Q1 2024 Driven Brands Holdings Inc Earnings Call

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Unknown Attendee: Good morning. My name is Karina.

Craig: Good morning, My name is Craig and I will be your conference operator today.

Unknown Executive: I will be your conference operator today. At this time, I would like to welcome everyone to the Driven Brands Q1 2024 Earnings Call. All lines have been placed on mute to prevent any background noise.

Craig: This time I would like to welcome everyone to the terrific brands Q1 2024 earnings call.

Craig: All lines have been placed on mute to prevent any background noise.

Craig: After the Speakers' remarks, there will be a question and answer session.

Speaker Change: If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Speaker Change: If you'd like to withdraw your question press the star followed by the number too.

Unknown Executive: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press the star followed by the number 0. Thank you. I will now turn the call over to Joel Arnao, SVP of Finance. Joel, you may begin your conversation.

Speaker Change: Thank you I will now turn the call over to Joe our new SVP of finance goals you may begin your conference.

Joel Arnao: Good morning and welcome to Driven Brands' first quarter 2024 earnings conference call. The earnings release and the leverage ratio reconciliation are available for download on our website at investors.drivenbrands.com. On the call today with me are Jonathan Fitzpatrick, President and Chief Executive Officer; Danny Rivera, Executive Vice President and Chief Operating Officer; and Gary Ferrera, Executive Vice President and Chief Financial Officer.

Joe: Good morning, and welcome to driven brands first quarter 2024 earnings conference call.

Joe: The earnings release, and the leverage ratio reconciliation are available for download on our website at investors <unk> driven brand dot com.

Joe: On the call today with me are Johnathan Fitzpatrick, President and Chief Executive Officer.

Joe: Danny Rivera Executive Vice President and Chief operating Officer, and Gary Ferrera, Executive Vice President and Chief Financial Officer.

Joel Arnao: In a moment, Jonathan, Danny, and Gary will walk you through our financial and operating performance for the quarter. Before we begin our remarks, I'd like to remind you that management will refer to certain non-GAAP financial measures. You can find the reconciliations to most directly comparable gap financial measures on the company's investor relations website and in its filings with the Securities and Exchange Commission. So, in the course of this call, we may also make four forward-looking statements in regard to our current plans, beliefs, and expectations.

Joe: In a moment, Jonathan Danny and Garry will walk you through our financial and operating performance for the quarter before we begin our remarks I would like to remind you that management will refer to certain non-GAAP financial measures.

Joe: You can find the reconciliations to most directly comparable GAAP financial measures on the company's Investor Relations website and in its filings with the Securities and Exchange Commission.

Joe: During the course of this call. We May also make forward looking statements in regards to our current plans beliefs and expectations.

Joel Arnao: 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 the results and events contemplated by these forward-looking statements. Please see our earnings release and our filings with the Securities and Exchange Commission for more information. Today's prepared remarks will be followed by a question and answer session. We will ask you to limit yourself to one question and one follow-up. Now, I'll turn it over to my partner, Jonathan.

Joe: 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 the results and events contemplated by these forward looking statements.

Joe: Please see our earnings release, and our filings with the Securities and Exchange Commission for more information.

Joe: Today's prepared remarks will be followed by question and answer session. We will ask you to limit yourself to one question and one follow up.

Joe: Now I'll turn it over to my partner Jonathan.

Jonathan G. Fitzpatrick: Good morning. We appreciate everyone joining us today to discuss Driven Brands' first quarter 2024 financial results. To begin, I want to acknowledge the hard work and strong execution by our more than 10,000 Driven Brands team members and our amazing franchisees for how they continue to navigate an extremely dynamic macroeconomic environment. I will start with a review of some of our first quarter 2024 highlights, and then turn it over to Danny, who will discuss our operating segments, and then Gary, who will detail our first quarter financial results and full year outlook.

Jonathan: Good morning, we appreciate everyone joining us today to discuss driven brands first quarter 2024 financial results to begin I want to acknowledge the hard work and strong execution by our more than 10000, driven brands team members and our amazing franchisees for how they continue to navigate an extremely.

Jonathan: <unk> macroeconomic environment.

Jonathan G. Fitzpatrick: For Q1 2024, we delivered 1.7% revenue growth versus the prior year, supported by 144 net new stores and 0.7% same-store sales growth, achieving diluted adjusted EPS of 23 cents. We continue to be pleased by the performance of our Take 5 oil change and franchise businesses, all being key contributors to a solid Q1 2024. Now, on our last earnings call, I mentioned the effects of extremely challenging weather conditions on our business in January. And despite these challenges, we were still able to deliver a solid first quarter and feel confident about the balance of the year. Now, before we dive in, I want to spend a moment on Gary.

Jonathan: I will start with a review of some of our first quarter 2024 highlights and then turn it over to Danny who will discuss our operating segments and then Gary who will detail, our first quarter financial results and full year outlook.

Daniel R. Rivera: For Q1, 2024, we delivered one 7% revenue growth versus the prior year supported by 144, net new stores and 0.7% same store sales growth achieving diluted adjusted EPS of <unk> 23.

Daniel R. Rivera: We continue to be pleased by the performance of our take five oil change and franchise businesses all being key contributors to our solid Q1 2024.

Daniel R. Rivera: Now on our last earnings call I mentioned, the effects of extremely challenging weather conditions on our business in January.

Jonathan: And despite these challenges we were still able to deliver a solid first quarter and feel confident about the balance of the year.

Jonathan G. Fitzpatrick: And, as you likely saw in our earnings release, Gary has decided to pursue another opportunity in order to be closer to his family in Colorado. He will be working closely with a former colleague he has known for decades. Joel Arnao, our Senior Vice President of Finance, who many of you know, will assume the role of interim CFO while we conduct a search for Gary's successor. We are focused on finding the right person for the role, and we appreciate that Gary will make himself available to support the transition, which we expect will be seamless.

Jonathan: Okay.

Jonathan: And before we dive in I want to spend a moment on Gary.

Jonathan: And as you likely saw in our earnings release, Gary has decided to pursue another opportunity in order to be closer to his family in Colorado. He.

Jonathan: He will be working closely with a former colleague is known for decades.

Jonathan: All our nail our senior Vice President of Finance, who many of you know will assume the role of interim CFO, while we conduct a search for Gary's successor.

Jonathan: We are focused on finding the right person for the role and we appreciate that Gary will make himself available to support the transition, which we expect will be seamless.

Jonathan G. Fitzpatrick: Gary has been a great partner this last year, and on behalf of the board and the management team, we wish him great success in his new role. Now, turning to the results for the quarter. Q1 revenue was impacted by the extreme weather conditions in January. We also believe that the ongoing inflationary environment will likely continue to pressure consumer spending throughout the balance of 2024, and that lower-income households will be the most impacted.

Jonathan: Gary has been a great partner this last year and on behalf of the board and the management team, we wish him great success in his new role.

Jonathan: Now turning to the results for the quarter.

Jonathan: Q1 revenue was impacted by the extreme weather conditions in January.

Jonathan: We also believe that the ongoing inflationary environment will likely continue to pressure consumer spending throughout the balance of 2024 and that lower income households will be the most impacted.

Jonathan: We expect that this pressure will be offset by continued strength in our <unk> and commercial business and our needs based businesses. We are focused on delivering our 2024 guidance. Despite this ongoing consumer uncertainty.

Jonathan G. Fitzpatrick: We expect that this pressure will be offset by continued strength in our B2B and commercial business, and our needs-based business. We are focused on delivering our 2024 guidance despite this ongoing consumer uncertainty. I want to take a few moments to speak about one of the key drivers of our performance, Take 5 Oil Change. Despite the challenging start to the quarter, this marks the 15th consecutive quarter of positive same-store sales.

Speaker Change: I wanted to take a few moments to speak about one of the key drivers of our performance take five oil change <unk>.

Jonathan: Despite the challenging start to the quarter. This marks the 15th consecutive quarter of positive same store sales.

Jonathan G. Fitzpatrick: And we're particularly pleased with the year-over-year margin expansion of approximately 300 bases, delivered by an increasing franchise revenue mix coupled with great margin management at our company location. Next, I want to provide an update on our purchasing platform, Driven Advantage, which we previewed at our Investor Day in 2020. You may recall that this is an online marketplace where our company stores, franchisees, and affiliates can purchase from over 90,000 SKUs from more than 50 vendor partners, ranging from office supplies to paint, oil, and equipment. And since its launch in Q1 2023, approximately 75% of eligible locations have already begun purchasing products and services on the platform.

Jonathan: And we're particularly pleased with the year over year margin expansion of approximately 300 basis points deliver.

Jonathan: <unk> delivered by an increasing franchise revenue mix, coupled with great margin management at our company locations.

Jonathan: Next I want to provide an update on our purchasing platform driven advantage, which we previewed at our Investor day in 2023.

Jonathan: You may recall that this is an online marketplace for our company stores franchisees and affiliates can purchase from over 90000 skus for more than 50 vendor partners ranging from office supplies to paint oil and equipment.

Jonathan: And since its launch in Q1 2023, approximately 75% of eligible locations have already begun purchasing products and services on the platform.

Jonathan G. Fitzpatrick: The team is now focused on making additional enhancements aimed at increasing our wallet share and driving additional convenience and value for our partners. We continue to augment our vendor landscape with new SKUs and make technical enhancements to the platform, such as suggestive selling and customized advertising. This is a uniquely powerful platform we have created that benefits our franchisees, company stores, vendor partners, and Driven. And we feel very good about delivering on the growth from this platform we outlined at Investor Day, including the incremental $35 million in adjusted EBITDA we expect by 2026.

Jonathan: The team is now focused on making additional enhancements aimed at increasing our wallet share and driving additional convenience and value for our partners.

Jonathan: We continue to augment our vendor landscape with new Skus and make technical enhancements to the platform such as suggestive selling and customized advertising.

Jonathan: This is a uniquely powerful platform, we have created that benefits, our franchisees company stores vendor partners and driven.

Jonathan: And we feel very good about delivering on the growth from this platform, we outlined at Investor day, including the incremental $35 million and adjusted EBITDA, We expect by 2026.

Jonathan G. Fitzpatrick: Our franchise businesses, Meineke, Mako, Carstar, and 1-800, all delivered strong results in Q1 and continue to drive significant cash flow and very strong margins. Now, let me give you an update on our car wash business. Margins in the U.S. business were negatively impacted in Q1 by lower revenue, and revenue was impacted by a combination of consumer softness, weather, and the continued impact of competitive intrusion.

Jonathan: Our franchise businesses Meineke, Mako car Star and one 800, all delivered strong results in Q1 and continue to drive significant cash flow and very strong margins.

Jonathan: Now let me give you an update on our car wash segment.

Jonathan: Margins in the U S business were negatively impacted in Q1 by lower revenue in.

Jonathan: And revenue was impacted by a combination of consumer softness weather and the continued impact of competitive intrusion.

Jonathan G. Fitzpatrick: As mentioned on our previous earnings call, we have stopped all new growth capital investments in this business and will not open new U.S. car wash stores. Additionally, the team is making good progress on divesting pipeline properties we owned when we made this decision. Through Q1, we have received approximately 33 million in revenue and are still planning on at least 100 million in fiscal year 2024. On the other hand, our international car wash business had a solid first quarter, and we're seeing really nice trends in April. Now I'm switching to our US glass business, Auto Glass Now.

