Driven Brands Holdings Inc. (NASDAQ:DRVN) is the largest automotive services company in North America, providing a diverse range of consumer and commercial automotive services, including paint, collision, glass, vehicle repair, oil changes, and car washes. With a growing and highly-franchised base of over 5,000 locations across 49 U.S. states and 13 other countries, Driven Brands has established itself as a dominant player in the industry.
Company History and Growth
The company's origins can be traced back to 1972, when the first Meineke Car Care Center was opened in Charlotte, North Carolina. Over the decades, Driven Brands has undergone a remarkable transformation, expanding its portfolio of iconic brands and cementing its position as a leader in the automotive aftermarket space. The company has grown both organically and through strategic acquisitions, building a portfolio of highly recognized automotive service brands, including Meineke Car Care Centers, MAACO, CARSTAR, and 1-800-Radiator & A/C.
In 2016, the company made a strategic acquisition that would prove to be a game-changer – the purchase of Take 5 Oil Change. At the time of the acquisition, Take 5 had less than 60 company-owned locations and less than $10 million in EBITDA. This acquisition has since become the crown jewel of Driven Brands' operations, driving significant growth and profitability. As of the end of fiscal year 2024, Take 5 Oil Change boasted 1,181 locations, 40% of which were franchised, and generated approximately $1.4 billion in system sales and $355 million in adjusted EBITDA.
Financials
Driven Brands' financial performance has been impressive, showcasing steady growth across various metrics. In fiscal year 2024, the company reported revenue of $2.3 billion, an increase of 2% compared to the prior year. Adjusted EBITDA grew by 7% to $553 million, driven by 191 net new stores and 1.3% same-store sales growth. However, the company reported a net loss of $292.5 million for the fiscal year 2024.
For the fourth quarter of 2024, Driven Brands reported revenue of $564.1 million, a 1.9% increase year-over-year. The quarter saw a net loss of $311.97 million, primarily driven by $317.9 million in asset impairments, mostly related to the U.S. car wash segment. Operating cash flow for Q4 2024 was $32.94 million, while free cash flow was negative at -$36.26 million.
The company's diverse portfolio of brands has provided a stable and predictable revenue stream, with franchise businesses accounting for approximately two-thirds of Driven Brands' system sales. More than 50% of these sales come from long-standing commercial partners. These franchise brands, which are the largest in their respective categories, offer compelling asset-light margins and steady cash flow, allowing the company to fund growth and investment in its industry-leading Take 5 Oil Change brand.
Segment Performance
Driven Brands operates through four main segments: Maintenance, Car Wash, Paint, Collision & Glass, and Platform Services.
The Maintenance segment, which includes Take 5 Oil Change and Meineke Car Care Centers, is the largest business unit, accounting for over 50% of total net revenue. For the three months ended June 29, 2024, this segment generated $277.92 million in net revenue, up 15% compared to the prior year period. Segment Adjusted EBITDA increased 21% to $102.94 million, driven by same-store sales growth of 4.3% and the addition of 159 net new stores over the prior 12 months.
The Car Wash segment, which includes Take 5 Car Wash and other regional car wash brands, generated $156.90 million in net revenue for the same period, a 5% decrease compared to the prior year. Segment Adjusted EBITDA declined 15% to $33.77 million, primarily due to softening demand, increased competition, and negative weather patterns impacting the retail customer base.
The Paint, Collision & Glass segment, comprising MAACO, CARSTAR, and Auto Glass Now brands, reported $112.03 million in net revenue, a 16% decrease compared to the prior year period. Segment Adjusted EBITDA declined 14% to $35.17 million, driven by a 22% decrease in company-operated store sales, partially offset by a 1.5% increase in franchised system-wide sales.
The Platform Services segment, which provides support services to other business units, generated $61.24 million in net revenue, a 7% increase compared to the prior year period. Segment Adjusted EBITDA increased 12% to $25.31 million, driven by growth in system-wide sales across the company's various brands and improved cost management.
Strategic Initiatives
In addition to its core business, Driven Brands has been actively managing its portfolio, including the recent announcement of a definitive agreement to sell its U.S. car wash business for $385 million. This strategic move will enable the company to reduce debt and enhance its focus on its growing Take 5 Oil Change brand and its stable, cash-generating franchise businesses. The decision to divest the U.S. car wash segment came after a strategic review conducted in 2023, allowing the company to focus on its core automotive service offerings.
Future Outlook
Looking ahead, Driven Brands has provided its fiscal year 2025 outlook, excluding the impact of the U.S. car wash divestiture. The company expects revenue to be between $2.05 billion and $2.15 billion, with adjusted EBITDA ranging from $520 million to $550 million. Same-store sales are projected to grow between 1% and 3%, while the company plans to open between 175 and 200 net new stores, with the majority coming from the Take 5 Oil Change brand.
Additionally, Driven Brands has provided guidance on other financial metrics for 2025. The company expects adjusted diluted EPS of $1.15 to $1.25 per share, net capital expenditures between 6.5% to 7.5% of revenue, interest expense of $125 million to $130 million, and an effective annual tax rate of 26% to 27%. Driven Brands remains committed to achieving its net leverage target of 3x by the end of 2026, using free cash flow primarily for debt paydown.
Leadership Transition
The company's strong performance and strategic initiatives have not gone unnoticed. In February 2025, Driven Brands announced a leadership transition, with Chief Operating Officer Daniel Rivera set to become the new President and Chief Executive Officer, effective May 9, 2025. This transition is the result of a well-executed succession planning process and underscores the company's commitment to continuity and long-term growth.
Challenges and Opportunities
Despite the challenges posed by the ongoing macroeconomic environment, including inflationary pressures and changing consumer spending patterns, Driven Brands remains confident in its ability to navigate the dynamic landscape. The company's focus on delivering its 2025 outlook, reducing debt, and actively managing its portfolio positions it well for continued success in the years to come.
Liquidity
As of Q4 2024, Driven Brands reported a cash position of $170.0 million. The company has access to $478.7 million on variable funding securitization senior notes and a revolving credit facility. The current ratio stands at 1.52, while the quick ratio is 1.36, indicating a relatively healthy short-term liquidity position. However, the debt-to-equity ratio of 6.58 suggests a higher level of leverage, which the company aims to address through its debt reduction initiatives.
Conclusion
In conclusion, Driven Brands Holdings Inc. (NASDAQ:DRVN) is a compelling investment opportunity in the automotive services industry. With its diversified brand portfolio, strong growth in its flagship Take 5 Oil Change brand, and a prudent approach to managing its business, the company is well-equipped to capitalize on the long-term opportunities in the sector. As Driven Brands embarks on a new chapter under the leadership of Daniel Rivera, investors can expect the company to continue its trajectory of sustainable growth and value creation, while also focusing on improving its financial metrics and reducing leverage.