Driven Brands Holdings Inc.

Previous wording

The following discussion and analysis for Driven Brands Holdings Inc. and Subsidiaries (“Driven Brands,” “the Company,” “we,” “us,” or “our”) should be read in conjunction with our consolidated financial statements and the related notes to our consolidated financial statements included elsewhere in this Quarterly Report. We operate on a 52-or 53-week fiscal year, which ends on the last Saturday in December. The three months ended March 29, 2025 and March 30, 2024 were both 13 week periods.

Current wording

The following discussion and analysis for Driven Brands Holdings Inc. and Subsidiaries (“Driven Brands,” “the Company,” “we,” “us,” or “our”) should be read in conjunction with our consolidated financial statements and the related notes to our consolidated financial statements included elsewhere in this Quarterly Report. We operate on a 52-or 53-week fiscal year, which ends on the last Saturday in December. The three and six months ended June 28, 2025 and June 29, 2024 were both 13 and 26 week periods, respectively.

Previous wording

Driven Brands is the largest automotive services company in North America with a growing and highly-franchised base of approximately 4,800 locations across 49 states in the U.S. and 13 other countries. Our scaled, diversified platform fulfills an extensive range of core retail and commercial automotive needs, including paint, collision, glass, and repair services, as well as a variety of more frequent services, such as oil changes and car washes. We have continued to grow our base of consistent recurring revenue through same store sales and adding new franchised and company-operated stores. Driven Brands generated net revenue of approximately $516.2 million during the three months ended March 29, 2025, an increase of 7% compared to the prior year period, and system-wide sales of approximately $1.5 billion during the three months ended March 29, 2025, an increase of 2% from the prior year period.

Current wording

Driven Brands is the largest automotive services company in North America with a growing and highly-franchised base of approximately 4,800 locations across 49 states in the U.S. and 13 other countries. Our scaled, diversified platform fulfills an extensive range of core retail and commercial automotive needs, including paint, collision, glass, and repair services, as well as a variety of more frequent services, such as oil changes and car washes. We have continued to grow our base of consistent recurring revenue through same store sales and adding new franchised and company-operated stores. Driven Brands generated net revenue of approximately $551 million and $1.1 billion during the three and six months ended June 28, 2025, respectively, an increase of 6% and 7% compared to the prior year period, and system-wide sales of approximately $1.6 billion and $3.2 billion during the three and six months ended June 28, 2025, respectively, an increase of 3% and 3% compared to the prior year period.

Previous wording

We have experienced same store sales growth for 17 consecutive quarters, which we attribute to our diversified customer base and service offerings. However, we have experienced and expect to continue experiencing softening demand across several of our segments, primarily as a result of tariffs, inflationary pressures, increased competition, industry dynamics, and negative weather patterns.

Current wording

While we have achieved same store sales growth for 18 consecutive quarters, which we attribute to our diversified customer base and service offerings, we have experienced and expect to continue experiencing softening demand across several of our segments, primarily as a result of tariffs, inflationary pressures, increased competition, industry and macroeconomic dynamics, and negative weather patterns.

Previous wording

As previously disclosed in the Company’s 2024 Form 10-K, on February 24, 2025, the Company entered into a definitive agreement to sell its U.S. Car Wash business to Express Wash Operations, LLC dba Whistle Express Car Wash (the “Buyer”) for an aggregate purchase price of $385 million, subject to customary adjustments. Under the terms of the agreement, the Buyer agreed to pay the Company $255 million in cash and deliver to the Company an interest-bearing seller note evidencing a loan in the initial principal amount of $130 million. The transaction was completed on April 10, 2025.

Current wording

As previously disclosed in the Company’s 2024 Form 10-K, on February 24, 2025, the Company entered into a definitive agreement to sell its U.S. Car Wash business to Express Wash Operations, LLC dba Whistle Express Car Wash (the “Buyer”) for an aggregate purchase price of $385 million, subject to customary adjustments. Under the terms of the agreement, the Buyer agreed to pay the Company $255 million in cash and deliver to the Company an interest-bearing seller note (“Seller Note Receivable”) evidencing a loan of $130 million. The transaction was completed on April 10, 2025. In July 2025, the Company sold the Seller Note Receivable for $113 million.

