Q2 2024 Driven Brands Holdings Inc Earnings Call

Good morning, ladies and gentlemen, and welcome to the Driven Brands Inc. Q-24 earnings call. At this time, all lines are in listen-only mode.

Operator: Thank you to 24 earnings calls. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session.

Following the presentation, we will conduct a question and answer session.

Operator: If at any time during this call, you require immediate assistance, please press zero for the operator. This call is being recorded on August 1, 2024.

If at any time during this call you require immediate assistance, please

This call is being recorded on August 1st, 2024. I would now like to turn the conference over to Mr. Chris Thompson, Senior Director of Treasury and Investor Relations.

Chris Thompson: I would now like to turn the conference over to Mr. Chris Thompson, Senior Director of Treasury and Investor Relations. Please go ahead. Good morning and welcome to Driven Brands' second 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 with me today are Jonathan Fitzpatrick, President and Chief Executive Officer, Danny Rivera, Executive Vice President and Chief Operating Officer, and Joel Arnao, Senior Vice President and Interim Chief Financial Officer. In a moment, Jonathan, Danny, and Joel will walk you through our financial and operating performance for the quarter.

Speaker Change: Go ahead.

Chris Thompson: Good morning and welcome to Driven Brands' second quarter 2024 earnings conference call. The earnings release and the leverage ratio reconciliation are available for download on our website at investors.drivenbrands.com.

Speaker Change: On the call with me today are Jonathan Fitzpatrick, President and Chief Executive Officer.

Speaker Change: Danny Rivera, Executive Vice President and Chief Operating Officer, and Joel Arnao, Senior Vice President and Interim Chief Financial Officer.

Speaker Change: In a moment, Jonathan, Danny, and Joel will walk you through our financial and operating performance for the quarter.

Chris Thompson: Before we begin our remarks, I'd like to remind you that management refers to certain non-GAAP financial measures. You can find the reconciliation is the most directly comparable gap financial measures on the company's investor relations website and in its filings with the Securities and Exchange Commission.

Speaker Change: 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 the most directly comparable GAAP financial measures on the company's investor relations website and in its filings with the Securities and Exchange Commission.

Chris Thompson: During the course of this call, we may also make forward-looking statements in regards to our current plans, beliefs, and expectations. These statements are not guarantees the 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 results and events contemplated by these award-looking statements. Please see our earnings release and our violence of the carries in exchange condition for more information.

Speaker Change: During the course of this call, we may also make forward-looking statements in regards to our current plans, beliefs, and expectations.

Speaker Change: 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 results and events contemplated by these forward-looking statements.

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

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

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

Jonathan Fitzpatrick: Now, I'll turn it over to Jonathan. Good morning. We appreciate everyone joining us today to discuss Driven Brand's second 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 their amazing franchisees for how they continue to navigate an extremely dynamic macroeconomic environment.

Unknown Executive: you through the 24. This time, all lines are in the list. Danny Rivera, Executive Vice President and Chief Operating Officer, and Joel Arnao, Senior Vice President and Interim Chief Financial Officer. 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 results and events contemplated by these forward-looking statements. Today's prepared remarks will be followed up by a question and answer session. Please limit yourself to one question and one follow-up. Good morning.

Speaker Change: Now, I'll turn it over to Jonathan.

Unknown Executive: We appreciate everyone joining us today to discuss Driven Brands' second quarter 2024 financial results. Although Mike will officially start in a couple of weeks, he is here with me today. Mike has a terrific background in multi-unit businesses and was most recently CFO at the Michaels Company, using excess free cash flow to pay down debt with a year-end target of less than four and a half times levered and a year-end 2026 target of less than three times. And finally, Active Portfolio Manager.

Jonathan Fitzpatrick: Good morning. We appreciate everyone joining us today to discuss Driven Brands' second quarter 2024 financial results.

Jonathan Fitzpatrick: To begin, I want to acknowledge the hard work and strong execution by our more than 10,000 Driven Brands team members and their amazing franchisees for how they continue to navigate an extremely dynamic macroeconomic environment.

Jonathan Fitzpatrick: After a very thorough national search, I'm delighted to announce that Mike Diamond has joined Driven as our CFO. Although Michael will officially start in a couple of weeks, he is here with me today. Mike has a terrific background in multi-unit businesses and was most recently CFO at the Michael's Companies, and you can read about Mike's background in our earnings release. We're super excited to have him join the team.

Jonathan Fitzpatrick: I also want to take a moment to recognize and thank Joel Arneo, our Senior Vice President of Finance, who has done such a terrific job as interim CFO over this past quarter. My focus continues to be on delivering our outlook for 2024 and using excess free cash flow to pay down debt, with a year-end target of less than 4.5 times levered and a year-end 2026 target of less than three times.

Jonathan Fitzpatrick: I also want to take a moment to recognize and thank Joel Arnao, our Senior Vice President of Finance, who has done such a terrific job as Interim CFO over this past quarter.

Jonathan Fitzpatrick: Finally, active portfolio management. Management.

Jonathan Fitzpatrick: I will start with a review of some of our second quarter 2024 highlights and corporate initiatives, and then turn it over to Danny, who will discuss our operating segments, and then Joel, who will detail our second quarter financial results and full year outlook. For Q2 2024, we delivered revenue of 612 million, of 1% versus the prior year, supported by 115 net new stores, and 0.5% same-store sales growth. Our 14th consecutive quarter of positive same-store sales growth, and adjusted EBIDA of 152.2 million, resulting in diluted adjusted EPS of 35 cents. We continue to be pleased by the performance of our Take 5 All Change and franchise businesses, all being key contributors to a solid Q2 2024.

Unknown Executive: I will start with a review of some of our second quarter 2024 highlights and corporate initiatives, and then turn it over to Danny, who will discuss our operating segments, and then Joel, who will detail our second quarter financial results and full year outlook. Reported by 115 Net News Stores and 0.5% same store sales growth, our 14th consecutive quarter of positive same store sales growth. We continue to be pleased by the performance of our take five oil change and franchise businesses, all being key contributors to a solid Q2 2024.

Jonathan Fitzpatrick: Supported by 115 net new stores and 0.5% same-store sales growth, our 14th consecutive quarter of positive same-store sales growth.

Jonathan Fitzpatrick: An adjusted EBITDA of $152.2 million, resulting in diluted adjusted EPS of $0.35.

Jonathan Fitzpatrick: We continue to be pleased by the performance of our Take 5 Oil Change and Franchise businesses, all being key contributors to a solid Q2 2024.

Jonathan Fitzpatrick: And it is worth noting that on a two-year basis, driven delivered 8.1% same-store sales growth. Our PC and G segment, which represents more than 50% of that comp, delivered a two-year comp of 11.7%. And take 5 all change, our biggest and fastest growing business delivered a two-year comp of 23.5%. As I mentioned on Q1 earnings call, we still 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. We saw that it impacted our Q2 results, and we are taking this into account in our updated expectations.

Unknown Executive: And it is worth noting that on a two-year basis, Driven delivered 8.1% same-store sales growth. Our PC&G segment, which represents more than 50% of that comp, delivered a two-year comp of 11.7%, and Take 5 Oil Change, our biggest and fastest growing business, delivered a two-year comp of 23.5%. Now, as I mentioned on the Q1 earnings call, we still believe that the ongoing inflationary environment will likely continue to pressure consumer spending throughout the balance of 2024. I'd now like to spend a few minutes on some key corporate initiatives. We began the migration to our new ERP platform at the start of Q3.

Jonathan Fitzpatrick: And it is worth noting that on a two-year basis, Driven delivered 8.1% same-store sales growth.

Jonathan Fitzpatrick: And Take 5 Oil Change, our biggest and fastest-growing business, delivered a two-year comp of 23.5%.

Jonathan Fitzpatrick: As I mentioned on Q1 earnings call, we still believe that the ongoing inflationary environment will likely continue to pressure consumer spending throughout the balance of 2024.

Jonathan Fitzpatrick: and that lower income households will be the most impacted.

Jonathan Fitzpatrick: We saw that it impacted our Q2 results, and we are taking this into account in our updated expectations.

Jonathan Fitzpatrick: And we believe that this pressure will be somewhat offset by strength in our commercial business and our needs-based businesses. We remain focused on delivering our 2024 outlook, despite this ongoing consumer uncertainty.

Jonathan Fitzpatrick: Joel will provide more details on our 2024 outlook shortly.

Jonathan Fitzpatrick: Joel will provide more details on our 2024 outlook shortly.

Jonathan Fitzpatrick: I'd now like to spend a few minutes on some key corporate initiatives. We began the migration to our new ERP platform at the start of Q3. And so far, we're pleased with the progress of the implementation. This is testament to the hard work and extensive preparation from the entire team led by our Chief Information Officer, Karen Conrad. The team is continuing to make good progress on divesting US car wash pipeline properties. In Q1, we received approximately 33 million of proceeds. And in Q2, we received an incremental approximate 66 million for a total of approximately 100 million.

Unknown Executive: And so far, we're pleased with the progress of the implementation. This is testament to the hard work and extensive preparation from the entire team, led by our Chief Information Officer, Karen Conrad. The team is continuing to make good progress on divesting the U.S. car wash pipeline property. In Q1, we received approximately $33 million of proceeds, and in Q2, we received an incremental approximately $66 million for a total of approximately $100 million. Year-to-date, we are now at 107 million in proceeds.

Joel Arnao: The team is continuing to make good progress on divesting U.S. car wash pipeline properties.

Jonathan Fitzpatrick: Year to date, we are now at 107 million of proceeds. Our previous target was at least 100 million for Fiscal 2024. Now that we've achieved that, we're confident in delivering at least another 50 million in US car wash divestitures in the second half of 2024. Now, as I have previously mentioned, reducing our overall leverage is one of my primary objectives. Our goal is to finish the year at less than 4.5 times. While we saw a moderate reduction from Q1 to Q2, we remain on target to achieve our goal by the end of 2024, and we'll continue to focus on paying down debt towards our long-term target of less than three times levered by year end 2026.

Unknown Executive: Our previous target was at least $100 million for fiscal 2024. Now that we've achieved that, we're confident in delivering at least another $50 million in U.S. car wash divestitures in the second half of 2020. As I have previously mentioned, reducing our overall leverage is one of my primary objectives. Our goal is to finish the year at less than four and a half times.

Joel Arnao: Year-to-date, we are now at 107 million of proceeds.

Joel Arnao: Our previous target was at least $100 million for fiscal 2024. Now that we've achieved that, we're confident in delivering at least another $50 million in U.S. car wash divestitures in the second half of 2024.

Joel Arnao: As I have previously mentioned, reducing our overall leverage is one of my primary objectives.

Unknown Executive: While we saw a moderate reduction from Q1 to Q2, we remain on target to achieve our goal by the end of 2024, and we'll continue to focus on paying down debt towards our long-term target of less than three times leveraged by year-end 2026. I'm pleased to report that we successfully refinanced $258 million of WBS notes, which were coming due in April 2025, by issuing new $275 million seven-year notes, We also increased our liquidity through the addition of $400 million of variable funding notes, which replaced our $115 million variable funding notes from 2019. Our variable funding notes remain fully undrawn.

Joel Arnao: Our goal is to finish the year at less than four and a half times.

Joel Arnao: I'm pleased to report that we successfully refinanced $258 million of WBS notes which were coming due in April 2025 by issuing new $275 million seven-year notes, essentially leveraged neutral.

Jonathan Fitzpatrick: We also increased our liquidity through the addition of $400 million of variable funding notes, which replaced our $150 million variable funding notes from 2019. Our variable funding notes remain fully undrawn. Our debt stack is comprised of approximately 80% WBS notes with a blended fixed rate of 4.5% and a weighted average maturity of 3.6 years. There are no maturities coming due until Q2, 2026.

