Driven Brands (DRVN) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2020, system-wide sales reached $935 million, with revenue of$ 289 million, representing a 58% increase year-over-year [15] - Adjusted EBITDA for Q4 was $66 million, more than double that of Q4 2019, with an adjusted EBITDA margin of 23% [15][17] - Fiscal 2020 revenue was over$ 904 million, a 51% increase compared to the prior year, with adjusted EBITDA of $205 million, up 72% [21][22] Business Line Data and Key Metrics Changes - Same store sales for the maintenance segment grew by 1.2%, while the platform services segment saw a 9.5% increase; however, the paint, collision, and glass segment declined by 7.3% [16][19] - The Car Wash segment's Wash Club subscriptions increased from 41% to 45% of sales, indicating a strong recurring revenue stream [10][19] - The company added 42 net new stores in Q4 alone, contributing to a total of 1,121 locations added in 2020, representing a net store growth of 36% [21][22] Market Data and Key Metrics Changes - Same store sales declined by 5.6% for the year, but the company outperformed the industry, gaining market share primarily from independents and small chains [6][21] - The company ended 2020 with over 4,200 locations, nearly 40% more than at the end of fiscal 2019, with significant growth potential in North America [11][12] Company Strategy and Development Direction - The company aims to capitalize on the recovery trends in the automotive services industry, focusing on consistent same store sales growth and leveraging its marketing and data analytics capabilities [14][24] - The long-term growth model includes adding new stores, growing same store sales, and maintaining stable margins, which translates into significant cash flow generation [24] - The company has a strong franchise pipeline with over 600 new store commitments, indicating confidence in future growth [12][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in consumer trends as mobility increases due to vaccine distribution and stimulus effects [25][59] - The company expects positive same store sales growth in fiscal 2021, with Q1 anticipated to be the low point and significant growth expected in Q2 [25][31] - Management highlighted the resilience of the business model during the pandemic and the ability to navigate challenges effectively [21][22] Other Important Information - The company ended the year with over$ 188 million in cash and cash equivalents, along with $156 million of undrawn capacity on revolving credit facilities [22] - The company anticipates depreciation and amortization of approximately$ 110 million for fiscal 2021, with a lower annual interest expense due to debt repayment [26] Q&A Session Summary Question: Impact of government support on M&A opportunities - Management noted that while there was some residual impact from PPP loans on smaller businesses, they remain confident in their M&A pipeline and opportunities moving forward [28] Question: Organic store growth opportunities - Management identified significant opportunities in the maintenance segment, particularly in quick lube, and expressed excitement about the Car Wash segment's growth potential [29] Question: Specifics on same store sales guidance - Management indicated that they expect positive same store sales across all segments, with a return to historical averages in the latter half of the year [31][33] Question: Segment performance and COVID impact - Management acknowledged that while the maintenance segment performed well, the paint, collision, and glass segment lagged due to lower congestion miles affecting collision trends [38][40] Question: Competitive environment in the Car Wash segment - Management expressed confidence in their competitive positioning and ability to execute M&A effectively in the Car Wash space, leveraging their experience from the Take 5 business [42][43] Question: Franchise renewal rates and interest - Management reported strong franchise renewal rates and an increasing interest in the automotive space, indicating a robust franchise pipeline [45] Question: Vehicle miles traveled and impact on paint, collision, and glass segment - Management projected that congestion miles would recover by September 2021, which would positively impact the paint, collision, and glass segment [48] Question: Stimulus impact on sales - Management expressed optimism that stimulus checks would benefit their core customer base, leading to increased mobility and spending in 2021 [59][60]