Driven Brands : Reports First Quarter Results Delivers Strong Same-Store Sales and Net Store Growth Reports Robust Operating Income and Earnings Per Share Growth - Form 8-K

Driven Brands Holdings Inc. Reports First Quarter Results

Delivers Strong Same-Store Sales and Net Store Growth

Reports Robust Operating Income and Earnings Per Share Growth

Charlotte, N.C. (April 27, 2022) - Driven Brands Holdings Inc. (NASDAQ: DRVN) ("Driven Brands" or the "Company") today reported financial results for the first quarter ended March 26, 2022.

For the first quarter, revenue was $468.3 million, an increase of 42% versus the prior year. System-wide sales were $1.3 billion, an increase of 26% versus the prior year, with 8% net store growth and an increase in consolidated same-store sales of 15.6%.

Earnings per diluted share was $0.20 for the first quarter.

Adjusted earnings per diluted share² was $0.28, an increase of 47% versus the prior year.

"Driven Brands posted strong first quarter results despite a challenging macroeconomic landscape. Our scale and sophistication allowed us to navigate continued supply chain challenges and an accelerating inflationary environment. This scale and sophistication, coupled with our proven playbook for growth, allowed us to once again outperform expectations," said Jonathan Fitzpatrick, president and CEO. "This would not be possible without the hard work of the entire team, from our employees to franchisees. Their relentless focus on operational excellence delivered quality results," Fitzpatrick added.

"We continue to be enthusiastic about fiscal 2022. With our scale, the significant whitespace in this fragmented and needs-based industry, and our robust cash generation engine, our business model remains well-positioned to maximize long-term value for all of our stakeholders."

First Quarter Highlights

•

Revenue increased 42% versus the prior year, driven by same-store sales and net store growth.

•

Consolidated same-store sales increased 15.6% for the quarter, and all segments posted positive same-store sales.

•

The Company added 114 net new stores during the quarter.

•

Net income in the first quarter was $34.4 million.

•

Adjusted Net Income1 was $47.8 million, an increase of 57% versus the prior year.

•

Adjusted EBITDA3 was $118.5 million, an increase of 52% versus the prior year.

1

First Quarter 2022 Key Performance Indicators by Segment

		System-wide Sales (in millions)			Store Count			Same-Store Sales			Revenue (in millions)			Segment Adjusted EBITDA4 (in millions)
Maintenance		$	357.1				1,531				19.2	%		$	178.7			$	52.5
Car Wash			157.6				1,063				6.6	%			159.3				55.7
Paint, Collision & Glass			659.0				1,730				13.7	%			79.4				29.0
Platform Services			90.8				202				30.9	%			43.2				14.2
Corporate / Other			N/A				N/A				N/A				7.7
Total		$	1,264.5				4,526				15.6	%		$	468.3

Capital and Liquidity

The Company ended the first quarter with total liquidity of $667.9 million, consisting of $270.7 million in cash and cash equivalents, and $397.2 million of undrawn capacity on its variable funding securitization senior notes and revolving credit facility.

Fiscal Year 2022 Guidance

The Company provided the following guidance⁵ for the fiscal year ending December 31, 2022 on February 16, 2022 and will provide updated guidance in connection with the release of its second quarter results:

•

Revenue of approximately $1.9 billion.

•

Adjusted EBITDA3 of approximately $465 million.

•

Adjusted Earnings per Share2 of approximately $1.04.

The above guidance includes the impact of the 79 acquired Auto Glass Now stores and the 53rd week in fiscal year 2022. The impact of the extra week is expected to yield approximately $16 million in revenue, $4 million in Adjusted EBITDA³ and approximately $0.02 in Adjusted Earnings Per Share².

The Company also expects:

•

Mid-single-digit same-store sales growth.

•

Net store growth of approximately 225:

•

Maintenance: approximately 145 stores of which 65% will be franchised and 35% will be company-operated

•

Car Wash: approximately 45 stores which will be company-operated

•

Paint, Collision & Glass: approximately 35 stores which will be company-operated.

The Company has not included future M&A in its guidance for fiscal year 2022.