Previous wording

Q1 2025 Highlights and Key Performance Indicators

Current wording

Q2 2025 Three Months Ended Highlights and Key Performance Indicators

Previous wording

•Consolidated same store sales increased 0.7%.

Current wording

•Consolidated same store sales increased 1.7%.

Previous wording

•Net revenue increased 7% to $516.2 million, driven by company-operated store revenue, primarily due to net new store growth within our Take 5 segment and same store sales growth within our Take 5 and Car Wash segments.

Current wording

•Net revenue increased 7% to $1,067 million, driven by company-operated store sales, primarily due to net new store growth and same store sales growth within our Take 5 segment, and independently-operated store sales due to same store sales growth within our Car Wash segment. These increases were partially offset by the absence of supply and other revenue relating to the sale of our Canadian distribution business in the third quarter of 2024 and decreased same store sales within our Franchise Brands segment.

Previous wording

•Adjusted Net Income (non-GAAP) increased 10% to $44 million or $0.27 per diluted share. The increase was primarily due to continued same store sales growth, improved operating margins within the Car Wash segment, and lower interest expense, partially offset by increased selling, general, and administrative costs reflective of the Company’s growth, the non-recurrence of earnings relating to the sale of our Canadian distribution business in the third quarter of 2024, and reduced operating margins within the Take 5 and Franchise Brands segments.

Current wording

•Adjusted Net Income (non-GAAP) increased 3% to $103 million or $0.63 per diluted share. The increase primarily related to same store sales growth, primarily within the Take 5 and Car Wash segments, and net new store growth within the Take 5 segment. This increase was partially offset by negative same store sales growth within the Franchise Brands segment as well as increased selling, general, and administrative costs reflective of the Company’s growth. In addition, the absence of Adjusted Net Income relating to the sale of our Canadian distribution business in the third quarter of 2024 and decreased interest expense partially offset increases to our Adjusted Net Income from continuing operations delivered by our underlying business.

Previous wording

•Adjusted EBITDA (non-GAAP) increased 2% to $125 million. The increase was primarily due to continued same store sales growth and improved operating margins within the Car Wash segment, partially offset by increased selling, general, and administrative costs reflective of the Company’s growth, the non-recurrence of earnings relating to the sale of our Canadian distribution business in the third quarter of 2024, and reduced operating margins within the Take 5 and Franchise Brands segments.

Current wording

•Adjusted EBITDA (non-GAAP) increased 1% to $268 million. The increase primarily related to same store sales growth, predominantly within the Take 5 and Car Wash segments, and net new store growth within the Take 5 segment. This increase was partially offset by negative same store sales growth within the Franchise Brands segment as well as increased selling, general, and administrative costs reflective of the Company’s growth. In addition, the absence of Adjusted Net Income relating to the sale of our Canadian distribution business in the third quarter of 2024 partially offset increases to our Adjusted Net Income from continuing operations delivered by our underlying business.

Previous wording

Adjusted EBITDA. We define Adjusted EBITDA as earnings from continuing operations before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition related costs, equity compensation, loss on debt extinguishment, foreign currency transaction related gains or losses, cloud computing amortization, and certain non-recurring and non-core, infrequent or unusual charges. Adjusted EBITDA is a supplemental measure of operating performance of our segments and may not be comparable to similar measures reported by other companies. Adjusted EBITDA is a performance metric utilized by our Chief Operating Decision Maker to allocate resources to and assess performance of our segments. Refer to Note 4 in our consolidated financial statements for a reconciliation of reportable segment Adjusted EBITDA to income from continuing operations before taxes for the three months ended March 29, 2025 and March 30, 2024.

