Q1 2025 Driven Brands Holdings Inc Earnings Call
Good morning ladies and gentlemen and welcome to the Driven Brands Q1 2025 earnings call. At this time all lines are in the listen only mode.
Following the presentation, we will conduct a question and answer session. If at any time during this call, you require me to do the assistance, please press star zero for the operator.
Speaker Change: This call has been recorded on Tuesday, May 6, 2025. I would now like to turn the conference over to Joel, Arnao SVP of Fine Arts and Investor Relations. Please go ahead.
Speaker Change: Good morning, and welcome to Driven Brands' first quarter, 2025 Ernie's conference call.
Speaker Change: The earnings release and in that leveraged racial reconciliation are available for download on our website at investors. Driven Brands.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 Mike Diamond, Executive Vice President and Chief Financial Officer. In a moment, Jonathan, Danny and Mike will walk you through our financial and operating performance for the quarter.
Speaker Change: Before we begin our results, I'd like to remind you that management will refer to certain non-GAAP financial measures. You can find a reconciliation to the most directly comparable GAAP financial measures on the company's investor relations website, and it's probably the securities exchange commission. Thank you very much.
Speaker Change: During the course of this call, we may make four 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 risk and uncertainties and other factors that could cause actual results in events to differ materially from results and events contemplated by these for looking statements.
Speaker Change: Please see our earnings release and our follow-ins and securities exchange commission for more information. Today's prepared remarks will be followed by a question and answer session. We ask you to limit yourself to one question and one follow-up. Now I will turn it over to Jonathan.
Jonathan Fitzpatrick: Good morning. Thank you for joining us today to discuss Driven Brands' first quarter 2025 financial results.
Jonathan Fitzpatrick: I want to acknowledge the hard work and great execution by the more than 7,500 Driven Brands team members and our amazing franchisees for how they continue to deliver in a dynamic macroeconomic environment.
Speaker Change: I will begin with a review of our Q1 2025 highlights and then turn it over to Danny who will be taking over as CEO this week and he will discuss the business in greater detail and then Mike who will detail our first quarter financial results.
and 0.7% same-store sales growth. [inaudible]
Speaker Change: Our 17th consecutive quarter of positive same-store sales growth. We generated deluded adjusted EPS from continuing operations of 27 cents and adjusted EBITDA of 125 million.
Speaker Change: We close our US car wash transaction on April 10th and use the majority of cash proceeds to retire debt.
Speaker Change: As of today, we have paid down nearly $290 million since the beginning of this year. And since the beginning of 2024, this brings total debt repaid to more than half a billion dollars.
I'll now turn it over to Danny.
Danny Rivera: Thank you, Jonathan. Our growth in cash playbook continues to generate predictable high-quality growth and robust free cashflow. Q1 was a clear demonstration of the power of our platform. Even in uncertain times, customers depend on their vehicles to live their lives and care for their families.
Danny Rivera: Whether it's a routine oil change, a broken AC, squealing breaks or a collision, Driven Brands' diversified portfolio anchored by our non-discretionary services meets those needs.
Danny Rivera: Take 5 all change, home of the stay in your car 10 minute all change, continues to deliver industry leading growth. Take 5 delivered same-store sales growth of 8% for the quarter, marking its 19th consecutive quarter of positive same-store sales.
Danny Rivera: We complemented this organic momentum with 168 net new openings over the past year, relating to a strong year-over-year revenue and adjusted EBITDA growth of 15 and 14% respectively, while maintaining healthy adjusted EBITDA margins of 34%.
Danny Rivera: which has been organically built over the past five years. We continue to have direct real estate visibility into more than one third of this pipeline, which provides this clear line of sight to achieving our target of at least 2000 total locations over the next five years.
Danny Rivera: Take 5 all change continues to be our most compelling growth engine, fueled by a proven operating model, strong consumer demand, and discipline execution.
Danny Rivera: This growth is made possible by the outstanding efforts of our franchisees and our corporate teams who support them every day.
Danny Rivera: This quarter, that momentum was recognized as take five climbed to number 27 on entrepreneurs list of fastest growing franchises. Further validation of the brand's momentum and unit level economics.