Jonathan: As mentioned on our previous earnings call. We have stopped all new growth capital investments in this business and we will not open new U S Carwash stores.

Jonathan: Additionally, the team is making good progress on divesting pipeline properties, we owned when we made this decision.

Jonathan: Through Q1, we have received approximately $33 million of proceeds and are still planning on at least $100 million in fiscal year 2024.

Jonathan: On the other hand, our international car wash business had a solid first quarter and we're seeing really nice trends in April.

Jonathan: Now switching to our U S glass business auto glass now.

Jonathan G. Fitzpatrick: We remain excited about the medium and longer-term prospects for this business but also know that it will take time to build scale and momentum. The team is focused on growing both the top and bottom lines of this business. And while we saw a slower Q1 from the retail consumer, similar to some of our other businesses, we're pleased with the continued progress in our commercial business. The team is focused on building our insurance sales with an immediate focus on regional carriers.

Jonathan: We remain excited about the medium and longer term prospects for this business, but also know that it will take time to build scale and momentum.

Jonathan: The team is focused on growing both the top and bottom lines of this business.

Jonathan: And while we saw a slower Q1 from the retail consumer similar to some of our other businesses. We're pleased with the continued progress in our commercial business.

Jonathan: The team is focused on building our insurance sales with an immediate focus on regional carriers.

Jonathan G. Fitzpatrick: And we're pleased with the growing pipeline and look forward to turning this into new revenue throughout the remainder of the year. My focus in 2024 is delivering on our guidance, reducing debt, and actively managing the portfolio, which means making sure that Driven has the right assets to execute on our short, medium, and longer-term goals. We have a platform that generates high steady-state returns with a long runway for reinvestment at attractive returns. And we're incredibly motivated to see our valuation mirror our results over time. Now, I will hand it over to my partner, Danny, our Chief Operating Officer, to discuss our key business segments.

Jonathan: And we're pleased with the growing pipeline and look forward to turning this into new revenue throughout the remainder of the year.

Speaker Change: My focus in 2024 is delivering on our guidance, reducing debt and actively managing the portfolio, which means making sure that driven has the right assets to execute on our short medium and longer term goals.

Speaker Change: We have a platform that generates high steady state returns with a long runway for reinvestment at attractive returns.

Speaker Change: And we are incredibly motivated to see our valuation mirrored our results over time now let me hand, it over to my partner, Danny Our Chief operating officer to discuss our key business segments.

Daniel R. Rivera: Thank you, Jonathan. I wanted to start by formally welcoming two new leaders to Driven, Tim Austin and Missy McKinley. Tim joins us as our new president of Take 5 Car Wash. Tim built his career at Walmart, where he grew from a store manager to regional vice president. He also held several leadership roles at Sears before becoming COO at Lucid Hearing, helping to grow the company to over 500 locations in five countries. Missy is our new Vice President of Field Operations for Take-Five Ultra. She joins us from Scooter's Coffee, where she served as President of Operations.

Daniel R. Rivera: Thank you Jonathan I wanted to start by formally welcoming two new leaders to driven Tim Austin amidst the Mckinley Tim.

Daniel R. Rivera: Tim joins us as our new President of <unk>, Bob Carwash, Tim doses career at Walmart, where he grew from a store manager to regional Vice President.

Daniel R. Rivera: He also held several leadership roles at Sears before becoming CEO at lucid hearing helping to grow the company to over 500 locations in five countries.

Speaker Change: <unk>, our new Vice President of field operations would take five oil change basically joins us from scooters coffee, where she served as president of operations before scooters freehold operational leadership positions at several great retailers, including Cvs dollar tree and circle K welcome, Tim and Miss me, because a driven team.

Daniel R. Rivera: Before scooters, she held operational leadership positions at several great retailers, including CVS, Dollar Tree, and Circle K. Welcome, Tim and Missy, to the Driven team. Switching gears to Q1 performance, Q1 was a difficult quarter with a few headwinds from weather and a softer retail environment. However, I'm happy with the results our team achieved. First, weather was not our friend in the first quarter, particularly in January.

Daniel R. Rivera: January was the 10th wettest on record in the United States, and multiple major winter storms forced us to lose over 200 retail days due to store closures. Second, as other major retailers have recently mentioned, we saw some moderate softness in consumer demand, particularly from lower-income households. Despite these headwinds, the team was able to deliver a very solid quarter with year-over-year increases in system-wide sales, same store sales, revenue, EBITDA, and EBITDA margin, and new units.

Daniel R. Rivera: Switching gears to Q1 performance Q1 was a difficult quarter with a few headwinds from weather and a softer retail environment. However, I am happy with the results our team achieved <unk>.

Daniel R. Rivera: First weather was not our friend in the first quarter, particularly in January January was the 10th wettest on record in the United States and multiple major winter storms forced us to lose over 200 retail days due to store closures.

Daniel R. Rivera: As other major retailers have recently mentioned, we saw some moderate softness with consumer demand, particularly from lower income households. Despite these headwinds the team was able to deliver a very solid quarter with year over year increases in systemwide sales same store sales revenue EBITDA and EBITDA margin.

Daniel R. Rivera: Units.

Daniel R. Rivera: That's the power of Driven's diversified platform. While some of our businesses, which I'll discuss shortly, may not be hitting on all cylinders, others are more than making up the slack. Before I jump into the segments, it's worth spending a moment on Driven's highly franchised business. Mako, Carstar, Meineke, and 1-800 are asset-light franchise businesses that are an important part of Driven's portfolio. These iconic businesses, some of which have been around for more than 50 years, continue to produce steady results, adjusted EBITDA margins north of 50%, and significant cash flow. They are a major part of Driven's DNA and performance, and I'd like once again to thank our franchisees for their hard work and dedication.

Daniel R. Rivera: That's the power driven diversified platform, while some of our businesses, which I will discuss shortly may not be hitting on all cylinders, others are more than making up the slack.

Daniel R. Rivera: Before I jump into the segments, it's worth spending a moment on driven highly franchise businesses Mako car Star Meinecke, and one 800, our asset light franchise businesses that are an important part of driven portfolio.

Daniel R. Rivera: These iconix businesses, some of which have been around for more than 50 years continued to produce steady results adjusted EBITDA margins north of 50% and significant cash flow.

Daniel R. Rivera: They are a major part of driven the DNA and performance and I would like to once again, thank our franchisees for their hard work and dedication.

Daniel R. Rivera: Moving on to our maintenance segment, which was up year-over-year in system-wide sales, revenue, adjusted EBITDA, and adjusted EBITDA margin. Take 5 Oil Change led the way and continued its streak of top-to-bottom growth. In Q1, FIBOs were up year-over-year about 16% in revenue, 7% in same-store sales, 30% in adjusted EBITDA, and 350 basis points in adjusted EBITDA margin. We also opened an additional 28 net locations in Q1, 162 more locations than in Q1 of 2023.

Daniel R. Rivera: Moving onto our maintenance segment, which was up year over year in system wide sales revenue adjusted EBITDA and adjusted EBITDA margin take.

Daniel R. Rivera: Take five oil change led the way and continued its streak of top to bottom growth in Q1 take fiber was up year over year about 16% in revenue, 7% and same store sales, 30% in adjusted EBITDA, and 350 basis points and adjusted EBITDA margin.

Daniel R. Rivera: We also opened an additional 28 net locations in Q1 162 more locations than in Q1 of 2023.

Daniel R. Rivera: About two-thirds of these locations are franchised. Take 5 Oil Change continues to win because of our differentiated, fast, friendly, and simple business model. We deliver stay-in-your-car oil changes in less than 10 minutes with no high-pressure selling.

Daniel R. Rivera: About two thirds of these locations are franchised.

Daniel R. Rivera: Five oil change continues to win because of our differentiated fast friendly and simple business model, we deliver stay in your car oil changes and less than 10 minutes with no high pressure selling.

Daniel R. Rivera: The result is a premium oil conversion rate of approximately 90 percent, ancillary attachment rates north of 40 percent, and top two box MPS scores in the mid-70s. Our growth plan for Take 5 Oil Change remains unchanged thanks to the success we've seen to date. As highlighted at our Investor Day, we will open about 150 new locations every year. Of these, about two-thirds will operate as franchises, while the remaining one-third will be corporate-owned.

Daniel R. Rivera: The result is a premium oil conversion rate of approximately 90%.

Daniel R. Rivera: Ancillary attachment rates north of 40% and top two box NPS scores in the mid seventies.

Daniel R. Rivera: Our growth plan for take five oil change remains unchanged. Thanks to the success, we've seen to date as.

Daniel R. Rivera: As highlighted at our Investor Day, we will open about 150, new locations every year.

Daniel R. Rivera: These about two thirds will operate as franchises, while the remaining one third will be corporate owned.

Daniel R. Rivera: We're planning for continued organic same-store sales growth due to a steady pipeline of newer vintages that are ramping, healthy repeat rates thanks to our differentiated service offering, and leaning into new channels that tap into new customer segments, such as online appointments. We launched online appointments towards the end of last year and have recently finished the rollout in our company-owned location. For 30 plus years of Take 5's history, no appointment was necessary, and customers were free to come anytime that was convenient.

Daniel R. Rivera: We're planning for continued organic same store sales growth due to a steady pipeline of newer vintages that are ramping healthy repeat rates. Thanks to our differentiated service offering and leaning into new channels that tap into new customer segments, such as online appointments.

Daniel R. Rivera: We launched online appointments towards the end of last year and have recently finished the rollout in our company owned locations for 30 plus years of <unk> history, No appointment was necessary and customers were free to come anytime that was convenient to them.

Daniel R. Rivera: Today, our No Appointment Necessary culture hasn't changed, but we now offer appointments for customers that are time-starved and want to carefully plan exactly when to get their next oil change. We're very encouraged with the results we've seen to date. In the stores where we've rolled out online appointments, this new channel has led to an incremental half car per day per store. Importantly, over 80% of the customers we're seeing through this new channel have either never been to Take 5 Oil Change or have lapsed, meaning they haven't been to Take 5 Oil Change in the past 12 months. Many thanks to Mo Khalid, President of Take 5 Oil Change, our employees, and our amazing franchisees for the continued success we've seen.

Daniel R. Rivera: Today, our no appointment necessary culture, Hasnt changed, but we now offer appointments for customers that are time start and want to carefully plan exactly when they get their next oil change.

Daniel R. Rivera: We're very encouraged with the results we've seen to date in the stores, where we've rolled out online appointments. This new channel has led to an incremental half car per day per store.

Daniel R. Rivera: Importantly over 80% of the customers we're seeing through this new channel have either never been to take five oil change or have elapsed, meaning they haven't been to take five oil change in the past 12 months.

Daniel R. Rivera: Many thanks to Moca lead president of take five oil change our employees and our amazing franchisees for the continued success we have seen.