Current wording

Adjusted EBITDA —We define Adjusted EBITDA as earnings from continuing operations before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition related costs, equity compensation, loss on debt extinguishment, foreign currency transaction related gains or losses, cloud computing amortization, and certain non-recurring and non-core, infrequent or unusual charges. Adjusted EBITDA is a supplemental measure of operating performance of our segments and may not be comparable to similar measures reported by other companies. Adjusted EBITDA is a performance metric utilized by our Chief Operating Decision Maker to allocate resources to and assess performance of our segments. Refer to Note 4 in our consolidated financial statements for a reconciliation of reportable segment Adjusted EBITDA to income from continuing operations before taxes for the three and six months ended June 28, 2025 and June 29, 2024.

Previous wording

The following table sets forth our key performance indicators for the three months ended March 29, 2025 and March 30, 2024:

Current wording

The following table sets forth our key performance indicators for the three and six months ended June 28, 2025 and June 29, 2024:

Previous wording

Adjusted EBITDA. We define Adjusted EBITDA as earnings from continuing operations before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition related costs, equity compensation, loss on debt extinguishment, cloud computing amortization, and certain non-recurring, non-core, infrequent or unusual charges. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation. Management believes this non-GAAP financial measure is useful because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans, and make strategic decisions.

Current wording

Adjusted EBITDA —We define Adjusted EBITDA as earnings from continuing operations before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition related costs, equity compensation, loss on debt extinguishment, foreign currency transaction related gains or losses, cloud computing amortization, and certain non-recurring and non-core, infrequent or unusual charges. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation. Management believes this non-GAAP financial measure is useful because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans, and make strategic decisions.

Previous wording

(a) Consists of acquisition costs as reflected within the consolidated statements 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 GAAP, such costs relating to acquisitions are expensed as incurred and not capitalized.

Current wording

(a) Consists of acquisition costs as reflected within the consolidated statements 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. As acquisitions occur in the future we expect to incur similar costs and, under U.S. GAAP, such costs relating to acquisitions are expensed as incurred and not capitalized.

Previous wording

(e)Represents foreign currency transaction losses, net that primarily related to the remeasurement of our intercompany loans as well as gains and losses on cross currency swaps and forward contracts.

Current wording

(e)Represents foreign currency transaction (gains) losses, net that primarily related to the remeasurement of our intercompany loans as well as gains and losses on cross currency swaps and forward contracts.

Previous wording

(f) Consists of the following items (i) (gains) losses, net on sale leasebacks, disposal of assets, or sale of business; (ii) net losses (gains) on sale for assets held for sale; and (iii) impairment of certain fixed assets and operating lease right-of-use assets related to closed and underperforming locations, lease exit costs and other costs associated with stores that were closed prior to the respective lease termination dates.

Current wording

(f) Consists of the following items (i) (gains) losses, net on sale leasebacks, disposal of assets, or sale of business; (ii) net losses (gains) on sale for assets held for sale; (iii) impairment of certain fixed assets and operating lease right-of-use assets related to closed and underperforming locations, lease exit costs and other costs associated with stores that were closed prior to the respective lease termination dates; and (iv) unrealized loss on fair value of the Seller Note Receivable.

Previous wording

We recognized net income from continuing operations of $17 million, or $0.11 per diluted share, for the three months ended March 29, 2025, compared to $12 million, or $0.07 per diluted share, for the three months ended March 30, 2024. The increase of approximately $6 million was primarily due to the following:

Current wording

We recognized net income from continuing operations of $12 million, or $0.07 per diluted share, for the three months ended June 28, 2025 compared to $37 million, or $0.22 per diluted share, for the three months ended June 29, 2024. The decrease of approximately $25 million was primarily due to the following:

Previous wording

•Net income from continuing operations increased 51% to $17 million or $0.11 per diluted share. The increase primarily relates to continued same store sales growth, improved operating margins within the Car Wash segment, lower interest expense, and reduction in foreign currency transaction losses in the current period, primarily relating to intercompany activity. These increases were partially offset by losses on the sale or disposal of fixed assets, increased selling, general, and administrative costs reflective of the Company’s growth, the non-recurrence of earnings relating to the sale of our Canadian distribution business in the third quarter of 2024, and reduced operating margins within the Take 5 and Franchise Brands segments.