Danny Rivera: Our franchise segment, home to some of the most iconic names in the automotive aftermarket, including Miningy, Meiko, and Carstar remain a strong contributor to free cash flow.
Danny Rivera: Our International Car Wash Simeon also posted a very strong quarter, delivering one of its best revenue and adjusted EBITDA results to date.
Danny Rivera: Same-store sales grew 26% while year-over-year revenue and adjusted EBITDA increased 25 and 36% respectively.
Jonathan Fitzpatrick: As we've shared in previous quarters, having the right portfolio of assets is imperative for Driven As Jonathan mentioned, we're pleased to report that the U.S. Car Wash transaction officially closed on April 10th. This strategic move delivers three immediate benefits to Driven Brands . . . . . . . . . . . .
Jonathan Fitzpatrick: First, we use the majority of proceeds to repaid debt supporting one of our highest priorities.
Jonathan Fitzpatrick: Second, it will help us achieve our outlook for net capex, which is approximately $70 million less than last year. Third, this divestiture simplifies our portfolio by removing its most discretionary component.
Jonathan Fitzpatrick: The leveraging remains a key priority for Driven. With proceeds from the car wash sale, we remain firmly on track to meet our goal of reducing net leverage to three times by the end of 2026.
Jonathan Fitzpatrick: Charis are also top of mind as we look ahead to the rest of 2025. We've analyzed the potential impact through two lenses, margin and demand.
Jonathan Fitzpatrick: On the margin side are diversified sourcing strategy and pricing power, anchored by the nondiscretionary low frequency nature of our services, help us mitigate foreseeable risks.
Jonathan Fitzpatrick: on the demand side are offerings remain essential. Even in uncertain times, people rely on their vehicles.
Jonathan Fitzpatrick: Our Brands offer compelling, cost-effective solutions to consumers and our iconic Brands remain trusted providers to get people back on the road.
Speaker Change: Before I hand it over to my partner and driven CFO Mike Diamond, I want to thank the thousands of employees and franchise partners across through the brands
Speaker Change: Their dedication and execution powered a solid start to the year. And while macro uncertainty lies ahead, I remain confident in our team and our ability to deliver.
Speaker Change: I also want to personally thank Jonathan for his leadership, vision and guidance through the years, and I look forward to continuing to partner with him in his new role as Chair of the Board. With that, I'll turn it over to Mike.
Thank you, Danny, and good morning, everyone. Thank you, everyone.
Speaker Change: Q-1 2025 was another strong quarter for Driven, marked by robust operating performance led by our take 5 oil change business.
Speaker Change: The results for that business are included in discontinued operations and are not included in financial details provided today, unless otherwise noted.
Speaker Change: Driven recorded its 17th consecutive quarter of same-store sales growth, increasing 0.7% into 1.
Speaker Change: Total units were flat in Q1, as continued growth in our take 5 oil change locations was offset primarily by the negotiated departure of a 19 unit franchisee in our franchise brand segment.
Speaker Change: Systemwide sales for the company, grew 2.2% in Q1 to 1.5 billion dollars.
Speaker Change: Total revenue for Q1 was $516.2 million and increased the 7.1% year-over-year.
Q1 operating expenses increased $41 million year-over-year
Speaker Change: Key drivers of this increase include an increase in company and independently operated store expenses of 19.6 million dollars driven by higher sales volumes and more stores in Q1 of 2025 versus Q1 of 2024.
An increase in SGNA of 19.2 million dollars.
Speaker Change: Approximately $7 million is the result of lapping a gain in Q1 of 2024 from the refranchising of company locations offset in part by losses from assets in Q1 of 2025.
Operating income, declined $6.8 million to $61.3 million for Q1.
Adjusted EBITDA, increased 1.9% to $125.1 million for the court. [inaudible]
Speaker Change: As a reminder, this growth came without the benefit of PHB trip, which we divested in August 2024, but the results of which are still included in Q1 2024 results.
Speaker Change: Justin Ibidda, Margin for Q1, was 24.2%, a decrease of roughly 120 basis points versus Q1 of last year, as sales growth was offset by the aforementioned increases in store expenses in S.G.N.A.