Daniel R. Rivera: Moving over to our car wash segment, the softening of this part of our business continued into Q1 with year over year declines in revenue of about 8%, adjusted EBITDA of about 29%, and EBITDA margins of about 600 basis. We did see some positive signs, however, as we sequentially improved revenue and EBITDA. From an adjusted EBITDA margin perspective, we've maintained the variable cost improvements we made in Q4 into Q1. However, rents on a year-over-year basis were higher in the first quarter of 2024 by about $2 million due to the execution of sale leaseback.

Daniel R. Rivera: Moving over to a car wash segment. The softening of this part of our business continued into Q1 with year over year declines in revenue of about 8% adjusted EBITDA of about 29% and EBITDA margins of about 600 basis points. We did see some positive signs however, as we sequentially improved revenue and EBITDA from an adjusted.

Daniel R. Rivera: EBITDA margin perspective, we've maintained the variable cost improvements we made in Q4 into Q1, however rents on a year over year basis was higher in the first quarter of 2024 by about $2 million due.

Daniel R. Rivera: Due to the execution of sale leasebacks.

Daniel R. Rivera: While we saw approximately 65 basis points of a sequential drop in margins, this is entirely due to year-end rebates we received in Q4. The softness within the segment continues to be entirely due to our domestic business, as our international business, led by Tracy Gellin, turned in another solid quarter with positive year-over-year financial growth. The themes for our U.S. car wash business remain the same, but revenue declines due to unfavorable weather conditions and competitive intrusion. January was particularly difficult from a weather perspective for our U.S. car wash.

Daniel R. Rivera: While we saw approximately 65 basis points sequential drop in margins. This was entirely due to year end rebates, we received in Q4.

Daniel R. Rivera: The softness within the segment continues to be entirely due to our domestic business as our international business led by Tracey gallon turned in another solid quarter with positive year over year financial growth.

Daniel R. Rivera: The themes for our U S car wash business remain the same revenue declines due to unfavorable weather conditions and competitive intrusion.

Daniel R. Rivera: <unk> was particularly difficult from a weather perspective for our U S Carwash business.

Daniel R. Rivera: Massive winter storms forced store closures resulting in over 200 lost retail locations. Unlike other parts of our business, like oil changes, these tend to be lost occasions that do not result in pent-up future demand. The operational plan that we established for our U.S. car wash business in Q4 remains the same. Preserve the variable cost improvements we made and grow membership revenue. When it comes to growing membership revenue, we began testing some pricing changes in two markets in early Q1. Based on the encouraging results we saw with these two markets, we grew the test to approximately half of the portfolio early in March.

Daniel R. Rivera: The massive winter storms forced store closures, resulting in over 200 loss retail days. Unlike other parts of our business like oil change. These tend to be lost occasions that do not result in pent up future demand.

Daniel R. Rivera: The operational plan that we established for our U S car wash business in Q4 remains the same preserve the variable cost improvements, we made and grow membership revenue.

Daniel R. Rivera: When it comes to growing membership revenue, we began testing some pricing changes in two markets in early Q1.

Daniel R. Rivera: Based on the encouraging results we saw with these two markets. We grew the test to approximately half of the portfolio early in March.

Daniel R. Rivera: While we're in very early innings, this new program has materially improved both member conversion rates and churn rates. We continue to monitor this program closely and remain optimistic about what this could mean for the trajectory of the U.S. car wash business in 2024. Our PC&G segment had year-over-year decreases in revenue and adjusted EBITDA while generating positive same-store sales.

Daniel R. Rivera: While we are in very early innings. This new program has materially improved both member conversion rates and churn rates.

Daniel R. Rivera: We continue to monitor this program closely and remain optimistic about what this could mean for the trajectory of the U S car wash business in 2024.

Daniel R. Rivera: Our <unk> segment had year over year decreases in revenue and adjusted EBITDA, while generating positive same store sales.

Daniel R. Rivera: It's worth noting that we refranchised nine company-owned collision centers and secured a significant multi-year development agreement in January of this year. This leaves us with one remaining company-operated collision center. Refranchizing these locations naturally leads to a reduction in revenue for the segment with no changes to system-wide sales.

Daniel R. Rivera: It's worth noting that we re franchised nine company owned collision centers and secured a significant multi year development agreement in January of this year.

Daniel R. Rivera: This leaves us with one remaining company operated collision Center <unk>.

Daniel R. Rivera: Refranchising. These locations naturally leads to a reduction in revenue for the segment with no changes to system wide sales.

Daniel R. Rivera: When looking at the individual performance of Autoglass Now, Mako, and Carstar, we have a tale of two cities. Mako and Carstar continue to deliver solid performance and adjusted EBITDA margins in excess of 50%. Autoglass now continues to be a strategic growth area. The plan for Autoglass now that was established in Q4 hasn't changed, to improve our cost structure and grow revenue with a heavy focus on driving regional insurance. Michael Macaluso and the AGM team started 2024 on the right foot by delivering sequential growth in financial performance.

Daniel R. Rivera: When looking at individual performance of auto glass now Mako and car Star. We are a tale of two cities Mako in car store continued to deliver solid performance and adjusted EBITDA margins in excess of 50%.

Daniel R. Rivera: Aldo glass now continues to be a strategic growth area for us the plan for auto glass now that was established in Q4 hasnt changed improve our cost structure and grow revenue with a heavy focus on driving regional insurance.

Daniel R. Rivera: Michael Macaluso on the AGM team started 2024 on the right foot by delivering sequential growth and financial performance.

Daniel R. Rivera: The team also has a robust pipeline of regional insurance carriers that are in the latter stages of negotiation. We are optimistic that we will start to see growth in regional insurance revenue in the second half of 2024. Lastly, our platform services segment had another solid quarter with year-over-year increases in revenue, adjusted EBITDA, and adjusted EBITDA margin, driven by strong performance from 1-800 and SPIRE, which benefits directly from the continued amazing growth in Take-Five, the old change that I spoke about a moment ago.

Daniel R. Rivera: The team also has a robust pipeline of regional insurance carriers that are in the latter stages of negotiation. We are optimistic that we will start to see growth in regional insurance revenue in the second half of 2024.

Daniel R. Rivera: Lastly, our platform services segment had another solid quarter with year over year increases in revenue adjusted EBITDA and adjusted EBITDA margin driven by strong performance from one 800 and spire, which benefits directly from the continued amazing growth in take five oil change that I spoke about a moment ago I would also like to Echo Jonathan.

Daniel R. Rivera: I would also like to echo Jonathan's sentiments on Driven Advantage. We are excited with the results Kyle Marshall, EVP of our platform segment, and the team have been able to deliver just one short year after building this truly unique platform. To summarize, I'm proud of the year-over-year growth the Driven team, both employees and franchisees, achieved despite facing many headwinds in the quarter. While there's still much work ahead to get our U.S. car wash and glass businesses to where we want them to be, Take 5 Oil Change continues to knock it out of the park, and our franchise businesses remain strong. With that said, I'd like to hand it over to my partner, Gary.

Daniel R. Rivera: <unk> sentiments on driven advantage. We are excited with the results call Marshall EVP of our platform segment and the team have been able to deliver just one short year into building this truly unique platform.

Daniel R. Rivera: To summarize I am.

Daniel R. Rivera: Proud of the year over year growth, a driven team both employees and franchisees achieved despite facing many headwinds in the quarter, while theres still much work ahead to get our U S car, Washington glass businesses to where we want them to be take five oil change continues to knock it out of the park and our franchise businesses remained strong with that I'd like.

Daniel R. Rivera: Hand, it over to my partner Gary.

Gary W. Ferrera: Thanks, Danny, and welcome everyone. This morning, I will review our first quarter financial performance and discuss our outlook for the rest of the year. Before I start, I just want to take a moment to thank Jonathan and Danny for being such great partners.

Gary W. Ferrera: Thanks, Danny and welcome everyone. This morning, I will review, our first quarter financial performance and discuss our outlook for the rest of the year before I start I just want to take a moment to thank Jonathan and Danny for being such Great partners. It's been in order to work alongside both of you. The rest of the executive team our board of directors and all of our.

Gary W. Ferrera: It's been an honor to work alongside both of you, the rest of the executive team, our board of directors, and all of our incredible employees. I joined Driven Brands a year ago, and while 2023 was a bit of a challenge, we adjusted course where needed and delivered on a revised outlook. The team is now focused on accelerating growth in 2024 while remaining hyper-focused on generating cash flow and delivery. While I will miss working with everyone, I look forward to being able to spend more time with my family in Colorado.

Daniel R. Rivera: <unk> employees.

Daniel R. Rivera: I joined driven brands, a year ago, and while 2023 was a bit of a challenge, we adjusted course, where needed and delivered on our revised outlook.

Daniel R. Rivera: The team is now focused on accelerating growth in 2024, while remaining hyper focused on generating cash flow and delevering.

Speaker Change: While I will Miss working with everyone I look forward to being able to spend more time with my family in Colorado he'll be joining a private company and as Jonathan mentioned partnering with a long term friend.

Gary W. Ferrera: I'll be joining a private company and, as Jonathan mentioned, partnering with a long-term friend. Importantly, I will leave here knowing that Driven Brands is in very capable hands and has a bright future ahead. Now turning to our results, as Jonathan and Danny discussed, we had extremely challenging weather during the quarter, especially in the U.S. during January. Additionally, we experienced some moderate softness in consumer demand, particularly from lower-income households. Even with these challenges, we still delivered our 13th straight quarter of positive same-store sales growth.

Speaker Change: Importantly, I believe here knowing the driven brands is in very capable hands and has a bright future ahead.

Speaker Change: Now turning to our results as Jonathan and Danny discussed we had extremely challenging weather during the quarter.

Speaker Change: Especially in the U S. During January.

Speaker Change: Additionally, we experienced some moderate softness with consumer demand, particularly from lower income households.

Speaker Change: Even with these challenges we still delivered our 13th straight quarter of positive same store sales growth.

Speaker Change: Adjusted EBITDA and adjusted EBITDA margin for the quarter increased both sequentially and year over year and cash flows from operations increased approximately 64%.

Gary W. Ferrera: Adjusted EBITDA. The adjusted EBITDA margin for the quarter increased both sequentially and year-over-year, and cash flows from operations increased approximately 64 percent. I am proud of how well our team executed in a dynamic environment, especially how they managed the bottom line.

Speaker Change: I am proud of how well our team executed in a dynamic environment, especially how they manage the bottom line.

Gary W. Ferrera: For the first quarter, our system-wide sales were $1.6 billion, up 6.7% versus the prior year. This growth was driven by 144 net new stores year over year and 0.7% same store sales growth. As planned, the majority of our new store openings came from the maintenance segment, with approximately 60% of those being franchise openings.

Speaker Change: For the first quarter, our system wide sales were $1 6 billion up six 7% versus the prior year.

Speaker Change: This growth was driven by a 144 net new stores year over year.

Speaker Change: And 7% same store sales growth.

Speaker Change: As planned the majority of our new store openings came from the maintenance segment with approximately 60% of those being franchise openings.

Gary W. Ferrera: Our same store sales performance for the first quarter was lower than the outlook we provided for the full year 2024 but in line with our expectations for the quarter. The lower growth rate was primarily driven by the extreme weather in January impacting most of our businesses, as well as generally poor weekend weather impacting the car wash segment. We continue to expect same-store sales for the full year to be between 3 and 5 percent and for the majority of that growth to occur in the second half of the year.

