Driven Brands Holdings Inc.

Good morning and welcome to Driven Brand's first quarter 2023 earnings conference call. My name is Sylvie and I will be your conference operator today. As a reminder, this call is being recorded. I would now like to turn the conference over to Christy Moser, Vice President of Investor Relations.

Thanks very much and welcome everybody to Driven Brand's first quarter 2023 earnings conference call. In addition to the earnings release, There's a leverage ratio reconciliation and infographic available for download on our website at investorrelations.drivenbrands.com, summarizing our first quarter results. On the call with me today are Jonathan Fitzpatrick, President and Chief Executive Officer, and Tiffany Mason, Executive Vice President and Chief Financial Officer. In a moment, Jonathan and Tiffany will walk you through our financial and operating performance for the quarter. Before we begin our remarks, I'd like to remind you that management will refer to certain non-GAAP financial measures. You can find reconciliations of the most directly comparable GAAP financial measures on the company's investor relations website and in its filings with the Securities and Exchange Commission. During the course of this call, management may also make forward-looking statements in regards to our current plans, beliefs, and expectations. These statements are not guarantees of our future performance and are subject to a number of risks and uncertainties. and other factors that could cause actual results and events to differ materially from the results and events contemplated by these forward-looking statements. Please see our earnings release and our filings with the Securities and Exchange Commission for more information. Today's prepared remarks will be followed by a question and answer session. We kindly ask that you limit yourself to one question and one follow-up. With that, I'll now turn it over to Jonathan.

Thank you and good morning. In the first quarter, Driven Brands continued to deliver strong results. We gained significant share leveraging our proven playbook to drive long-term sustainable growth and tailwinds from our network benefits that provide a significant and compounding advantage across our business. With continued resilience in the needs-based automotive services category, the quarter unfolded much like we anticipated. We delivered 20% revenue growth supported by 9% same-store sales growth and 7% new store growth. And all that is thanks to the hard work and strong execution by our 12,000 Driven Brands team members and our amazing franchisees who serve our loyal long-term customers. I couldn't be more proud of how our nimble and innovative team has continued to deliver on behalf of both our customers and shareholders. Consistent execution by our team combined with our differentiated business model has delivered a strong record of performance across a variety of economic environments. In the first quarter, we generated strong cash flow even as we integrated our glass businesses and continued the rebranding of U.S. Car Wash. And we used that cash flow to reinvest in the business and gain further market share. Momentum has continued into the second quarter, powered by the resilience of the category, our diversified platform, and our strong track record of execution. Our pipeline of future openings has continued to expand to 1,700 units, 35% of which are site secured or better, providing line of sight into significant multi-year growth. Now underpinning that momentum, our carefully curated portfolio of automotive services drove strong performance and cash flow. And we use that cash flow generation to invest into the flywheel of growth, into our three growth priorities. Take 5 Oil Change, Take 5 Car Wash, and Auto Glass Now. We continue to make significant progress across these growth categories, simplifying and enhancing the customer experience, integrating to a standard operating playbook, and moving to a single technology platform, supporting our market share gains and strong unit level economics. Starting with QuickLube, our most mature growth focus, Take 5 Oil Change continued to drive customer acquisition and best in category same store sales of 20%. Continuing to outpace the competition as our differentiated 10 minute stay in your car quick loop model builds brand recognition with top quartile NPS scores and increasing repeat rates. We continue to gain market share as customers become aware of Take 5's faster, friendlier, and simpler alternative for their oil change. at a more effective price point than dealerships. In addition to our strong same-store sales performance, we grew our footprint over 20% year over year, and our pipeline remains robust at 950 units, primarily made up of franchise locations, giving us a long runway for sustainable, profitable multi-year growth. And we expect to grow our footprint by an additional 20% in 2023, largely driven by franchise store growth. Now shifting to Car Wash, we continue to experience softer retail volume as a result of the macro environment. We had modestly less pressure from foreign exchange rate movement, and we will begin to lap that FX rate pressure in Q2 23. The long-term opportunity within the Car Wash business remains compelling with strong profitability, cash on cash returns, and cash flow generation over time. Our scale and experience will remain a significant competitive advantage as the current environment is beginning to rationalize the competitive intensity of new entrants. Additionally, as we look to past economic cycles, the car wash category remained resilient relative to the broader retail industry. As we migrate our footprint under the Take 5 brand, which was largely two-thirds complete as of the end of Q1, we are elevating our brand awareness standardizing our market positioning, our operations, systems, and customer experience. This in turn allows us to integrate our Take 5 Unlimited program and enhance our data capture capabilities. In fact, we continue to grow our total Take 5 Unlimited program to over 700,000 subscription members. For the quarter in aggregate, locations where rebranding was complete delivered higher adjusted EBITDA margin and same-store sales, than the locations yet to be rebranded. And our greenfield pipeline for openings in the U.S. remains robust at over 300 locations, with roughly 65 expected to open in 2023, enabling us to be more selective with tuck-in M&A, which is following our proven playbook for growth. Now, wrapping up with Glass. In the first quarter, we made significant progress integrating our 10 acquisitions to create a U.S. Glass platform. This platform is the culmination of years of careful planning, studying, and phenomenal execution. Beyond building national scale, our U.S. Glass platform includes expertise in calibration, mobile, insurance, and fleet servicing. We've combined the best processes, procedures, and technology to inform our standard operating model that has been rolled out across the entire footprint. Simultaneously, we have begun scaling our organic growth strategy, building on our position as the second largest player in the US auto glass servicing category. We ended the quarter with over 200 locations and approximately 800 mobile units in the United States. In addition to strong expected unit growth of almost 100 net new stores in fiscal 2023, store volumes continue to increase As we see the early benefits from integration under the auto glass now brand, including calibration attachment rates and expanding commercial relationships. The benefits of scale from further growth and the increase in commercial business as we mature our footprint over the next year will provide a tailwind to the already compelling economics. We couldn't be more excited about the long-term potential of our US glass business as we leverage the network benefits of the broader Driven Brands platform. The power of bringing these businesses together on the Driven platform is compelling. The diversification and breadth of our offering provide a natural balance and additional resilience to our business. This diversification is complemented by significant network benefits that include driving more value for and sales from our commercial customers, which already comprise approximately half of our system sales. Delivering revenue growth and cost savings from the benefits of scale and expertise in procurement, which we believe will be further enhanced by our driven advantage marketplace, which has great long-term potential. Our driven advantage test has performed ahead of our expectations, and we're expanding that test across our full suite of businesses. Leveraging our development and M&A capabilities to deliver best in category store growth in our key growth categories. And unlocking the power of our data ecosystem with over 32 million unique customers that is generated from all our brands to help grow same store sales and our share of wallet benefits. We're only beginning to scratch the surface of the long-term opportunity to drive customer acquisition, retention, and share of wallet across our platform which is a focus for us in 2023. The unmatched scale and sophistication of our shared service capabilities generate these significant network benefits that deepen our competitive moat and differentiate our business. These network benefits continue to compound as we grow our diversified platform, driving further unit growth, same-store sales growth, and incremental profits. Now we're pleased with the strong start to 2023 and the continued momentum into early Q2. We are growing, taking share and generating cash, which we are reinvesting into the flywheel of growth. Our scale gives us a competitive and compounding advantage. We have a proven playbook and multi-year visibility into unit growth. Our momentum combined with the strength of our business model and playbook for growth gives us further confidence in our ability to deliver on our short, medium, and long-term goals. With that, let me turn it over to Tiffany for a deeper dive into the first quarter financial results.