Driven Brands Holdings Inc.

This call is being recorded on Tuesday, August 5th, 2025. I would now like to turn the call over to Joel Arnao. Please go ahead.

Good morning and welcome to Driven Brands second quarter 2025 earnings conference call. The earnings release and the net leverage ratio reconciliation are available for download on our website at .drivenbrands.com. On the call today with me are Danny Rivera, President and Chief Executive Officer, and Mike Diamond, Executive Vice President and Chief Financial Officer. In a moment, Danny and Mike 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 the reconciliations 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 results in events contemplated by these forward-looking statements. Please find the earnings release and our filings with the Securities and Exchange Commission for more information. Today's prepared remarks will be followed by a -and-answer session. We ask you to limit yourself to one question and one follow-up. Now I'll turn it over to my partner, Danny.

Good morning. Thank you for joining us today to discuss Driven Brands' second quarter 2025 financial results. I want to begin by thanking the more than 7,500 Driven Brands team members and franchise partners whose hard work and execution continue to drive results in a dynamic macro environment. One of my first actions as CEO was to hit the road on a listening tour, visiting many of our offices and shops across the country to hear directly from our team. I wanted to solidify what's working, where we can improve, and how we shape the next chapter of Driven Brands together. That effort continued with our annual Talent Week, where Driven senior leaders came together to review key roles, invest in leadership development, and hold open conversations about Driven, our talent, and our future. What came through loud and clear in every location and every conversation is that we have an incredible team. I left both the tour and Talent Week more energized than ever about our future. We have the right people, the right model, and the right momentum to win. Shifting gears to our second quarter results. Driven Brands grew revenue by 6% and delivered adjusted EBITDA of $143 million. Systemwide sales increased 3%, supported by 184 net new stores over the last 12 months and 52 additions this quarter alone. Same store sales rose 1.7%, marking our 18th consecutive quarter of positive same store sales. We remain focused on our key priorities, delivering consistent growth fueled by Take 5, generating strong free cash flow from our franchise brands, and executing on our deleveraging plan to create long-term shareholder value. Take 5 oil change once again led the way with industry-leading growth, inclusive of 10% EBITDA growth year over year, 169 net new stores over the past 12 months and 41 for the quarter, and same store sales of 7%, marking our 20th consecutive quarter of same store sales growth. Take 5 is the home of the -your-car 10-minute oil change. Our unique operating model, paired with the passion and consistency of our team members franchisees, continues to deliver net promoter scores in the high 70s, resulting in strong customer loyalty. As we continue to open over 150 new locations annually, many in new markets, brand awareness and customer trial continues to grow, and those first-time visitors become repeat customers. We're also seeing meaningful contribution from our non-oil change revenue, which accounted for more than 20% of Take 5 sales for the quarter, driven by continued strong attachment rates. As part of our strategy to grow non-oil change revenue and expand our service offerings, we began piloting differential service, the replacement of a vehicle's differential fluid last year. Today, that service is fully rolled out across all company-owned locations and roughly half of our franchise locations, with full rollout expected by the end of Q3. This brings our total number of non-oil services to six, all designed to fit seamlessly within our fast, friendly, simple -your-car model. Importantly, our attachment rates and net promoter scores remain strong, underscoring the trust customers place in us to deliver more in every visit. As we continue to execute, we're unlocking greater value for our customers and greater productivity from every lane. Our franchise and international car wash segments, home to iconic brands like Minike, Mako, and Carstar, continue to be high-margin, strong free cash flow generators, allowing us to reinvest in the growth engine that is Take 5. Our franchise segment generated $45 million in adjusted EBITDA for the quarter, with adjusted EBITDA margins of 61%. We continue to see -over-year softness in both our collision business and Mako. In collision, the broader industry remains under pressure, but we're encouraged by Driven's continued market share gains. Mako showed sequential improvement this quarter, though it remains down versus prior year, due primarily to a pullback in discretionary spending among lower-income consumers. While we're pleased with our market share gains in collision and Mako's -over-quarter progress, we anticipate ongoing softness in both for the remainder of the year. Meanwhile, IMO, our international car wash business, continues to deliver strong top and bottom-line performance, with same-source sales for the quarter of 19%, adjusted EBITDA of $27 million, and adjusted EBITDA margins of 37%. Similar to our comments in Q1, we are thrilled with the performance of our car wash segment, but expect the performance to moderate in the back half of the year. We remain committed and laser-focused on reducing leverage to three times by the end of 2026. Importantly, we recently monetized a seller note from our U.S. car wash transaction for $113 million. While Mike will provide the details shortly, this move allowed us to fully retire our term loan and pay down our revolver, reducing net leverage to 3.9 times on a pro forma basis. We first outlined our deleveraging goal at our investor day in late 2023, and since the end of that year, we've paid down just under $700 million of debt, reducing net leverage from five times to 3.9 times. I'm pleased with the steady progress we're making and remain fully committed to reaching three times by the end of 2026. While the tariff environment remains fluid, we've seen no material change to our tariff posture since our Q1 update. Driven remains well-positioned, and we continue to believe that our diversified sourcing strategy power, supported by the nondiscretionary, low-frequency nature of our services, will enable us to manage any foreseeable risk. I'd summarize my remarks today as follows. First, we delivered a strong second quarter across same-store sales, revenue, adjusted EBITDA, and adjusted EPS. Second, Take 5 continues to deliver industry-leading growth. Third, our franchise and car wash segments remain reliable sources of strong free cash flow. And finally, we remain on track and committed to reducing leverage to three times by the end of 2026. I want to sincerely thank our thousands of employees and franchise partners for their continued dedication and hard work. Despite a dynamic environment, I remain confident in our team and ability to execute. With that, I'll turn it over to my partner and Driven CFO, Mike.