Speaker Change: Our same store sales performance for the first quarter was lower than the outlook. We provided for the full year 2024, but in line with our expectations for the quarter.

Speaker Change: The lower growth rate was primarily driven by the extreme weather in January impacting most of our businesses as well as generally poor weekend weather impacting the Carwash segment.

Speaker Change: We continue to expect same store sales for the full year to be between three and 5%.

Speaker Change: And for the majority of that growth to occur in the second half of the year.

Gary W. Ferrera: As a reminder, we had our highest same-store sales in 2023 during the first quarter. Total revenue for the quarter was $572.2 million, and adjusted EBITDA was $131 million, an increase of 1.7% and 6.1%, respectively. Adjusted EBITDA margin was 22.9%, representing an increase of 95 basis points versus the prior year period. Cash provided by operating activities was $60.3 million versus $36.8 million in the prior year quarter, an increase of approximately 64%. I will now focus on our performance by Sigman.

Speaker Change: As a reminder, we had our highest same store sales in 2023 during the first quarter.

Speaker Change: Total revenue for the quarter was $572 2 million and adjusted EBITDA was $131 million.

Speaker Change: An increase of one 7% and six 1% respectively.

Speaker Change: Adjusted EBITDA margin was 22, 9%, representing an increase of 95 basis points versus the prior year period.

Speaker Change: Cash provided by operating activities was $60 3 million versus $36 8 million in the prior year quarter.

Speaker Change: An increase of approximately 64%.

Speaker Change: I will now focus on our performance by segment.

Gary W. Ferrera: In our maintenance segment, system-wide sales were $500 million, and same-store sales grew 4.8%. Our same store sales growth and margin expansion were driven by strong attachment rates of our ancillary products, particularly coolant, which helped drive ticket expansion and take five oil changes. During the quarter, we opened 28 net new stores, with 19 franchise stores and nine company-owned stores.

Gary W. Ferrera: In our maintenance segment systemwide sales were $500 million and same store sales grew four 8%.

Speaker Change: Our same store sales growth and margin expansion were driven by strong attachment rates of our ancillary products, particularly coolant, which helped drive ticket expansion in take five oil change.

Gary W. Ferrera: During the quarter, we opened 28 net new stores with 19 franchise stores and nine company owned stores.

Gary W. Ferrera: We achieved revenue of $261.7 million and adjusted EBITDA of $91.4 million, representing growth of 15% and 26.6% respectively. The adjusted EBITDA margin of 34.9% increased 320 basis points versus the prior year period. In our car wash segment, same-store sales declined 7.4%. This decline was driven by our U.S. car wash operations, which saw lower volume due to weather and competitive intrusion.

Gary W. Ferrera: We achieved revenue of $261 7 million and adjusted EBITDA of $91 4 million representing growth of 15% and 26, 6% respectively.

Gary W. Ferrera: While adjusted EBITDA margin at 34, 9% increased 320 basis points versus the prior year period.

Gary W. Ferrera: And our Carwash segment same store sales declined seven 4%.

Gary W. Ferrera: This decline was driven by our U S car wash operations, which saw lower volume due to weather and competitive intrusion.

Gary W. Ferrera: We delivered revenue of $144.7 million and adjusted EBITDA of $29.1 million. While these represent significant declines from the prior year period, we experienced sequential growth in revenue and adjusted EBITDA of 8.7% and 5.2%, respectively, versus the fourth quarter of 2023, despite having the benefit of some one-time rebates being recognized in Q4 and considerable weather disruptions in the first quarter of 2024. And our PC&G segment, system-wide sales were $882.1 million, up 8.1% driven by our franchise business. Fame Store sales increased 1.3%.

Gary W. Ferrera: We delivered revenue of $144 7 million and adjusted EBITDA of $29 1 million.

Gary W. Ferrera: While these represent significant declines from the prior year period, we experienced sequential growth in revenue and adjusted EBITDA of eight 7% and five 2% respectively versus the fourth quarter of 2023, despite having the benefit of some onetime rebates being recognized in Q4 and considerable weather disrupt.

Gary W. Ferrera: <unk> in the first quarter of 2024.

Gary W. Ferrera: And our <unk> segment Systemwide sales were $882 1 million up eight 1% driven by our franchise businesses.

Gary W. Ferrera: Same store sales increased one 3%.

Gary W. Ferrera: Revenue was $106.4 million, and adjusted EBITDA was $30.8 million, resulting in decreases of 11.9% and 13.1%, respectively. These declines were primarily driven by the re-franchizing of nine company-owned collision stores earlier this year and the performance at Auto Glass Now.

Gary W. Ferrera: Revenue was $106 4 million and adjusted EBITDA was $30 8 million.

Gary W. Ferrera: <unk> and decreases of 11, 9% and 13, 1% respectively.

Gary W. Ferrera: These declines were primarily driven by the Refranchising of nine company owned collision stores earlier this year and the performance at auto glass now.

Gary W. Ferrera: In our platform services segment, we delivered revenue of $53.8 million and adjusted EBITDA of $19.9 million for growth of 3.4% and 16.8%, respectively. Adjusted EBITDA margin increased 423 basis points versus the prior year to 36.9%, which was due to effective cost management. Corporate and other spending decreased 3.9% primarily due to the timing of third-party expenses, which we expect will hit in future quarters.

Gary W. Ferrera: And our platform services segment, we delivered revenue of $53 8 million and adjusted EBITDA of $19 9 million for growth of three 4% and 16, 8% respectively.

Gary W. Ferrera: Adjusted EBITDA margin increased 423 basis points versus the prior year to 36, 9%.

Gary W. Ferrera: Which was due to effective cost management.

Gary W. Ferrera: Corporate and other spending decreased three 9% primarily due to the timing of third party expenses, which we expect will hit in future quarters.

Gary W. Ferrera: Now I will focus on some key components below Adjusted EBITDA. For the quarter, depreciation and amortization expenses totaled $43.2 million, which was an increase of $5 million from the prior year due to an increase in company-owned stores. Additionally, interest expense was $43.8 million, a $5.6 million increase from the prior year, primarily due to higher interest rates and increased use of the revolver.

Gary W. Ferrera: Now I will focus on some key components below adjusted EBITDA.

Gary W. Ferrera: For the quarter depreciation and amortization expenses totaled $43 2 million, which was an increase of $5 million from the prior year due to an increase in company owned stores.

Gary W. Ferrera: Additionally, interest expense was $43 8 million or $5 6 million increase from the prior year.

Gary W. Ferrera: Primarily due to the higher interest rates and increased use of the revolver.

Gary W. Ferrera: Net income for the first quarter was $4.3 million versus net income of $29.7 million in Q1 2023, or a decrease of $25.5 million. This decrease was primarily due to asset impairment and lease termination charges, as well as the increases in DNA and interest expense that I just mentioned. Adjusted Net Income was $38.1 million in the first quarter, slightly lower than $39.1 million last year, resulting in adjusted diluted EPS of $0.23, flat versus the same period in 2020.

Gary W. Ferrera: Net income for the first quarter was $4 3 million versus net income of $29 7 million in Q1, 2023, or a decrease of $25 $5 million.

Gary W. Ferrera: This decrease was primarily due to asset impairment and lease termination charges as well as the increases in DNA and interest expense that I just mentioned.

Gary W. Ferrera: Adjusted net income was $38 1 million in the first quarter slightly lower than the $39 1 million last year, resulting in adjusted diluted EPS of 23.

Gary W. Ferrera: Flat versus the same period in 2023.

Gary W. Ferrera: Gross capital investments were $89.5 million for the quarter versus $169.2 million in the same period last year. This is a 47% reduction from the first quarter of 2023 and consistent with our expectations based on the full year outlook we shared last quarter. Total sale leaseback activity for the quarter was $4.5 million, driven by our maintenance segment.

Gary W. Ferrera: Gross capital investments were $89 5 million for the quarter versus $169 2 million in the same period last year. This is a 47% reduction from the first quarter of 2023 and consistent with our expectations based on the full year outlook, we shared last quarter.

Gary W. Ferrera: Total sale leaseback activity for the quarter was $4 5 million driven by our maintenance segment. This resulted in net capex of $84 9 million, which is consistent with the dream Big 2026 plan that we shared at our Investor day in September of 2023.

Gary W. Ferrera: This resulted in net capex of $84.9 million, which is consistent with the Dream Big 2026 plan that we shared at our Investor Day in September of 2023. As I mentioned last quarter, we're in the process of rolling out a new Enterprise Resource Planning, or ERP, system. As a reminder, this project will replace multiple legacy ERP systems with Oracle Fusion.

Gary W. Ferrera: As I mentioned last quarter, we are in the process of rolling out a new enterprise resource planning or ERP system.

Gary W. Ferrera: As a reminder, this project will replace multiple legacy ERP systems with Oracle fusion use.

Gary W. Ferrera: U.S. GAAP does not consider investments in cloud computing to be a capital investment. Therefore, our ERP project investment flows through operating cash flows. At quarter end, our net leverage ratio declined sequentially to 4.92 times versus 4.96 times for Q4 2023. We anticipate continued de-levering throughout 2024, as future quarters will have increased operating cash flow and decreased CapEx spend, all while we continue to generate cash through our U.S. Car Wash assets are held for sale.

Gary W. Ferrera: U S. GAAP does not consider investments in cloud computing to be a capital investment therefore, our ERP project investment flows through operating cash flows.

Gary W. Ferrera: At quarter end, our net leverage ratio declined sequentially to $4 92 times versus 496 times for Q4 2023, we anticipate continued delevering throughout 2024 as future quarters will have increased operating cash flow and decreased capex spend all while.

Gary W. Ferrera: We continue to generate cash through our U S carwash assets held for sale.

Gary W. Ferrera: We generated $33 million in cash through these sales during Q1 and remain on track to deliver at least $100 million in 2024. At quarter end, the balance on the revolving credit facility was $248 million, consistent with year end 2023. And as of earlier this week, we are now down to a balance of $223 million. We expect this amount to continue to decline as we move through the rest of the year. At the end of the first quarter, we had $308 million in liquidity, comprising $166 million in cash and cash equivalents, along with $142 million of undrawn capacity on our variable funding, securitization, senior notes, and our revolving credit facility. This does not account for the additional $135 million of variable funding notes, which could be utilized at the company's discretion if specific conditions continue to be met.

Gary W. Ferrera: We generated $33 million in cash through these sales during Q1 and remain on track to deliver at least $100 million in 2024.

Gary W. Ferrera: At quarter end the balance on our revolving credit facility was $248 million.

Gary W. Ferrera: <unk> with year end 2023, and as of earlier. This week, we are now down to a balance of $223 million and we expect this amount to continue to decline as we move through the rest of the year.

Gary W. Ferrera: At the end of the first quarter, we had $308 million in liquidity comprising of $166 million in cash and cash equivalents, along with $142 million of Undrawn capacity on our variable funding securitization senior notes and our revolving credit facility.

Gary W. Ferrera: Our liquidity does not account for the additional $135 million of variable funding notes, which could be utilized at the company's discretion. If specific conditions continue to be met.

