prior 12 months.
The company’s adjusted EBITDA increased 4.0% to $152.22 million, and its adjusted EBITDA margin grew 77 basis points to 24.9% , primarily from margin improvement in Maintenance.
MAINTENANCE … Maintenance system-wide sales were $535.37 million in the second quarter of 2024 — up 10.5% year over year, with franchised stores up 9.2% and company-operated stores up 12.2%.
Total Maintenance revenue came in at $277.92 million — up 14.7%, and same-store sales grew 4.3% on top of a 10.2% increase a year ago for a two-year stack of +14.5%.
A closer look at Driven’s Maintenance results shows that Take 5 Oil Change revenue rose 15.6%, its same-store sales grew 5.7% and its unit growth increased 19% on a year-over-year basis. It’s worth noting that the second quarter of 2024 was the 16th consecutive quarter of positive same-store sales growth for Take 5 Oil Change.
Meanwhile, Maintenance segment adjusted EBITDA came in at $102.94 million — up 21.4%, primarily tied to revenue growth, cost management and operational leverage.
Segment adjusted EBITDA margin grew from 35.0% to 37.0% year over year, driven primarily by Take 5 Oil Change.
Driven’s Maintenance segment is primarily comprised of the Take 5 Oil Change and Meineke brands, which service a combination of retail and commercial customers, such as fleet operators.
CAR WASH … Car Wash system-wide sales came in at $155.49 million — down 4.7% year over year, with company-operated stores down 6.3% and independently operated stores down 2.0%.
Total revenue was $156.90 million — down 4.8%. And, on a same-store basis, sales declined 4.1% on top of a 4.0% decrease a year ago for a two-year stack of -8.1%.
Meanwhile, Car Wash segment adjusted EBITDA was $33.77 million — down 15.1%, and its segment adjusted EBITDA margin declined from 24.1% to 21.5% year over year.
Driven bills itself as the world’s largest conveyor car wash company by location count with sits across North America, Europe and Australia.
PAINT, COLLISION & GLASS … Paint, Collision & Glass system-wide sales came in at $862.16 million — down 3.4% year over year, with franchised stores down 1.5% and company-operated stores down 21.6%.
Total revenue was $112.03 million — down 15.9%, and same-store sales decreased 0.5% up against a 12.2% gain a year ago for a two-year stack of +11.7%.
Paint, Collision & Glass segment adjusted EBITDA declined 14.3% to $35.17 million, but segment adjusted EBITDA margin increased from 30.8% to 31.4%.
Driven’s Paint, Collision & Glass segment is primarily composed of the Carstar, ABRA, Fix Auto, Maaco, Uniban and AGN brands, and serves both retail and commercial customers. Its paint services include full body repainting and touch-up, surface preparation and protection, and refinishing and other cosmetic repairs. Its collision services include full collision repair and refinishing services, and its glass services include replacement, repair and calibration services for automotive glass.
PLATFORM SERVICES … Platform Services system-wide sales came in at $115.79 million — down 2.5% year over year, with franchised stores down 2.5% and company-operated stores down 3.6%.
Total revenue, however, grew 6.8% to $61.24 million, mainly because of increased product purchases by franchisees and company-operated stores in addition to increased training memberships in the current period.
Platform Services segment adjusted EBITDA was $25.31 million — up 12.4%, driven by revenue growth, cost management and operational leverage. And, segment adjusted EBITDA margin rose from 39.3% to 41.3% year over year
Driven’s Platform Services segment is primarily composed of the 1-800 Radiator, PH, Spire Supply, Driven Advantage and Automotive Training Institute (ATI) businesses.
LOOKING AHEAD … Management has updated its full-year financial guidance indicating that revenue is likely to come in toward the low end of its original outlook of $2.35 billion to $2.45 billion.
Adjusted EBITDA is expected to come in toward the middle to high end of management’s prior guidance of $535.00 million to $565.00 million.
Additionally, same-store sales growth is now expected to be between 1.0% and 3.0% — down from the previous guidance of 3.0% to 5.0% growth.
Net store growth of 205 to 220 units was unchanged.
MISCELLANEOUS … Other items of interest from Driven’s quarterly report and conference call …
• The company began migrating to a new ERP platform at the start of the current quarter. “So far, we’re pleased with the progress of the implementation,” Fitzpatrick told analysts on the call.
• Over a two-year period, Take 5 Oil Change’s franchise store count has almost doubled, and management anticipates franchisees to account for approximately 50% of total Take 5 Oil Change locations over time.
• Since the launch of Driven Advantage in the first quarter of 2023, approximately 80% of eligible locations have begun purchasing products and services via the platform. Driven Advantage is an online marketplace where Driven’s company stores, franchisees and affiliates can purchase over 90,000 SKUs from more than 50 vendor partners, ranging from office supplies to paint, oil and equipment.
• Driven completed one acquisition within the Maintenance segment and one acquisition in the Car Wash segment during the six months ended June 29, 2024, representing two sites and one site, respectively, for an aggregate cash consideration, net of cash acquired and liabilities assumed, of less than $2 million.
• During the six months ended June 29, 2024, the company sold nine company-operated stores within the Paint, Collision, & Glass segment to a franchisee at a purchase price of $18 million. — Reporting by Marc Vincent, Editor