Current wording

•losses on the sale or disposal of fixed assets;

Previous wording

Company-operated store expenses increased $13 million, or 7%, primarily due to variable costs associated with increased Take 5 company-operated store sales in the current period as well as increased rent expense and maintenance and repair charges.

Current wording

Company-operated store expenses increased $12 million, or 7%, primarily due to variable costs associated with increased Take 5 company-operated store sales in the current period as well as store related costs associated with 76 net new company-operated stores in the current period compared to the prior year period.

Previous wording

Independently-operated store expenses (comprised entirely of expenses from the international car wash locations) increased $7 million, or 24%, primarily due to variable costs associated with the increase in sales.

Current wording

Independently-operated store expenses (comprised entirely of expenses from the international car wash locations) increased $6 million, or 19%, primarily related to variable costs associated with the increase in sales.

Previous wording

Supply and other expenses decreased $1 million, or 3%, primarily due to the inclusion of $10 million of supply and other expenses from our Canadian distribution business in the three months ended March 30, 2024 compared to no expense in the current quarter as a result of the sale of that business in the third quarter of 2024, partially offset by costs associated with increased Take 5 supply sales.

Current wording

Supply and other expenses decreased $1 million, or 3%, primarily due to the inclusion of $11 million of supply and other expenses from our Canadian distribution business in the three months ended June 29, 2024 compared to no expense in the current quarter as a result of the sale of that business in the third quarter of 2024 and decreased supply revenue within Franchise Brands, partially offset by costs associated with the increased Take 5 supply revenue.

Previous wording

The foreign currency transaction loss for the three months ended March 29, 2025 was primarily comprised of a loss on foreign currency hedges of less than $1 million, partially offset by transaction remeasurement gains in our foreign operations of less than $1 million. The foreign currency transaction loss for the three months ended March 30, 2024 was primarily comprised of transaction losses in our foreign operations of $7 million, partially offset by a gain on foreign currency hedges of $3 million.

Current wording

The foreign currency transaction gain for the three months ended June 28, 2025 was primarily comprised of $17 million on transaction gains in our foreign operations, partially offset by a loss on foreign currency hedges of $5 million. The foreign currency transaction gain for the three months ended June 29, 2024 was primarily comprised of transaction losses in our foreign operations of over $2 million, partially offset by a gain of less than $2 million on foreign currency hedges.

Previous wording

The effective tax rate for the three months ended March 29, 2025 was 28.7% compared to 42.3% for the three months ended March 30, 2024. The decrease was primarily driven by non-deductible share-based compensation, limitation on interest deduction in certain foreign jurisdictions, state taxes related to pre-tax income, and a reduction in U.S. tax impacts of its foreign operations.

Current wording

The effective income tax rate for the three months ended June 28, 2025 was 37.7% compared to 35.4% for the three months ended June 29, 2024. The effective income tax rate differs from the U.S. federal statutory rate of 21% primarily due to non-deductible share-based compensation, limitation on interest deduction in certain foreign jurisdictions, state taxes related to pre-tax income, and U.S. tax impacts of its foreign operations.

Previous wording

Adjusted net income was $44 million for the three months ended March 29, 2025 compared to $40 million for the three months ended March 30, 2024. This increase of approximately $4 million was primarily due to the following:

Current wording

Adjusted Net Income was $103 million for the six months ended June 28, 2025 compared to $100 million for the six months ended June 29, 2024. This increase of approximately $3 million was primarily due to the following:

Previous wording

Adjusted EBITDA was $125 million for the three months ended March 29, 2025 compared to $123 million for the three months ended March 30, 2024. The increase of approximately $2 million was primarily due to:

Current wording

Adjusted EBITDA was $268 million for the six months ended June 28, 2025 compared to $266 million for the six months ended June 29, 2024. The increase of approximately $2 million was primarily due to:

Previous wording

Company-operated store sales increased $30 million, or 11%, of which $30 million related to an increase in the Take 5 segment. The increase was primarily due to same store sales growth and 74 net new company-operated stores.

Current wording

Company-operated store sales increased $61 million, or 10%, of which $57 million related to an increase in Take 5. The increase was primarily due to same store sales growth and 83 net new Take 5 company-operated stores.

