8-K
Driven Brands Holdings Inc. (DRVN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________
FORM 8-K
_________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 28, 2021
Commission file number: 001-39898
_________________________________
Driven Brands Holdings Inc.
(Exact name of Registrant as specified in its charter)
_________________________________
| Delaware |
|---|
| (State or other jurisdiction of incorporation or organization) |
| 47-3595252 |
| --- |
| (I.R.S. Employer Identification No.) |
| 440 South Church Street, Suite 700 |
| --- |
| Charlotte, North Carolina |
| (Address of principal executive offices) |
| 28202 |
| --- |
| (Zip Code) |
Registrant’s telephone number, including area code: (704) 377-8855
_________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
|---|
| Common Stock, $0.01 par value |
| Trading Symbol |
| --- |
| DRVN |
| Name of each exchange on which registered |
| --- |
| The Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities ct of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 Results of Operations and Financial Condition.
On July 28, 2021, Driven Brands Holdings Inc. (the “Company”) issued a press release and related infographic, furnished as Exhibits 99.1 and 99.2, respectively, and incorporated herein by reference, announcing the Company’s financial results for the quarter ended June 26, 2021.
The information provided pursuant to Item 2.02, including the exhibits attached hereto, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description | Location |
|---|---|---|
| 99.1 | Press Release, datedJuly28, 2021 | Furnished herewith |
| 99.2 | Infographic | Furnished herewith |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: July 28, 2021
| DRIVEN BRANDS HOLDINGS INC. | |
|---|---|
| By: | /s/ Tiffany Mason |
| Name: | Tiffany Mason |
| Title: | Chief Financial Officer |
Document
Driven Brands Holdings Inc. Reports Second Quarter Results
Delivers Strong Same-Store Sales Growth and Adds 70 Net New Stores
Reports Robust Operating Income and Earnings per Share Growth
Raises Fiscal Year 2021 Guidance
Charlotte, N.C. (July 28, 2021) - Driven Brands Holdings Inc. (NASDAQ: DRVN) (“Driven Brands” or “the Company”) today reported financial results for the second quarter ended June 26, 2021.
For the second quarter, revenue was $374.8 million, an increase of 123% versus the prior year. System-wide sales hit a record $1.2 billion, an increase of 65% versus the prior year, with 34% net store growth and an increase in consolidated same-store sales of 38.7%. On a two-year basis, same-store sales increased 19.1%.
Earnings per share was $0.21 for the second quarter, an increase of 600% versus the prior year.
Adjusted earnings per share2 was $0.25, an increase of 79% versus the prior year.
“The power of Driven Brands is evident in our continued strong operating results,” said Jonathan Fitzpatrick, president and chief executive officer. “While this quarter laps the depths of COVID-19 in the prior year, our strong two-year trend indicates continued momentum in the fundamentals of our business.
“Initiatives we implemented last year, coupled with strong execution from employees and franchisees drove compounding same-store sales and store growth. We continued to capitalize on opportunities as consumers drove more in the second quarter,” Fitzpatrick added.
“Given our scale, the significant whitespace in this fragmented and needs-based industry, and our robust cash generation, our business model remains well-positioned to maximize long-term value for all of our stakeholders.”
Second Quarter Highlights
•Revenue increased 123% versus the prior year, driven primarily by the acquisition of International Car Wash Group (“ICWG”) in the third quarter of 2020 as well as organic growth across all segments from positive same-store sales growth and net store growth.
•Consolidated same-store sales increased 38.7% for the quarter and increased 19.1% on a two-year basis.
•Same-store sales increased across all segments on both a one- and two-year basis.
•The Company added 70 net new stores during the quarter.
•The Company recorded net income in the second quarter of $35.2 million, an increase of 1051% versus the prior year.
•Adjusted Net Income1 was $41.9 million, an increase of 233% versus the prior year.
•Adjusted EBITDA3 was $100.8 million, an increase of 152% versus the prior year.