Speaker Change: That interest expense for Q1 was $36.5 million, $7.2 million lower than Q1 last year, driven primarily by ongoing debt paydown.
Income Tax Expense for the Quarter was $7 million. $7 million.
Speaker Change: Met income from continuing operations for the quarter was $17.5 million.
Speaker Change: Adjusted, diluted EPS from continuing operations for Q1 was 27 cents, up to 2 cents from Q1 last year, driven by strong operating performance, and continued debt paydown.
Speaker Change: As a reminder, in mid-March, we included unaudited pro forma 2024 quarterly results for these new segments to aid investors in evaluating our business.
Speaker Change: This detail can be found on the Investor Relations page of our website. Q1 performance for each of our segments include
Speaker Change: Take 5 Oil Change, which had another impressive quarter of growth with same-store sales growth of 8% and revenue growth of 15.3%.
Speaker Change: Strong sales continue to be driven by a combination of non-oil change services.
Speaker Change: which is now above 20% of take five total system wide sales and the continued benefit from the use of premium oils which account for approximately 90% of our oil changes.
Speaker Change: Adjusted EBITDA for the quarter was $100.9 million, reflecting growth of 13.5% compared to Q1 2024.
Speaker Change: Justin Ibidammargin was 34.4%, a decrease of 50 basis points versus Q1 last year, driven by higher repair maintenance and rent expenses.
Speaker Change: Additionally, we opened 22 net new units in the quarter of which 17 were company operating stores, and five were franchise operated.
Speaker Change: Brands recorded a 2.9% decline in same-store sales. While we do not plan to break out our franchise businesses by brand, we will provide additional color from time to time if there are significant variations in performance.
Speaker Change: Adjusted EBITDA margin for Q1, declined approximately 40 basis points from Q1 of 2024 to 61.9% driven by the decline in revenue. During the quarter, we closed a net of 19 units driven primarily by the negotiated departure of a 19-unit franchisee.
Our Car Wash segment, representing our international car wash business,
Speaker Change: and one of its most profitable quarters ever with the same store sales growth of 26.2% driven by improved operations, expanded service offering.
Turning to liquidity, leverage, and cash flow for Q1.
Speaker Change: Capital expenditures from our U.S. car wash operations in Q1 were approximately $3 million.
Speaker Change: Proceeds from Assets Health for Sailing Q1, generated an additional $3.5 million of cash.
Speaker Change: We ended Q1 with net leverage of 4.3 times net debt to adjust the EBITDA, reflecting the debt paid down to $43 million in the quarter.
Speaker Change: During Q1, we announce the sale of our US car wash business for approximately $385 million, which is comprised of gross cash proceeds of $255 million and a seller note of $130 million.
Speaker Change: Disseller Note, which bears paid-in kind interest, will be held on our balance sheet and its present value as a long-term note receivable, starting in Q2.
Speaker Change: This transaction closed on April 10th. Following closed, we used almost all of the net proceeds to pay down a meaningful portion of the outstanding balance on our terminal. As of today, we have paid down a total of $246 million against the terminal in Q2 and have an outstanding terminal balance of roughly $81 million. $1 million.
Speaker Change: This reduction in debt will save us more than $15 million of annualized interest expense which was reflected in our outlook provided on the Q4 call.
Speaker Change: I'd now like to spend a bit of time on the current operating environment, including the potential impact of tariffs on our business. As Danny mentioned earlier, the driven portfolio benefits from providing generally non-discretionary services for an asset, a person's transportation that is essential for their livelihood.
Speaker Change: While declining consumer sentiment can impact frequency among our more discretionary brands and services, like Mako, our business model remains resilient overall. We are mindful however that if consumer sentiment continues to worsen, it could affect certain segments of our business.
Speaker Change: While the margin side is a bit more dynamic, we believe we're a well-positioned thanks to our strong supply chain team and a geographically diversified supply chain.
Speaker Change: We are reiterating our fiscal 2025 outlook on revenue, same-store sales, net-store growth, adjusted EBITDA, and adjusted diluted EPS.