5	See Disclosure Regarding Non-GAAP Financial Measures

2

Conference Call

Driven Brands will host a conference call to discuss first quarter 2022 results today, Wednesday, April 27, 2022 at 9:00am 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 until July 26, 2022.

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^®, Meineke Car Care Centers^®, Maaco^®, 1-800-Radiator & A/C^®, and CARSTAR^®. Driven Brands has more than 4,500 locations across 15 countries, and services over 50 million vehicles annually. Driven Brands' network generates more than $1.6 billion in annual revenue from more than $4.7 billion in system-wide sales.

Contacts

Shareholder/Analyst inquiries:		Media inquiries:
Rachel Webb		Taylor Blanchard
[e-mail]		[e-mail]
[phone]		[phone]

3

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 press release, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, 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; and (iv) 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 factors that are described under the section titled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 25, 2021 and 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.

Forward-looking statements represent our estimates and assumptions only as of the date on which they are made, and we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Disclosure Regarding Non-GAAP Financial Measures

In addition to the financial measures presented in this release in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), the Company has included certain non-GAAP financial measures in this release, including Adjusted Net Income¹, Adjusted Earnings Per Share², andAdjusted EBITDA³. Management believes these non-GAAP financial measures are useful because they enable management, investors, and others to assess the operating performance of the Company and its segments. Please refer to the Reconciliation of Non-GAAP Financial Information tables located in the financial supplement in this release.

This release includes forward-looking guidance for certain non-GAAP financial measures, including Adjusted Earnings Per Share² and Adjusted EBITDA³. These measures will differ from net income, determined in accordance with GAAP, in ways similar to those described in the Reconciliation of Non-GAAP Financial Information tables in this release. We do not provide guidance for net income, determined in accordance with GAAP, or a reconciliation of guidance for Adjusted EBITDA³ to the most directly comparable GAAP measure because the Company is not able to predict with reasonable certainty the amount or nature of all items that will be included in net income.

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1

"Adjusted Net Income" is calculated by eliminating from net income the adjustments described for Adjusted EBITDA, amortization related to acquired intangible assets and the tax effect of the adjustments. Please refer to Reconciliation of Non-GAAP Information tables located in the financial supplement in this release.

2	"Adjusted Earnings Per Share" represents Adjusted Net Income divided by weighted average shares (basic and diluted). Please refer to Reconciliation of Non-GAAP Information tables located in the financial supplement in this release.

3

"Adjusted EBITDA" represents earnings before interest expense, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, straight-line rent, equity compensation, loss on debt extinguishment and certain non-recurring,non-core, infrequent or unusual charges. Please refer to Reconciliation of Non-GAAP Information tables located in the financial supplement in this release.

4

"Segment Adjusted EBITDA" is defined as Adjusted EBITDA with a further adjustment for store opening costs. Corporate & Other costs are not allocated across segments. Segment Adjusted EBITDA is a supplemental measure of operating performance of our segments and may not be comparable to similar measures reported by other companies. Please refer to Adjusted EBITDA and Segment Adjusted EBITDA Reconciliation located in the financial supplement in this release.

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DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

		Three months ended
(in thousands, except per share amounts)		March 26, 2022			March 27, 2021
Revenue:
Franchise royalties and fees		$	37,888			$	30,414
Company-operated store sales			292,391				183,855
Independently-operated store sales			63,089				56,163
Advertising contributions			19,698				17,255
Supply and other revenue			55,257				41,733
Total revenue			468,323				329,420
Operating expenses:
Company-operated store expenses			177,867				112,756
Independently-operated store expenses			33,299				31,108
Advertising expenses			19,698				17,255
Supply and other expenses			32,774				22,489
Selling, general and administrative expenses			92,220				69,050
Acquisition costs			4,318				1,646
Store opening costs			506				289
Depreciation and amortization			33,023				23,852
Asset impairment charges and lease terminations			898				1,253
Total operating expenses			394,603				279,698
Operating income			73,720				49,722
Other expenses, net:
Interest expense, net			25,353				18,091
Loss on foreign currency transactions, net			971				10,511
Loss on debt extinguishment			-				45,498
Total other expenses, net			26,324				74,100
Net income (loss) before taxes			47,396				(24,378	)
Income tax expense (benefit)			12,968				(4,446	)
Net income (loss)		$	34,428			$	(19,932	)
Net income (loss) attributable to non-controlling interests		$	(15	)		$	7
Net income (loss) attributable to Driven Brands Holdings Inc.		$	34,443			$	(19,939	)
Earnings per share(1):
Basic		$	0.21			$	(0.13	)
Diluted		$	0.20			$	(0.13	)
Weighted average shares outstanding(1):
Basic			162,762				154,827
Diluted			166,748				154,827

