Driven Brands Holdings Inc.

Good morning, ladies and gentlemen, and welcome to the Lucara Diamond Corp. Year end 2024 results webcast conference call. At this time, all lines are in listen-only mode. Following the presentation, there will be a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, February 25th, 2025. I would now like to turn the conference over to Joel Arnaio, SVP of Finance and Investor Relations. Please go ahead.

Good morning and welcome to Driven Brands' fourth quarter and fiscal year 2020 for earnings conference call. The earnings release and the net leverage ratio reconciliation are available for download on our website at investors.drivenbrands.com. On the call today with me are Jonathan Fitzpatrick, President and Chief Executive Officer, Danny Rivera, Executive Vice President and Chief Operating Officer, and Mike Diamond, Executive Vice President and Chief Financial Officer. In a moment, Jonathan, Danny, and Mike will walk you through our financial and operating performance for the quarter and full year. Before we begin our remarks, I'd like to remind you that 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 in its filings with the Securities and Exchange Commission. During the course of this call, we may also make forward-looking statements in regards to our current plans, beliefs, and expectations. These statements are not guarantees of 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 ask you to limit yourself to one question and one follow-up. Now I will turn it over to my partner, Jonathan.

Good morning. Thank you for joining us today to discuss Driven Brands' fourth quarter and full year 2024 financial results. First, I want to acknowledge the hard work and great execution by the more than 10,000 Driven Brands team members and their amazing franchisees for how they continue to navigate an extremely dynamic macroeconomic environment. Secondly, I'm proud of our collective efforts for 2024, This was not an easy macro environment, and we delivered very solid results. Now, our focus for 2025 is on three key priorities. Number one, delivering our 2025 outlook. Number two, utilizing excess free cash flow to reduce debt. And number three, active portfolio management. And I will begin with a review of our fourth quarter and fiscal year 2024 highlights, corporate initiatives, and then turn it over to Danny who will discuss some of our operating segments, and then Mike, who will detail our fourth quarter financial results and full year outlook for 2025. For Q4 2024, we delivered revenue of $564 million, up 2% versus the prior year, supported by 70 net new stores and 2.9% same-store sales growth. Our 16th consecutive quarter of positive same-store sales growth and adjusted EBITDA of 130.7 million, generating diluted adjusted EPS of 30 cents. For fiscal year 2024, we delivered revenue of 2.3 billion and adjusted EBITDA of 553 million, up 2% and 7% respectively versus the prior year. These results were driven by 191 net new stores and 1.3% same-store sales growth, generating diluted adjusted EPS of $1.14. We continue to be pleased by the performance of our Take 5 oil change and franchise businesses, all being key contributors to a very solid 2024. As discussed on prior earnings calls, we anticipate that the ongoing inflationary environment will likely continue to pressure consumer spending for 2025, with lower income households being the most impacted. Now we expect this pressure to be somewhat mitigated by the strength in our commercial and needs-based businesses, leading us to remain confident in our ability to navigate this dynamic environment. Mike will provide more details on our 2025 outlook shortly. Now I'd like to spend a few minutes on some key corporate initiatives. Following a very robust sale process, we have entered into a definitive agreement to sell our U.S. car wash business. This will likely be a Q2 closing, and Mike will give more details on the impact of this announcement. To better reflect how we view the business, we will adopt a more simplified segment structure for reporting starting in Q1 of 2025. Firstly, our flagship growth driver, Take 5 Oil Change, will now be a standalone segment. This change should enable investors and analysts to more easily understand the performance of Take-5 All Change and the KPIs underpinning this double-digit growth business. Secondly, we are consolidating our stable, predictable, high-margin, cash-generating franchise businesses into one segment. This includes our portfolio of needs-based franchise brands such as Meineke, Mako, Carstar, 1-800, all scaled players in their respective categories. This is the core of Driven's business model, growth from take five and cash from our franchise segment. We will continue to report international car wash as a standalone segment. Finally, we are moving our early stage glass businesses, which operate in the retail, commercial, and insurance spaces under the Auto Glass Now banner into our corporate and other segment. We will continue to manage these smaller lines of business until they reach the scale to become a standalone segment. While we remain very confident