Speaker Change: We expect take five growth to moderate as it continues growing over a larger base, our car wash business to generate more moderate growth and softer trends in our most discretionary business may go to continue.
Speaker Change: These factors, combined with the changes in our business from the divestiture of our US car wash business and PHV trip, lead us to reiterate our expectation that the second half of 2025 should contribute a percentage in the low 50s for our full year revenue and adjusted EBITDA.
Speaker Change: We remain focused on achieving our net leverage target of three times by the end of 2026, with the majority of our free cashflow, earmarked for reducing outstanding debt on both the revolver and term loan.
Speaker Change: We're encouraged by our start to the year and confident in our ability to sustain momentum even amid a dynamic operating environment.
Speaker Change: As we focus on continuing to grow our take-five business and maintaining the strength of our franchise segment, we remain committed to generating cash and executing our de-leveraging plan.
Speaker Change: With that, I will turn it over to the operator and we are happy to take your questions
Speaker Change: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question? Please press star followed by the one on your touch tone phone. You will hear prompt that your hand has been raised. Should you wish to decline from the polling process? Please press star followed by the two.
Speaker Change: If you are using a speaker phone place with the hands up before pressing any keys.
Speaker Change: One moment, please food first question. Your first question comes from Simeon Gutman with Morgan Stanley . Your line is now open.
Simeon Goodman: Good morning guys. I wanted to start with take five, thinking about the EBITDA margin, which was solid.
Speaker Change: on an eight comp. The margin itself, I guess, was down a little year over year. Is there a way to think about how do you manage that margin? And then in subsequent concorders if. [inaudible]
Simeon Goodman: Same-source sales flows. Could we see a reverse dynamic where margin actually goes up? Was there anything that was unusual in the first quarter? Thanks.
Simeon Goodman: Gordon Simeon, much I would say anything unusual, I think as we discussed the key drivers of
Simeon Goodman: of that margin were, you know, a little bit of pressure on both repair and maintenance and rent expense.
Simeon Goodman: Both of which are really just engineered to make sure that we have the you know the right assets in the right locations that are appealing to our customers I think that the main takeaway is [inaudible]
Simeon Goodman: Well there's a little bit of pressure. We feel really good about what the team is doing to manage their costs and we feel really good about in general the top line performance even if it does moderate a bit through the rest of the year.
Simeon Goodman: Is there anything you can share as a follow-up on the franchise brands? If the comp softness continues, is there any way you can drive EBITDA up in that scenario or is it going to be proportionate to sales direction?
Simeon Goodman: Camgo, you think about the stable of iconic brands we have? [inaudible]
Simeon Goodman: that have been around for over 50 years and have weathered, you know, many different types of pressures. As we mentioned, this softness is driven largely by our most discretionary business make-o, but feel good with where the trajectory of that business, that segment is going over the long term of 2025.
Okay, thanks, good luck, congratulations, Danny Jonathan [inaudible]
Thanks a new.
Speaker Change: The next question comes from Justin Kleber with Beard. Your line is now open.
Justin Kleber: Hey good morning guys, thanks for taking the questions. The first one for me just as we think about the shape of comps over the balance of the year. Thank you very much.
Justin Kleber: with a backup of the year, is that just easier comparisons or is there something else identifiable that you would point us to?
Justin Kleber: Yeah, I mean, I'll say a couple of things. We're not going to provide quarter specific guidance, although we tried to give a little bit of color on how we see, you know, at least Q2 shaping up.
Justin Kleber: Our full-year reiteration of all of those metrics incorporates performance we've seen so far to date through Q2. You know, I think if you look at the construct of Q1, obviously we had strength.
Justin Kleber: from our Take Five Brands, and a little bit more softness from franchise. I think that overall, for the rest of the year, probably equalizes, although it may take a little bit of time, just given some of the discretionary pressure we see and make go. But we still feel good with the 1-3% just based on the trends we're seeing.
Speaker Change: Okay, and then just to follow up there to the Simeon's question on take five margins, how quickly does the decline in what we're seeing with like base oils? All right.
Justin Kleber: Fill up in your product costs. What's the typical lag as we think about the potential margin tailwind in that business from the decline in oil? No.