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DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)		March 26, 2022			December 25, 2021
Assets
Current assets:
Cash and cash equivalents		$	270,681			$	523,414
Restricted cash			792				792
Accounts and notes receivable, net			133,809				117,903
Inventory			48,883				46,990
Prepaid and other assets			24,640				24,326
Income tax receivable			5,070				6,867
Advertising fund assets, restricted			51,281				45,360
Assets held for sale			3,275				3,275
Total current assets			538,431				768,927
Notes receivable, net			8,918				3,182
Property and equipment, net			1,384,770				1,350,984
Operating lease right-of-use assets			1,026,537				995,625
Deferred commissions			10,623				10,567
Intangibles, net			862,761				816,183
Goodwill			2,044,594				1,910,392
Deferred tax assets			1,477				1,509
Total assets		$	5,878,111			$	5,857,369
Liabilities and shareholders' equity
Current liabilities:
Accounts payable		$	85,468			$	83,033
Accrued expenses and other liabilities			241,730				297,620
Income taxes payable			20,642				11,054
Current portion of long-term debt			22,969				26,044
Income tax receivable liability			24,255				24,255
Advertising fund liabilities			29,022				26,441
Total current liabilities			424,086				468,447
Long-term debt, net			2,358,379				2,356,320
Deferred tax liability			256,535				257,067
Operating lease liabilities			961,182				931,604
Income tax receivable liability			131,715				131,715
Deferred revenue			39,541				37,576
Accrued expenses and other long-term liabilities			28,181				29,398
Total liabilities			4,199,619				4,212,127
Common stock			1,675				1,674
Additional paid-in capital			1,610,585				1,605,890
Retained earnings			76,050				41,607
Accumulated other comprehensive loss			(10,483	)			(5,028	)
Total shareholders' equity attributable to Driven Brands Holdings Inc.			1,677,827				1,644,143
Non-controlling interests			665				1,099
Total shareholders' equity			1,678,492				1,645,242
Total liabilities and shareholders' equity		$	5,878,111			$	5,857,369

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DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		Three months ended
(in thousands)		March 26, 2022			March 27, 2021
Net income (loss)		$	34,428			$	(19,932	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			33,023				23,852
Non-cash lease cost			17,002				20,028
Loss on foreign denominated transactions			970				13,000
Gain on derivatives not designed as hedges			-				(2,489	)
Bad debt expense			372				657
Asset impairment costs			898				1,253
Amortization of deferred financing costs and bond discounts			2,224				2,139
Benefit (provision) for deferred income taxes			132				(8,018	)
Loss on extinguishment of debt			-				45,498
Other, net			1,597				(749	)
Changes in assets and liabilities, net of acquisitions:
Accounts and notes receivable, net			(21,123	)			(19,693	)
Inventory			(1,787	)			135
Prepaid and other assets			397				(8,184	)
Advertising fund assets and liabilities, restricted			(1,204	)			2,621
Deferred commissions			(39	)			(573	)
Deferred revenue			455				1,551
Accounts payable			509				638
Accrued expenses and other liabilities			(61,624	)			(6,451	)
Income tax receivable			11,476				3,061
Operating lease liabilities			(8,666	)			(15,758	)
Cash provided by operating activities			9,040				32,586
Cash flows from investing activities:				-
Capital expenditures			(68,967	)			(23,280	)
Cash used in business acquisitions, net of cash acquired			(224,526	)			(26,732	)
Proceeds from sale-leaseback transactions			37,781				41,023
Proceeds from sale of company-operated stores			-				4,481
Proceeds from disposition of Denmark car wash operation			1,577				-
Proceeds from disposal of property and equipment			803				-
Cash used in investing activities			(253,332	)			(4,508	)
Cash flows from financing activities:
Repayment of long-term debt			(4,820	)			(707,384	)
Proceeds from revolving lines of credit and short-term debt			-				114,800
Repayments of revolving lines of credit and short-term debt			-				(132,800	)
Repayment of principal portion of finance lease liability			(879	)			(409	)
Proceeds from initial public offering, net of underwriting discounts			-				661,500
Net proceeds from underwriters' exercise of over-allotment option			-				99,225
Repurchases of common stock			-				(42,977	)
Payment for termination of interest rate swaps			-				(21,826	)
Other, net			(20	)			-
Cash provided by financing activities			(5,719	)			(29,871	)

