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01/09 19:53
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong financial performance, growth in key segments like Take 5 Oil Change, and a strategic focus on debt reduction, which are positive indicators. The Q&A revealed management's optimism about non-oil change services, the glass business, and Take 5's market position. Despite some softness in collision and discretionary spending, management is confident in their growth strategy and market share gains. The market cap suggests moderate volatility, leading to a predicted positive stock price movement of 2% to 8% over the next two weeks.
Revenue $551 million, an increase of 6.2% year-over-year. The increase was driven by higher sales volumes and more stores in Q2 of 2025 versus Q2 of 2024.
Adjusted EBITDA $143.2 million, roughly $0.2 million below Q2 last year. The decrease was due to the absence of PH Vitres, which was divested in August 2024, and increased store expenses and SG&A.
System-wide sales $1.6 billion, a growth of 3.1% year-over-year. This was supported by 184 net new stores over the last 12 months and 52 additions this quarter.
Same-store sales 1.7% increase, marking the 18th consecutive quarter of positive same-store sales. Growth was driven by consistent execution and strong performance in the Take 5 Oil Change segment.
Take 5 Oil Change Adjusted EBITDA $108.2 million, reflecting growth of 9.9% compared to Q2 2024. Growth was driven by the rollout of differential fluid service and increased penetration of premium oils.
Franchise Brands Adjusted EBITDA $45.4 million, down $8.8 million from the prior year. The decline was due to revenue decreases and higher G&A costs, as well as softness in discretionary businesses like Maaco and the broader collision industry.
Car Wash Adjusted EBITDA $27.3 million, an increase of $5.1 million year-over-year. Growth was driven by improved operations, expanded service offerings, and favorable weather conditions.
Net income from continuing operations $11.8 million. Adjusted net income from continuing operations was $59.1 million, with adjusted diluted EPS from continuing operations at $0.36, a decrease of $0.01 versus Q2 last year due to the absence of PH Vitres earnings.
Operating income $38.1 million. This was impacted by increased operating expenses, including higher SG&A and store expenses.
Net leverage 3.9x on a pro forma basis, reduced from 5x at the end of 2023. This was achieved through debt paydown, including the monetization of the U.S. Car Wash seller note for $113 million.
Take 5 Oil Change: Take 5 Oil Change led with 10% adjusted EBITDA growth year-over-year, 169 net new stores over the past 12 months, and 41 for the quarter. Same-store sales increased by 7%, marking the 20th consecutive quarter of same-store sales growth. Non-oil change revenue accounted for more than 20% of Take 5 sales for the quarter, driven by strong attachment rates. Differential service was fully rolled out across all company-owned locations and half of franchise locations, with full rollout expected by the end of Q3.
Market Expansion: Take 5 Oil Change opened over 150 new locations annually, expanding into new markets. The company added 52 net new stores in Q2 2025, contributing to a total of 184 net new stores over the last 12 months.
Operational Efficiencies: The company achieved 18 consecutive quarters of positive same-store sales growth, with a 1.7% increase in Q2 2025. System-wide sales grew by 3.1% to $1.6 billion, and total revenue increased by 6.2% year-over-year to $551 million. Adjusted EBITDA for Q2 was $143.2 million, with a margin of 26%. The franchise segment generated $45 million in adjusted EBITDA with a 61% margin, while the international car wash business delivered $27 million in adjusted EBITDA with a 37% margin.
Debt Reduction: The company reduced net leverage to 3.9x on a pro forma basis, with a goal to reach 3x by the end of 2026. Approximately $700 million of debt has been paid down since late 2023, including $265 million in Q2 2025. The sale of the U.S. Car Wash business and monetization of the seller note contributed to debt reduction.
Collision Business and Maaco Performance: The collision business and Maaco segment are experiencing ongoing softness due to broader industry pressures and a pullback in discretionary spending among lower-income consumers. This is expected to persist for the remainder of the year, potentially impacting revenue and profitability.
Take 5 Growth Moderation: While Take 5 continues to grow, its growth is moderating as it scales over a larger base. This could impact the company's ability to sustain its current growth trajectory.
Franchise Brands Segment Challenges: The Franchise Brands segment is facing challenges, including a 1.5% decline in same-store sales and ongoing softness in discretionary businesses like Maaco. This could affect the segment's revenue and cash generation capabilities.
Tariff Environment: Although the company has a diversified sourcing strategy, the fluid tariff environment poses a potential risk to operations and costs.
Consumer Sentiment and Discretionary Spending: Declining consumer sentiment and reduced discretionary spending, particularly among lower-income consumers, could adversely impact performance in certain segments.
Weather Conditions Impacting Car Wash Segment: Unsettled weather conditions in July are expected to pressure the Car Wash segment's performance in the second half of the year.
Debt and Leverage: While the company is making progress in reducing leverage, it still has a net leverage ratio of 3.9x, which could pose financial risks if economic conditions worsen or refinancing challenges arise.
Revenue Outlook: Driven Brands reiterates its fiscal 2025 revenue guidance of $2.05 billion to $2.15 billion.
Adjusted EBITDA Outlook: The company maintains its adjusted EBITDA guidance for fiscal 2025 at $520 million to $550 million.
Adjusted Diluted EPS: Guidance for adjusted diluted EPS from continuing operations is set at $1.15 to $1.25 for fiscal 2025.
Same-Store Sales Growth: Driven Brands expects same-store sales growth of 1% to 3% for fiscal 2025.
Net Store Growth: The company anticipates net store growth between 175 and 200 units for fiscal 2025.
Capital Expenditures: Net capital expenditures are projected to be between 6.5% and 7.5% of revenue for fiscal 2025.
Tax Rate: The effective annual tax rate is estimated to be between 28% and 30%, driven by earnings in the higher tax jurisdiction Car Wash segment.
Interest Expense: Full-year interest expense is expected to range between $130 million and $135 million.
Take 5 Growth: Growth in the Take 5 segment is expected to moderate as it grows over a larger base.
Car Wash Segment Performance: The Car Wash segment is anticipated to face pressure from unsettled weather conditions in July.
Franchise Brands Segment: Ongoing headwinds are expected in the end markets of the Franchise Brands segment.
Second Half Performance: The second half of fiscal 2025 is expected to represent approximately 50% of full-year revenue and adjusted EBITDA, with a more tempered third quarter weighting.
Leverage Reduction: Driven Brands remains committed to reducing net leverage to 3x by the end of 2026.
The selected topic was not discussed during the call.
The earnings call reflects a mixed outlook. Strong financial metrics and optimistic guidance are countered by challenges in specific segments like Car Wash and Franchise Brands, and ongoing consumer uncertainty. The Take 5 model shows promise with unique offerings and growth potential, but choppiness and pressure on lower-income consumers present risks. Positive elements like successful differential service rollout and stable labor market are balanced by concerns about industry-wide trends and lack of specific guidance in some areas. Overall, the sentiment is neutral, with no clear catalysts for strong stock movement.
The earnings call highlights strong financial performance, growth in key segments like Take 5 Oil Change, and a strategic focus on debt reduction, which are positive indicators. The Q&A revealed management's optimism about non-oil change services, the glass business, and Take 5's market position. Despite some softness in collision and discretionary spending, management is confident in their growth strategy and market share gains. The market cap suggests moderate volatility, leading to a predicted positive stock price movement of 2% to 8% over the next two weeks.
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