Unknown Executive: Our debt stack is comprised of approximately 80% WBS notes with a blended fixed rate of 4.5% and a weighted average maturity of 3.6 years. There are no maturities coming due until Q2 2026. Now, let me spend a few minutes on our growth priorities: Take 5 Oil Change, Auto Glass Now, and Driven Advantage. Take 5 continues to deliver very strong results. Q2 2024 marks the 16th consecutive quarter of positive same-store sales.

Joel Arnao: Our debt stack is comprised of approximately 80% WBS notes with a blended fixed rate of 4.5% and a weighted average maturity of 3.6 years.

Joel Arnao: There are no maturities coming due until Q2 2026.

Jonathan Fitzpatrick: Now let me spend a few minutes on our growth priorities. Take 5 all change, auto glass now and driven advantage. Take 5 continues to deliver very strong results. Q2, 2024 marks the 16th consecutive quarter of positive same-store sales growth. Revenue grew by 16% and EBITDA grew by 22% compared to Q2, 23. Additionally, moccaleed in the team grew margins by approximately 170 basis points over Q1. The team remains focused on executing the take 5 playbook to drive sales while maintaining strong operational efficiency and satisfied customers, manifested in our net promoter score of 77%. Take 5 All Change has seen robust unit growth, adding 68 new units year to date, and the majority of which are asset-like franchises.

Joel Arnao: Now let me spend a few minutes on our growth priorities, Take 5 Oil Change, Auto Glass Now, and Driven Advantage. Take 5 continues to deliver very strong results. Q2 2024 marks the 16th consecutive quarter of positive same-store sales growth.

Unknown Executive: Revenue grew by 16% and EBITDA grew by 22% compared to Q2 2020. Additionally, Mo Khalid and the team grew margins by approximately 170 basis points over Q1. The team remains focused on executing the Take 5 playbook to drive sales while maintaining strong operational efficiency and satisfied customers, manifested in our net promoter score of 77%. Take 5 Oil Change has seen robust unit growth, adding 68 new units year to date, a majority of which are asset light franchises.

Mo Khalid: Additionally, Mo Khalid and the team grew margins by approximately 170 basis points over Q1.

Mo Khalid: Take 5 Oil Change has seen robust unit growth, adding 68 new units year-to-date, a majority of which are asset-light franchises. We also expect to add approximately a hundred additional stores in the second half.

Jonathan Fitzpatrick: We also expect to add approximately 100 additional stores in the second half. At the end of the quarter, 37% of Take 5 stores are franchised. Over a two-year period, our franchise store count has almost doubled. And we anticipate franchisees to account for approximately 50% of total locations over time. Our unit economics continue to attract new franchisees and drive existing franchisees to sign new development agreements. Looking at the last eight quarters for Take 5 All Change, some KPIs measured on a two-year Keger include franchise unit growth of 39.9%, company unit growth of 10.1%, for a combined unit growth of 18.8%.

Unknown Executive: We also expect to add approximately 100 additional stores in the second quarter. At the end of the quarter, 37% of Take 5 stores are franchised, and we anticipate franchisees to account for approximately 50% of total locations over time.

Mo Khalid: Over a two-year period, our franchise store count has almost doubled.

Unknown Executive: Now looking at the last eight quarters for Take-Five Oil Change, some KPIs measured on a two-year CAGR include franchise unit growth of 39.9%, company unit growth of 10.1%, for a combined unit growth of 18.8%. System-wide sales growth of 24.8%, and net revenue growth of 20.3%. In summary, very strong performance across all measures.

Speaker Change: Now looking at the last eight quarters for Take 5 Oil Change, some KPIs measured on a two-year CAGR include

Mo Khalid: Franchise unit growth of 39.9 percent

Jonathan Fitzpatrick: System-wide sales growth of 24.8%, and net revenue growth of 20.3%.

Jonathan Fitzpatrick: In summary, very strong performance across all metrics.

Jonathan Fitzpatrick: Now switching to our U.S. glass business auto-glass net. We remain excited about the medium and longer term prospects for this business and know that it will take time to build scale and momentum. Earning insurance and commercial business can take time, and we want to do it right because of the importance of long-term sustainable partnerships. Now revenue for AGM is blended approximately one-third retail, one-third commercial, and one-third insurance. And over time, we expect to grow the commercial and insurance revenue faster than our retail business. So let's start with our retail customers. These are typically out-of-pocket pay, with an average check of approximately $300.

Unknown Executive: Now switching to our US glass business, Autoglass now. We remain excited about the medium and longer-term prospects for this business and know that it will take time to build scale and momentum. Earning insurance and commercial business can take time, and we want to do it right because of the importance of long-term sustainable partnerships. So let's start with our retail customer. These are typically out-of-pocket payments with an average check of approximately $300.

Speaker Change: Now switching to our U.S. glass business, Auto Glass Now.

Speaker Change: Now revenue for AGN is blended approximately one-third retail, one-third commercial, and one-third insurance.

Speaker Change: So let's start with our retail customers.

Speaker Change: These are typically out-of-pocket pay with an average check of approximately $300.

Jonathan Fitzpatrick: Now, in order to capture additional retail revenue, we rolled out the online estimator in late Q2, allowing customers to avoid coming to the shops for quotes, and we are very pleased with the early adoption rates. Next are commercial customers who are owners and managers of large fleets of vehicles. The average check is approximately $400, with a calibration attachment rate of approximately 31%. We're pleased to have signed contracts with two major national car rental companies in Q2, and we'll start seeing that volume materialize in the second half of 2024. Finally, our insurance customers have an average check of approximately $650 and a calibration attachment rate of approximately 42%.

Unknown Executive: Now, in order to capture additional retail revenue, we rolled out the online estimator in late Q2, allowing customers to avoid coming to the shops for quotes. And we are very pleased with the early adopters, who are owners and managers of large fleets of vehicles. The average check is approximately $400 with a calibration attachment rate of approximately 31%.

Speaker Change: Next are commercial customers.

Speaker Change: who are owners and managers of large fleets of vehicles.

Unknown Executive: We're pleased to have signed contracts with two major national car rental companies in Q2, and we'll start seeing that volume materialize in the second half of 2020. Finally, our insurance policies have an average check of approximately $650 and calibration attachment rate of approximately 42%.

Speaker Change: Finally, our insurance customers have an average check of approximately $650 and calibration attachment rate of approximately 42%.

Jonathan Fitzpatrick: I'm also pleased to report that we finalized six new agreements with regional partners in Q2, and this volume will start flowing in the second half of 2024. We also have a growing pipeline of regional and national carriers and are currently in multiple RFPs. The momentum and interest continue to build, with carriers presenting increasing medium and long-term opportunities. And, as I have mentioned multiple times over the past several quarters, it will take time to build this business. However, we remain very optimistic about the future of this nascent category.

Unknown Executive: I'm also pleased to report that we finalized six new agreements with regional partners in Q2, and this volume will start flowing in the second half of 2020. We also have a growing pipeline of regional and national carriers and are currently in multiple RFPs. The momentum and interest continue to build with carriers presenting increasing medium and long-term opportunities. And, as I have mentioned multiple times over the past several quarters, it will take time to build this business. However, we remain very optimistic about the future of this nascent category.

Speaker Change: I'm also pleased to report that we finalized six new agreements with regional partners in Q2, and this volume will start flowing in the second half of 2024.

Speaker Change: We also have a growing pipeline of regional and national carriers and are currently in multiple RFPs.

Speaker Change: And as I have mentioned multiple times over the past several quarters, it will take time to build this business. However, we remain very optimistic about the future of this nascent category.

Jonathan Fitzpatrick: Driven Advantage is our online marketplace where our company stores, franchisees, and affiliates can purchase over 90,000 SKUs from more than 50 vendor partners ranging from office supplies to pinked oil and equipment. Since its launch in Q1 2023, approximately 80% of eligible locations have already begun purchasing products and services on the platform. While the majority of revenue and contribution benefits from driven advantage show up in our operating segments, some highlights from the first half of 2024 include. We've added 1,500 customers in the first half of 2024, almost entirely from our franchisees and affiliates. Sales in the first half of 2024 were up approximately $170 million, up from $70 million in the first half of 2023.

Unknown Executive: Driven Advantage is our online marketplace where our company stores, franchisees, and affiliates can purchase over 90,000 SKUs from more than 50 vendor parts, ranging from office supplies to paint, oil, and equipment. While the majority of revenue and contribution benefits from Driven Advantage show up in our operating segments, some highlights from the first half of 2024 include: We launched new capabilities to further increase sales, like automatic reordering, vendor promotions, and are now generating advertising revenue from our partners, both from automotive suppliers looking to sell on Driven Advantage and from other automotive companies looking to use Driven Advantage at their own locations.

Speaker Change: Driven Advantage is our online marketplace where our company stores, franchisees, and affiliates can purchase over 90,000 SKUs from more than 50 vendor partners, ranging from office supplies to paint, oil, and equipment.

Speaker Change: We've added 1,500 customers in the first half of 2024, almost entirely from our franchisees and affiliates.

Jonathan Fitzpatrick: We launched new capabilities to further increase sales, like automatic reordering, vendor promotions, and are now generating advertising revenue from our vendor partners. Partners. We also see a growing interest in the industry as more third parties see the platform, both from automotive suppliers looking to sell on Driven Advantage and from other automotive companies looking to use Driven Advantage at their own locations. This is a uniquely powerful platform that we have created that benefits our franchisees, company stores, vendor partners, and driven.

Speaker Change: We launched new capabilities to further increase sales like automatic reordering, vendor promotions, and are now generating advertising revenue from our vendor partners.

Unknown Executive: This is a uniquely powerful platform that we have created that benefits our franchisees, company stores, vendor partners, and Driven. Now my focus in 2024 is again on delivering our outlook, reducing debt, and actively managing the portfolio. 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, let me hand it over to my partner, Danny, our Chief Operating Officer, to discuss our key business segments. While the team here works to strategically position Driven for future growth, Driven's success is ultimately defined by the boots-on-the-ground employees and franchisees at our more than 5,000 locations who work tirelessly to delight our customers.

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

Jonathan Fitzpatrick: Now, my focus in 2024 again is on delivering our outlook, reducing debt, and actively managing the portfolio. 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.

Speaker Change: Now, my focus in 2024, again, is on delivering our outlook, reducing debt, and actively managing the portfolio.

Speaker Change: And we're incredibly motivated to see our valuation mirror our results over time.

Danny Rivera: Now, let me hand it over to my partner, Danny, our Chief Operating Officer, to discuss our key business segments. Thanks, Jonathan. Before diving into our results, I want to acknowledge our driven employees and franchisees who embody our model of dream big, work hard, and continue to deliver results for our shareholders and our brand leaders. While the team here works to strategically position Driven for future growth, Driven success is ultimately defined by the boots-on-the-ground employees and franchisees at our more than 5,000 locations who work tirelessly to delight our customers. I'd like to begin by restating that my priority for 2024 remains unchanged.

Speaker Change: Now let me hand it over to my partner Danny, our Chief Operating Officer, to discuss our key business segments.

Danny Rivera: While the team here works to strategically position Driven for future growth, Driven's success is ultimately defined by the boots-on-the-ground employees and franchisees at our more than 5,000 locations who work tirelessly to delight our customers.