Previous wording

Independently-operated store sales (comprised entirely of sales from the international car wash locations) increased $14 million, or 26%, due to same store sales growth resulting from increased volume and revenue per wash.

Current wording

Independently-operated store sales (comprised entirely of sales from the international car wash locations) increased $25 million, or 22%, primarily due to same store sales growth as a result of increased volume and improved price realization.

Previous wording

Advertising fund contributions increased by $1 million, or 5%, primarily due to changes in the mix of system-wide sales among franchised brands. Our franchise agreements typically require the franchisee to pay continuing advertising fund fees based on a percentage of the franchisee’s gross sales or a stated fee.

Current wording

Advertising fund contributions increased by $3 million, or 7%, primarily due to changes in the mix of system-wide sales among franchised brands. Our franchise agreements typically require the franchisee to pay continuing advertising fund fees based on a percentage of the franchisee’s gross sales or a stated fee.

Previous wording

Supply and other revenue decreased $10 million, or 14%, primarily due to the inclusion of $15 million of supply and other revenue from our Canadian distribution business in the three months ended March 30, 2024 compared to no revenue in the current quarter as a result of the sale of that business in the third quarter of 2024, partially offset by increased supply sales within the Take 5 segment.

Current wording

Supply and other revenue decreased $22 million, or 14%, primarily due to the inclusion of $33 million of supply and other revenue from our Canadian distribution business in the six months ended June 29, 2024 compared to no revenue in the current quarter as a result of the sale of that business in the third quarter of 2024 as well as decreased supply revenue within Franchise Brands due to lower volume, partially offset by increased supply revenue within Take 5.

Previous wording

Advertising fund expenses increased by $1 million, or 5%, which is commensurate with the increase to advertising fund contributions during the period. Advertising fund expenses generally trend consistent with advertising fund contributions.

Current wording

Advertising fund expenses increased by $3 million, or 7%, which is commensurate with the increase to advertising fund contributions during the period. Advertising fund expenses generally trend consistent with advertising fund contributions.

Previous wording

Depreciation and amortization expense increased $2 million, or 7%, primarily due to 69 net new company-operated store openings in the current year compared to the prior year.

Current wording

Depreciation and amortization expense increased $4 million, or 6%, primarily due to 76 net new company-operated stores in the current year compared to the prior year.

Previous wording

We assess the performance of our segments based on Adjusted EBITDA, which is defined as earnings from continuing operations before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition related costs, store closure costs, equity compensation, loss on debt extinguishment, cloud computing amortization, and certain non-recurring, non-core, infrequent or unusual charges. Shared services costs are not allocated to these segments and are included in Corporate and Other. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation.

Current wording

We assess the performance of our segments based on Adjusted EBITDA, which is defined as earnings from continuing operations before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition related costs, store closure costs, equity compensation, loss on debt extinguishment, cloud computing amortization, and certain non-recurring, non-core, foreign currency, infrequent or unusual charges. Shared services costs are not allocated to these segments and are included in Corporate and Other. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation.

Previous wording

Take 5 Adjusted EBITDA increased $12 million, or 14%, primarily due to net new store growth, same store sales growth, partially offset by higher repair and maintenance and rent expense as well as variable costs associated with the increased company-operated store sales.

Current wording

Take 5 Adjusted EBITDA increased $10 million, or 10%, primarily due to net new store growth and same store sales growth, partially offset by variable costs associated with the increased company-operated store sales and store related costs associated with 83 net new company-operated stores in the current period compared to the prior year period.

Previous wording

Franchise Brands net revenue decreased $5 million, or 6%, driven by a decrease in system-wide sales of $41 million, or 4%, primarily driven by lower volume in the current period.

Current wording

Franchise Brands net revenue decreased $6 million, or 8%, driven by a decrease in franchised stores system-wide sales of $27 million, or 2.5%, primarily driven by lower volume in the current period.

Previous wording

Franchise Brands Adjusted EBITDA decreased $3 million, or 7%, primarily due to negative same store sales growth primarily due to lower volume in the current period.