All right, thank you guys. Best of what?
Thank you.
Speaker Change: Your next question comes from Seth Sigman with Barclays. The line is now open. Hey, good morning, everyone. I wanted to get an update on the glass business. It seems like we could back into it and maybe that business was positive in the quarter, but any more perspective on how it's performing and how it's starting to ramp. [inaudible]
Speaker Change: Nothing's changed in the underlying dynamics of the industry. We still feel good about being in that space. And we started to focus on growth last year and towards the back half of last year. We mentioned several areas where we're showing growth in terms of landing insurance carriers and landing commercial accounts.
Speaker Change: I mentioned at the time that it takes a couple quarters from the time that you ink those fields to the time that you operationalize those accounts and you start to see the traffic flow through your stores. We're seeing the benefit of that here in 2025.
Speaker Change: So I'd say look, good business, nothing's changed in the underlying dynamics, we're seeing growth towards the back half last year which is materializing, and we're in early ending so I'd say nothing has changed from that respect.
Speaker Change: Okay, helpful. And then on the international car wash momentum, you know, for the last couple of quarters, I feel like it's been overshadowed by the challenges in the US car wash business. So it's nice to see that now. Can you update us on performance there? Remind us.
Speaker Change: What's different about that business versus the US? And you had called out whether how incremental do you think that is versus just, you know, underlying strength in the business? Thanks.
Speaker Change: Yeah, so to your point, I mean, Car Wash International, that business has been a good business for a long time, you can see it now, obviously, with the financials that we're posting, comms of 26%, margins of 36%.
Speaker Change: I said there's two fundamental differences to the US business. Number one, it's not really a franchise business, it's an independent owner model.
Speaker Change: So it's a slightly different from a business modeling perspective and number two we are the industry leader in Europe so you know there's a clear differentiation there in Europe .
Speaker Change: I'd say look, the team continues to do a great job. Nothing new there. You're just seeing the numbers broken out for the first time. I'd also highlight some Mike's point while the business is doing quite well and we did benefit from some some. [inaudible]
Okay, thank you [inaudible]
Speaker Change: Your next question comes from Brian McNamara with Canacor Genuity. Your line is now open.
Brian McNamara: Hey, good morning, guys. Thanks for taking the question. I'm curious if you have observed any signs of, you know, oil change, kind of deferrals for your customers, at least recently, yes, kind of the, you know, widely consumer confidence has gotten hit. And what you're, what trends you're seeing in terms of car counts in those units. Thanks.
Speaker Change: Yeah, I mean, so suffice it to say we're thrilled with the 8% comps that take 5 put up in the first quarter. That business continues to be an absolute juggernaut and we're happy honestly with both sides of the equation volume volume is good. We're seeing a great increases in the majority of the increases coming from the check side of the house. We're seeing a great increase in the numbers. We're seeing a great increase in the numbers. We're seeing a great increase in the numbers.
So we're not...
Speaker Change: Seeing any material changes to the trends that you're referring to, if anything, I think, Mokaleed and Mike DeTranoff, who are the President and Vice President of Marketing respectively, I'll continue to do just a great job with our kind of two pronged approach from a marketing perspective we've got.
Speaker Change: Great top of the photo brand marketing that's in place keeping take five top of mind for consumers and they're doing an amazing job from a performance marketing perspective at the bottom of the funnel being really data oriented and surgical so so we're just continuing to see great trends out of that business.
Speaker Change: Great, and then secondly, I know we, you know, the last several calls have been all about car wash and auto glass. I'm curious if you could provide an update on auto glass. It's great to actually talk about take five taking up the predominant portion of the call, but any update on auto glass would be helpful. Thanks.
Speaker Change: Yeah, nothing more than what I said a second ago. I mean, auto glass, we put it into corporate another segment, again as an indication that it's early on from an EBITDA percentage of overall EBITDA. It's quite small, we're incubating that business.
Speaker Change: We still believe in the long-term growth of that business, multi-year plan, the teams focus on growing revenue through insurance and commercial partners, and we're seeing the growth internally and where those numbers are flowing through in 2025.
Speaker Change: Your next question comes from Chris Okul with Diffle. Your line is now open.