Daniel R. Rivera: I'd like to begin by restating that my priorities for 2024 remain unchanged, improve the trajectory of auto glass now and our US car wash business. We achieved year-over-year growth in revenue, adjusted EBITDA, and adjusted EBITDA margin while continuing our streak of 14 straight quarters of positive same-store sales. Take 5 continues to deliver against our expectations and is the major driver of our revenue and adjusted EBITDA growth in Q2. Our legacy franchise brands like Meineke, Mako, Carstar, and 1-800-RADIATOR all continue to steadily perform and drive adjusted EBITDA margins in excess of 50%. Performance in our maintenance segment continues to be driven by the strength of Take 5 Ultra.

Danny Rivera: I'd like to begin by restating that my priorities for 2024 remain unchanged, ensure Take 5 continues to deliver against our expectations, improve the trajectory of Autoglass Now and our U.S. car wash business,

Danny Rivera: In sure, take five continue to deliver against our patients, improve the trajectory of all glass now and our US car wash business, continue to grow driven advantage, and make certain that our legacy franchise brands generate consistent growth that continues to produce EBITDA margins in excess of 50%. Turning to our Q2 results, I am happy with the results the team delivered. We achieved year-over-year growth in revenue, adjusted EBITDA, and adjusted EBITDA margin while continuing our streak of 14 straight quarters of positive same-store sales. Take Five continues to deliver against our expectations and is the major driver of our revenue and adjusted EBITDA growth in Q2.

Speaker Change: continue to grow Driven Advantage and make certain that our legacy franchise brands generate consistent growth that continues to produce EBITDA margins in excess of 50%.

Speaker Change: Turning to our Q2 results, I am happy with the results the team delivered.

Danny Rivera: Our B2B channel also remains strong with consistent, steady, and predictable business from our commercial and insurance partners. As a reminder, about 50% of our system-wide sales come from commercial B2B customers. While auto glass now and our US car wash business are not yet fully firing on all cylinders, the businesses are steadily moving in the right direction. Both businesses saw sequential growth in revenue and adjusted EBITDA for the past two quarters. Our legacy franchise brands, like Minonky, Mako, Carstar, and 1,800 Radiator, all continue to steadily perform and drive adjusted EBITDA margins in excess of 50%. Turning now to our maintenance segment, which had year-over-year and sequential increases in system-wide sales, revenue, adjusted EBITDA, and adjusted EBITDA margin.

Speaker Change: Our B2B channel also remains strong with consistent, steady, and predictable business from our commercial and insurance partners.

Speaker Change: Both businesses saw sequential growth in revenue and adjusted EBITDA for the past two quarters.

Speaker Change: Our legacy franchise brands, like Meineke, Mako, Carstar, and 1-800-RADIATOR, all continue to steadily perform and drive adjusted EBITDA margins in excess of 50%.

Speaker Change: Turning now to our maintenance segment, which had year-over-year and sequential increases in system-wide sales, revenue, adjusted EBITDA, and adjusted EBITDA margin.

Danny Rivera: Performance and our maintenance segment continues to be driven by the strength of Take Five All Change. In Q2 versus the prior year, Take Five achieved a 15.6% increase in revenue and a 22.3% increase in adjusted EBITDA. While adjusted EBITDA margin expanded 191 b- in the quarter, we opened 40 units split between 15 company-owned and 25 franchise. Over the past 12 months, we have grown the number of Take Five units by about 20% and remain on track for our target of 150 openings each year for the next three years. Additionally, we achieved positive same-sour sales of 5.7%, resulting in a two-year same-sour sale stack of 23.5%.

Speaker Change: Performance and our maintenance segment continues to be driven by the strength of Take 5 Oil Change.

Daniel R. Rivera: In Q2 versus the prior year, Take 5 achieved a 15.6% increase in revenue, and a 22.3% increase in adjusted EBITDA, while adjusted EBITDA margin expanded 191 basis points. In the quarter, we opened 40 units split between 15 company-owned and 25 franchised. This business continues to grow sales through natural ticket growth and premium oil and our low pressure selling environment. The softness in revenue is mostly due to the refranchising of 12 company-owned locations and comping over a record quarter in 2023 caused by hailstorms that disproportionately grew our business. Moving over to Autoglass now, our company owns North American Glasses.

Speaker Change: In Q2 versus the prior year, Take 5 achieved a 15.6% increase in revenue and a 22.3% increase in adjusted EBITDA, while adjusted EBITDA margin expanded 191 basis points.

Danny Rivera: We achieved growth sales through natural ticket growth and premium oil, and our low-pressure selling environment. In the quarter, we achieved record premium mix and continued to see year-over-year growth and ancillary attachment rates. Mo Khalid, President of Take Five, and the team continue to deliver strong financial results while simultaneously delighting our customers with NPS scores in the upper 70s. Looking to our PC and G segment, Q2 delivered revenue of 112 million, adjusted EBITDAV 35 million, and adjusted EBITDAV margin of 31.4%, all of which represents sequential improvements versus the prior quarter. Q2, same-store sales were down 0.5%; however, our two-year same-store sales stack is 11.7%, demonstrating strong and consistent execution.

Mo Khalid: In the quarter, we achieved record premium mix and continue to see year-over-year growth in ancillary attachment rates. Mo Khalid, president of Take 5, and the team continue to deliver strong financial results while simultaneously delighting our customers with NPS scores in the upper 70s.

Speaker Change: Looking to our PC&G segment, Q2 delivered revenue of $112 million, adjusted EBITDA of $35 million, and adjusted EBITDA margin of 31.4%, all of which represents sequential improvements versus the prior quarter.

Danny Rivera: The softness in revenue is mostly due to the refranchising of 12 company-owned locations and comping over a record quarter in 2023 caused by hailstorms that disproportionately grew our business. Moving over to auto-glass now, our company owned North American glass business. As we've previously stated, auto-glass now is a multi-year journey. That being said, I'm happy with the progress and momentum the team is building. In Q2, we sequentially grew revenue and adjusted EBITDAV while seeing meaningful margin expansion. As part of our growth strategy, we continue to focus on signing insurance carriers as well as major commercial partners.

Speaker Change: The softness in revenue is mostly due to the re-franchising of 12 company-owned locations and comping over a record quarter in 2023 caused by hailstorms that disproportionately grew our business.

Speaker Change: Moving over to Autoglass now, our company-owned North American glass business.

Daniel R. Rivera: As we've previously stated, Autoglass now is a multi-year journey. That being said, I'm happy with the progress and momentum the team is building. In Q2, we sequentially grew revenue and adjusted EBITDA while seeing meaningful margin expansion. As part of our growth strategy, we continue to focus on signing insurance carriers, as well as major commercial partners. In just Q2, Autoglass has now added six regional insurance carriers to its portfolio while also signing agreements with two national rental car providers.

Speaker Change: As we've previously stated, Autoglass now is a multi-year journey. That being said, I'm happy with the progress and momentum the team is building. In Q2, we sequentially grew revenue and adjusted EBITDA while seeing meaningful margin expansion.

Speaker Change: As part of our growth strategy, we continue to focus on signing insurance carriers, as well as major commercial partners.

Danny Rivera: In just Q2, auto-glass now added six regional insurance carriers to its portfolio while also signing agreements with two national rental car providers. We remain bullish on this business and industry and feel good about the momentum and sequential improvements. Michael McEluso and the team are delivering. Shifting to our platform services segment, this segment continues to deliver a year-over-year growth as revenue and adjusted EBITDAV increased 6.8% and 12.4%, respectively, while adjusted EBITDAV margins increased 206 basis points to 41.3%. As Jonathan mentioned, Driven Advantage, our in-house procurement platform, continues to grow as well. This quarter we saw a total of $89 million in sales go through the platform, which represents sequential growth of 14%.

Speaker Change: In just Q2, Autoglass now added six regional insurance carriers to its portfolio, while also signing agreements with two national rental car providers.

Daniel R. Rivera: We remain bullish on this business and industry and feel good about the momentum and sequential improvements Michael Macaluso and the team are delivering. Shifting to our platform services segment, this segment continues to deliver year-over-year growth as revenue and adjusted EBITDA increased 6.8% and 12.4%, respectively, while adjusted EBITDA margins increased 206 basis points to 41.3%.

Speaker Change: Shifting to our platform services segment, this segment continues to deliver year-over-year growth as revenue and adjusted EBITDA increase 6.8% and 12.4% respectively.

Daniel R. Rivera: As Jonathan mentioned, Driven Advantage, our in-house procurement platform, continues to grow as well. This quarter, we saw a total of $89 million in sales go through the platform, which represents sequential growth of 14%. This growth is driven by the expansion of our offerings and continued adoption from our franchisees, with approximately 80% of all eligible franchisees using the platform. Many thanks to Kyle Marshall and his team for the continued strong performance.

Speaker Change: As Jonathan mentioned, Driven Advantage, our in-house procurement platform, continues to grow as well. This quarter we saw a total of $89 million in sales go through the platform, which represents sequential growth of 14%.

Danny Rivera: This growth is driven by the expansion of our offerings and continued adoption from our franchisees, with approximately 80% of all eligible franchisees using the platform. Many thanks to Kyle Marshall and his team for the continued strong performance.

Jonathan Fitzpatrick: This growth is driven by the expansion of our offerings and continued adoption from our franchisees, with approximately 80% of all eligible franchisees using the platform.

Danny Rivera: Lastly, I would like to discuss our car wash segment. We continue to work hard to turn this segment around and continue to see progress and momentum. In the quarter, we sequentially grew revenue and adjusted EBITDAV by 8.4% and 15.9%, respectively, while also growing adjusted EBITDAV margins by 139 basis points.

Daniel R. Rivera: Lastly, I would like to discuss our car wash segment. We continue to work hard to turn this segment around and continue to see progress and momentum. In the quarter, we sequentially grew revenue and adjusted EBITDA by 8.4% and 15.9%, respectively, while also growing adjusted EBITDA margins by 139 basis points. Q2 presented some strong headwinds, particularly for our U.S. car wash business, with 44% of the calendar days in the quarter experiencing heavy rain. However, we were able to overcome some of these headwinds with our continued focus on membership. As I've mentioned before, Tim Austin and our U.S.

Jonathan Fitzpatrick: We continue to work hard to turn this segment around and continue to see progress and momentum.

Speaker Change: In the quarter, we sequentially grew revenue and adjusted EBITDA by 8.4% and 15.9%, respectively, while also growing adjusted EBITDA margins by 139 basis points.

Danny Rivera: Dispoins. Q2 presented some strong headwinds, particularly for US car wash business, with 44% of the calendar days in the quarter experiencing heavy rain. We were able to overcome some of these headwinds with our continued focus on membership. As I've mentioned before, Tim Austin and our US car wash team remain extremely focused on growing our membership business, and we've seen significant improvement throughout the year. Year to date, we've nearly tripled our conversion rate of retail customers to members and have added over 200,000 new members. Our international car wash business, led by Tracy Gellon, delivered sequential margin expansion and continues to deliver solid financial results across the board.

Speaker Change: Q2 presented some strong headwinds, particularly for our U.S. car wash business, with 44% of the calendar days in the quarter experiencing heavy rain.

Daniel R. Rivera: The Car Wash team remains extremely focused on growing our membership business, and we've seen significant improvement throughout the year. Year-to-date, we've nearly tripled our conversion rate of retail customers to members and have added over 200,000 new members. Our international car wash business, led by Tracy Gellin, delivered sequential margin expansion and continues to deliver solid financial results across the board. Overall, I am pleased with the progress that we made this quarter, particularly considering the softer consumer environment.

Jonathan Fitzpatrick: Year-to-date, we've nearly tripled our conversion rate of retail customers to members and have added over 200,000 new members.

Danny Rivera: Overall, I am pleased with the progress that we made this quarter, particularly considering a softer consumer environment. We delivered another strong quarter with year-rear growth in Saint-Store sales revenue, EBITDA, and EBITDA margins. When it comes to our business priorities, take five old change, continue to deliver exceptional results. Auto-glass now and US car wash continue to show sequential momentum. Dream of the advantage continues to grow and is on track to deliver our 2026 EBITDA plans. And our legacy franchise businesses continue to predictably grow and generate cash.