Second Quarter 2021 Key Performance Indicators by Segment
| System-wide Sales (in millions) | Store Count | Same-Store Sales* | Revenue<br>(in millions) | Segment Adjusted EBITDA4<br><br>(in millions) | |||||
|---|---|---|---|---|---|---|---|---|---|
| Maintenance | $ | 321.2 | 1,485 | 41.9 | % | $ | 145.0 | $ | 44.6 |
| Car Wash | 122.1 | 979 | 35.2 | % | 123.9 | 43.1 | |||
| Paint, Collision & Glass | 597.6 | 1,655 | 37.3 | % | 50.6 | 21.9 | |||
| Platform Services | 117.5 | 200 | 37.2 | % | 44.8 | 17.6 | |||
| Corporate / Other | N/A | N/A | N/A | 10.5 | |||||
| Total | $ | 1,158.3 | 4,319 | 38.7 | % | $ | 374.8 |
*Car Wash will not be included in consolidated same-store sales until the one-year anniversary of the ICWG acquisition in the third quarter of 2021.
Capital and Liquidity
In May 2021, the Company closed on a new $300 million revolving credit facility. Borrowings under this facility, in conjunction with the variable funding note associated with the Company’s whole business securitization and cash on hand, will be utilized to fuel further growth and for general corporate purposes. From time-to-time, the Company expects to supplement liquidity with long-term borrowings under its whole business securitization structure.
The Company ended the second quarter with total liquidity of $468.2 million, which includes $147.4 million in cash, cash equivalents, and restricted cash, as well as $320.8 million of undrawn capacity on its revolving credit facilities.
Guidance
The Company has raised its guidance for fiscal year 2021 to account for the strong operating performance in the second quarter and an updated outlook for the remainder of the year. The following guidance reflects the Company’s current expectations for the fiscal year ending December 25, 2021:
•Revenue of approximately $1.4 billion
•Adjusted EBITDA3 of approximately $345 million
•Adjusted Earnings per Share2 of approximately $0.83
•Low double-digit same-store sales growth with positive same-store sales across all segments
•Net Store Growth:
◦Maintenance: 80 to 90 stores; driven by roughly equal parts franchise and company-operated store growth;
◦Car Wash: 20 to 30 stores; driven by company-operated store growth; and
◦Paint, Collision & Glass: 60 to 70 stores; driven by franchise store growth.
Conference Call
Driven Brands will host a conference call to discuss second quarter 2021 results today, Wednesday, July 28, 2021 at 9:00am ET. The call will be available by webcast and can be accessed by visiting Driven Brands’ Investor Relations website at investors.drivenbrands.com. A replay of the call will be available until October 26, 2021.
About Driven Brands
Driven Brands™, headquartered in Charlotte, NC, is the largest automotive services company in
North America, providing a range of consumer and commercial automotive needs, including
paint, collision, glass, vehicle repair, oil change, maintenance and car wash. Driven Brands is the
parent company of some of North America’s leading automotive service businesses including
Take 5 Oil Change®, Meineke Car Care Centers®, Maaco®, 1-800-Radiator & A/C®, and
CARSTAR®. Driven Brands has more than 4,300 locations across 15 countries, and services
over 50 million vehicles annually. Driven Brands’ network generates more than $1 billion in
revenue from more than $3 billion in system-wide sales.
Contacts
Shareholder/Analyst inquiries:
Rachel Webb
(704) 644-8125
Media inquiries:
Media
(704) 644-8129
Disclosure Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this press release, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, and expected market growth are forward-looking statements. In particular, forward-looking statements include, among other things, statements relating to: (i) our strategy, outlook and growth prospects; (ii) our operational and financial targets and dividend policy; (iii) general economic trends and trends in the industry and markets; and (iv) the competitive environment in which we operate. Forward-looking statements are not based on historical facts but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions, and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. It is not possible to predict or identify all such risks. These risks include, but are not limited to, the risk factors that are described under the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 26, 2020, and in our other filings with the Securities and Exchange Commission, which are available on its website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Forward-looking statements represent our estimates and assumptions only as of the date on which they are made, and we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Disclosure Regarding Non-GAAP Financial Measures
In addition to the financial measures presented in this release in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company has included certain non-GAAP financial measures in this release, including Adjusted Net Income1, Adjusted Earnings Per Share2, and Adjusted EBITDA3. Management believes these non-GAAP financial measures are useful because they enable management, investors, and others to assess the operating performance of the Company and its segments. Please refer to the Reconciliation of Non-GAAP Financial Information tables located in the financial supplement in this release.