Gary W. Ferrera: I will now turn to our outlook for the remainder of fiscal 2024. While we had significant weather-related issues in the first quarter and we noticed some softness in consumer spending, we are reaffirming our fiscal 2024 outlook that we provided on our fourth-quarter earnings call. As a reminder, that consisted of revenue of between $2.35 and $2.45 billion, adjusted EBITDA of $535 to $565 million, and adjusted diluted EPS of $0.88 to $1.

Speaker Change: I will now turn to our outlook for the remainder of fiscal 2024.

Gary W. Ferrera: While we had significant weather related issues in the first quarter and we noticed some softness in consumer spending we are reaffirming our fiscal 2024 outlook that we provided on our fourth quarter earnings call.

Gary W. Ferrera: As a reminder that consisted of revenue of between 235 to $4 5 billion adjusted EBITDA of $535 to $565 million and adjusted diluted EPS of <unk> 88 to $1.

Gary W. Ferrera: We also continue to expect same-store sales growth of 3 to 5% in 2024. While we don't provide a specific quarterly outlook, we continue to expect that approximately 80% of the year-over-year adjusted EBITDA total growth will come in the second half of the year. As we laugh, we could see comparable and see continued improvement in our U.S. car wash and U.S. glass business. We expect adjusted EBITDA to peak in Q2 and decline sequentially throughout the remainder of the year.

Gary W. Ferrera: We also continue to expect same store sales growth of 3% to 5% in 2024.

Gary W. Ferrera: While we don't provide specific quarterly outlook, we continue to expect that approximately 80% of the year over year adjusted EBITDA total growth will come in the second half of the year.

Gary W. Ferrera: As we lap weaker comparable and see continued improvement in our U S carwash and use glass businesses.

Gary W. Ferrera: We expect adjusted EBITDA to peak in Q2 and declined sequentially throughout the remainder of the year.

Gary W. Ferrera: Last year we had a very strong second quarter; therefore, we currently anticipate second quarter adjusted EBITDA growth to be in the low single digits. While we are focused on accelerating growth in our business segments, we remain committed to generating cash in order to pay down debt and remain hyper-focused on driving leverage down to our target of below 4.5 times by year-end. While we experienced a modest sequential decrease in leverage in Q1, we expect slightly greater delevering in Q2, and continue to expect the majority of the decrease to occur in the second half of the year. I will now turn the call back over to the operator.

Gary W. Ferrera: Last year, we had a very strong second quarter. Therefore, we currently anticipate second quarter adjusted EBITDA growth to be in the low single digits.

Gary W. Ferrera: While we are focused on accelerating growth in our business segments, we remain committed to generating cash in order to pay down debt and remain hyper focused on driving leverage down to our target of below four five times by year end.

Gary W. Ferrera: While we experienced a modest sequential decrease in leverage in Q1, we expect slightly greater delevering in Q2 and continue to expect the majority of the decrease to occur in the second half of the year.

Speaker Change: I will now turn the call back over to the operator.

Unknown Executive: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchstone phone. You will hear a prompt that your hand has been detected. Should you wish to decline from the polling process, please press the star followed by the number zero. If you are using a speakerphone, please lift the handset before pressing any button.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one on your Touchtone phone.

Unknown Executive: You will hear pump that <unk> had has been graced should you wish to decline from the Pulliam process. Please press the star followed by the number too.

Unknown Executive: We are using a speaker phone please lift the handset before pressing any.

Unknown Executive: One moment, please, for our first question. Your first question comes from Simeon Gutman from Morgan Stanley. Please go ahead.

Unknown Executive: One moment please for our first question.

Unknown Executive: Your first question comes from Simeon Gutman from Morgan Stanley. Please go ahead.

Unknown Executive: Good morning, everyone. I wanted to ask about car washes in this environment. I heard, you know, you mentioned international positive. So the U.S. is a little bit weaker. Can you talk about just the competitive set? And curious, because it seems like maybe the membership models are maybe performing a little bit better, a little stickier right now. You know, is that a disadvantage? I'm not sure how much that matters in this or if it's the weather because, you know, call it the retailer, the occasional customer just didn't have a reason to show up this quarter.

Simeon Ari Gutman: Good morning, everyone.

Simeon Ari Gutman: Wanted to ask about car wash in this environment I heard you mentioned international positive. So U S is a little bit weaker.

Unknown Executive: Can you talk about just the competitive set and curious because it seems like maybe the membership models.

Unknown Executive: Maybe performing a little bit better a little stickier right now.

Unknown Executive: Is that is that a disadvantage I'm not sure how much that matters in this or if it's weather because call. It the retailer the occasional customer just didn't have a reason to show up this quarter.

Jonathan G. Fitzpatrick: Hey Simeon, I'll start and Danny can certainly chime in. Look, I think that the three contributing factors to the, you know, the loss or lower revenue in Q1 really were that sort of extreme weather conditions, definitely some softness with the retail consumer, and obviously, competitive intrusion hasn't really changed. I think what Danny mentioned is this new pricing promotion effort that we kicked off and tested within Q1, targeting membership, you know, is showing some nice early results. So Danny, I don't know if you wanted to add anything. No, I'm fine.

Speaker Change: Hey, Jamie I'll start and Danny can certainly chime in look I think the three contributing factors on the.

Jonathan G. Fitzpatrick: Los are lower revenue in Q1, really where that sort of extreme weather conditions definitely some.

Jonathan G. Fitzpatrick: Softness with the retail consumer.

Jonathan G. Fitzpatrick: And obviously competitive intrusion hasnt really changed I think what Danny mentioned is this new pricing promotion effort that we kicked off and tested in Q1.

Jonathan G. Fitzpatrick: Targeting.

Jonathan G. Fitzpatrick: Membership is showing some nice early results. So Danny I don't know if you wanted to add anything no I think I'd just echo what Jonathan just said I mean, the pricing kind of changes that we're leaning into value a little bit more and we're seeing a nice.

Daniel R. Rivera: No, I think I just echo what Jonathan just said. I mean, the pricing kind of changes, and we're leaning into value a little bit more, and we're seeing a nice, positive change to member conversion and to retention. So, it's early innings.

Speaker Change: A nice positive change to member conversion and retention so.

Unknown Attendee: Okay, and then I guess my follow-up is... I guess, the complexion on, you know, the path to hire EBITDA, I'm reluctant to say, you know, the 850 number, given, you know, maybe it's a moving target. But thinking about the pieces we took, we talked about maturing businesses, and then sort of growth pieces, and then the different contributions among the different businesses. You know, this is only a quarter into this year, but clearly, maintenance is leading the charge.

Speaker Change: Early innings there.

Daniel R. Rivera: Okay, and then I.

Speaker Change: I guess my follow up is.

Unknown Attendee: I guess the complexion on the path to higher EBITDA I'm reluctant to say the $8 50 number given maybe it's a moving target.

Unknown Attendee: Thinking about the pieces, where we took the we talk about maturing businesses and then sort of the growth pieces and then the different contributions among the different businesses.

Unknown Attendee: Is that sort of different or expected in the way that you'd, you know, you thought the progression would look in 2024? And are the pieces moving around? Is paint collision and glass going, you know, like a positive or sort of a negative to that, to that contribution path, if that makes sense?

Unknown Attendee: This is only a quarter into this year, but clearly maintenance is leading the charge.

Unknown Attendee: Is that sort of different ore expected in the way that you thought the progression would look in 2024 and other pieces moving around is paint collision and glass going in it looks like.

Unknown Attendee: A positive or negative to that to that contribution path if that makes sense.

Jonathan G. Fitzpatrick: Yeah, thematically, Simeon, the growth that we've seen in the maintenance segment is what we've underwritten for, you know, the multi-year growth profile. So there's nothing different there in terms of maintenance leading the charge. Obviously, our Driven Advantage platform continues to do really, really well. And then, you know, over time, we're excited about the opportunity to grow that glass business. So thematically, nothing different from what you're seeing in Q1, still some volatility, certainly within the U.S. car wash business.

Speaker Change: Yes, see medically Simeon the growth that we've seen in the maintenance segment as what we've underwritten for the multi year growth profile.

Jonathan G. Fitzpatrick: So theres nothing different there in terms of maintenance leading the charge.

Jonathan G. Fitzpatrick: Obviously, our driven advantage platform continues to do really really well and then over time, we're excited about the opportunity to grow that <unk> business. So thematically nothing different what youre seeing in Q1 still some volatility certainly within the U S car wash business and.

Jonathan G. Fitzpatrick: And you know, but again, our focus right now is, you know, the outlook that we gave on the last earnings call and Gary reiterated this morning is all about delivering a really great 2024. But thematically, you're not seeing anything different in the trajectory of the business. Okay. That's helpful. Thanks.

Jonathan G. Fitzpatrick: But again, our focus right now is.

Jonathan G. Fitzpatrick: The outlook that we gave on the last earnings call and Gary reiterated. This morning is all about delivering a really great 2024, but theoretically youre not seeing anything different in the trajectory of the business.

Unknown Attendee: Okay, that's helpful. Thanks. Good luck.

Speaker Change: Okay. That's helpful. Thanks, and good luck.

Unknown Attendee: Okay.

Unknown Attendee: Your next question comes from the line of Peter Benedict from Baird. Please ask your question.

Unknown Attendee: Your next question comes from the line of Peter Benedict from Baird. Please ask your question.

Unknown Attendee: Hey, guys. Good morning. Thanks for taking the question. And Gary, good luck.

Peter Sloan Benedict: Hey, guys. Good morning, Thanks for taking the question Gary Good luck.

Unknown Attendee: The.

Peter Sloan Benedict: I guess a quick follow up on <unk> question, just the changes youre doing and Carwash Im not sure. If you can give us a little bit more detail on what exactly youre doing what what you tried.

Peter Sloan Benedict: What's working there and what's kind of baked into your outlook now from that.

Peter Sloan Benedict: Have you have you assumed.

Peter Sloan Benedict: The improvement that you've seen initially and rolled that through to the balance of the year or.

Peter Sloan Benedict: If those impacts were to play out would that be incremental to your view with carwash for the balance sheet. That's my first question.

Unknown Attendee: A quick follow-up on Simeon's question, just the changes you're doing in Car Wash. I'm not sure if you can give us a little bit more detail on what exactly you're doing, what you tried. What's working there? And what's kind of baked into your outlook now from that? Have you assumed, you know, the improvement that you've seen initially and rolled that through to the balance of the year or not? If those impacts were to play out, would that be incremental to your view with car wash for the balance of the earth? That's my first question.

Jonathan G. Fitzpatrick: Yeah, I'll start. Good morning, Pete.

Peter Sloan Benedict: Yeah I'll start good morning, Pete.

Speaker Change: It's attached to a rolling this out to a number of stores as we continue to see positive momentum from the test we're not changing at this point any any outlook for 2024 at a driven or a car washed level. Our focus again is on hitting the outlook that we've given and we re.

Speaker Change: Reiterated that this morning.

Jonathan G. Fitzpatrick: You know, it's a test. We're rolling this out to, you know, a number of stores as we continue to see positive momentum from the test. We're not changing, at this point, any outlook for 2024 at a Driven or Car Wash level. You know, our focus is again on hitting the outlook that we've given, and we reiterated that this morning. I think the test that, you know, Danny and Tim Austin, our new leader, have been running really is thinking about, you know, how do we develop higher levels of membership, which obviously is very important to create predictability and reduce volatility in sort of the revenue stream. So that's our focus, and I still think that we're still seeing, you know, softness in general retail, but our focus is on building that membership base to sort of create incremental predictability in this segment.