Daniel R. Rivera: We delivered another strong quarter with year-over-year growth in same store sales, revenue, EBITDA, and EBITDA margin. When it comes to our business priorities, Take 5 Oil Change continues to deliver exceptional results. Auto Glass Now and U.S.

Jonathan Fitzpatrick: When it comes to our business priorities, Take 5 Oil Change continues to deliver exceptional results. Auto Glass Now and U.S. Car Wash continue to show sequential momentum.

Jonathan Fitzpatrick: Grumman Advantage continues to grow and is on track to deliver our 2026 EBITDA plans. And our legacy franchise businesses continue to predictably grow and generate cash.

Danny Rivera: I'd once again like to thank the thousands of employees and franchisees that worked hard to put together a strong quarter.

Jonathan Fitzpatrick: I'd once again like to thank the thousands of employees and franchisees that worked hard to put together a strong quarter. With that, I will turn it over to my partner, Joel.

Joel Arnao: With that, I will turn it over to my partner, Joel. Thanks, Danny, and good morning, everyone. I'd like to start by thanking Jonathan, Danny, and the entire German brand's team for their support the past three months. It's been an incredible opportunity to lead the German brand's finance team. I am extremely proud of what we have accomplished this quarter. In addition, I've had the opportunity to meet with Mike several times and am confident that he will be a great addition to the team. I'm looking forward to working with him to deliver strong results in 2024 and beyond.

Joel Arnao: Car Wash continues to show sequential momentum. Driven Advantage continues to grow and is on track to deliver our 2026 EBITDA plan, and our legacy franchise businesses continue to predictably grow and generate cash. I'd once again like to thank the thousands of employees and franchisees that worked hard to put together a strong quarter. With that, I will turn it over to my partner, Joel. Thanks, Danny. And good morning, everyone.

Joel Arnao: I'd like to start by thanking Jonathan, Danny, and the entire Driven Brands team for their support the past three months. It's been an incredible opportunity to lead the finance team. I am extremely proud of what we have accomplished this quarter. I'm looking forward to working with him to deliver strong results in 2024 and beyond.

Joel Arnao: Thanks, Danny, and good morning, everyone. I'd like to start by thanking Jonathan, Danny, and the entire Driven Brands team for their support the past three months.

Joel Arnao: It's been an incredible opportunity to lead the Driven Brands finance team.

Speaker Change: I am extremely proud of what we have accomplished this quarter. In addition, I've had the opportunity to meet with Mike several times, and I am confident that he will be a great addition to the team. I'm looking forward to working with him to deliver strong results in 2024 and beyond.

Joel Arnao: First, I will discuss second quarter results before moving on to the full year outlook. On a consolidated basis, we delivered our 14th straight quarter of positive Saint-Store sales. Our system-wide sales reached $1.7 billion, representing a 0.6% increase from the previous year. This growth is driven by a 0.5% increase in Saint-Store sales and 2% net-store growth. Total revenue for the quarter increased 0.8% to $611.6 million, and adjusted EBITDA increased 4% to $152.2 million. Adjusted EBITDA margin increased 77 basis points to 24.9%, primarily driven by margin improvement in maintenance.

Joel Arnao: First, I will discuss the second quarter results before moving on to the full year. On a consolidated basis, we delivered our 14th straight quarter of positive same-store sales. Our system-wide sales reached $1.7 billion, representing a 0.6% increase from the previous year. This growth is driven by a 0.5% increase in same-store sales and 2% net store growth. Total revenue for the quarter increased 0.8% to $611.6 million, and adjusted EBITDA increased 4% to $152.2 million.

Speaker Change: First I will discuss second quarter results before moving on to the full year outlook.

Joel Arnao: On a consolidated basis, we delivered our 14th straight quarter of positive same-store sales. Our system-wide sales reached $1.7 billion, representing a 0.6% increase from the previous year.

Joel Arnao: This growth is driven by a 0.5% increase in same-store sales and 2% net store growth.

Joel Arnao: Total revenue for the quarter increased 0.8% to $611.6 million and adjusted EBITDA increase to 4% to $152.2 million.

Joel Arnao: It's just an even margin increase, 77 basis points to 24.9%, primarily driven by margin improvement in maintenance. Now I will discuss the performance of each of our segments. In our maintenance segment, system-wide sales increased 10.5% to $535 million, driven by a 4.3% increase in same store sales and 159 new store openings versus the second quarter of 2023. Take 5's continued sales execution, including same-store sales at 5.7%, were underscored by a record premium oil mix of approximately 90% in year-over-year improvement in attachment. We added 40 net new Take Five oil chain stores during the quarter, with 25 franchise and 15 company-owned stores.

Joel Arnao: Adjusted EBITDA margin increased 77 basis points to 24.9%, primarily driven by margin improvement in maintenance.

Joel Arnao: Now I will discuss performance at each of our segments. In our maintenance segment, system-wide sales increased 10.5% to $535 million, driven by a 4.3% increase in Saint-store sales, and 159 new-store openings versus the second quarter of 2023. Tank 5s continued sales execution, including Saint-Store sales at 5.7%, or underscored by record-premium oil mix of approximately 90% in year-to-year improvement in attachments. We added 40 net new takes five oil change stores throwing the quarter with 25 franchise and 15 company owned stores. The maintenance segment sales growth coupled with disciplined operational improvements led to a 21.4% increase in adjusted EBITDA to $102.9 million.

Joel Arnao: The maintenance segment sales growth coupled with disciplined operational improvements led to a 21.4% increase in adjusted EBITDA to $102.9 million. In our car wash segment, same store sales declined 4.1% due to retail softness and inclement weather in our U.S. car wash business during the quarter.

Joel Arnao: The maintenance segment sales growth coupled with disciplined operational improvements led to a 21.4% increase in adjusted EBITDA to $102.9 million.

Joel Arnao: Adjusted EBITDA margin expanded 203 basis points to 37% driven primarily by Take Five Oil Change.

Joel Arnao: Adjusted EBITDA margin expanded 203 basis points to 37% driven primarily by Take 5 oil change.

Joel Arnao: In our car wash segment, same store sales declined 4.1% due to retail softness and inclement weather in our U.S. Car wash business. For the quarter, sales were $156.9 million and adjusted EBITDA was $33.8 million. Although the decrease in revenue and adjusted EBITDA versus Q2 2023 was driven by our U.S. car wash operations, we saw constraints improved sequentially quarter over quarter due to our new membership pricing strategy. As Danny mentioned earlier, year to date, our membership count grew by over 200,000 new members.

Joel Arnao: Sales were $156.9 million, and adjusted EBITDA was $33.8 million. The decrease in revenue in adjusted EBITDA versus Q2 2023 was driven by our U.S. car wash operation. As Danny mentioned earlier, year to date, our membership count grew by over 200,000 new members. In our PC&G segment, system-wide sales were $862.2 million, a decrease of 3.4% versus the prior year period; change store sales declined 0.5%. Revenue for the segment was $112 million, and adjusted EBITDA was $35.2 million, a decrease of 15.9% and 14.3%, respectively. These results were primarily driven by our collision data. The decrease in same store sales was driven by two main factors.

Joel Arnao: For the quarter, sales were $156.9 million and adjusted EBITDA was $33.8 million.

Joel Arnao: As Danny mentioned earlier, year-to-date, our membership count grew by over 200,000 new members.

Joel Arnao: In our PC and G segment, systemwide sales rate $862.2 million, a decrease of 3.4% versus the prior year period. Same store sales declined 0.5%. Revenue for the segment was $112 million and adjusted EBITDA was $35.2 million. A decrease of 15.9% and 14.3%, respectively. These results were primarily driven by our collision business. The decrease in same store sales were driven by two manufacturers, lapping Q2 2023 hailstorms and 2024 industry softness. The decrease in revenue was additionally impacted by re-fansizing of 12 company owned locations, which lowered revenue by approximately $13 million and adjusted EBITDA by approximately $2 million.

Joel Arnao: Revenue for the segment was $112 million and Adjusted EBITDA was $35.2 million, a decrease of 15.9% and 14.3% respectively.

Speaker Change: These results were primarily driven by our collision business.

Joel Arnao: Lapping Q2 2023 hailstorms and 2024 industry softness, the decrease in revenue was additionally impacted by refranchising of 12 company-owned locations, which lowered revenue by approximately $13 million and adjusted EBITDA by approximately $2 million. In our platform services segment, sales grew 6.8% to $61.2 million, and adjusted EBITDA increased 12.4% to $25.3 million, just even a margin increase of 206 basis points to 41.3%, which was due to improve variable cost management. Now I will focus on key components below.

Speaker Change: The decrease in same-store sales was driven by two main factors, lapping Q2 2023 hailstorms and 2024 industry softness.

Joel Arnao: The decrease in revenue was additionally impacted by refranchising of 12 company-owned locations, which lowered revenue by approximately $13 million and adjusted EBITDA by approximately $2 million.

Joel Arnao: In our platform service segment, sales grew 6.8% to $61.2 million, and adjusted EBITDA increased to 12.4% to $25.3 million. Adjust EBITDA margin increased 206 basis points to 41.3%, which was due to improve the variable cost management.

Joel Arnao: Now, I will focus on key components below adjusted EBITDA. Depreciation and amateurization expenses totaled $45 million for the quarter, reflecting a $1 million decrease from the prior year, as we dispose of our U.S. car wash assets held for sale. Interest expense declined to $32 million per merely due to a one-time reduction in the estimated interest on our tax receivable agreement liability, and improved interest rates on our cash deposits. Now, income for the second quarter was $30.2 million versus $37.7 million in Q2 2023. Adjusted net income was $58 million for the quarter, resulting in an adjusted diluted EPS for the quarter of $35.

Joel Arnao: Appreciation and amortization expenses totaled $45 million for the quarter, reflecting a $1 million decrease from the prior year as we dispose of our U.S. car wash assets held for sale. Interest expense declined to $32 million primarily due to a one-time reduction in the estimated interest on our tax receivable agreement liability and improved interest rates on our cash deposits.

Joel Arnao: Now I will focus on key components below and just leave it at that.

Joel Arnao: Depreciation and amortization expenses totaled $45 million for the quarter, reflecting a $1 million decrease from the prior year, as we dispose of our U.S. car wash assets held for sale.

Joel Arnao: Net income for the second quarter was $30.2 million versus $37.7 million in Q2 2023, and adjusted net income was $58 million for the quarter, resulting in an adjusted diluted EPS for the quarter of 35 cents. Both are up versus the prior year due to strong EBITDA growth and continued debt reduction. At the end of the second quarter, we had $316 million in liquidity, comprised of $149 million in cash and cash equivalents, along with $167 million of undrawn capacity on our variable funding securitization, senior notes, and our revolving credit facility.

Joel Arnao: Net income for the second quarter was $30.2 million versus $37.7 million in Q2 2023.

Joel Arnao: Both are up versus prior year due to strong EBITDA growth and continued debt reduction. At the end of the second quarter, we have $316 million in liquidity, comprised of $149 million in cash and cash equivalents. Along with $167 million of undrawn capacity on our variable funding securities, senior notes, and a revolving credit facility.

Joel Arnao: At the end of the second quarter, we have $316 million in liquidity, comprised of $149 million in cash and cash equivalents, along with $167 million of undrawn capacity under a variable funding securitization, senior notes, and a revolving credit facility.