This release includes forward-looking guidance for certain non-GAAP financial measures, including Adjusted Earnings Per Share2 and Adjusted EBITDA3. These measures will differ from net income, determined in accordance with GAAP, in ways similar to those described in the reconciliations at the end of this release. We do not provide guidance for net income, determined in accordance with GAAP, or a reconciliation of guidance for Adjusted EBITDA3 to the most directly comparable GAAP measure because the Company is not able to predict with reasonable certainty the amount or nature of all items that will be included in net income.
___________
1 “Adjusted Net Income” is calculated by eliminating from net income the adjustments described for Adjusted EBITDA, amortization related to acquired intangible assets and the tax effect of the adjustments. Please refer to Non-GAAP reconciliation tables located in the financial supplement in this release.
2 “Adjusted Earnings Per Share” represents Adjusted Net Income divided by weighted average shares (basic and diluted). Please refer to Non-GAAP reconciliation tables located in the financial supplement in this release.
3 “Adjusted EBITDA” represents earnings before interest expense, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, straight-line rent, equity compensation, loss on debt extinguishment and certain non-recurring, non-core, infrequent or unusual charges. Please refer to Non-GAAP reconciliation tables located in the financial supplement in this release.
4 “Segment Adjusted EBITDA” is defined as Adjusted EBITDA with a further adjustment for store opening costs. Corporate & Other costs are not allocated across segments. Segment Adjusted EBITDA is a supplemental measure of operating performance of our segments and may not be comparable to similar measures reported by other companies. Please refer to reconciliation to Adjusted EBITDA located in the financial supplement in this release.
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| Three months ended | Six months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| (in thousands, except per share amounts) | June 26,<br>2021 | June 27,<br>2020 | June 26,<br>2021 | June 27,<br>2020 | ||||
| Revenue: | ||||||||
| Franchise royalties and fees | $ | 37,873 | $ | 28,282 | $ | 68,287 | $ | 57,694 |
| Company-operated store sales | 206,198 | 87,660 | 390,053 | 182,551 | ||||
| Independently-operated store sales | 56,379 | — | 112,542 | — | ||||
| Advertising contributions | 19,648 | 12,619 | 36,903 | 27,502 | ||||
| Supply and other revenue | 54,730 | 39,262 | 96,462 | 80,183 | ||||
| Total revenue | 374,828 | 167,823 | 704,247 | 347,930 | ||||
| Operating expenses: | ||||||||
| Company-operated store expenses | 123,820 | 53,373 | 236,575 | 116,665 | ||||
| Independently-operated store expenses | 30,792 | — | 61,900 | — | ||||
| Advertising expenses | 19,648 | 12,619 | 36,903 | 27,502 | ||||
| Supply and other expenses | 29,598 | 21,295 | 52,087 | 44,354 | ||||
| Selling, general and administrative expenses | 77,935 | 45,456 | 146,984 | 96,521 | ||||
| Acquisition costs | 389 | 1,016 | 2,038 | 1,211 | ||||
| Store opening costs | 405 | 627 | 694 | 1,802 | ||||
| Depreciation and amortization | 26,423 | 8,636 | 50,275 | 16,435 | ||||
