Driven Brands Holdings Inc.

Good day, everyone, and welcome to Driven Brand's fourth quarter 2025 earnings call. Please note that this call is being recorded. After the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during that time, please press star followed by one on your telephone keypad. Thank you. I'd now like to hand the call over to Steve Alexander. Please go ahead, sir.

Good morning. Welcome to Driven Brands' fourth quarter 2025 earnings conference call. The earnings release and net leverage ratio reconciliation are available for download on our website at investors.drivenbrands.com. On the call with me today 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 and full year. Before we begin our remarks, I would 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 this call, we may also make forward-looking statements regarding 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 and events contemplated by these forward-looking statements. Please see our earnings release and our filings with the Securities and Exchange Commissions for more information. 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. If you have additional questions, you may re-enter the queue after your initial questions are answered. Now with that, I'll hand the call over to Danny.

Good morning, and thank you for joining us to discuss Driven Brands' fourth quarter and full year 2025 results. Before discussing our results, I want to directly address our recent restatement. I'd also like to thank our shareholders for their patience as we completed this work with the rigor and accuracy it required. There are four questions I'd like to address directly. What happened? What were the root causes? why these issues were identified now, and what are we doing to help ensure this does not happen again. Beginning with what happened. During our 2025 year-end closing process, we identified three issues requiring further review related to lease accounting, auto glass now cash accounting, and expense mischaracterization with driven advantage, each related to prior periods. As we reviewed these matters further, we determined that there were material errors requiring the restatement of prior financial statements. We engaged our audit committee, external auditors, and outside advisors to conduct a comprehensive review of our previously issued financial statements. From the outset, we established two guiding principles. We would prioritize accuracy and completeness over speed, and we would take a broad and disciplined approach reviewing all relevant areas to reduce the risk of identifying additional issues in future periods. Consistent with that approach, our review identified additional items requiring adjustment. The result is a comprehensive restatement across multiple prior periods and financial statements designed to help establish a reliable financial foundation going forward. In a moment, Mike will walk through some of the specific adjustments in detail. At a high level, the impacts include revenue reductions of $12 million in 2023, $4 million in 2024, and $5 million in 2025, and a reduction in adjusted EBITDA of $57 million in 2023, $12 million in 2024, and $8 million in 2025. Turning to root causes. The majority of the issues trace back to 2023, 2022, and prior, a period of significant acquisition and integration activity for the company. During that time, we expanded into two new verticals, car wash and glass, and launched a new digital solution for our driven advantage marketplace. While the underlying issues are varied, they can be grouped into two primary drivers. First, The pace and complexity of growth outstripped the scale and maturity of certain back office people, processes, and controls. Second, as the business grew in scale and complexity, we recognized the need for a more integrated and scalable ERP environment, which led to the decision in 2023 to consolidate multiple ERPs to Oracle with the system going live in mid-2024. Turning to why this was identified now, the answer is straightforward. We have strengthened both our team and our systems. Mike joined the CFO in the third quarter of 2024 and strengthened the finance leadership team, including the appointment of a new chief accounting officer and other key roles. He also assumed direct oversight of the then in-progress Oracle implementation, helping operationalize the system and enhance the control environment. These improvements in both personnel and systems enabled us to identify issues that had previously not been accounted for properly. Lastly, what are we doing to help prevent this from happening again? First, as I've outlined, we have strengthened and will continue to invest in our finance leadership systems and processes. Second, Once a restatement became necessary, we deliberately broadened the scope of our review beyond the initially identified issues. Our objective was to address all relevant matters now, rather than risk identifying additional issues in future periods. Third, Driven Brands is a simpler, more focused company today. Since 2023, we have streamlined our portfolio, including the divestitures of US Car Wash, International Car Wash, and PH Vitra, and we have completed the integration of Auto Glass now. During that time, we have also not entered into any new verticals. As a result, Driven today is focused on core businesses that we know well and have operated for many years. This has been a challenging but important process, and it has increased our confidence in the team and systems we now have in place. We identified the issues, restated the financial statements, and are strengthening our controls. That foundation positions us well as we move forward. With an improved and still improving financial and control foundation in place, our focus now is on executing our strategy, delivering consistent performance, and maximizing long-term shareholder value. Now turning to our 2025 results. 