Chris O'Koole: Thanks, good morning guys. My question relates to take five franchise unit growth during the quarter. It looks like franchisees added five units but were there more gross openings all set maybe by closures. I'm just trying to understand why franchise unit growth at take five than the quarter was a little lower than the recent trend. [inaudible]
Chris O'Koole: Yeah, so I would say that there's nothing to highlight per se, I mean, generally speaking and franchising, you know, if you've been around franchising for some time, Q4 tends to be a heavier period in terms of openings as folks try to, you know, rush to get the numbers in by the end of the year, Q1 can therefore be a little bit lighter. I would say overall, if we look at take five, it continues to be just an amazing business from a growth perspective. So 22 net new openings for the quarter, a hundred and
168 on a trailing 12 month basis. Thank you.
Chris O'Koole: and nothing's changed, Chris, in terms of how we think about the long-term growth of that business. We're still targeting North of 150 units a year. We're still targeting to have two franchise locations for every one corporate location. So just, you know, Q1 may be a little slower, traditionally, but nothing to call out. [inaudible]
Speaker Change: Danny, do you expect Harris to raise the cost of equipment or construction for franchisees that are opening units?
Speaker Change: I mean, I'll take that one. I would say it's obviously something that's on our radar but nothing that we've seen so far that gives us any concern. We obviously track
Speaker Change: CapEx per unit very closely and so far that has been in line with our expectations that we designed at the beginning of the year, so we'll keep an eye on it, but I would say at this point it's more just something we observe and not anything that we're seeing really impact the cost of the builds. [inaudible]
Speaker Change: Yeah, of course the only thing I'd add is you know we keep a pulse obviously on franchisees and and how they're feeling about growth and and there's no slowdown from from what we're seeing right and franchisees are Very happy to spend their time and take five and put their capital to take five and it just continues to be a great return on their investment
Great. Thanks, guys.
Thank you.
Speaker Change: Your next question comes from Peter Keith with Piper Sandler. Your line is now open.
Peter Keith: Hey, I think you're good morning, nice quarter guys. You know, great results would take five oil change. I guess you are calling for the comp to slow in Q2. Certainly it's tough to call for acceleration from an eight, but you do it easier compared any reason why why I would slow or you just want to be prudent.
Peter Keith: I mean, I think I'll give the answer I've given in the past, which is…
Peter Keith: I may pressure the internal team to deliver as good a numbers as they are but I think if unrealistic to assume a...
You know, an 8% continuing, especially when you think about
Yeah, okay, it makes sense.
Peter Keith: And then on the on the makeup side, and I guess on collision in general, Mako, I guess you clearly had not insurance claim base. And so it's just more discretionary collision repair, car star is more insurance based, I guess, can confirm that dynamic. And what's happening with insurance claims, you know, that has been under pressure, is that started to get better on the car star side.
Danny Rivera: Yeah, hey, Peter, this is Danny, so to your point, right, the easiest way maybe to think about the dynamic between Mako and our collision businesses.
Danny Rivera: Generally speaking, if you're pulling up in a flatbed truck, you're probably going to a collusion shop. If you've got a light fender bender, you're probably going to a Mako. That's probably the easiest kind of layman's way to understand it.
Danny Rivera: So, to your point, since Michael's a bit more of a discretionary business, it also focuses a lot more on overall paint jobs, which again is a little bit more discretionary in nature. We're seeing a little bit of softness here in Q1. [inaudible]
Speaker Change: I'd reiterate, look, Mako's a 55 year old business I believe, it's been through many an upward cycle and downward cycle, it's a very stable iconic business.
Speaker Change: and the team has a good action plan in place, so while I think we'll continue to see softness into Q2, we think we can get that business back on track in the second half of the year. As far as the collision space, so we flagged a few quarters ago and certainly our public fears out there have mentioned this. There has been a bit of softness in the collision space for some time now.
Speaker Change: We haven't seen a material change to that softness, but that being said we've also mentioned that we believe based on all the industry data that we have that we're taking share during that softness and in Q1 we believe we've continued to take share so I'd say primarily the softness for the franchising segment is driven by Mako the fact that it's a bit more discretionary and again we've got plans in place to hopefully get that back on track here by the second half of the year.