Joel Arnao: On Monday, we closed an offering of $275 million in Series 2024 Class A2 senior notes to refinance our Series 2018-1 Class A2 senior notes. In conjunction with these notes, we increased our total variable funding note capacity to over $500 million. As a reminder, our debt stack is comprised of approximately 80% pulp business securitization notes with a blended 6th grade of 4.5% in a weighted average maturity of 3.6 years. There are no maturities coming due until Q2, 2026.

Joel Arnao: On Monday, we closed an offering of $275 million in Series 2024 Class A2 Senior notes. In conjunction with these notes, we increased our total variable funding note capacity to over $500 million. As a reminder, our debt stack is comprised of approximately 80% whole business securitization notes with a blended fixed rate of 4.5% and a weighted average maturity of 3.6 years. There are no maturities coming due until Q2 2026.

Joel Arnao: In conjunction with these notes, we increased our total variable funding note capacity to over $500 million.

Joel Arnao: As a reminder, our debt stack is comprised of approximately 80% whole business securitization notes with a blended fixed rate of 4.5% and a weighted average maturity of 3.6 years.

Joel Arnao: There are no maturities coming due until Q2 2026.

Joel Arnao: Throughout the quarter, we continue to make meaningful progress paying down our credit facilities. In addition to a $25 million reduction in our drawn revolver balance, we chose to make a $20 million prepayment to our term-loan principal balance to reduce our higher interest rate debt. As of Q2, we paid down $80 million of principal across our revolver in term-loan from our inter-quarter peak in Q1.

Joel Arnao: Throughout the quarter, we continue to make meaningful progress paying down our credit. In addition to a $25 million reduction in our drawn revolver balance, we chose to make a $20 million prepayment on our term loan principal balance to reduce our higher interest rate debt. As of Q2, we paid down $80 million of principal across our revolver and term loan from our inter-quarter peak in Q1. But we haven't stopped there. In July, we were able to make another $20 million of optional prepayments to our term loan principal balance and expect to build on this momentum in the second half of the year as we focus on getting our net leverage below $4.5. At the end of the quarter, our net leverage ratio improved sequentially from the prior quarter.

Joel Arnao: In addition to a $25 million reduction in our drawn revolver balance, we chose to make a $20 million prepayment to our term loan principal balance to reduce our higher interest rate debt.

Joel Arnao: But we haven't stopped there. In July, we're able to make another $20 million of optional prepayments to our term-loan principal balance and expect to build on this momentum in the second half of the year as we focus on getting our net leverage below 4.5 times. At the end of the quarter, our net leverage ratio improved sequentially from the prior quarter. As of Q2 24, our net leverage was 4.8 times, down from 4.9 times in Q1 and 5 times at the end of 2023.

Joel Arnao: As of Q2'24, our net leverage was 4.8 times, down from 4.9 times in Q1, and five times at the end of 2023. We plan to continue to deliver throughout the year thanks to improved cash flow from organic adjusted EBITDA growth and proceeds from the sale of U.S. Car Wash pipeline sites.

Joel Arnao: We plan to continue to do that throughout the year thanks to improved cash flow for organic adjusted EBITDA growth and proceeds from the sale of US car wash pipeline sites. In the second quarter, we generated $66 million from assets held for sale, bringing our total through Q2 to $100 million. As Johnson mentioned, the year-to-date, we have sold $17 million in assets held for sale and expect to sell an additional $50 million in 2024.

Joel Arnao: In the second quarter, we generated $66 million from assets held for sale, bringing your total through Q2 to $100 million. As Jonathan mentioned, a year to date, we have sold $107 million in assets held for sale and expect to sell an additional $50 million in 2024. Now, I will provide a brief update on our ERP implementation. I'm happy to share that our new ERP system went live in July.

Joel Arnao: In the second quarter, we generated $66 million from assets held for sale, bringing our total through Q2 to $100 million.

Speaker Change: As Jonathan mentioned, a year to date, we have sold $107 million in assets held for sale and expect to sell an additional $50 million in 2024.

Joel Arnao: Now, I will provide a brief update on our ERP implementation. I'm happy to share that our new ERP system went live in July. We are taking an incremental approach to the implementation and will continue to shift our brands onto the new system.

Speaker Change: Now I will provide a brief update on our ERP implementation. I am happy to share that our new ERP system went live in July . We are taking an incremental approach to the implementation and will continue to shift our brands onto the new system.

Joel Arnao: We are taking an incremental approach to the implementation, and we'll continue to shift our brands onto the new system. Now, I would like to update our full year out, based primarily on continued softness in the US car wash business. Collision Industry Trends and Macroeconomic Uncertainty

Joel Arnao: Now, I would like to update our full-year outlook. Based primarily on continued softness in the US car wash business, collision industry trends, and macroeconomic uncertainty, we are adjusting our same-store sales growth outlook for the year to 1-3% from 3-5%. We also expect to come into the lower end of our original revenue outlook of 2.35 to 2.45 billion dollars. Maintenance and platform services segments drove a just EBITDA growth through the first half of 2024. We expect these trends to continue in the back half of 2024, along with moderate improvement in our other segments. For the full year, we now expect adjusted EBITDA to come in at the mid to upper end of the original range of 535 to 565 million dollars.

Speaker Change: Based primarily on continued softness in the U.S. car wash business.

Joel Arnao: We are adjusting our same-store sales growth outlook for the year to 1% to 3%, from three to five. We also expect to come in at the lower end of our original revenue outlook of $2.35 to $2.45 billion, as maintenance and platform services segments drove adjusted EBITDA growth through the first half of 2024. We expect these trends to continue in the back half of 2024, along with moderate improvement in our other segments. For the full year, we now expect Adjusted EBITDA to come in at the mid to upper end of the original range of $535 to $565 million. We expect adjusted diluted EPS to come in at the higher end of our original range of $0.88 to $1.

Speaker Change: Maintenance and platform services segments drove adjusted EBITDA growth through the first half of 2024. We expect these trends to continue in the back half of 2024, along with moderate improvement in our other segments.

Joel Arnao: We expect adjusted diluted EPS to come in at the higher end of our original range of 80 cents to a dollar. We are reaffirming our original outlook on net-store growth of our profit in 205 to 220 stores during the year. We continue to expect depreciation and amortization expenses of approximately 175 million dollars and interest expenses of approximately 170 million dollars. Our effective tax rate is expected to be approximately 35% in 2024, which is in line with our 2022 effective tax rate. We continue to expect gross capital investments to be approximately 260 million dollars for the full year, with approximately 40 million dollars to sell leasebacks that result in net caps of approximately 220 million dollars.

Joel Arnao: We are reaffirming our original outlook on net store growth of approximately 205 to 220 stores during the year. We continue to expect depreciation and amortization expenses of approximately $175 million and interest expenses of approximately $170 million. Our effective tax rate is expected to be approximately 35% in 2024, which is in line with our 2022 effective tax rate.

Speaker Change: Our effective tax rate is expected to be approximately 35% in 2024, which is in line with our 2022 effective tax rate.

Joel Arnao: We continue to expect gross capital investments to be approximately $260 million for the full year, with approximately $40 million of sale leasebacks. This results in net capex of approximately $220 million. For the rest of the year, as Jonathan mentioned before, we are focused on generating free cash flow and reducing debt. We continue to expect net leverage to be below 4.5 times by year end. Now, we'd like to provide more color on the third quarter.

Joel Arnao: For the rest of the year, as Jonathan mentioned before, we are focused on generating free cash flow and reducing debt. We continue to expect net leverage to be below 4.5 times by year end.

Joel Arnao: Now we would like to provide more color on the third quarter. We expect our third quarter year-over-year revenue growth to be in a low single digits, and our adjusted EBITDA growth to be in a low double digits.

Operator: We expect our third quarter year-over-year revenue growth to be in the low single digits, and our adjusted EBITDA growth to be in the low double digits. Now I will turn it back over to the operator. Should you have a question, please press the star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Press the star followed by the number two.

Operator: Now I will turn it back over to the operator. Thank you.

Operator: 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 touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speaker phone, please lift the handset before pressing anything. One moment, please, for your first question.

Speaker Change: Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised.

Operator: If you are using a speakerphone, please lift the handset before pressing any key. Simeon Gutman from Morgan Stanley. Good morning, everyone. I wanted to ask you to start with the carwash.

Speaker Change: If you are using a speakerphone, please lift the handset before pressing any key.

Simeon Gutman: Our first question is from Simian Gottman from Morgan Stanley. Good morning, everyone.

Speaker Change: first question.

Unknown Executive: It's about 20-ish, 20-25% of EBITDA. Curious what your thoughts are. It's been a long and winding road.

Simeon Gutman: I wanted to ask and start with car wash. It's about 20 to 25% of EBITDA. Curious what your thoughts are. It's been a long and winding road.

Jonathan Fitzpatrick: It seems like it's stabilizing a bit; wonder how strategic it is to the overall portfolio and EBITDA growth going forward. Hi, Simian Jonathan here. Good question. I think a couple of things.

Speaker Change: Curious what your thoughts are. It's been a long and winding road. It seems like it's stabilizing a bit. I wonder how strategic it is to the overall portfolio and EBITDA growth going forward.

Jonathan G. Fitzpatrick: It seems like we're stabilizing a bit. I wonder how strategic it is. The Overall Portfolio and, [inaudible] Hi, Simeon, Jonathan here. Good question.

Jonathan G. Fitzpatrick: I think a couple of things. One is that we're retaining the position from investor day that we're not deploying incremental growth capital into that business. I'm very pleased with the progress that Tim Austin, our Car Wash President, and Danny have done in sort of stabilizing that business, and we're starting to see sequential growth. I've also mentioned that we are still in the process of evaluating the long-term sustainability of that Car Wash asset within our portfolio.

Speaker Change: Hi Simeon, Jonathan here. Good question. I think a couple of things. One is...

Jonathan Fitzpatrick: One is we're retaining the position from the Investor Day that we're not deploying incremental growth capital into that business. I'm very pleased with the progress that Tim Austin, our car wash president, and Danny have done in sort of stabilizing that business, and we're starting to see sequential growth. I've also mentioned that we are still in the process of evaluating the long-term sustainability of that car wash asset within our portfolio. We're not there yet in terms of a decision that we're willing to make publicly, but again, we're pleased with the stabilization that Danny and Tim have made on the business in 2024.

Speaker Change: I'm very pleased with the progress that Tim Austin, our Car Wash President, and Danny have done in sort of stabilizing that business, and we're starting to see sequential growth.

Jonathan G. Fitzpatrick: We're not there yet in terms of a decision that we're willing to make publicly, but again, we're pleased with the stabilization that Danny and Tim have made in the business in 2020. Yeah, look, I think Mo Khalid and the Take 5 team are doing an exceptional job on margin expansion. I think there's multiple things driving that, Simeon.

Danny Rivera: Okay, and then switching to maintenance, I guess, two parts. The margins are exploding positively. Maybe I missed the commentary on what's helping to drive that. While the take five looks like slow it a little bit sequentially. Maybe chalked up again, I may have missed some commentary, but what was the culprit? Was it temporal weather? and so on. Yeah, look, I think Mo Khalid and the Take Five team are doing an exceptional job on margin expansion. I think there's multiple things driving that. Simeon, one, is just great operational efficiency, continuing to drive premium oil mix attachment rates, which are all margin accretive.

Speaker Change: Okay.

Speaker Change: While the take five looks like slowed a little bit sequentially chalked maybe chalked up again I may have missed some commentary, but what was the culprit was it temporal weather, etc?

Speaker Change: Yeah, look, I think Mo Khalid and the Take 5 team are doing an exceptional job on margin expansion. I think there's multiple things driving that, Simeon. One is just great operational efficiency, continuing to drive premium oil mix attachment rates, which are all margin accretive.