| Asset impairment charges | 2,178 | 3,499 | 3,431 | 6,411 | ||||
| Total operating expenses | 311,188 | 146,521 | 590,887 | 310,901 | ||||
| Operating income | 63,640 | 21,302 | 113,360 | 37,029 | ||||
| Other expenses, net: | ||||||||
| Interest expense, net | 16,612 | 17,863 | 34,702 | 35,379 | ||||
| (Gain) / loss on foreign currency transactions, net | (5,229) | (1,194) | 5,282 | 2,285 | ||||
| Loss on debt extinguishment | 78 | — | 45,576 | — | ||||
| Total other expenses, net | 11,461 | 16,669 | 85,560 | 37,664 | ||||
| Net income (loss) before taxes | 52,179 | 4,633 | 27,800 | (635) | ||||
| Income tax expense | 17,011 | 1,542 | 12,565 | 221 | ||||
| Net income (loss) | $ | 35,168 | $ | 3,091 | $ | 15,235 | $ | (856) |
| Net income (loss) attributable to non-controlling interests | $ | (36) | $ | 33 | $ | (30) | $ | (66) |
| Net income (loss) attributable to Driven Brands Holdings Inc. | $ | 35,204 | $ | 3,058 | $ | 15,265 | $ | (790) |
| Earnings (loss) per share(1): | ||||||||
| Basic | $ | 0.21 | $ | 0.03 | $ | 0.09 | $ | (0.01) |
| Diluted | $ | 0.21 | $ | 0.03 | $ | 0.09 | $ | (0.01) |
| Weighted average shares outstanding(1): | ||||||||
| Basic | 162,626 | 88,990 | 158,727 | 88,990 | ||||
| Diluted | 166,512 | 88,990 | 162,271 | 88,990 |
(1) Share and per share amounts for the three and six months ended June 27, 2020 have been adjusted to reflect an implied 88,990-for-one stock split that became effective on January 14, 2021.
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| (in thousands) | June 26, 2021 | December 26, 2020 | ||
|---|---|---|---|---|
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 147,257 | $ | 172,611 |
| Restricted cash | 159 | 15,827 | ||
| Accounts and notes receivable, net | 106,846 | 84,805 | ||
| Inventory | 41,899 | 43,039 | ||
| Prepaid and other assets | 43,990 | 25,070 | ||
| Income tax receivable | 1,038 | 3,055 | ||
| Advertising fund assets, restricted | 40,084 | 29,276 | ||
| Assets held for sale | 990 | — | ||
| Total current assets | 382,263 | 373,683 | ||
| Notes receivable, net | 3,594 | 3,828 | ||
| Property and equipment, net | 922,370 | 827,392 | ||
| Operating lease right-of-use assets | 906,066 | 884,927 | ||
| Deferred commissions | 9,508 | 8,661 | ||
| Intangibles, net | 827,357 | 829,308 | ||
| Goodwill | 1,768,244 | 1,727,351 | ||
| Total assets | $ | 4,819,402 | $ | 4,655,150 |
| Liabilities and shareholders' equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 79,238 | $ | 67,802 |
| Accrued expenses and other liabilities | 198,939 | 190,867 | ||
| Income taxes payable | 3,644 | 3,513 | ||
| Current portion of long-term debt | 17,793 | 22,988 | ||
| Advertising fund liabilities | 32,047 | 20,276 | ||
| Total current liabilities | 331,661 | 305,446 | ||
| Long-term debt, net | 1,503,957 | 2,102,219 | ||
| Deferred tax liability | 253,507 | 249,043 | ||
| Operating lease liabilities | 844,809 | 818,001 | ||
| Income tax receivable liability | 155,970 | — | ||
| Deferred revenue | 23,837 | 20,757 | ||
| Accrued expenses and other long-term liabilities | 33,719 | 53,324 | ||
| Total liabilities | 3,147,460 | 3,548,790 | ||
| Common stock | 1,674 | 565 | ||
| Additional paid-in capital | 1,603,095 | 1,055,172 | ||
| Retained earnings | 47,240 | 31,975 | ||
| Accumulated other comprehensive income | 18,854 | 16,528 | ||
