Driven Brands Holdings Inc.

Good morning and welcome to the Driven Brands first quarter 2021 earnings conference call. My name is Tamia and I will be your operator today. As a reminder, this call is being recorded. Joining the call this morning are Jonathan Fitzpatrick, President and Chief Executive Officer, Tiffany Mason, Executive Vice President and Chief Financial Officer, and Rachel Webb. During today's call, management will refer to certain non-GAAP financial measures. You can find the reconciliation to the most directly comparable GAAP financial measures on the company's investor relations website and its filings with the Securities and Exchange Commission. Please be advised that during the course of this call, management may also make forward-looking statements that reflect expectations for the future. These statements are based on current information, and actual results may differ materially from these expectations. Factors that may cause actual results to differ materially from expectations are detailed in the company's SEC filings, including the Form 8-K filed today containing the company's earnings release. Information about any non-GAAP financial measures referenced, including a reconciliation of those measure-to-GAAP measures, can also be found in the company SEC filings, and an earnings release available on the Investor Relations website. Today's prepared remarks will be followed by a question and answer session. We ask that you limit yourself to one question and one follow-up. Please press star 1 to be placed in the queue. I'll now turn the call over to Jonathan. Please go ahead, sir.

Thank you, Tamiya, and good morning, everyone across the board, and are excited to share the results. Before we jump in, though, let me explain the power of Driven Brands. Driven Brands is the largest automotive services company in North America. Our four operating segments provide diversification to our business model, diversity across our brands, geographies, and needs-based service categories. We have scale in an industry where scale matters. And we marry this scale with sophistication, which allows us to leverage our massive growing data capabilities to drive more cars to our shops through more effective marketing, to identify the best possible real estate, and to drive cost efficiencies through purchasing that creates profitable growth for us and our franchisees, generating better returns than most independents could achieve on their own. Our industry is massive and extremely fragmented. It's roughly $300 billion and growing. And we're the biggest in our space today, despite having less than 5% market share. Now, we have consistently taken share in this industry for the past decade, and we will continue to do this for the next decade. We have many levers to grow organically, and because of our asset life business model, we generate a ton of cash flow. Put all this together, we grow same store sales in units, and we generate a ton of cash. Over the long term, Driven will consistently deliver double digit revenue growth and double digit adjusted EBITDA growth. And this is before we layer on acquisitions, which we see as incremental upside to our model. This is the power of driven brands. I'm pleased with our Q1 results that we released this morning. Compared to Q1 of 2020, consolidated same-store sales were significantly ahead of expectations at positive 0.5%. Revenue increased 83%. Adjusted EBITDA more than doubled to 78 million at a margin of nearly 24%. And adjusted EPS was 19 cents, significantly beating expectations. A top-to-bottom beat. We are optimistic about the remainder of the year and are incredibly proud of these results. But I would be remiss not to mention some discrete tailwinds in the quarter. Pent-up demand. Stimulus. and rising consumer confidence, particularly in our southern markets, all meant that demand for our services was strong in Q1. Then in late March, we began comping over the beginning of COVID lockdowns last year. We were well positioned to capitalize on these tailwinds through the hard work of the team and franchisees in 2020 that positioned us to take market share in 2021. the overall strength and diversity of our business model, the inherent operating leverage in our business, and of course, the power of our data analytics platform. This momentum in the business has continued into Q2. Let me give you some additional color on our top line results and the state of the customer. Our same store sales performance was high quality. built on a foundation of marketing and operational execution, not by excessive discounting or increasing price. We drove more new and repeat customers to our shops, and this resulted in increased market share across all segments in Q1. We did many things differently than our competition in 2020 and in Q1 that is positively contributing to our results. While many reacted, we were proactive, putting our foot on the gas with key initiatives we knew would drive growth in 2021 and for years to come. We kept opening new stores and selling record numbers of new licenses. We remained open, staffed, and had inventory for our customers as they needed our services. We played offense with marketing. And as a result, we acquired new customers, both retail and commercial. With retail customers, we focused on both acquiring new customers and improving repeat rates through improved data-driven marketing strategies we initiated in 2020. You can see this in our strong same-store sales in Q1 in both our maintenance and car wash segments. Our insurance partners continue to place increased value on doing business with fewer scale providers that can service their customers better. The DRPs we added in 2020 continue to add more cars into 2021. This allowed our PC&G business to outperform the industry despite vehicle miles traveled still not back to normal. And maintaining best-in-class inventory levels, leveraging data and supply chain allowed franchisees within our platform services segment to continue to sell when many of our competitors could not. In fact, franchisees have been enjoying record sales weeks in 2021 as a result. These were just some of the actions that contributed to our share gains in 2020. and position us well to continue to build on these share gains throughout 2021. So now let me give you a little bit of color about our customer and vehicle miles traveled. Push about the impact of the reopening in the United States and the demand for our services for the remainder of 2021, 2022 and beyond. said simply as consumers drive more driven wins and we are already seeing more of our customers take to the road recent studies in the u.s show 40 percent of consumers have already booked or plan to book travel this year and tooth or car this is good for driven we leverage our scale, sophistication, data, and marketing engine to ensure that as consumers are driving more, we capture that demand. Let me spend a few minutes explaining how data impacts results.

It starts with our unique ability from so many touch points across our businesses.