Speaker Change: I think that test that Danny and Tim Austin, our new leader have been running really is thinking about how do we.

Jonathan G. Fitzpatrick: Develop higher levels of membership, which obviously is very important to create.

Jonathan G. Fitzpatrick: Predictability and reduce volatility in sort of the revenue stream. So that's our focus and I still think that we're still seeing softness in general retail, but our focus is on building that membership base to sort of create.

Jonathan G. Fitzpatrick: Incremental predictability in this segment.

Jonathan G. Fitzpatrick: Okay, fair enough. You know, one of the three focus areas you mentioned, Jonathan, was managing the portfolio. I'm curious how the performance of the US Car Wash business kind of impacts your confidence in realizing at least, I guess, 100 million dollars in proceeds from asset disposition this year. Does it make you more motivated? Does it make it harder to do?

Speaker Change: Okay fair enough.

Jonathan G. Fitzpatrick: One of the three focus areas you mentioned, Jonathan was managing the portfolio.

Jonathan G. Fitzpatrick: I'm curious how the performance of the U S carwash business kind of impacts here.

Jonathan G. Fitzpatrick: Kind of your confidence in realizing at least I guess, its a $100 million of proceeds from asset disposition. This year does it does it make it more motivated does it make it harder to do.

Jonathan G. Fitzpatrick: Just kind of curious where your mind is, your mindset is today relative to 90 days ago. Thank you.

Jonathan G. Fitzpatrick: Just kind of curious where your mind is your mindset is today relative to 90 days ago. Thank you.

Daniel R. Rivera: Yeah, the assets held for sale are the sort of dispositions that we're working on completely completely isolated from the day-to-day running of the business, Pete. So I think, you know, we're pleased with the $33 million of proceeds in Q1. Our target is still at least $100 million for the balance of the year. So that really is managed completely separately and distinctly from the day-to-day running of the business. I think, you know, I'll let Danny talk about the efforts and how he feels about the U.S. car wash business, and, obviously, with Tim on board now. Yeah.

Jonathan: Yes, the assets held for sale or that sort of dispositions that were working on really is completely isolated from the day to day running of the business. Pete. So I think we're pleased with the $33 million of proceeds in Q1, our target is still at least $100 million for the balance of the year. So that really is managed completely separately and distinctly from the day to day running of the business.

Daniel R. Rivera: I think I'll, let Danny talk about the efforts and how he feels about the U S car wash business, then obviously with him onboard now.

Daniel R. Rivera: Yeah, as far as the US car wash business, I mean, I just reiterate there are really two things that the team is focused on that we laid out in Q4. So let's preserve the variable cost improvements that we made in Q4, which Tim and the team have done a really nice job doing, and we've preserved that going into Q1. And I mentioned, although you'll see a sequential degradation in margins, it's entirely due to some rebates in Q4. So if you double-click on that, Tim's done a really nice job on the team preserving what we did in Q4.

Danny: As far as the U S car wash business I mean, I'd, just reiterate theres really two things that the team is focused on that we laid out in Q4, so let's preserve the variable cost improvements that we made in Q4, which Tim and the team have done a really nice job doing and we preserve that going into Q1.

Daniel R. Rivera: And I mentioned, although youll see a sequential degradation in margins.

Daniel R. Rivera: Partly due to some rebates in Q4, so if you double click into that Tim has done a really nice job and the team preserving what we did in Q4 and then growing the membership revenue, which we've talked about the test is encouraging we're seeing increased conversion rates we're seeing.

Daniel R. Rivera: And then growing the membership revenue, which we've talked about, the test is encouraging. We're seeing increased conversion rates. We're seeing reduced churn rates. So we're seeing all the things we want to see.

Daniel R. Rivera: Reduced churn rates. So we're seeing all things we want to see.

Unknown Attendee: Got it. Great. Good luck, guys. Thank you.

Speaker Change: Got it great. Good luck guys. Thank you.

Daniel R. Rivera: Thanks.

Unknown Attendee: Your next question comes from Robbie Ohms from Bank of America. Please ask your question.

Speaker Change: Your next.

Unknown Attendee: Question comes from Robby <unk> from Bank of America. Please ask your question.

Unknown Attendee: Oh, hey, Jonathan. You know, my question was, my first question was, if we could get a little more color on the sort of low-income consumer weakness. And I think I'd be curious, when you look at the segment, historically, when the low-income consumer is, you know, weakening, which segments do better and which segments do worse? And so, you know, so, for example, is auto glass? Does the auto glass segment have more negative exposure to low-income consumer weakness or or not? You know, any kind of thoughts on that would be really helpful.

Robert Frederick Ohmes: Oh, Hey, Jonathan.

Unknown Attendee: My question was.

Unknown Attendee: My first question was if we could get a little more color on the sort of low income consumer weakness I think I'd be curious what when you look at the segments.

Unknown Attendee: Historically, when the low income consumers.

Unknown Attendee: <unk>, which segments do better and which segments do worse. So for example is auto glass to solve the auto glass segment have more.

Unknown Attendee: Negative exposure to low income consumer weakness or.

Speaker Change: Not any kind of thoughts on that would be really helpful.

Jonathan G. Fitzpatrick: Yeah, great. Thanks, Robbie. Good morning.

Jonathan: Yes, great. Thanks, Rob and good morning, really what we're saying is I am not calling out any of our individual businesses as having direct.

Jonathan G. Fitzpatrick: Really, what we're saying is I'm not calling out any of our individual businesses as having direct, you know, impact at this moment on lower-income households. What I'm saying is that, you know, given sort of the inflationary environment, we do believe that that customer cohort is likely to be the most challenged throughout the balance of the year. So that's sort of number one.

Jonathan G. Fitzpatrick: Impact at this moment with the lower income households, what I'm, saying is that given sort of the inflationary environment. We do believe that that customer cohort is likely to be the most challenged throughout the balance of the year. So that's sort of number one I think when you think about driven in our portfolio Theres a couple of things that are naturally in our favor.

Jonathan G. Fitzpatrick: I think when you think about Driven in our portfolio, there's a couple of things that are naturally in our favor. Number one, as we mentioned last on the last call, about 50% of our sales come from commercial or B2B customers. So that's a really nice hedge, and obviously, there's no, you know, household income impacts there with that B2B customer set.

Jonathan G. Fitzpatrick: Number one we mentioned last on the last call about 50% of our sales come from commercial or <unk> customers. So that's a really nice hedge and obviously theres no.

Jonathan G. Fitzpatrick: Household income impacts there, but that <unk> customer set I think the other thing is if you look across our portfolio. The majority of our businesses Ravi our needs based businesses. So it's very hard to put those off you really have to get those done. If you look at the history of driven brands and obviously, we've only been public a couple of years if you look.

Jonathan G. Fitzpatrick: I think the other thing is, if you look across our portfolio, the majority of our businesses, Robbie, are needs-based businesses. So it's very hard to put those off. You really have to get those done.

Jonathan G. Fitzpatrick: If you look at the history of Driven Brands, and obviously, you know, we've only been public for a couple of years, if you look at the last two major sort of financial stress points, you know, the 07-08 time, and obviously, you know, March of 2020, because of our needs-based businesses, you know, we see very minimal impact, you know, over time in those two time periods. So I'm just calling out that I think there will likely be an incremental challenge to those lower household incomes with the inflationary environment, but I think Driven is uniquely positioned to sort of manage through that. So that's what I would say.

Jonathan G. Fitzpatrick: The last two major set of financial stress points 070, wait time, and obviously March of 2020 because of our needs based businesses.

Jonathan G. Fitzpatrick: We see very minimal impact over time in those two time periods. So I'm, just calling out that I think there is likely incremental challenge those lower household incomes with the inflationary environment, but I think driven is uniquely positioned to sort of manage through that so that's what I would say.

Unknown Attendee: Gotcha, that's really helpful. And then just a follow-up, just on take five with the online appointments. I'm just curious how you manage that. If that takes off like a rocket and you get a ton of online appointments, does that interfere at all with the drive-up customer?

Speaker Change: Got you that's really helpful. And then just a follow up just on page five with the with.

Speaker Change: With the online appointments.

Speaker Change: Just curious.

Speaker Change: How do you manage that if that takes off like a rocket and U.

Speaker Change: You just get a ton of online appointments does that interfere at all with the drive up customer.

Daniel R. Rivera: No. Hey, Robbie, this is Danny.

Unknown Attendee: No Hey, Ravi this is Danny I appreciate the question no. It doesn't interfere so the team's done a really nice job of accounting for our model predominantly as we want folks to come in at any time no appointment necessary the way that we've rolled out appointments that accounts for our business model and it won't interfere so it's pretty intelligently laid out and we like what we're seeing so far.

Robbie: Great. Thanks, so much.

Daniel R. Rivera: Okay.

Daniel R. Rivera: I appreciate the question. No, it doesn't interfere. So the team's done a really nice job of accounting for, you know, our model predominantly is that we want folks to come in at any time, no appointment necessary. The way that we've rolled out appointments accounts for our business model, and it won't interfere. So it's pretty intelligently laid out, and we like what we're seeing so far.

Daniel R. Rivera: Your next question comes from Seth Sigman from Barclays. Please ask your question.

Unknown Attendee: Great, thanks so much.

Speaker Change: Great. Thanks, Good morning, everyone I wanted to focus on the maintenance segment and the demand trends any more color on just the cadence after that difficult January I guess, what did you see the rest of the quarter and then even early here in the second quarter.

Unknown Attendee: Your next question comes from Seth Sigman from Barclays. Please ask your question.

Seth Ian Sigman: Any more perspective on that end customer based on the issues you talked about.

Seth Ian Sigman: That just driving lower transactions with less frequency or is there a trade down that youre seeing as well. Thanks.

Unknown Attendee: Great. Thanks. Good morning, everyone.

Seth Ian Sigman: Good morning, SaaS, Jonathan again, I just want to reiterate.

Seth Ian Sigman: We're saying that we think lower household income customers could be challenged with the sort of ongoing inflationary conditions, we're not pointing to any of our businesses that have seen impact yet. So I think we're just being prudent around the balance of the year within Q1 and maintenance I think.

Jonathan G. Fitzpatrick: I wanted to focus on the maintenance segment and the demand trends. Any more color on just the cadence after that difficult January? I guess, what did you see the rest of the quarter and then even early here in the second quarter? Any more perspective on that end customer based on the issues you talked about? Is that just driving lower transactions, just less frequency, or is there a trade-down that you're seeing as well? Thanks.

Jonathan G. Fitzpatrick: We did see very challenging weather conditions in <unk>, one I think most retailers in the United States saw that the good news about our maintenance segment, both our mining business and our take five oil change business is it is it is a truly need space category. So while we did see some challenge in P. One, we obviously think that week.

Jonathan G. Fitzpatrick: Morning, Seth, Jonathan again, and I just want to reiterate that we think lower household income customers could be challenged by the sort of ongoing inflationary conditions. We're not pointing to any of our businesses that have seen an impact yet.