| Total shareholders' equity attributable to Driven Brands Holdings Inc. | 1,670,863 | 1,104,240 | ||
| Non-controlling interests | 1,079 | 2,120 | ||
| Total shareholders' equity | 1,671,942 | 1,106,360 | ||
| Total liabilities and shareholders' equity | $ | 4,819,402 | $ | 4,655,150 |
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Six months ended | ||||
|---|---|---|---|---|
| (in thousands) | June 26,<br>2021 | June 27,<br>2020 | ||
| Net income | $ | 15,235 | $ | (856) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||
| Depreciation and amortization | 50,275 | 16,435 | ||
| Noncash lease cost | 37,990 | 17,412 | ||
| Gain on foreign denominated transactions | 5,707 | 2,285 | ||
| Bad debt expense | 1,739 | 4,351 | ||
| Asset impairment costs | 3,431 | 6,411 | ||
| Amortization of deferred financing costs and bond discounts | 3,619 | 2,573 | ||
| Loss on derivatives not designed as hedges | (425) | — | ||
| Benefit (provision) for deferred income taxes | 4,742 | (1,471) | ||
| Loss on extinguishment of debt | 45,576 | — | ||
| Other, net | 1,375 | 1,342 | ||
| Changes in assets and liabilities: | ||||
| Accounts and notes receivable, net | (24,174) | (26,134) | ||
| Inventory | (396) | (577) | ||
| Prepaid and other assets | (20,885) | (9,643) | ||
| Advertising fund assets and liabilities, restricted | 12,548 | 4,165 | ||
| Deferred commissions | (809) | (1,614) | ||
| Deferred revenue | 2,994 | (2,780) | ||
| Accounts payable | 3,860 | 11,686 | ||
| Accrued expenses and other liabilities | 9,707 | 301 | ||
| Income tax receivable | 3,665 | 4,051 | ||
| Operating lease liabilities | (31,034) | (14,427) | ||
| Cash provided by operating activities | 124,740 | 13,510 | ||
| Cash flows from investing activities: | ||||
| Capital expenditures | (47,274) | (24,708) | ||
| Cash used in business acquisitions, net of cash acquired | (204,556) | (28,490) | ||
| Proceeds from sale-leaseback transactions | 49,166 | — | ||
| Proceeds from sale of company-operated stores | 5,775 | — | ||
| Cash used in investing activities | (196,889) | (53,198) | ||
| Cash flows from financing activities: | ||||
| --- | --- | --- | --- | --- |
| Payment of contingent consideration related to acquisitions | — | (1,783) | ||
| Payment of debt extinguishment and issuance costs | (2,408) | (2,421) | ||
| Repayment of long-term debt | (712,649) | (12,809) | ||
| Repayments of revolving lines of credit and short-term debt | (152,800) | — | ||
| Proceeds from revolving lines of credit and short-term debt | 213,800 | 79,501 | ||
| Repayment of principal portion of finance lease liability | (1,127) | (282) | ||
| Proceeds from initial public offering, net of underwriting discounts | 661,500 | — | ||
| Net proceeds from underwriters' exercise of over-allotment option | 99,225 | — | ||
| Repurchases of common stock | (43,040) | — | ||
| Payment for termination of interest rate swaps | (21,826) | — | ||
| Other, net | 152 | — | ||
| Cash provided by financing activities | 40,827 | 62,206 | ||
| Effect of exchange rate changes on cash | 1,374 | (337) | ||
| Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted | (29,948) | 22,181 | ||
| Cash and cash equivalents, beginning of period | 172,611 | 34,935 | ||
| Cash included in advertising fund assets, restricted, beginning of period | 19,369 | 23,091 | ||
