Earnings Call: Driven Brands Reports Steady Growth Amid Challenges

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Earnings Call: Driven Brands Reports Steady Growth Amid Challenges

Driven Brands Inc. (NASDAQ: DRVN), the parent company of automotive service brands, reported a slight increase in revenue for the third quarter of 2024 despite facing operational challenges due to severe weather conditions. The company's quarterly revenue rose by 2% year-over-year to $592 million, while adjusted EBITDA reached $138.8 million.

Diluted adjusted earnings per share (EPS) were reported at $0.26. The quarter also marked Driven Brands' 15th consecutive period of positive same-store sales growth, supported by the addition of 56 new stores and a 1.1% increase in same-store sales. The Take 5 Oil Change segment continued its strong performance, achieving positive same-store sales growth for the 17th consecutive quarter.

Key Points:

  • Driven Brands reported Q3 revenue of $592 million, reflecting a 2% increase year-on-year.
  • Adjusted EBITDA for the quarter was $138.8 million, with diluted adjusted EPS of $0.26.
  • The company experienced positive same-store sales growth for the 15th consecutive period.
  • The Take 5 Oil Change segment showcased strong performance with a 15% year-on-year revenue increase.
  • Driven Brands plans to open approximately 170 new units in 2024, primarily through franchising.
  • The company sold its Canadian distribution business, contributing to debt reduction efforts.
  • Driven Brands aims to reduce its leverage ratio below three times by the end of 2026.

Company Outlook: Driven Brands expects full-year revenue for 2024 to be between $2.33 billion and $2.43 billion. Adjusted EBITDA for the full year is anticipated to range from $529 million to $559 million. The company maintains its net store growth target of between 205 and 220 stores for the year.

Declining Factors:

  • Operations were challenged by four hurricanes, affecting over 500 locations and potentially leading to a $10 million sales loss in Q3.
  • The Car Wash segment faced weather-related challenges despite continued growth.
  • A slight decline was reported in franchise average unit volumes.

Rising Factors:

  • The Take 5 Oil Change segment showed significant growth in same-store sales and revenue.
  • The successful sale of the Canadian distribution business to PH Vitres aided in debt reduction.
  • More than 50% of system sales come from B2B commercial partnerships.
  • The company's membership programs exceeded one million members, contributing to revenue growth.

Missed Targets: Despite overall growth, the company missed estimates due to operational challenges caused by hurricanes.

Q&A Highlights: No additional questions were raised by participants during the call, indicating that the company's performance and strategy were clearly communicated.

Driven Brands continues to focus on optimizing its portfolio to realize financial performance, managing debt effectively, and supporting long-term growth. The company's strategic initiatives, including recent divestitures and continuous expansion of its franchise model, demonstrate its commitment to sustainable growth and operational efficiency. Despite disruptions from natural disasters, Driven Brands' diversified business model and robust franchise network position it well for future success.

InvestingPro Forecasts: Driven Brands Inc. (NASDAQ: DRVN) continues to demonstrate resilience in a challenging market environment. According to InvestingPro data, the company's market capitalization stands at $2.42 billion, reflecting its significant presence in the automotive services sector.

One of the most notable InvestingPro metrics is Driven Brands’ adjusted price-to-earnings (P/E) ratio of 11.16 as of Q3 2024. This relatively low P/E ratio suggests that the company's earnings may appear more attractive when certain adjustments are taken into account, especially compared to a raw P/E ratio of 595.93.

The company's trailing twelve-month revenue as of Q3 2024 was $2.33 billion, closely aligned with the full-year revenue guidance mentioned in the article, which ranges from $2.33 billion to $2.43 billion. This consistency in performance is further highlighted by the company’s gross profit margin of 42.25% during the same period, indicating strong pricing power and operational efficiency.

An InvestingPro tip highlights that Driven Brands’ earnings per share have shown year-over-year growth, consistent with the reported positive same-store sales growth for 15 consecutive periods. This growth trend in earnings reinforces the company’s positive outlook on its operational performance.

Another relevant InvestingPro tip points out that analysts have recently revised their earnings expectations for Driven Brands upward. This positive outlook aligns with the company's strategic initiatives aimed at supporting long-term growth, such as the expansion of its franchise model and the successful divestiture of the Canadian distribution business.

For investors seeking more comprehensive analysis, InvestingPro offers additional tips and forecasts. In fact, there are 12 more InvestingPro tips available for Driven Brands, providing a deeper understanding of the company’s financial health and market position.