Very helpful. Thank you so much.
Robbie Owens: Your next question comes from Robbie Ohmes with Think of America. Your line is now open.
Robbie Owens: Oh, yeah, thank you. So, you know, maybe for Mike, just the, the store expense pressures and the SNA pressures you talked about maybe a little more color on, you know, what you're seeing in SNA pressures and how we should think about that in, in, in 2Q and, and also 2H.
Robbie Owens: Yeah, and I would start by saying, you know, we view ourselves as a growth company and obviously one of the things you need to do
Robbie Owens: Even in periods of economic uncertainty is to continue to grow. I've looked at numerous studies that show those that create
Robbie Owens: to invest in some of those growth initiatives. To give you a couple of examples, Driven Advantage continues to be a growth lever for us. We see a big opportunity longer term for us to be able to add third parties to that platform and really drive additional longer term performance.
Robbie Owens: If and when, or if results become more tight, but we think we have a good growth platform, not only with take five, but some of these other business opportunities and we want to make sure we continue to give it the supportive deserves.
Speaker Change: Thank you and then just the you know you discretionaries come up a few times in the Q and A just can you remind us if the you know like if the environment gets more challenging in the US and
Danny Rivera: Yeah, hey Robbie, this is Danny. First and foremost, I guess I'd highlight the vast majority of the services that we provide are non-discretionary in nature, right? So discretionary has come up only from the perspective of make those experiencing a little bit of softness, but the vast majority of the portfolio is non-discretionary in nature, which obviously if you're going into economic uncertainty, that's a good thing. We believe that at the end of the day our customers need their vehicles in good times and in bad and presumably in bad times you need it.
and more great because you want to make sure that you keep your livelihood intact.
Danny Rivera: So so that's number one and then yeah in a world where [inaudible]
Danny Rivera: Consumers back off of buying new cars. That would be a tailwind for Driven Brands right at the end of the day. An aging car park is a good thing for us. It means more repairs and more services for the sweet spot of customers that we serve.
That's really helpful. Thank you.
Our pleasure.
Speaker Change: Your next question comes from Kate McShane with Goldman Sachs. Your line is now open.
Speaker Change: Good morning. This is Mark Jordan on for Kate. Thank you for taking our question. You know we're we're thinking about take five at a great comp during the quarter. Can you maybe talk about how performance trended by month and you know maybe if you can what you might be seeing for today. Thank you very much.
Speaker Change: Yeah, we're not going to break out specific month by month other than to say in general, if you think about Q1 and Q4 results were somewhat similar and so I would say take five continues to be
for all of our brands.
You know, through the month of April . [inaudible]
Speaker Change: and what I mentioned earlier to answer the unanswered question is as we preach a little bit more moderation in the take five longer-term growth, it's more just a recognition that that powerhouse of growth from a unit perspective ultimately creates a larger base and so even stronger growth over a larger base ends up massing down to a slightly lower number.
Okay, thank you very much.
Thank you.
Speaker Change: Your next question comes from Christian Carlino with JP Morgan. Your line is now open.
Hi, good morning. Thanks for taking our question.
Christian Carlino: I was wondering if you've seen any quick loop competitors, you know, get more price competitive, give them the little prices are falling and a more subdued consumer backdrop. And I know it's a historically rational industry in terms of pricing and promotions and things like that but I'm curious if you've seen anyone sort of opportunistically go after share just given the moment in time. [inaudible]
Danny Rivera: Yeah, hey, Christian, this is Danny. Look, I would say nothing material worth mentioning, right? Here in there, certain markets, certain pockets
Danny Rivera: based on kind of local dynamics, whether it's, you know, a certain competitor opening more.
Danny Rivera: Stores or something in a certain VMA and maybe they're getting a little aggressive but from a macro perspective I say there's been really no nothing material worth talking about I don't know, I don't know.
Danny Rivera: I was wondering how you contemplated the risks, maybe the consumers shift their oil chain spending to other channels, whether that's their repair maintenance mechanic or one of the retailer club offerings, just given they felt a lot of inflation of the past couple of years and could potentially see more significant inflation in other areas of the wallet. Thanks.