Unknown Executive: One is just great operational efficiency, continuing to drive premium oil mixes and attachment rates, which are all margin accretive. We've obviously got more franchise stores joining the mix as well, which obviously helps leverage. In terms of your comment around Q1 to Q2 sequential same store sales, there's really a de minimis move. We don't see any trajectory change in that business and are still very confident in the four-year outlook for Take 5 oil. Questions will be coming from Justin Feber. Hey guys, good morning.

Simeon Gutman: We've obviously got more franchise stores joining the mix as well, which obviously helps leverage in terms of your comment around Q1 to Q2 sequential same store sales. There's, you know, really, as a diminimus move, we don't see any trajectory change in that business and are still very confident in the four year outlook for Take Five old change. Okay, thank you.

Speaker Change: In terms of your comment around Q1 to Q2 sequential same-store sales, there's, you know, really is a de minimis move. We don't see any trajectory change in that business and are still very confident in the full-year outlook for a Take 5 oil change.

Simeon Gutman: Good luck.

Justin Kleber: Next question will be coming from Justin Kleber from there. Hey guys, good morning. Thanks for taking a question.

Unknown Executive: Thanks for taking the question. Just first one was on carwash and the test you talked about last quarter. , , , , , , , , , over time to reestablish a gap between subscription and retail. Hey, Justin, this is Danny.

Justin Kleber: Just first one was on car wash and the test you talked about last quarter, where did you drop the subscription price to be in line with the single wash. Here's if you're operating with that pricing structure, cross the chain today. Have you seen any response competitive response in those actions and then just longer term your view on this pricing strategy is sustainable or would you expect over time to reestablish a gap between subscription and retail.

Speaker Change: Hey guys, good morning. Thanks for taking the question. The first one was on car wash and the test you talked about last quarter.

Speaker Change: Where do you drop the subscription price to be in line with a single wash? Curious if you're operating with that pricing structure across the chain today. Have you seen any response, competitive response from those actions? And then just longer term, your view on this pricing strategy. Is it sustainable or would you expect?

Speaker Change: Over time to reestablish a gap between subscription and retail.

Danny Rivera: Hey, Justin, this is Danny. Thanks for the question. So, so the short answer is yes. We've deployed that pricing strategy across the country. As I mentioned in my prepared remarks, you know, we're really happy with results. We're seeing we tripled our conversion rate. We've added 200,000 members a year to date to members. So, it's working exactly as we hoped. We're not seeing any response to what we're doing in any kind of scaled or meaningful way. As far as how long we will deploy a strategy like this, I'd say look for the short to medium term.

Daniel R. Rivera: Thanks for the question. So the short answer is yes, we've deployed that pricing strategy across the country. As I mentioned in my prepared remarks, you know, we're really happy with the results we're seeing; we've tripled our conversion rate, and we've added 200,000 members year to date. So it's working exactly as we'd hoped; we're not seeing any response to what we're doing in any kind of scaled or meaningful way.

Speaker Change: As far as how long will we deploy a strategy like this, I'd say look for the short to medium term. This makes a lot of sense for us.

Daniel R. Rivera: As far as how long we will deploy a strategy like this, I'd say look for the short to medium term. This makes a lot of sense for us. We want to grow our membership base; it hedges against the natural sensitivity to weather in this business. And overall, it'll be margin accretive to us as we keep our fixed costs in place, and we continue to grow our membership revenue. So this strategy is working exactly as we'd hoped. And we think it'll continue to add financial benefits in the second half of the year. Great, thanks for that, Danny.

Danny Rivera: This makes a lot of sense for us. We want to grow our membership base. It hedges against the natural sensitivity to weather in this business. And overall, it'll be margin accretive to us as we keep our fixed costs in place. And we continue to grow our membership revenue. So strategies working exactly as we'd hoped. And we think it'll continue to add financial benefits in the back half of the year. Great.

Speaker Change: And overall, it'll be margin accretive to us as we keep our fixed costs in place and we continue to grow our membership revenue. So strategy is working exactly as we'd hoped. And we think it'll continue to add financial benefits in the back half of the year.

Unknown Executive: And then just a question on the glass business Jonathan, you talked about, I think it was six regional insurance carriers and two rental car company contracts. Can you frame, I guess, how many insurance and rental company contracts are out there as potential AGN customers and maybe where you stand today from a penetration standpoint on commercial and insurance relative to kind of the end goal for that business? Thanks, guys.

Danny Rivera: Thanks for that, Danny.

Jonathan Fitzpatrick: And then just a question on the glass business. Jonathan, you talked about the six, I think it was six regional insurance carriers and two rental car company contracts. Can you frame, I guess how many insurance and rental company contracts are out there as potential agent customers and maybe where you stand today. From a penetration standpoint on commercial and insurance, relative to kind of the end goal for that business. Thanks, guys. Yeah, I'll do my best to frame that a little bit for you. Just in the, you know, the rental car business nationally is quite concentrated with very familiar names.

Speaker Change: I think it was six regional insurance carriers and two rental car company contracts. Can you frame, I guess, how many insurance and...

Speaker Change: Rental company contracts are out there as potential AGN customers and maybe where you stand today from a penetration standpoint on commercial and insurance relative to kind of the end goal for that business.

Unknown Executive: Yeah, I'll do my best to frame that a little bit for you, Justin. The rental car business nationally is quite concentrated with very familiar names, and we're very pleased with the work that the team did, which is to get two of those names added to our portfolio of AGN. And there's continued growth we expect in the future across multiple commercial lines, not just rental, but we think about commercial customers and then fleet management customers.

Speaker Change: Thanks, guys.

Jonathan Fitzpatrick: And we're very pleased with the work that the team done, which is to get, you know, two of those names added to our portfolio of AGM. And in terms of the, and there's continued growth, we expect in the future across multiple commercial lines, not just rental, but we think about commercial customers and then fleet management customers. So there's multiple layers within that commercial sector within regional insurance. Very pleased with the signing of those six contracts, six regional contracts in Q2. Once we sign, we then have to activate those contracts and then sort of bleed that revenue in, you know, over the course of the back half of the year.

Speaker Change: in terms of the and there's continued growth we expect in the future across multiple commercial lines, not not just rental, but we think about commercial customers and then fleet management customers. So there's multiple layers within that.

Unknown Executive: So there are multiple layers within that commercial sector. Within regional insurance, I'm very pleased with the signing of those six contracts, six regional contracts in Q2. Once we sign, we then have to activate those contracts and then sort of bleed that revenue in over the course of the back half of the year. To put it in perspective, there are approximately 300 regional insurance, sorry, over 3,000 regional insurance carriers out there. And so this is just the tip of the iceberg.

Speaker Change: Once we sign, we then have to activate those contracts and then sort of bleed that revenue in, you know, over the course of the back half of the year.

Jonathan Fitzpatrick: To put in perspective, you know, there's approximately 300 regional insurance, sorry, over 3,000 regional insurance carriers out there. And, you know, so this is just the tip of the iceberg. So we feel good about the momentum we're building. Again, I would just point to, we're early in the innings of building that business. We think it's going to be a phenomenal business for us over time, but we are very pleased with the progress that we're making so far in 20. 24. Janet, thanks for that color and the best of luck.

Speaker Change: To put in perspective, you know, there's approximately

Unknown Executive: So we feel good about the momentum we're building. Again, I would just point out that we're early in the innings of building that business. We think it's going to be a phenomenal business for us over time, but very pleased with the progress that we're making so far in 2020. Got it. Thanks for that color, and the best of luck, and thank you.

Robbie: Oh, thanks for taking my question. My question is on the, you know, on PCG, and I was wondering if you guys could give a little more color and commentary on how you're thinking about the back half and what, you know, what the headwinds have been there and any, you know, when you think the headwinds, you know, whether it's, you know, big ticket deferrals or, or, you know, what's happening in that space and when, when we could see return to growth in EBITDA there. Yeah, thanks, Robbie. I'll start, and Danny or Joel may actually jump in on top. But, you know, when we look at the little bit of softness that we've seen in really the second half, sorry, the second quarter in PCG, I would say that's primarily ring-fenced around the US collision, which is our 100% franchise business.

Unknown Executive: Oh, thanks for taking my question. My question is on the, you know, PCG. And I was wondering if you guys could give a little more color and commentary on how you're thinking about the back half and what, you know, the headwinds have been there. And any times when you think the headwinds, you know, whether it's, you know, big ticket deferrals or, or, you know, what's happening in that space. And when will we see a return to growth in EBITDA there? Yeah, thanks, Robbie.

Speaker Change: Unknown Speaker 3 What are the headwinds that have been there, and when do you think the headwinds, whether it's big-ticket deferrals or what's happening in that space, and when we could see a return to growth in EBITDA there? Unknown Speaker

Unknown Executive: I'll start, and Danny or Joel may actually jump in on top of this, but, You know, when we look at the little bit of softness that we've seen in really the second half, sorry, the second quarter, in PC&G, I would say that's primarily ring-fenced around the US collision, which is our 100% franchise business. Some of that softness can be attributed to industry-wide claims year to date being down mid single However, Driven's claims are down to low single digits.

Speaker Change: Yeah, thanks, Robbie. I'll start and Danny or Joel may actually jump in on top, but...

Unknown Executive: So we look at that as outperforming the broader market. The second factor is that used car pricing has returned to more normal levels, increasing the frequency of total losses. That being said, we look at the collision tailwinds as dissipating in the back half of the year. So I think that's a fairly sort of short-term headwinds that we have there. Terrific. Thanks so much.

Robbie: Some of that softness can be attributed to industry wide claims here to date are down mid single digits; however, Driven claims are down low single digits, so we look at that as outperforming the broader market. The second factor is that used car pricing has returned to more normal levels, increasing the frequency of total losses.

Speaker Change: Some of that softness can be attributed to industry-wide claims, year-to-date, are down mid-single digits. However, Driven's claims are down low single digits, so we look at that as outperforming the broader market.

Speaker Change: The second factor is that used car pricing has returned to more normal levels, increasing the frequency of total losses.

Robbie: That being said, we look at the collision tailwinds as dissipating in the back half of the year, so I think that's a fairly sort of short-term headwinds that we have there, so I'll stop there and.

Robbie: And then maybe just a follow up on can you can we get an update on cost pressures, you know, across your businesses has, you know, has the wage outlook and improved from here are there any cost pressures alleviating that could support a better EBITDA growth in the back half. Yeah, I think no major trajectory changes, Robbie. I mean, I think that the labor environment has certainly sort of settled down compared to two, three, four quarters ago. Our input costs in terms of cost of goods are generally we've got good visibility in there, so we don't see any major moderation, but we don't see any likely increase in pricing there. So, it feels like the back half of the year will be pretty similar to the first half.

Speaker Change: Yeah, I think

Robbie: In terms of just overall costs.

Robbie: Terrific, thanks so much.

Unknown Executive: Question will be coming from Seth Sigman from Mark. Great, good morning, everyone. Nice progress in the quarter. I wanted to talk a little bit about the guidance.

Seth Sigman: Question will be coming from this segment from Barkley. Great, good morning, everyone. Nice progress in the quarter. I want to talk a little bit about the guidance, so you narrowed the EBITDA guidance to the high end of the range, which is nice to see. Can you elaborate on what's implied here for the second half of the year, maybe some of the underlying assumptions, because if I recall, you previously assume that most of the EBITDA growth at the 80% of the EBITDA growth is going to come in the second half of the year. It seems like first half came in better to not really raising the second half, but then you also talked if I caught this right low double digit EBITDA growth in Q3.

Speaker Change: Session will be coming from.