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Effect of exchange rate changes on cash			(592	)			650
Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted			(250,603	)			(1,143	)
Cash and cash equivalents, beginning of period			523,414				172,611
Cash included in advertising fund assets, restricted, beginning of period			38,586				19,369
Restricted cash, beginning of period			792				15,827
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period			562,792				207,807
Cash and cash equivalents, end of period			270,681				175,371
Cash included in advertising fund assets, restricted, end of period			40,716				21,160
Restricted cash, end of period			792				10,133
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period		$	312,189			$	206,664

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DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

Adjusted Net Income and Adjusted Earnings Per Share

		Three months ended
(in thousands, except per share amounts)		March 26, 2022			March 27, 2021
Net income (loss)		$	34,428			$	(19,932	)
Acquisition related costs(a)			4,318				1,646
Non-core items and project costs, net(b)			866				32
Straight-line rent adjustment(c)			4,093				2,485
Equity-based compensation expense(d)			2,618				983
Foreign currency transaction (gain) loss, net(e)			971				10,511
Asset sale leaseback (gain) loss, impairment and closed store expenses(f)			(124	)			(786	)
Loss on debt extinguishment(g)			-				45,498
Amortization related to acquired intangible assets(h)			5,142				3,652
Provision for uncertain tax positions(i)			76				-
Adjusted net income before tax impact of adjustments			52,388				44,089
Tax impact of adjustments(j)			(4,612	)			(13,641	)
Adjusted net income			47,776				30,448
Net (loss) income attributable to non-controlling interest			(15	)			7
Adjusted net income attributable to Driven Brands Holdings Inc.		$	47,791			$	30,441
Adjusted earnings per share
Basic(1)		$	0.29			$	0.19
Diluted(1)		$	0.28			$	0.19
Weighted average shares outstanding
Basic			162,762				154,827
Diluted			166,748				158,761

(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 $1.0 million and $0.7 million for the three months ended March 26, 2022 and March 27, 2021, respectively, and adjusted net income attributable to participating securities used in the diluted earnings per share calculation was $0.9 million and $0.7 million for the three months ended March 26, 2022 and March 27, 2021, respectively.

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DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

Net Income (Loss) to Adjusted EBITDA Reconciliation

		Three months ended
(in thousands)		March 26, 2022			March 27, 2021
Net income (loss)			34,428			$	(19,932	)
Income tax expense			12,968				(4,446	)
Interest expense, net			25,353				18,091
Depreciation and amortization			33,023				23,852
EBITDA			105,772				17,565
Acquisition related costs(a)			4,318				1,646
Non-core items and project costs, net(b)			866				32
Straight-line rent adjustment(c)			4,093				2,485
Equity-based compensation expense(d)			2,618				983
Foreign currency transaction loss, net(e)			971				10,511
Asset sale leaseback (gain) loss, impairment and closed store expenses(f)			(124	)			(786	)
Loss on debt extinguishment(g)			-				45,498
Adjusted EBITDA		$	118,514			$	77,934

a.