Jonathan G. Fitzpatrick: So I think we're just, you know, being prudent around the balance of the year. Within Q1 and maintenance, you know, I think we did see very challenging weather conditions in P1. I think most retailers in the United States saw that. The good news about our maintenance segment, both our Meineke business and our Take 5 Oil Change business, is that it is a truly needs-based category. So while we did see some, you know, challenge in P1, we obviously think that we have caught up with those, you know, customers that were looking for those services. So there is nothing at this point in that segment that concerns us. Obviously, we're keeping an eye very closely on how the consumer reacts throughout the balance of the year.

Jonathan G. Fitzpatrick: We catch up those.

Jonathan G. Fitzpatrick: Customers that were looking for that.

Jonathan G. Fitzpatrick: Services, so nothing at this point.

Jonathan G. Fitzpatrick: In that segment that concerns us, obviously, where we're keeping an eye very closely on how the consumer reacts throughout the balance of the year.

Unknown Attendee: So it's just fair to think that as the weather has normalized in certain markets, you've seen evidence of that pent-up demand. It's coming through.

Jonathan G. Fitzpatrick: So just fair to think that as the weather has normalized in certain markets you've seen evidence of that pent up demand, it's coming through I.

Speaker Change: I guess that and then I'll have a follow up question there around.

Speaker Change: The guidance I think I heard you say most of the comp growth is expected to come in the second half of the year. That's overall across the business segments. So does that imply second quarter will look a lot like the first quarter. Thank you.

Speaker Change: Yes, I would say that on your first question on same store sales for maintenance segment, we're very pleased with how the business finished the quarter and.

Unknown Attendee: Excited about the next three quarters for that business and then I'll, let Gary talk about the guidance, yes, I mean, we don't give specific quarter quarterly guidance I mean, I think I was pretty directed where I thought at least adjusted EBITDA will come out in Q2.

Unknown Attendee: I guess that and then just I'll add a follow-up question there around the guidance. I think I heard you say most of the comp growth is expected to come in the second half of the year, that's overall across the business segments. But does that imply the second quarter will look a lot like the first quarter?

Gary W. Ferrera: We don't give specifically quarterly guidance; I mean, I think I would pretty directly tell you that at least adjusted EBITDA will come out in Q2 and that the second half of the year is where we expect to see most of the growth because just of the comps and the lapping of the comps. Q2 is usually our largest quarter on an adjusted EBITDA basis; we don't see that changing.

Unknown Attendee: Thank you.

Gary W. Ferrera: Yeah, I would say that on your first question about same-store sales for the maintenance segment, we're very pleased with how the business finished the quarter and, you know, excited about the next three quarters for that business. And then I'll let Gary talk about the guidance. Yeah, I mean, we don't give specifically quarterly guidance. I mean, I think I would

Gary: In the second half of the year is where we expect to see most of the growth because just the comps and the lapping of the comps Q.

Unknown Attendee: I think that's it. Okay, thanks guys. Your next question comes from Brian McNamara from Canaccord Genuity.

Gary: Q2 is usually our largest quarter on an adjusted EBITDA basis, we don't see that changing.

Speaker Change: I think thats it.

Speaker Change: Okay. Thanks, guys.

Unknown Attendee: Your next question comes from Brian McNamara from Canaccord Genuity. Please ask your question.

Brian Christopher McNamara: Your next question comes from Brian Macnamara from Canaccord Genuity. Please ask your question.

Brian Christopher McNamara: Hi, guys. This is Madison County answer Brian Thanks for taking our question.

Unknown Attendee: The CFO of <unk>.

Unknown Attendee: Typically arent were hit by the market.

Unknown Attendee: <unk> during the year, regardless of the reason or circumstance nationally concerns with investors.

Unknown Attendee: Reassure investors concerned by the recent China Brinci.

Unknown Attendee: Well, maybe I'll start with Gary, right? And then I'll sort of follow up.

Speaker Change: Well, maybe I'll start with Gary.

Speaker Change: And then also to follow up but yes.

Gary W. Ferrera: Yeah, no, I'd repeat what I said is, you know, I'm going into an opportunity to work with someone I've known for three decades and move my family back to Colorado, or be back with my family in Colorado, but I loved working with Jonathan and Danny, and Joel's been by my side ever since I walked in the door. So the two of us have done everything together, and Mike's been here for a few years and knows the company in and out, so I think the transition should be pretty smooth. Yeah, Madison, I think it's a good question.

Gary: I would repeat what I said is.

Gary W. Ferrera: You could go into an opportunity to work with someone I've known for three decades.

Gary W. Ferrera: My family back to Colorado will be back with my family in Colorado.

Gary W. Ferrera: Loved working with Johnson and Danny.

Gary W. Ferrera: Joel has been by my side ever since I walked in the door. So the two of US have done everything done together.

Gary W. Ferrera: Mike has been here for a few years and knows the company in an hour. So I think we are transition should be pretty smooth.

Jonathan G. Fitzpatrick: Yeah, Madison, I think it's a good question. We've got a strong bench of talent here. Joel's going to do an amazing job as interim. Michael Land is our fabulous Chief Accounting Officer. Gary's got a phenomenal opportunity, and a lot of this is personal decisions. And I would remind you that, you know, there's no one person that's overly important in Driven Brands, and we feel really good about the year. And again, I would just thank Gary for all his partnership over the last 12 months.

Gary W. Ferrera: Yes that is and I think it's I think it's a good question. We've got a strong bench of talented <unk> Joel is going to do an amazing job as interim Michael and as our Fabulous Chief Accounting Officer, Gary's got a phenomenal opportunity and a lot of this is personal decisions and I would remind you that.

Jonathan G. Fitzpatrick: There is no one person that said overly important and driven brands and we feel really good about the year and again I would just thank Gerry for all the partnership over the last 12 months. So.

Speaker Change: Great. Thanks, guys.

Unknown Attendee: Your next question comes from Christian Carlino from JP Morgan. Please ask your question.

Jonathan G. Fitzpatrick: Your next question comes from Christian Carlino from Jpmorgan. Please ask your question.

Unknown Attendee: Hi, good morning. Thanks for taking our questions. Just wanted to follow up on some of the competitive dynamics in car wash. You know, the recent pricing changes, is that a result of maybe some pressure from peers in certain markets where you need to lean into value? And just given the development pipelines in the car wash business are quite long, do you see the industry continuing to slow unit growth into next year? Or does it seem like we've found maybe a local bottom?

Christian Justin Carlino: Hi, good morning, Thanks for taking our questions.

Christian Justin Carlino: Just wanted to follow up on some of the competitive dynamics and carwash or the recent pricing changes as a result of maybe some pressure from peers in certain markets, where you need to lean into value.

Unknown Attendee: Just given the development pipelines and in the car wash business are quite long.

Unknown Attendee: See the industry continuing to slow unit growth into next year or does it seem like we've found maybe a local bottom.

Jonathan G. Fitzpatrick: Yeah, I'll start with sort of the development view, Christian, and then Danny can probably talk a little bit about the other question. You know, I think I've said it on multiple occasions, I think we've seen a massive increase in the number of car washes over the last sort of three to four years while we've been in this category. You know, somewhere between two and three thousand new express tunnel car washes have come online in the United States, which is obviously having a massive impact.

Speaker Change: Yeah, I'll start with sort of the development view Christian and Danny can probably talk a little bit about the the other question.

Jonathan G. Fitzpatrick: I think I've said it on multiple occasions, I think we've seen a massive increase in the number of car washes over the last sort of three to four years, while we've been in this category some.

Jonathan G. Fitzpatrick: Somewhere between two and 3000, New Express tunnel car washes have come online in the United States, which is obviously.

Jonathan G. Fitzpatrick: I have said in the past that we think that will moderate in 2024, but again, with the sort of long lead times on the pipeline, I think, you know, we'll see further moderation in 2025. And then Danny on the first question. Yeah, and Christian on the second question.

Danny: Massive impact we did I have said in the past that we think that will moderate in 2024, but again with the set of long lead times on the pipeline I think.

Speaker Change: You'll see further moderation in 2025.

Daniel R. Rivera: Yeah, and Christian, on the first question, look, I think we've mentioned before, we're under indexed as it relates to membership in our US car wash business, and membership is obviously a hugely important part of that business. Because it just creates predictability in that business. So leaning into value just seemed like a natural thing to do to build up our membership base. And the results are exactly what we're hoping for, you know, increased member conversion or reduced churn. So we're happy with what we're seeing. And it's doing exactly what we hoped it would.

Speaker Change: And then Danny on the on the first question, Yes Christian on the first question look.

Daniel R. Rivera: I think we've mentioned before we're under index as it relates to membership in our U S car wash business of memberships, obviously, a hugely important part of that business because it just creates predictability in that business. So leaning into value just seem like a natural thing to do to build up our membership base.

Daniel R. Rivera: And the result is exactly what we're hoping for increased member conversion or reduce churn. So we're happy with what we're seeing and it's doing exactly what we hoped it would.

Unknown Attendee: Got it, that's helpful. And I think last quarter you said the lower end of the guide implied continued pressure from weather and some macro overhang. And you talked about inflation continuing to pressure at least low-income consumers for the balance of the year. So while you, you know, reiterated the range, is it now biased more towards the low end? Or are you outperforming in other areas where you think you can still achieve the EBITDA you laid out at the analyst site? Yeah,

Speaker Change: Got it that's helpful and I think last quarter, you said the lower end of the guide implies continued pressure from weather and some macro overhang and you talked about inflation continuing to pressure at least the low income consumer it for the balance of the year. So while you reiterated the range is it now biased more towards the low end or are you.

Unknown Attendee: You're outperforming in other areas, where you think you can still achieve the EBITDA you laid out at the analyst day.

Gary W. Ferrera: Yeah, no, I think when you look at everything we talked about earlier, you know, when we set the range this year, the top end of the range was dead on what we said on investor day, right? So we don't we don't have any questions about 2026. I mean, that's still our goal is everything will drive towards, of course, consumer confidence and things like that will obviously impact us as we move through the year. But everything we're looking at, whether it's adjusted EBITDA, debt pay down, etc., we're still all on track for Plan for 2026. I got it.

Speaker Change: Yeah, No I think when you everything we talked about earlier when we set the range. This year. The top end of the range was dead on what we said on Investor day right. So we don't we don't have any questions on 2026.

Gary W. Ferrera: Our goal is everything will drive towards of course consumer confidence and things like that will obviously impact as we move through the year, but everything we're looking at whether its adjusted EBITDA debt Paydown et cetera, we're still on track for.

Gary W. Ferrera: Plan for 2026.

Unknown Attendee: Got it. Thank you very much. Your next question comes from Kate McShane from Goldman Sachs, please.

Speaker Change: Got it. Thank you very much best of luck.

Unknown Attendee: Your next question comes from Kate McShane from Goldman Sachs. Please ask your question. Hi, good morning. Thanks for taking our questions.

Katharine Amanda McShane: Your next question comes from Kate Mcshane from Goldman Sachs. Please ask your question.

Katharine Amanda McShane: Hi, good morning, Thanks for taking our question.