Joel Arnao: So you narrowed the EBITDA guidance to the high end of the range, which is nice to see. Can you just elaborate on what's implied here for the second half of the year, maybe some of the underlying assumptions? Because, if I recall, you previously assumed that most of the EBITDA growth, I think 80% of the EBITDA growth is going to come in the second half of the year. It seems like the first half came in better.

Barclays: from Barclays.

Speaker Change: Can you just elaborate on what's implied here for the second half of the year, maybe some of the underlying assumptions? Because if I recall, you previously assumed that most of the EBITDA growth, I think 80% of the EBITDA growth was going to come in the second half of the year. It seems like first half came in better, so you're not really raising the second half.

Joel Arnao: So you're not really raising the second half. But then you also talked about, if I caught this right, low double digits EBITDA growth in Q3. So maybe just help us understand some of the assumptions in there. That'd be a good start. Thanks. Hey, Seth. This is Joel.

Speaker Change: But then you also talked, if I caught this right, low double-digit EBITDA growth in Q3. So maybe just help us understand some of the assumptions in there. That would be a good start. Thanks.

Seth Sigman: So maybe just to help us understand some of the assumptions in there, that would be a good start.

Joel Arnao: Thanks.

Joel Arnao: Hey, Seth, this is Joel. I'll just reaffirm what we said earlier in my script. You know, continued growth in the back half of the year maintenance and PC or, sorry, and platform services. And we'll expect to see some improvement from, you know, from our other segments, car wash and TCNG, kind of from the year-to-year comparison basis. You know, we still, we're going to still see 80% of our growth in the back half of the year, so it's consistent with what we've messaged in Q4 and Q1, but feel good about the outlook that we gave earlier.

Joel Arnao: I'll just reaffirm what we said earlier in my script, you know, continued growth in the back half of the year in maintenance and PC, or sorry, in platform services. And we'll expect to see some improvement from our other segments, car wash and PC, and G kind of on a year over year comparison basis. It was still We're going to still see 80% of our growth in the back half of the year. So it's consistent with what we've messaged in Q4 and Q1. But feel good about the outlook we gave earlier. Got it.

Speaker Change: And we'll expect to see some improvement from, you know, from our other segments, car wash and TC&G kind of from the year over year comparison basis. It was still we're going to still see 80% of our growth in the back half of the year. So it's consistent with what we've messaged in Q4 and Q1. But feel good about the outlook, you know, that we gave earlier.

Joel Arnao: Got it.

Unknown Executive: Okay. And then I guess just one follow-up question on Glass. I mean, if you could maybe spend a minute on the infrastructure that's been put in place here, just help us understand exactly the timing of that. And how would you categorize the second quarter for this segment? It seems like it was still a transition period.

Joel Arnao: Okay.

Joel Arnao: And then I guess just one follow-up question on glass.

Joel Arnao: I mean, if you could maybe spend a minute on the infrastructure that's been put in place here, just help us understand exactly the timing of that. And how would you categorize the second quarter for this segment? It seems like it was still a transition period, so we haven't seen the full potential yet. But is there a way to frame how that part of the segment accelerates in the back half of the year? I think that would be helpful.

Speaker Change: Got it. Okay. And then I guess just one follow-up question on Glass.

Speaker Change: I mean, if you could maybe spend a minute on the infrastructure that's been put in place here, just help us understand exactly the timing of that. And how would you categorize the second quarter?

Speaker Change: For this segment, it seems like it was still a transition period. So we haven't seen the full potential yet. But is there a way to frame how that part of the of the segment accelerates in the back half of the year? I think that would be helpful. Thanks.

Jonathan Fitzpatrick: Thanks. Yes, we typically don't give any sort of a sub-segment guidance, but I would say I would sort of point you to two things. What is that? You know, this is a long-term play for us, and we're in the early innings, and we are making great progress. Mike McEluso, who's running that business, has got all the necessary people, process, and systems in place to now focus on growing revenue and generating, you know, really solid margins there. So I think again, like I said on Q1, and I'll reiterate again today, you know, this is about future growth and future profits in the business, but it will take time.

Unknown Executive: So we haven't seen the full potential yet, but is there a way to frame how that part of the segment accelerates in the back half of the year? I think that would be helpful. Yeah, Seth, we typically don't give any sort of sub-segment guidance, but I would say, I would sort of point you to two things. One is that, you know, this is a long-term play for us, and we're in the early innings, and we are making great progress.

Unknown Executive: Mike Macaluso, who's running that business, has got all the necessary people, processes, and systems in place to now focus on growing revenue and generating, you know, really solid margins there. I think, again, like I said in Q1, and I'll reiterate again today, this is about future growth and future profits in the business, but it will take time, and we're pretty pleased with the progress so far in 2020. Our next question will be coming from Brian McNamara from Canada. Good morning, this is Madison Callinan on behalf of Brian.

Speaker Change: Mike Macaluso, who's running that business, has got all the necessary people, processes and systems in place.

Speaker Change: to now focus on growing revenue and generating, you know, really solid margins there. So I think, again, like I said, on Q1, and I'll reiterate again today, you know, this is about future growth and future profits in the business, but it will take time. And we're pretty pleased with the progress so far in 2024.

Jonathan Fitzpatrick: And we're pretty pleased with the progress so far in 2024.

Jonathan Fitzpatrick: Okay, thanks.

Brian McNamara: Our next question will be coming from Brian McNamara from Kindred Gord. Good morning.

Unknown Executive: Thanks for taking our question. So, year to date, you have 9.8 million in consulting fees for strategic transformation initiatives. We're curious if this is related to any plans to try and sell or monetize or wash assets as a way to hasten the deleveraging process. Thank you, Thank you, Madison, and good question.

Madison Calonan: This is Madison Calonan on for Brian. Thanks for taking our questions. So year to date, you have 9.8 million of consulting fees for strategic transformation initiatives. What's your recent business related to any plans to try and sell or monetize our watch assets as a way to hasten the delivery chain process? Thanks. Thanks, Madison, and good question. And, you know, I remain committed to active portfolio management in the organization. I think it's important that, you know, if and when we announce something publicly, that we're very comfortable with, you know, the potential impact to our employees, to obviously our investors, and to any potential processes or hypothetical processes that we could be running.

Speaker Change: Good morning, this is Madison Callinan on for Brian . Thanks for taking our question.

Unknown Executive: And, you know, I remain committed to active portfolio management in the organization. I think it's important that, if and when we announce something publicly, we're very comfortable with the potential impact on our employees, obviously our investors, and to any potential processes or hypothetical processes that we could be running. So just because we haven't announced anything doesn't mean that we're not busy working in the background. And obviously, when the time is right, we will talk about them. All right.

Speaker Change: I think it's important that, you know, if and when we announce something publicly that we're very comfortable with, you know, the potential impact to our employees, to obviously our investors and to any potential processes or hypothetical processes that we could be running.

Jonathan Fitzpatrick: So, you know, just because we haven't announced anything doesn't mean that we're not busy working in the background. And obviously, when the time is right, we will talk about those specifics.

Speaker Change: So, you know, just because we haven't announced anything doesn't mean that we're not busy working in the background and Obviously when the time is right, we will we will talk about those specifics

Madison Calonan: All right. Thank you.

Christian Cardino: Next question will be coming from Christian Cardino from JP Morgan. Hi. Good morning. Thanks for taking our question.

Unknown Executive: Thank you, will be coming from Christian Carlino from J.P. Hi, good morning. Thanks for taking our question. How should we think about the potential lift to the glass units when you add these renewable insurance agreements to it?

Speaker Change: Next question will be coming from Christian Carlino from J.B. Morgan.

Christian Cardino: How should we think about the potential lift to the glass units when you had these regional insurance agreements? And it's left of a question on this year and the recent agreements you've made. And it's more about what mature AUDs could look like, given on the website you speak to acquiring locations with about three million AUDs.

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

Daniel R. Rivera: Less of a question on this year and the recent agreements you've made, and it's more about what mature AUVs could look like. Given on the website, you speak to acquiring locations with about 3 million AUVs. So is that where you expect things to shake out over time as you expand these insurance agreements? Yeah, hey, Chris. This is Danny.

Christian Carlino: Less of a question on this year and the recent agreements you've made, and it's more about what mature AUVs could look like. Given on the website you speak to acquiring locations with about 3 million AUVs, so is that where you expect things to shake out over time as you expand these insurance agreements?

Danny Rivera: So, is that where you expect things to shake out over time as you expand these insurance? Yeah, hey, Chris, this is Danny. Look, I'm not going to get into how much incrementality we're going to see from any one or, you know, few regional agreements. I guess what I do is take a step back and say, we've set all along for the AGM business. Now that we're kind of past integration and we're building this business and we're building the momentum of this business. We've said that we want to really focus in on building out regional insurance and commercial.

Daniel R. Rivera: Look, I'm not gonna get into how much incrementality we're gonna see from any one or, you know, a few regional agreements. I guess what I'm going to do is take a step back and say, we've said all along for the AGN business, now that we're kind of past the integration, and we're building this business, and we're building the momentum of this business, we've said that we want to really focus on building out a regional insurance and commercial business. And Q2 represents an opportunity for us to not just say that we're; we want to do that. But in fact, we have done that, right?

Danny Rivera: Hey Chris, this is Danny. Look, I'm not going to get into how much incrementality we're going to see from any one or a few regional agreements. I guess what I'd do is take a step back and say, we've said all along for the AGN business, now that we're kind of past the integration and we're building this business and we're building the momentum of this business, we've said that we want to really focus in on building out regional insurance and commercial.

Danny Rivera: And Q2 represents for us an opportunity to not just say that we're we want to do that, but in fact, we have done that, right? So now we've landed six different regional insurance carriers in one quarter, two national car rental companies. And that's just momentum that we look to continue to grow into the future. So we're happy with the progress.

Christian Carlino: Q2 represents for us an opportunity to not just say that we want to do that, but in fact we have done that, right? So now we've landed six different regional insurance carriers in one quarter, two national car rental companies.

Daniel R. Rivera: So now we've landed six different regional insurance carriers in one quarter, and two national car rental companies. And that's just momentum that we look to continue to grow into the future. So we're happy with the progress. It's exactly what we said we were going to do, and we're hoping to do. And we're just happy to announce that it's not theoretical anymore.

Danny Rivera: And that's just momentum that we look to continue to grow into the future. So we're happy with the progress. It's exactly what we said we're going to do and we're hoping to do. And we're just happy to announce that it's not theoretical anymore, but we're landing deals and we hope to continue to do so.

Jonathan Fitzpatrick: It's exactly what we said we're going to do, and we're hoping to do, and we're just happy to announce that it's not theoretical anymore, but we're landing deals, and we hope to continue to do so. We got it.

Jonathan G. Fitzpatrick: But we're landing deals, and we hope to continue to do so. Got it. And I guess at a high level, how would you diagnose what you're seeing from the consumer? Like, did the consumer weaken versus the first quarter, or stay flat, and you'd expect things to get better? Any color on maintenance deferral? And I guess to what extent are things like higher insurance premiums just pressuring, you know, vehicle spend broadly? Yeah, Christian, Jonathan here. I'll take that one.

Christian Cardino: And I guess that at a high level, how would you diagnose what you're seeing from the consumer? Did the consumer weaken versus the first quarter, or state flat, and you'd expect things to get better? Any color on maintenance deferral and I guess to what extent are things like higher insurance premiums, just pressuring vehicle spend broadly?

Speaker Change: Got it. And I guess just at a high level, how would you diagnose what you're seeing from the consumer? Like, did the consumer weaken versus the first quarter or stay flat and you'd expect things to get better? Any color on maintenance deferral? And I guess to what extent are things like higher insurance premiums just pressuring, you know, vehicle spend broadly?