Consists of acquisition costs as reflected within the consolidated statement of operations, including legal, consulting and other fees and expenses incurred in connection with acquisitions completed during the applicable period, as well as inventory rationalization expenses incurred in connection with acquisitions. We expect to incur similar costs in connection with other acquisitions in the future and, under U.S. GAAP, such costs relating to acquisitions are expensed as incurred and not capitalized.

b.

Consists of discrete items and project costs, including (i) third-party consulting and professional fees associated with strategic transformation initiatives, and (ii) other miscellaneous expenses, including non-capitalizable expenses relating to the Company's initial public offering and other strategic transactions

c.	Consists of the non-cash portion of rent expense, which reflects the extent to which our straight-line rent expense recognized under U.S. GAAP exceeds or is less than our cash rent payments.

d.	Represents non-cash equity-based compensation expense.

e.	Represents foreign currency transaction gains/losses, net that primarily related to the remeasurement of our intercompany loans. These losses are partially offset by unrealized gains/losses on remeasurement of cross currency swaps and forward contracts.

f.

Relates to (gain) loss on sale leasebacks, the discontinuation of the use of a trade name, as well as impairment of certain fixed assets and operating lease right-of-use assets related to closed locations. Also represents lease exit costs and other costs associated with stores that were closed prior to the irrespective lease termination dates.

g.	Represents the write-off of debt issuance costs associated with early termination of debt.

h.	Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statements of operations.

i.	Represents uncertain tax positions recorded for tax positions, inclusive of interest and penalties.

j.

Represents the tax impact of adjustments associated with the reconciling items between net income and Adjusted Net Income, excluding the provision for uncertain tax positions and valuation allowance for certain deferred tax assets. To determine the tax impact of the deductible reconciling items, we utilized statutory income tax rates ranging from 9% to 36%, depending upon the tax attributes of each adjustment and the applicable jurisdiction.

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DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

ADJUSTED EBITDA AND SEGMENT ADJUSTED EBITDA RECONCILIATION (UNAUDITED)

		Three months ended
(in thousands)		March 26, 2022			March 27, 2021
Segment Adjusted EBITDA:
Maintenance		$	52,485			$	40,440
Car Wash			55,720				34,155
Paint, Collision & Glass			29,012				17,639
Platform Services			14,165				11,008
Corporate and other			(32,362	)			(25,019	)
Store opening costs			(506	)			(289	)
Adjusted EBITDA		$	118,514			$	77,934

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DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

ADDITIONAL INFORMATION ON KEY PERFORMANCE INDICATORS (UNAUDITED)

		Three months ended March 26, 2022
(in thousands)		Maintenance			Car Wash			Paint, Collision & Glass			Platform Services			Total
System-wide Store sales
Franchise stores		$	200,284			$	-				619,063			$	89,643			$	908,990
Company-operated stores			156,828				94,495				39,904				1,151				292,378
Independently operated Stores			-				63,089				-				-				63,089
Total System-wide Sales		$	357,112			$	157,584			$	658,967			$	90,794			$	1,264,457
Store Count (in whole numbers)
Franchise stores			982				-				1,611				201				2,794
Company-operated stores			549				341				119				1				1,010
Independently operated Stores			-				722				-				-				722
Total Store Count			1,531				1,063				1,730				202				4,526

		Three months ended March 27, 2021
(in thousands)		Maintenance			Car Wash			Paint, Collision & Glass			Platform Services			Total
System-wide Store sales
Franchise stores		$	163,817			$	-			$	530,503			$	68,373			$	762,693
Company-operated stores			114,067				57,048			$	11,930			$	983				184,028
Independently operated Stores			-				56,163				-				-				56,163
Total System-wide Sales		$	277,884			$	113,211			$	542,433			$	69,356			$	1,002,884
Store Count (in whole numbers)
Franchise stores			975				-				1,594				197				2,766
Company-operated stores			495				220				33				1				749
Independently operated Stores			-				734				-				-				734
Total Store Count			1,470				954				1,627				198				4,249

62 Drive N Style stores are included in the Maintenance store count for the three months ended March 27, 2021 as previously reported, but none are included in store count for the three months ended March 26, 2022 as they are held for sale.

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