2025 was a foundational year for Driven Brands. as we executed our growth in cash strategy. We simplified our portfolio by exiting non-core businesses and sharpening our focus on non-discretionary automotive services in North America. We also materially strengthened the balance sheet, paying down $545 million of debt and reducing net leverage to 3.7 times by year end. We continued to execute on this strategy in the first quarter of 2026. completing the sale of our international car wash business in January and using the proceeds to pay down more than $470 million of additional debt, bringing our pro forma net leverage to 3.3 times. Alongside these portfolio and balance sheet actions, we also executed with discipline across the business, delivering against our 2025 outlook. Collectively, These actions have positioned Driven Brands as a simpler, more predictable, and higher cash flow business. For the full year, revenue grew 6.3% to approximately $1.9 billion, and we generated adjusted EBITDA of $449 million. System-wide sales increased 2.7%, supported by 175 net new stores, while same-store sales increased 1%. Driven Brands today is a simpler, more focused company centered on non-discretionary automotive services in North America that generates scalable growth and sustainable cash flow. A historical view reinforces the strength of our model. Since 2021, Take5 has grown revenue by $627 million, added 634 locations, and grown EBITDA by 171%. while expanding margins from 27% to 34% by the end of 2025. Over the same period, our franchise segment delivered a sales CAGR of 5.3% and expanded margins by over 1,200 basis points, finishing 2025 with margins of 62.7%. Auto Glass now provides another lever for future growth. Since entering the automotive glass market in 2022, we have scaled the business to become the second largest operator in the industry. Over time, we see additional opportunities to expand through additional locations and increased market share across retail, commercial, and insurance. Together, these businesses create a model designed to deliver sustained growth, strong cash generation, and long-term value creation. Turning to Take 5 Oil Change, home of the stay-in-your-car, 10-minute oil change. In 2025, Take 5 achieved its 22nd consecutive quarter of same-store sales growth, while opening 161 net new stores. System-wide sales grew 17%, same-store sales grew 6%, and adjusted EBITDA increased 10%, with margins of 34%. Operational execution remained strong, with bay times consistently under 12 minutes, net promoter scores in the high 70s, premium mix up 300 basis points, and ancillary attachment rates up 380 basis points. Looking ahead, we remain highly confident in Take 5's long-term runway to more than 2,500 total locations, supported by a strong development pipeline of approximately 900 sites. We continue to see outstanding engagement from our franchise partners, with over 65% signing second or third area development agreements. This strong partnership gives us excellent visibility into unit growth in 2026 and beyond. Our franchise segment did exactly what it is designed to do, generate robust, reliable cash flow with EBITDA margins of 63% for the year. Auto Glass now also made solid progress in 2025. Revenue and EBITDA improved 9% and 105% year over year respectively. with EBITDA margins improving 470 basis points. While still in incubation, we are encouraged by the foundation that has been built and continue to see meaningful long-term potential at Autoglass now. Turning to 2026, our priorities remain consistent. Disciplined execution, continued growth from take five, strong cash generation from the franchise segment, and achieving our target of reducing net leverage to three times by year end. Mike will walk through the details, but at a high level, we expect revenue of approximately $1.95 to $2.05 billion, approximately $430 to $460 million in adjusted EBITDA. Importantly, that includes approximately $35 to $45 million of restatement-related non-recurring costs and excludes international car wash. same-store sales growth in the range of flat to 2%, and approximately 160 to 190 net new units. I'd like to close with a few key takeaways. 2025 was a foundational year for Driven Brands. We delivered on our business commitments, growth from Take 5, strong cash generation from our franchise businesses, portfolio simplification, and meaningful deleveraging. We also addressed prior period accounting issues through a comprehensive restatement, and we are implementing stronger financial controls, improved systems, and a more disciplined financial foundation. Looking ahead, our focus remains firmly on executing our growth and cash strategy. We expect another year of strong growth led by take five, and we'll deploy the cash we generate to achieve our targeted three times net leverage by year end 2026. I want to thank our 7,100 Driven Brands team members and our franchise partners for their commitment and execution throughout 2025. Their focus on delighting our customers every day is what drives our results. With that, I'll turn it over to my partner and Driven CFO, Mike.