Driven Brands Q2 Earnings Call Highlights

Key Points

• Q2 results were mixed but positive operationally: Systemwide sales rose 4.9% to $1.6 billion, revenue increased 6.8% to $507.4 million, and consolidated same-store sales grew 1.4%. Adjusted EBITDA declined due to restatement costs, but increased 3.4% excluding those charges.
• Take 5 Oil Change remained the key growth engine, delivering its 24th consecutive quarter of same-store sales growth, 13% systemwide sales growth, and 50 net new locations. Management cited an approximately 800-unit development pipeline and a long-term goal of more than 2,500 locations.
• Full-year guidance was reaffirmed but is expected near the low end because of weaker lower-income consumer demand, higher oil-related costs, market uncertainty, and elevated restatement expenses. Leverage improved to 3.1 times, with the company still targeting 3 times by the end of 2026.

Driven Brands NASDAQ: DRVN reported second-quarter results marked by positive same-store sales growth across its operating segments, continued expansion at Take 5 Oil Change, and lower leverage, while management said it expects full-year results to trend toward the lower end of its guidance ranges amid pressure on lower-income consumers and higher oil-related input costs.

Systemwide sales increased 4.9% year over year to $1.6 billion, while revenue rose 6.8% to $507.4 million. Consolidated same-store sales increased 1.4%, and the company added 42 net new locations during the quarter. Driven Brands ended the period with more than 4,300 locations, up 5% from a year earlier.

Adjusted EBITDA declined $7.9 million to $107 million, including restatement costs. Excluding those costs, adjusted EBITDA increased $3.9 million, or 3.4%, according to Chief Financial Officer Mike Diamond. The company reported adjusted diluted earnings per share of $0.29, net income from continuing operations of $37.3 million, and adjusted net income from continuing operations of $48.2 million.

Take 5 Extends Same-Store Sales Growth Streak

Take 5 Oil Change remained the company’s primary growth driver, posting its 24th consecutive quarter of same-store sales growth. Same-store sales at the segment rose 3.6%, while systemwide sales increased 13%. On a two-year basis, Take 5 same-store sales were up 10.2%.

The segment added 50 net new locations during the quarter, including 24 franchised units, and ended the period with more than 1,400 locations. Take 5 adjusted EBITDA rose 7.8% to $114.9 million, though its adjusted EBITDA margin declined about 70 basis points as inflation and store operating expenses increased.

President and Chief Executive Officer Danny Rivera said non-oil-change services represented nearly 30% of Take 5 sales in the quarter. The company’s Net Promoter Score remained in the mid-70s, he said.

Driven Brands has an approximately 800-unit pipeline for Take 5, with more than one-third of those sites secured or at a later stage of development. The company continues to target annual openings of at least 150 units and has a long-term goal of more than 2,500 Take 5 locations.

Management said consumer demand remained mixed. Rivera said the company continued to see moderation among lower-income customers and newer customers, though the trend had stabilized and had not worsened during the second quarter. He said the rest of the customer base remained resilient, citing higher average checks, premium mix in the low 90% range, and attachment rates in the high 50% range.

Higher oil and related input costs are expected to continue into the second half of the year. Rivera said the company began seeing cost increases in the second quarter, while franchisees started taking pricing actions early in the quarter and corporate locations implemented “a bit of price” near the end of the period. Driven Brands intends to use modest price increases as needed to preserve gross-margin dollars while maintaining customer value.

Franchise Brands Generates Cash Despite Mixed Demand

The Franchise Brands segment, which includes Meineke, Maaco and CARSTAR, produced same-store sales growth of 0.5% and an adjusted EBITDA margin of 59%. Segment revenue declined $3.4 million, primarily because the company sold its two remaining company-operated collision locations. Adjusted EBITDA declined $2.4 million to $41.2 million, reflecting higher technology costs and investments in personnel.

Rivera said Meineke maintained its momentum from the first quarter and that management sees no reason it cannot have a strong second half. Maaco, a more discretionary business, remained under pressure, which management attributed to the challenged lower-income consumer.

In collision repair, management said broader industry conditions remained soft, but Driven Brands continued to outperform the industry by roughly 100 to 300 basis points, depending on the quarter. Rivera characterized 2026 as a year of stabilization rather than recovery for collision repair.

Auto Glass Now posted 2.6% same-store sales growth. Its adjusted EBITDA fell $6.6 million to $3.5 million, largely due to about $4 million of out-of-period costs related to balance-sheet cleanup from 2024 and earlier. Diamond said the reported quarterly EBITDA figure was not representative of the business’s underlying earnings power.

Management described Auto Glass Now as being in an incubation period and said performance could be uneven from quarter to quarter. Diamond said low double-digit margins represent an appropriate baseline for the business, with potential for better incremental flow-through as traffic and sales increase.

Restatement Costs, Cash Flow and Leverage

Operating expenses increased $6.2 million from the prior-year period, reflecting higher costs associated with sales and store growth, $11.8 million of non-recurring restatement costs, and approximately $4 million in out-of-period costs. Year-to-date restatement costs totaled $20.9 million.

Diamond said second-quarter restatement costs came in about $3 million below the company’s initial expectations, but the difference is expected to shift into the third quarter as Driven Brands completes audit work on its whole-business securitization financials. The company now expects restatement costs to reach the high end of its initial $35 million to $45 million estimate.

Interest expense declined $10.4 million year over year to $20.8 million, primarily due to debt repayment. Free cash flow increased $13.2 million to $44.7 million, while net capital expenditures declined $11.7 million to $31 million, mainly reflecting the absence of capital spending from divested car-wash operations.

Driven Brands ended the quarter at 3.1 times net leverage and said it remains on track to reach its target of 3 times by the end of 2026. Diamond said the company would discuss future capital-allocation plans after reaching that threshold, adding that possible options include further investment in the business or returns of capital.

Guidance Reiterated, With Results Expected Near Lower End

Driven Brands reaffirmed its 2026 guidance for revenue of $1.95 billion to $2.05 billion, same-store sales ranging from flat to 2%, and 160 to 190 net new units. It also maintained guidance for adjusted EBITDA of $430 million to $460 million and adjusted diluted EPS of $1.15 to $1.25.

However, management said it now expects results to be closer to the lower end of those ranges. The company cited continued uncertainty surrounding lower-income consumers, the Middle East conflict and energy-market volatility, restatement costs expected at the high end of its range, and the second-quarter out-of-period costs.

The company continues to expect net capital expenditures of about 6.5% of revenue and free cash flow of $125 million to $145 million for the full year.

During the question-and-answer session, Rivera also addressed a recently rejected acquisition proposal from ADW. He said Driven Brands’ board unanimously concluded that the proposal was highly conditional, did not provide a credible basis to proceed, and significantly undervalued the company’s long-term value creation opportunities.

About Driven Brands (NASDAQ:DRVN)

Driven Brands Holdings Inc NASDAQ: DRVN is a leading North American provider of automotive aftermarket services, operating through a network of franchised and company-owned locations. The company's platform encompasses a diverse portfolio of car care and maintenance brands, including Meineke Car Care Centers, Maaco Collision Repair & Auto Painting, Take 5 Oil Change, and Carstar Collision Repair. Driven Brands delivers a full range of services from routine maintenance and oil changes to collision repair, paint protection, and vehicle customization.

Headquartered in Charlotte, North Carolina, Driven Brands serves both individual consumers and commercial clients across the United States and Canada.

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