Danny Rivera: Yeah, it's a great question. Look, I mean, at the end of the day, take five crates and deliver great value to the consumer, right? Value can be defined different ways. So at the end of the day, we're the only oil change provider of any kind of scale that can deliver, stay in your car, 10 minute oil change with MPS scores in the 70s, right? And consumers...
Danny Rivera: Like what we do, they like how we go to market as evidenced by the fact, you know, if you look at comps for the quarter, you know, 8% obviously a pretty good print.
Danny Rivera: So the reality is, Christian, we're just not seeing it, from a growth perspective, we don't break out volume versus average check, but we're quite happy with both sides of that equation, and we're really happy with what we're seeing from a demand generation and from a loyalty perspective sitting here today.
Christian Carlino: Got it. Thank you very much. That's a lot and congratulations, Jonathan.
Thank you.
Speaker Change: Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Phillip Blee with William Blair. Your line is now open.
Speaker Change: Good morning, guys. Thanks for the question. You thought even a margin can track in the franchise brand segment this quarter? Is that entirely driven by the comp decline or are there other drivers here? And then there's our certain levels comp that we should be thinking about that's necessary in this segment to drive leverage here. Thank you.
Speaker Change: You start to gain leverage pretty quickly once sales grow. And so, you know, as we talked about earlier. [inaudible]
Speaker Change: while we think there may be some continued short-term softness particularly in our most discretionary focus on MAKO. In general, we feel comfortable in that business as trajectory over the medium to longer term. And that's part of what drove the confidence in the reiteration of the guide.
Okay, great, very helpful, and then just-
Speaker Change: You know, can you just talk about a little bit about your outlook, which assuming the broader health of the consumer. You appreciate the vast majority of your businesses defensive here, but I'm sure you can appreciate we're just modeling out different scenarios. So any color, I guess if there's any other areas in the model outside of me go, they could be softer. [inaudible]
Speaker Change: Upon a broader downturn, maybe how those have performed during prior periods of volatility and then how quickly you typically see every bend.
there. Thank you.
Speaker Change: Yeah, I mean, I don't want to speculate too broadly and wouldn't be wise for you to trust me if I did just because the given how uncertain the overall economic environment is.
Speaker Change: But let me offer you a couple of data points, right? So if you think about oil changes, one, it is not optional, it is necessary for a car. Danny mentioned the stats around COVID and the fact that take five was able to generate positive same store sales growth. We've looked as far back as the global financial crisis and know that even during the GFC overall oil changes across the industry were flat up during that period. So that gives us confidence that even in uncertain economic times, you know, oil changes will remain steady. And as Danny has mentioned, and we think as a...
Speaker Change: as the only national spain your car, 10 minute oil change with an NPS above 70, we are poised to benefit from that volume maintaining or increasing.
Speaker Change: As you then think about the rest of our portfolio, you know, one could argue that even in periods of economic uncertainty or pressure, what happens to happen is an Asian car park, which I would argue can benefit us.
Speaker Change: as you think through people choosing to stay in their own cars, as opposed to go find new cars. And so, again, I'm not promising that. I think one of the beauties of the underlying driven model is its diversification and the fact that its pieces move so well together both operationally. But in times of potential economic dislocation, we have natural built-in hedges across several of our brands that provide us some comfort and some ballast as we think about, you know, how the overall numbers will work.
Unknown to form.
Very helpful. Appreciate it. Thanks so much.
Thank you. Thank you.
Speaker Change: There are no further questions at this time. I will now turn the call over to Jonathan Fitzpatrick, President and CEO for closing remarks.
Jonathan Fitzpatrick: Thank you, and as this is my final earnings call after 13 years of CEO , I wanted to take a moment to thank all of our franchisees and driven employees for making my time here an unforgettable journey.
Jonathan Fitzpatrick: I'm excited to stay on the board as chair and look forward to continuing to support Danny and as well as our new role in the future growth of Driven With that operator, we will close the call. Thank you
Speaker Change: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating in S.A. Please disconnect your lines.