Katharine Amanda McShane: Are you still expecting to open between 205 and 220 stores this year and how should we think about the cadence of store openings, especially in the maintenance segment.

Unknown Attendee: Good morning, Kate. Yeah, nothing has changed in terms of our guidance that we gave on the call about 90 days ago. So we're reiterating the major financial numbers along with the same store sales and unit count assumptions that we gave on that call. So I would just say nothing has changed there. And we do expect that, typically, you see a little bit more waiting for stores in the back half of the year, but nothing has changed in terms of our overall unit count guidance.

Katharine Amanda McShane: Yes, good morning, Kate.

Katharine Amanda McShane: Yes, nothing has changed in terms of our guidance that we gave on the call about 90 days ago. So we're reiterating the major financial numbers, along with the same store sales and unit count assumptions that we gave on that call.

Unknown Attendee: So I would just say nothing has changed there and.

Unknown Attendee: We do expect that typically you see a little bit more of a weighting of stores in the back half of the year, but nothing has changed in terms of our overall unit count guidance.

Speaker Change: Thank you.

Unknown Attendee: Your next question comes from Chris Ockel from CFO. Please ask your question. Thanks.

Unknown Attendee: Your next question comes from Chris <unk> from Stifel. Please ask your question.

Unknown Attendee: Thanks. My question is about the car wash segment. Jonathan, can you explain how the U.S. and international car wash businesses strategically support each other?

Chris Ockel: Thanks. My question is about the Carwash segment, Jonathan can you explain how the U S and the international car wash businesses.

Chris Ockel: Strategically support each other.

Chris Ockel: And then I had a follow up.

Jonathan G. Fitzpatrick: Sure, I think, obviously, there are two different geographies, there are two different operating models, because our European car wash is what we call an independently operated model, or you could think of it as almost a franchise, but the teams do spend a lot of time together talking through pricing strategies, promotion strategies, you know, the right equipment, the right chemicals. So it's really more of, you know, sharing best practices, what's working, what's not working with both teams, understanding opportunities, whether it's value engineering of the buildings, the chemistry, again, marketing and promotion. So that's really how we sort of leverage the leadership between both.

Chris Ockel: Sure I think.

Chris Ockel: Obviously, there are two different geographies.

Jonathan G. Fitzpatrick: There is two different operating models, because our European car washes, what we call an independently operated model or you can think almost franchise like.

Jonathan G. Fitzpatrick: But the teams do spend a lot of time together talking through pricing strategies promotion strategies.

Jonathan G. Fitzpatrick: The right equipment, the right chemicals, so it's really more of sharing best practices, what's working what's not working with both teams understanding opportunities whether it's value engineering of the buildings that chemistry again, the marketing and promotion. So that's really how we set and leverage the leadership between both groups.

Jonathan G. Fitzpatrick: You know, part of the Driven thesis is that you have a national consumer platform for auto services. So how does an international car wash business support that strategy?

Jonathan G. Fitzpatrick: Part of the driven thesis is that you have a national consumer platform for auto services. So how does an international carwash business support that strategy.

Jonathan G. Fitzpatrick: Our international business run by Tracy Gellin is a fabulous business that continues to deliver really solid results. And, you know, we bought that business as part of our initial entry into the US car wash market in August of 2020. So I would just say that Tracy and the team continue to deliver great results, very stable, predictable results. And, of course, naturally, it doesn't necessarily impact our US business. But again, there's lots of learnings and best practices that we leverage between each other.

Jonathan G. Fitzpatrick: Our international business run by Tracy gallon is a fabulous business that continues to deliver really solid results and we bought that business as part of our initial entry into the U S car wash market in 'twenty two in August of 2020, So I would just say that tracing the team continued to deliver great results vary.

Jonathan G. Fitzpatrick: Stable predictable results and of course naturally it doesn't necessarily impact our U S business, but again, there's lots of learnings and best practices that we leverage between each other.

Unknown Attendee: Okay, fair enough. And then lastly, I know that EBITDA, the Car Wash EBITDA in the U.S., was impacted by the weather, but can you guys describe how U.S. car wash profitability looked after January or once you got through that weather period?

Speaker Change: Okay Fair enough and then lastly.

Jonathan G. Fitzpatrick: I know that the EBITDA the Carwash EBITDA in the U S was impacted by the weather, but can you guys describe how the U S car wash profitability looked after January or once you got through that weather period.

Unknown Attendee: Yeah, Chris, we don't get into periods or sub-segment reporting within periods. I will tell you that, you know, as we've gotten through the difficult weather periods in January, and, you know, like I said in my prepared remarks, we're seeing a nice Trans in April, certainly with our international car wash business, and I think Danny and Tim Austin are pretty happy with how the business is performing right now in the U.S. Okay, great.

Unknown Attendee: Yes, Chris we don't get into periods are sub sub sub segment reporting with within periods I will tell you that.

Unknown Attendee: We've seen.

Unknown Attendee: Yeah.

Unknown Attendee: As we've gotten through the difficult weather periods in January and.

Unknown Attendee: Like I said on the prepared remarks, we're seeing a nice trends in April certainly with our international car wash business and I think Danny and Tim Austin are pretty happy with how the business is performing right now in the U S.

Unknown Attendee: Okay, great. Thanks, guys.

Speaker Change: Okay, great. Thanks, guys.

Unknown Attendee: As a reminder, if you wish to ask a question, please press star one. Should you wish to decline from the polling process, please press the star followed by the number. Your next question comes from Peter Keith from Piper Sandler. Please ask your question.

Unknown Attendee: As a reminder, if you wish to ask a question. Please press star one should you wish to decline from the polling process. Please press the star followed by the number too.

Unknown Attendee: Your next question comes from Peter Keith from Piper Sandler. Please ask your question.

Unknown Attendee: Hey, good morning, everyone. I wanted to dig into two different segments, one negative and one positive. I'll do the negative one first.

Peter Jacob Keith: Hey, good morning, everyone I wanted to dig into two different segments, one negative one positive due to negative one first could you talk about PC and <unk>, where the comp was $1 three I'm not sure. If weather played a role in that but we've seen pretty steady comp deceleration there.

Peter Jacob Keith: I know the glasses and turnaround.

Peter Jacob Keith: And to think about the collision business has been really steady and quite robust from a ticket standpoint, so could you flesh out some of the fundamentals that's dragging on sales there.

Daniel R. Rivera: Sure, Peter. Hey, this is Danny.

Daniel R. Rivera: Could you talk about PC and G where the comp was 1.3? I'm not sure if weather played a role in that, but we've seen pretty steady comp deceleration there. I know the glass isn't turning around, but I tend to think about the collision business as being really steady and quite robust from a ticket standpoint. So could you flesh out some of the fundamentals that's dragging on the sales there? Sure, Peter. Hey, this is...

Unknown Attendee: Sure Peter Hey, This is Danny look I think what you said, it's pretty spot on I mean, if we look at the <unk> segment, the paint and collision side of that segment continue to do quite well those are franchise businesses mature business. They are very steady delivering north of 50% margins and they continue to do so the glass part of that business as Jonathan indicated in his.

Daniel R. Rivera: Look, I think what you said is pretty spot on. I mean, if we look at the PCMG segment, the paint and collision side of that segment continues to do quite well. Those are franchise businesses, mature businesses. They're very steady, delivering north of 50% margins, and they continue to do so. The glass part of that business, as Jonathan indicated in his comments, we're looking at that as a kind of mid- to long-term play for us. We just got through the integration. We're very focused on growth, both at the bottom and the top.

Daniel R. Rivera: So we're looking at that as a kind of mid to long term play for US just got through the integration. We're very focused on growth both bottom and top line like we mentioned and we're just in early innings and we're excited about the future there.

Unknown Attendee: Okay, I guess, kind of, I guess that only answers my question. I guess, is this low? You don't want to guide comp for the segments, but are we in a low single-digit comp environment now for this? This area of the business.

Daniel R. Rivera: Okay.

Speaker Change: Okay I guess.

Unknown Attendee: Kind of I guess the only.

Unknown Attendee: Answered My question I guess is this low you don't guide comfort segments, but are we in a low single digit comp environment now for this.

Unknown Attendee: This area of the business.

Jonathan G. Fitzpatrick: Peter, I think we're reiterating our full same-store sales guidance for the year, which Gary mentioned, which is a range of three to five percent, and we're very comfortable with that at a full-driven level, and again, we don't guide on a segment level, but we're reiterating three to five percent.

Speaker Change: Peter I think we're reiterating our full same store sales guidance for the year, which Gary mentioned, which is a range of 3% to 5% and we're very comfortable with that at a full driven level and again, we don't guide on a segment level segment level, but were reiterating three to five for the full year.

Unknown Attendee: All right, let's pivot to the positive segment. So maintenance, I guess what intrigues me there is the EBITDA improvement. Year-on-year margins expanded nicely, even the EBITDA growth accelerated quite a bit, and you did so off of a very similar comp to Q4. To operationally help unpack that for us, what's driving the profitability improvement there?

Jonathan G. Fitzpatrick: Alright.

Jonathan G. Fitzpatrick: Let's pivot to the positive segments of maintenance.

Unknown Attendee: I guess, what intrigues me there is the EBITDA improvement.

Unknown Attendee: Year on year margins expanded nicely, even the EBITDA growth accelerated quite a bit and you did so off of a very similar comp to Q4.

Unknown Attendee: Operationally help unpack that for us, what's what's driving the profitability improvement there.

Jonathan G. Fitzpatrick: Yeah, so I think Mo Khalid and the team are doing an amazing job, kind of on three fronts. So I'd say number one is just ongoing expense management. So that's one obvious positive. The second one is improving our PMIX.

Speaker Change: Yeah, So I think <unk> and the team are doing an amazing job kind of on three fronts. So I'd say number one just ongoing expense management.

Jonathan G. Fitzpatrick: That's one of the obvious positive the second one is improving our P mix. So specifically we've talked about this in the past the teams are really leaning into our coolant services and that becomes.

Jonathan G. Fitzpatrick: So specifically, we've talked about this in the past, the team's really leaning into our coolant services, and that will become a more important part, let's just say, of our product mix. And that's a very profitable service for us, so that's going to grow margins over time. And then the last thing is just, look, naturally, as the business gets more heavily weighted to be a franchise business, as we continue to open, kind of two-thirds of our openings will be franchise-based, that'll naturally lead to an increase in margins as well.

Jonathan G. Fitzpatrick: More important part lets just say of our product mix and Thats, a very profitable service for us. So that's going to grow margins over time and then the last thing is just look naturally as the business gets more heavily weighted to be a franchise business. As we continue to open kind of two thirds of our openings will be franchise base that will naturally lead to an increase in margins as well.

Unknown Attendee: Okay, sounds good. Thank you.

Speaker Change: Okay sounds good thank you.

There are no further questions at this time. That concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: There are no further questions at this time that concludes today's conference call. Thank you for your participation you may now disconnect.

Unknown Attendee: Okay.

Unknown Attendee: Okay.

Unknown Attendee: Yes.

Unknown Attendee: Okay.

Unknown Attendee: Okay.

Unknown Attendee: Yes.

Unknown Attendee: Okay.

Speaker Change: Thank you.

Unknown Attendee: Okay.

Unknown Attendee: Okay.