Jonathan Fitzpatrick: Yeah, Christian, Jonathan, here I'll take that one. We're not economists, but we'll tell you sort of our view on the world. We certainly don't see the second half of the year as massively changing from the first half of the year. I would say that's sort of how we think about things. You know, when we look at obviously the outlook that we gave on same-store sales and revenue, we think that's factoring in our view on sort of an unchanged customer consumer spending environment in the second half of the year. And then the other two pieces in there are continued sort of softness in our US carwash business and a little bit of the headwinds we saw in collision in Q2.

Jonathan G. Fitzpatrick: You know, we're not economists, but we'll tell you sort of our view of the world. We certainly don't see the second half of the year as massively different from the first half of the year. I would say that's sort of how we think about things. You know, when we look at, obviously, the outlook that we gave on same store sales and revenue, we think that's factoring in our view on sort of an unchanged consumer spending environment in the second half of the year.

Jonathan Fitzpatrick: Yeah, Christian, Jonathan here. I'll take that one. You know, we're not economists, but we'll tell you sort of our view on the world. We certainly don't see the second half of the year as massively changing from the first half of the year. I would say that's sort of how we think about things.

Speaker Change: You know when we look at

Jonathan G. Fitzpatrick: And then the other two pieces in there are, you know, continued sort of softness in our US car wash business and a little bit of the headwinds we saw in collision in Q2. So I think that's our, you know, best estimate in terms of what we see for the back half of the year. So ultimately, no major change in consumer spending. Got it. Thank you very much.

Jonathan Fitzpatrick: So I think that's our, you know, best estimate in terms of what we see for the back half of the year. So ultimately, no major changing consumer spending environment. Got it.

Peter Keith: Thank you very much, Bethela.

Christian Carlino: Got it. Thank you very much. Best of luck.

Speaker Change: Transcribed by https://otter.ai

Jonathan Fitzpatrick: Our next question is from Peter Keith from Piper Sandler. Hey, thanks. Good morning, everyone. So we've noticed that motor vehicle maintenance remains one of the more inflationary areas of the consumer economy. And I guess from the driven portfolio, I'm curious, are you seeing, I guess, ticket increases just with general inflation? And where might that be occurring to the greatest degree? We don't break out obviously ticket in any of the sub segments, Peter, but I think it's well known that over the last number of years we've seen ticket growth across almost all of our segments. And I think that's more from a complexity of vehicle, age of vehicle, complexity of repair than it is taking of price.

Unknown Executive: Best of luck, from Piper. Hey, thanks. Good morning, everyone.

Speaker Change: Our next question is from Peter Keith from Piper Sandler.

Unknown Executive: So we've noticed that motor vehicle maintenance remains one of the more inflationary areas of the consumer economy. And I guess from the Driven portfolio, I'm curious, are you seeing ticket increases just with general inflation? And where might that be occurring, to the greatest degree?

Speaker Change: More from a complexity of vehicle, age of vehicle, complexity of repair than it is taking of price.

Jonathan Fitzpatrick: And as I've mentioned multiple times in the past, we don't see any change in that trajectory, you know, over the next couple of years, again, because of the miles driven, age of vehicles, and complexity of repair. So we think that growth in ARO or average order repair will continue as we look.

Speaker Change: And as I've mentioned multiple times in the past, we don't see any change in that trajectory over the next couple of years, again, because of the miles-driven age of vehicles and complexity of repair. So we think that growth in ARO, or average order repair, will continue as we look forward.

Peter Keith: Forward. Okay, fair it up, Ed.

Unknown Executive: Okay, fair enough. And one thing I was hoping to get an update on would be the take five rewards and kind of how you're thinking about that program across both QuickLube and Car Wash, just particularly given sort of the strategic evaluation of Car Wash today. Yeah, hey, Peter.

Peter Keith: One thing I was hoping to get an update on would be Take Five Rewards and kind of how you're thinking about that program across both Quick Loop and Car Wash, just particularly given sort of the strategic evaluation of Car Wash today. Yeah. Hey Peter, so to your point, given the strategic evaluation and some of the things that Jonathan is thinking through from a portfolio manager perspective, we've been quite prudent with that program. So nothing's changed in the sense that it's rolled out. It's at a few different markets. We're really happy with the results that we're seeing in that market and those markets, both from an operational perspective and how the team's able to deploy that solution and how consumers are reacting to it.

Speaker Change: Okay, fair enough. And one thing I was hoping to get an update on would be take five rewards and kind of how you're thinking about that program across both QuickLube and Car Wash, just particularly given sort of the strategic evaluation of Car Wash today.

Unknown Executive: So to your point, given the strategic evaluation and some of the things that Jonathan is thinking through from a portfolio management perspective, we've been quite prudent with that program. So nothing's changed in the sense that it's rolled out, it's in a few different markets, and we're really happy with the results that we're seeing in that mark in those markets, both from an operational perspective and how the team's able to deploy that solution and how consumers are reacting to it. And we're just being methodical about that program moving forward, from William Blake. Hi, this is Sabrina.

Speaker Change: Yeah, hey Peter, so to your point, given the strategic evaluation and...

Speaker Change: Some of the things that Jonathan is thinking through from a portfolio management perspective. We've been quite prudent with that program, so nothing's changed in the sense that it's rolled out, it's in a few different markets. We're really happy with the results that we're seeing in those markets, both from an operational perspective and how the team's able to deploy that solution and how consumers are reacting to it. And we're just being methodical about that program moving forward.

Peter Keith: And we're just being methodical about that program moving forward. Okay, thanks much.

Speaker Change: Okay, thanks much.

Speaker Change: Unknown Speaker 0

Speaker Change: And, of course, our experts in the field. I hope you enjoyed the conversation. And I'll see you next time. I'm gonna go get a beer. I'm gonna go get a beer. I'll see you guys later. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.

Sabrina: Next question is from Phillip Blee from William Blair. Hi, this is Sabrina. Thanks for taking our question.

Speaker Change: Next question is from Phillip Blee from William Blair.

Unknown Executive: Thanks for taking our question. I know we kind of just talked a little bit about the traffic verse check, but what are some of the ancillary categories customers will purchase other than oil? And then what's the frequency of this and its impact on that average check?

Sabrina: I know we kind of just talked a little bit about the traffic verse track, but what are some of the ample air categories cost and rental purchase other than oil and then what's that frequency of this and the impact on that average track? Yeah, I think I got your question, Sabrina. So I'll do my best to answer it. So, you know, if we look at our Take Five oil change business, there's really sort of two major drivers to average check growth over the last number of years. One is a continued shift to what we call premium oil mix, which would be defined as either semi or false synthetic.

Speaker Change: Hi, this is Sabrina. Thanks for taking our question. I know we kind of just talked a little bit about the traffic versus check, but what are some of the ancillary categories customers will purchase other than oil? And then what's that frequency of this and its impact on that average check?

Unknown Executive: Yeah, I think I have your question, Sabrina, so I'll do my best to answer it. So you know, if we look at our take five oil change business, there are really sort of two major drivers of average check growth over the last number of years. One is a continued shift to what we call a premium oil mix, which would be defined as either semi or full synthetic. I think in this quarter, we hit about 90% of our customers buying a premium oil mix.

Jonathan Fitzpatrick: I think in this quarter, we hit about 90% of our customers buying a premium oil mix. The second component is what we call attachment rate of our big five and silery products. And, you know, we're right around that sort of 40% attachment rate. That's really execution by our company and franchise stores. So I think, you know, we don't see any material change in those trajectory and those two sort of, you know, check building pieces. Obviously, on the premium oil mix at 90%, you know, there's not going to be massive growth on a go forward basis, but we do think that there's opportunity to continue and continue to build on the great 40% attachment rate on the big five.

Unknown Executive: The second component is what we call the attachment rate of our big five ancillary products, and you know, we're right around that sort of 40% attachment rate. That's really execution by our company and franchise stores. So I think, you know, we don't see any material change in the trajectory and those two sort of, you know, check building pieces, obviously, on the premium oil mix at 90%, there's not going to be massive growth on a go forward basis.

Speaker Change: The second component is what we call attachment rate of our big five ancillary products, and you know, we're right around that sort of 40% attachment rate.

Speaker Change: That's really execution by our company and franchise stores.

Speaker Change: Obviously on the premium oil mix at 90%, there's not going to be massive growth on a go-forward basis, but we do think that there's opportunity to continue to build on the great 40-ish percent attachment rate on the Big 5.

Unknown Executive: But we do think that there's opportunity to continue and continue to build on the great 40, 40 ish percent attachment rate on the big five. Should you have any questions, please press the star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised.

Jonathan Fitzpatrick: That's helpful.

Operator: Thank you. Again, should you have any questions? Please press the star, follow up with the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Again, should you have a question? Please press the star, follow up with the number one on your touch-tone phone. You will hear a prompt that your hand has been raised.

Speaker Change: Unknown Speaker 0

Speaker Change: Again, should you have any questions, please press the star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised.

Speaker Change: Again, should you have a question, please press the star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised.

William Staudinger: Last question on the line will be coming from William Staudinger from BMO Capital Markets.

Speaker Change: Last question on the line will be coming from William Saldinger from BMO Capital Markets.

William Staudinger: Hi, good morning. Can you just talk about the demand trends you're seeing from commercial customers versus retail customers?

Speaker Change: Hi, good morning. Can you just talk about the demand trends you're seeing from commercial customers versus retail customers?

Jonathan Fitzpatrick: Yeah, William, welcome to the coverage universe has driven. First of all, so good question. I think one of the beautiful things about driven brands is approximately 50% of our system sales come from our commercial partners. It's a huge focus for us and has been for a number of years. Inherently, that commercial customer is using their vehicle for revenue-generating purposes or to complete jobs that they have to do. We generally see very sticky, predictable revenue demand from our commercial customers, and we've not seen anything to change that 24.

Unknown Executive: Yeah, William, welcome to the coverage universe of Driven, first of all. So, yeah, good question. You know, I think one of the beautiful things about Driven Brands is that, you know, approximately 50% of our system sales come from our commercial partners. And, you know, it's a huge focus for us and has been for a number of years. Inherently, that commercial customer is using their vehicle for revenue-generating purposes or to, you know, complete jobs that they have to do.

Unknown Executive: So we generally see very sticky, predictable revenue demand from our commercial customers, and we've not seen anything to change that, you know, so far in 2020. Okay, thanks. And then, have any of your businesses experienced impacts from Hurricane Beryl, which hit Texas in July? Yes, hey, this is Danny.

William Staudinger: Okay, thanks.

Danny Rivera: And then have any of your businesses experience impacts from Hurricane Barrel, which hit Texas in July? Yes, hey, this is, hey, well, and this is Danny. So we'll probably get into it more next earnings call, but the short answer is yes. I mean, we have a heavy presence for multiple brands in the Houston and Texas area. And certainly when Hurricane barrel, not no pun intended, barrel through there, we took store closures for multiple days across a variety of stores.

Speaker Change: Okay, thanks. And then, have any of your businesses experienced impacts from Hurricane Beryl, which hit Texas in July ?

Daniel R. Rivera: So we'll probably get into it more on next earnings call, but the short answer is yes. I mean, we have a heavy presence for multiple brands in the Houston and Texas area. And certainly, when Hurricane Beryl, no pun intended, barreled through there, we took store closures for multiple days across a variety of stores. So we'll give more of an update next earnings earnings, but yes, there was a bit of an impact for us. Okay, thanks guys.

Danny Rivera: So we'll give more of an update next earnings, but yes, there was a bit of an impact for us.

Operator: Okay, thanks, Shaz.

Speaker Change: Okay, thanks guys.

Operator: Go further questions at this time.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.

Speaker Change: No further questions at this time.

You all have a good one.