Current wording

Franchise Brands Adjusted EBITDA decreased $9 million, or 16%, primarily due to negative same store sales growth predominantly due to lower volume in the current period.

Previous wording

Car Wash Adjusted EBITDA increased by $6 million, or 36%, driven primarily by same store sales growth, partially offset by variable costs associated with increased sales.

Current wording

Car Wash Adjusted EBITDA increased by $5 million, or 23%, primarily driven by same store sales growth, partially offset by variable costs associated with increased sales.

Previous wording

Take 5 net revenue increased $39 million, or 15%, driven primarily by a $30 million increase in company-operated store sales from same store sales growth and 74 net new company-operated stores. Supply and other revenue increased by $6 million, or 23%, primarily due to higher system-wide sales. Franchise royalties and fees increased by $3 million, or 46%, primarily due to a $31 million, or 29%, increase in franchise system-wide sales from same store sales growth and 94 net new franchise stores.

Current wording

Take 5 net revenue increased $78 million, or 15%, driven primarily by a $57 million increase in company-operated store sales from same store sales growth and 83 net new company-operated stores. Supply and other revenue increased by $16 million, or 28%, primarily due to higher system-wide sales. Franchise royalties and fees increased by $6 million, or 49%, primarily due to a $64 million, or 29%, increase in franchised stores system-wide sales from same store sales growth and 86 net new franchised stores.

Previous wording

The Company’s 2019-1 Notes and 2019-2 Notes have anticipated repayment dates in April 2026 and October 2026, respectively. The Company anticipates refinancing these notes prior to the anticipated repayment dates. As of the date of this filing, the Company has sufficient potential borrowing capacity under the Revolving Credit Facility and the Company’s variable funding notes to repay these notes.

Current wording

The Company’s Series 2019-1 Securitization Senior Notes and Series 2019-2 Securitization Senior Notes have anticipated repayment dates in April 2026 and October 2026, respectively. The Company anticipates refinancing these notes prior to the anticipated repayment dates. As of the date of this filing, the Company has sufficient potential borrowing capacity under the Revolving Credit Facility and the Company’s variable funding notes to repay these notes.

Previous wording

At March 29, 2025, the Company had total liquidity of $641 million consisting of $152 million in cash and cash equivalents and $489 million of undrawn capacity on its variable funding securitization senior notes and Revolving Credit Facility. This did not include the additional $135 million Series 2022 Class A-1 Notes that expand the Company’s variable funding note borrowing capacity if the Company elects to exercise them, assuming certain conditions continue to be met.

Current wording

At June 28, 2025, the Company had total liquidity of $655 million consisting of $166 million in cash and cash equivalents and $489 million of undrawn capacity on its variable funding securitization senior notes and Revolving Credit Facility. This did not include the additional $135 million Series 2022 Class A-1 Notes that expand the Company’s variable funding note borrowing capacity if the Company elects to exercise them, assuming certain conditions continue to be met.

Previous wording

On February 24, 2025, the Company entered into a definitive agreement to sell its U.S. Car Wash business to Express Wash Operations, LLC dba Whistle Express Car Wash (the “Buyer”) for an aggregate purchase price of $385 million, subject to customary adjustments. Under the terms of the agreement, the Buyer agreed to pay the Company $255 million in cash and deliver to the Company an interest-bearing seller note evidencing a loan in the initial principal amount of $130 million. The transaction was completed on April 10, 2025.

Current wording

On February 24, 2025, the Company entered into a definitive agreement to sell its U.S. Car Wash business to the Buyer for an aggregate purchase price of $385 million, subject to customary adjustments. Under the terms of the agreement, the Buyer agreed to pay the Company $255 million in cash and deliver to the Company an interest-bearing seller note evidencing a loan in the initial principal amount of $130 million. The transaction was completed on April 10, 2025.

Previous wording

The following table illustrates the main components of our cash flows for the three months ended March 29, 2025 and March 30, 2024:

Current wording

The following table illustrates the main components of our cash flows for the six months ended June 28, 2025 and June 29, 2024: