Driven Brands Holdings, Inc. ((DRVN)) has held its Q4 earnings call. Read on for the main highlights of the call.
Driven Brands Holdings, Inc. recently held its Q4 2024 earnings call, revealing a mixed sentiment. The company demonstrated resilience through revenue and store growth, particularly in the Take 5 Oil Change segment, and made strides in debt reduction and asset sales. However, challenges such as a decline in operating income, net loss, and inflationary pressures affecting consumer spending were also highlighted, painting a picture of both achievements and hurdles.
Steady Revenue and Store Growth
Driven Brands reported a Q4 2024 revenue of $564 million, marking a 2% increase year-over-year. This growth was fueled by the addition of 70 net new stores and a 2.9% rise in same-store sales. For the fiscal year 2024, the company achieved a revenue of $2.3 billion, supported by 191 net new stores.
Strong Performance of Take 5 Oil Change
The Take 5 Oil Change segment continued to shine, achieving its 18th consecutive quarter of positive same-store sales growth with a 9.2% increase in Q4 2024 and 6.8% for the fiscal year. The segment’s revenue grew by 16%, and EBITDA saw a 21% increase compared to the previous year, underscoring its role as a key growth driver.
Debt Reduction and Leverage Improvement
In 2024, Driven Brands successfully reduced its debt by approximately $248 million, achieving a net leverage ratio of 4.4x in Q4. The company has set a target to reduce this ratio to less than 3x by the end of 2026, reflecting a strong commitment to financial health.
Divestiture Plan and Asset Sales
The company entered into a definitive agreement to sell its U.S. car wash business and sold $208 million worth of assets in 2024, completing over 75% of its asset divestiture process. This strategic move is aimed at streamlining operations and focusing on core business areas.
Operating Income and Net Loss Challenges
Driven Brands faced significant challenges with a decline in operating income, which fell to negative $318.8 million in Q4, accompanied by a net loss of $312 million. These results were primarily due to asset impairments and increased operating expenses.
Challenges in Consumer Spending
The company anticipates ongoing inflationary pressures to continue affecting consumer spending in 2025, particularly among lower-income households, posing a challenge to future growth.
Impact of Strategic Reviews
The strategic review of the U.S. car wash segment led to increased operating expenses, with $317.9 million in asset impairments and $43.4 million in SG&A costs, impacting overall financial performance.
Forward-Looking Guidance
Looking ahead to 2025, Driven Brands provided guidance with expected revenue ranging between $2.05 billion to $2.15 billion and adjusted EBITDA projected between $520 million to $550 million. The company anticipates adjusted diluted EPS between $1.15 and $1.25 per share, aiming for same-store sales growth of 1% to 3% and net store growth of 175 to 200 units. The focus remains on reducing the leverage ratio to less than 3x by year-end 2026, with the sale of the U.S. car wash business expected to close in Q2 2025.
In summary, Driven Brands Holdings, Inc. showcased a mixed performance in its Q4 2024 earnings call. While the company achieved notable growth in revenue and store expansion, particularly in the Take 5 Oil Change segment, it also faced significant challenges with operating income and consumer spending pressures. The forward-looking guidance reflects cautious optimism, with strategic priorities set to navigate the macroeconomic landscape.