| Restricted cash, beginning of period | 15,827 | — | ||
| Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period | 207,807 | 58,026 | ||
| Cash and cash equivalents, end of period | 147,257 | 67,617 | ||
| Cash included in advertising fund assets, restricted, end of period | 30,882 | 12,590 | ||
| Restricted cash, end of period | 159 | — | ||
| Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period | $ | 178,298 | $ | 80,207 |
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)
| Adjusted Net Income/Adjusted Earnings Per Share | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three months ended | Six months ended | |||||||
| (in thousands, except per share amounts) | June 26,<br>2021 | June 27,<br>2020 | June 26,<br>2021 | June 27,<br>2020 | ||||
| Net income (loss) | $ | 35,168 | $ | 3,091 | $ | 15,235 | $ | (856) |
| Acquisition related costs(a) | 389 | 1,016 | 2,038 | 1,211 | ||||
| Non-core items and project costs, net(b) | 2,522 | 509 | 2,553 | 1,764 | ||||
| Sponsor management fees(c) | — | 539 | — | 1,079 | ||||
| Straight-line rent adjustment(d) | 3,358 | 1,787 | 5,843 | 2,639 | ||||
| Equity-based compensation expense(e) | 1,028 | 791 | 2,011 | 690 | ||||
| Foreign currency transaction (gain) / loss, net(f) | (5,229) | (1,194) | 5,282 | 2,285 | ||||
| Bad debt expense(g) | — | 2,842 | — | 2,842 | ||||
| Asset impairment and closed store expenses(h) | 3,478 | 2,560 | 2,692 | 6,880 | ||||
| Loss on debt extinguishment(i) | 78 | — | 45,576 | — | ||||
| Amortization related to acquired intangible assets(j) | 5,558 | 3,685 | 9,210 | 7,650 | ||||
| Adjusted net income before tax impact of adjustments | 46,350 | 15,626 | 90,440 | 26,184 | ||||
| Tax impact of adjustments(k) | (4,441) | (2,995) | (18,082) | (6,622) | ||||
| Adjusted net income | 41,909 | 12,631 | 72,358 | 19,562 | ||||
| Net (loss) / income attributable to non-controlling interest | (36) | 33 | (30) | (66) | ||||
| Adjusted net income attributable to Driven Brands Holdings Inc. | $ | 41,945 | $ | 12,598 | $ | 72,388 | $ | 19,628 |
| Adjusted earnings per share(1) | ||||||||
| Basic(2) | $ | 0.25 | $ | 0.14 | $ | 0.45 | $ | 0.22 |
| Diluted(2) | $ | 0.25 | $ | 0.14 | $ | 0.44 | $ | 0.22 |
| Weighted average shares outstanding(1) | ||||||||
| Basic | 162,626 | 88,990 | 158,727 | 88,990 | ||||
| Diluted | 166,512 | 88,990 | 162,271 | 88,990 |
(1) Share and per share amounts have been adjusted to reflect an implied 88,990-for-one stock split that became effective on January 14, 2021.
(2) Adjusted earnings per share for the three and six months ended June 26, 2021 is calculated under the two-class method. Under the two-class method, adjusted earnings per share is calculated using adjusted net income attributable to common shares, which is derived by reducing adjusted net income by the amount attributable to participating securities. Adjusted net income attributable to participating securities used in the basic earnings per share calculation was $0.9 million and $1.6 million for the three and six months ended June 26, 2021, respectively, and adjusted net income attributable to participating securities used in the diluted earnings per share calculation was $0.8 million and $1.4 million for the three and six months ended June 26, 2021, respectively.