in the long-term opportunity for this business, we recognize it will take time to deliver growth. Now, the team is continuing to make good progress on divesting our U.S. car wash pipeline properties. As a reminder, through Q3 2024, we had sold approximately 160 million of assets. We sold an additional $48 million in Q4, which puts the fiscal year 2024 total at approximately $208 million. We are now more than 75% through this process and are confident we will complete this initiative in 2025. As I have previously mentioned, reducing our overall leverage remains one of our primary objectives. Our goal was to finish the year at 4.5 times net debt to adjusted EBITDA or below, which we achieved in Q3 and further improved to 4.4 times in Q4. For the full year 2024, Mike and his team successfully paid down approximately $248 million of debt. Mike will walk you through the details and our focus now shifts to achieving our target of less than three times leverage by year end 2026 or sooner. Now let me spend a few minutes on some key drivers of our results. Let's start with our biggest and fastest growing business, Take 5 Oil Change, the largest piece of our current maintenance segment. Q4 2024 marks the 18th consecutive quarter of positive same store sales growth for Take 5 Oil Change. And I'm very pleased with the 9.2% same store sales growth in Q4 which resulted in 6.8% same-store sales growth for fiscal year 2024. In Q4, we opened 61 new stores, resulting in 174 net new stores for fiscal year 2024. Finally, compared to fiscal year 2023, revenue grew by 16% and EBITDA grew by 21%. As a reminder, Driven acquired Take 5 Oil Change in 2016 with less than 60 company-owned locations and less than $10 million of EBITDA. At the end of 2024, we had 1,181 locations, 40% of which were franchised, approximately $1.4 billion in system sales, and approximately $355 million in adjusted EBITDA. all of this in less than 10 years. Take-five oil change is our number one priority, and we are hyper-focused on continuing to drive unit growth, franchise mix, same-store sales, revenue, and profits over the next five years. Over a two-year period, our franchise store count has almost doubled, and we anticipate franchisees to account for approximately 50% of total take-five locations over time. Our unit economics continue to attract new franchisees and drive our existing franchisees to sign incremental development agreements. Today we have a very robust pipeline of approximately 1,000 sites in place, one that we built organically over the past five years and will continue to build. We have direct real estate visibility into more than one-third of this pipeline, which provides us with clear line of sight into the next five years of unit growth and achieving our target of at least 2,000 locations. Take-5 oil change performance and growth rates over the past three years are as good or better than any national scaled oil change business. We will continue to prioritize growth for this brand as its competitive positioning and long runway for growth will help drive significant value for driven long-term. And over time, we remain optimistic that analysts and investors will come to appreciate the massive value that Take-5 Oil Change has and will continue to deliver. Our franchise businesses, which today are spread across our maintenance, PC&G, and platform services segments, represent approximately two-thirds of driven system sales, with more than 50% of those system sales coming from long-standing, sticky, predictable commercial partners. Our scaled franchise businesses are the largest in the industry, and AssetLite, providing driven with consistent, predictable growth, compelling AssetLite margins, and steady cash flow that allow us to fund growth and investment in our industry-leading Take5 oil change brand. This is the compelling one-two punch of growth and cash flow. In addition to this one-two punch, we have other levers that we expect to drive growth over time for Driven, such as Auto Glass Now and our e-commerce marketplace, Driven Advantage. Our focus in 2025 is clear, delivering on our outlook, reducing debt, and active portfolio management. We have a platform that generates high steady-state returns with a long runway for reinvestment and attractive returns. and we're incredibly motivated to see our valuation mirror our results over time. Before I hand it over to Danny, I wanted to let people know that after 13 years, I will be stepping down as CEO after our Q1 earnings call in May 2025. At that time, Danny will be taking over as CEO and will be joining the board as part of a very robust multi-year succession planning process. Danny has been my partner for 13 years, and I know he'll be a great CEO. I'd also like to acknowledge our terrific CFO, Mike Diamond, who has made such a measurable impact in the time he's been with Driven. Finally, I'm excited to be staying on the board as chair and look forward to continuing to support Danny in his well-deserved new role and the future growth of Driven. Now, let me hand it over to my partner, Danny, our Chief Operating Officer, to discuss our key business segments.