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)
| Adjusted EBITDA | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three months ended | Six months ended | |||||||
| (in thousands) | June 26,<br>2021 | June 27,<br>2020 | June 26,<br>2021 | June 27,<br>2020 | ||||
| Net income (loss) | 35,168 | $ | 3,091 | $ | 15,235 | $ | (856) | |
| Income tax expense | 17,011 | 1,542 | 12,565 | 221 | ||||
| Interest expense, net | 16,612 | 17,863 | 34,702 | 35,379 | ||||
| Depreciation and amortization | 26,423 | 8,636 | 50,275 | 16,435 | ||||
| EBITDA | 95,214 | 31,132 | 112,777 | 51,179 | ||||
| Acquisition related costs(a) | 389 | 1,016 | 2,038 | 1,211 | ||||
| Non-core items and project costs, net(b) | 2,522 | 509 | 2,553 | 1,764 | ||||
| Sponsor management fees(c) | — | 539 | — | 1,079 | ||||
| Straight-line rent adjustment(d) | 3,358 | 1,787 | 5,843 | 2,639 | ||||
| Equity-based compensation expense(e) | 1,028 | 791 | 2,011 | 690 | ||||
| Foreign currency transaction (gain)/loss, net(f) | (5,229) | (1,194) | 5,282 | 2,285 | ||||
| Bad debt expense(g) | — | 2,842 | — | 2,842 | ||||
| Asset impairment and closed store expenses(h) | 3,478 | 2,560 | 2,692 | 6,880 | ||||
| Loss on debt extinguishment(i) | 78 | — | 45,576 | — | ||||
| Adjusted EBITDA | $ | 100,838 | $ | 39,982 | $ | 178,772 | $ | 70,569 |
a.Consists of acquisition costs as reflected within the consolidated statement of operations, including legal, consulting and other fees and expenses incurred in connection with acquisitions completed during the applicable period, as well as inventory rationalization expenses incurred in connection with acquisitions. We expect to incur similar costs in connection with other acquisitions in the future and, under U.S. GAAP, such costs relating to acquisitions are expensed as incurred and not capitalized.
b.Consists of discrete items and project costs, including (i) third-party consulting and professional fees associated with strategic transformation initiatives, (ii) wage subsidies received directly attributable to the COVID-19 pandemic and (iii) other miscellaneous expenses, including non-capitalizable expenses relating to the Company’s initial public offering and other strategic transactions.
c.Includes management fees paid to Roark Capital Management, LLC.
d.Consists of the non-cash portion of rent expense, which reflects the extent to which our straight-line rent expense recognized under U.S. GAAP exceeds or is less than our cash rent payments.
e.Represents non-cash equity-based compensation expense.
f.Represents foreign currency transaction gains/losses, net that primarily related to the remeasurement of our intercompany loans. For the six months ended June 26, 2021, these losses are offset by unrealized gains on remeasurement of cross currency swaps.
g.Represents bad debt expense related to uncollectible receivables outside of normal operations.
h.Relates to the impairment of certain fixed assets and operating lease right-of-use assets related to closed locations. Also represents lease exit costs and other costs associated with stores that were closed prior to their respective lease termination dates.
i.Represents the write-off of debt issuance costs associated with early termination of debt.
j.Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statements of operations.
k.Represents the tax impact of adjustments associated with the reconciling items between net income and Adjusted Net Income, excluding the provision for uncertain tax positions and valuation allowance for certain deferred tax assets. To determine the tax impact of the deductible reconciling items, we utilized statutory income tax rates ranging from 9% to 38%, depending upon the tax attributes of each adjustment and the applicable jurisdiction.
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
ADJUSTED EBITDA AND SEGMENT ADJUSTED EBITDA RECONCILIATION (UNAUDITED)
| Three months ended | Six months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| (in thousands) | June 26,<br>2021 | June 27,<br>2020 | June 26,<br>2021 | June 27,<br>2020 | ||||
| Segment Adjusted EBITDA: | ||||||||
| Maintenance | $ | 44,561 | $ | 26,339 | $ | 85,001 | $ | 47,805 |
| Car Wash | 43,069 | — | 77,224 | — | ||||
| Paint, Collision & Glass | 21,856 | 11,011 | 39,495 | 26,888 | ||||
| Platform Services | 17,602 | 15,969 | 28,610 | 23,434 | ||||
| Corporate and other | (25,845) | (12,710) | (50,864) | (25,756) | ||||
| Store opening costs | (405) | (627) | (694) | (1,802) | ||||
| Adjusted EBITDA | $ | 100,838 | $ | 39,982 | $ | 178,772 | $ | 70,569 |
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