Annual Statements Open main menu

Driven Brands Holdings Inc. - Quarter Report: 2022 June (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 25, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-39898

drvn-20220625_g1.jpg

Driven Brands Holdings Inc.
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
47-3595252
(I.R.S. Employer Identification No.)
440 South Church Street, Suite 700
Charlotte, North Carolina
(Address of principal executive offices)
28202
(Zip Code)
Registrant’s telephone number, including area code: (704) 377-8855

Title of each class
Common Stock, $0.01 par value
Trading Symbol
DRVN
Name of each exchange on which registered
The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Small reporting company
Emerging growth company
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

As of August 1, 2022, the Registrant had 167,477,320 shares of Common Stock outstanding.



Driven Brands Holdings Inc.
Table of Contents
Page
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION



Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, and expected market growth are forward-looking statements. In particular, forward-looking statements include, among other things, statements relating to: (i) our strategy, outlook and growth prospects; (ii) our operational and financial targets and dividend policy; (iii) general economic trends and trends in the industry and markets; and (iv) the competitive environment in which we operate. Forward-looking statements are not based on historical facts, but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions, and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. It is not possible to predict or identify all such risks. These risks include, but are not limited to, the risk factors that are described under the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 25, 2021, as supplemented by Item 1A. Risk Factors section in this Quarterly Report on Form 10-Q as well as in our other filings with the Securities and Exchange Commission, which are available on its website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Forward-looking statements represent our estimates and assumptions only as of the date on which they are made, and we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.




Part I - Financial Information
Item 1. Financial Statements (Unaudited)
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three months endedSix months ended
(in thousands, except per share amounts)June 25, 2022June 26, 2021June 25, 2022June 26, 2021
Revenue:
Franchise royalties and fees$44,850 $37,873 $82,738 $68,287 
Company-operated store sales323,885 206,198 616,276 390,053 
Independently-operated store sales54,942 56,379 118,031 112,542 
Advertising contributions22,091 19,648 41,789 36,903 
Supply and other revenue62,856 54,730 118,113 96,462 
Total revenue508,624 374,828 976,947 704,247 
Operating Expenses:
Company-operated store expenses192,939 123,820 370,806 236,575 
Independently-operated store expenses28,843 30,792 62,142 61,900 
Advertising expenses22,091 19,648 41,789 36,903 
Supply and other expenses35,800 29,598 68,574 52,087 
Selling, general, and administrative expenses97,977 77,935 190,197 146,984 
Acquisition costs3,338 389 7,656 2,038 
Store opening costs666 405 1,172 694 
Depreciation and amortization38,087 26,423 71,110 50,275 
Trade name impairment charge125,450 — 125,450 — 
Asset impairment charges and lease terminations(882)2,178 16 3,431 
Total operating expenses544,309 311,188 938,912 590,887 
Operating income (loss)(35,685)63,640 38,035 113,360 
Other expenses, net:
Interest expense, net26,270 16,612 51,623 34,702 
Loss (gain) on foreign currency transactions13,937 (5,229)14,908 5,282 
Loss on debt extinguishment— 78 — 45,576 
Other expense, net40,207 11,461 66,531 85,560 
Income (loss) before taxes(75,892)52,179 (28,496)27,800 
Income tax expense (benefit)(18,848)17,011 (5,880)12,565 
Net income (loss)(57,044)35,168 (22,616)15,235 
Net income (loss) attributable to non-controlling interest— (36)(15)(30)
Net income (loss) attributable to Driven Brands Holdings Inc.$(57,044)$35,204 $(22,601)$15,265 
Earnings (loss) per share:
Basic$(0.34)$0.21 $(0.14)$0.09 
Diluted$(0.34)$0.21 $(0.14)$0.09 
Weighted average shares outstanding
Basic162,781 162,626 162,772 158,727 
Diluted162,781 166,512 162,772 162,271 
The accompanying notes are an integral part of these consolidated financial statements.
3



DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
Three months endedSix months ended
(in thousands)June 25, 2022June 26, 2021June 25, 2022June 26, 2021
Net income (loss)$(57,044)$35,168 $(22,616)$15,235 
Other comprehensive income (loss):
   Foreign currency translation adjustment(42,114)11,411 (47,688)2,168 
   Unrealized gain from cash flow hedges, net of tax(225)— (93)30 
   Defined benefit pension plan actuarial gain, net of tax— 128 
Other comprehensive income (loss), net(42,332)11,411 (47,774)2,326 
Total comprehensive income (loss)(99,376)46,579 (70,390)17,561 
Comprehensive income (loss) attributable to non-controlling interests(19)(1)(21)39 
Comprehensive income (loss) attributable to Driven Brands Holdings Inc.$(99,357)$46,580 $(70,369)$17,522 
The accompanying notes are an integral part of these consolidated financial statements.
4


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share and per share amounts)
June 25, 2022December 25, 2021
Assets
Current assets:
Cash and cash equivalents$197,853 $523,414 
Restricted cash 792 792 
Accounts and notes receivable, net178,201 117,903 
Inventory53,124 46,990 
Prepaid and other assets47,964 24,326 
Income tax receivable5,070 6,867 
Assets held for sale3,275 3,275 
Advertising fund assets, restricted55,596 45,360 
Total current assets541,875 768,927 
Notes receivable, net5,092 3,182 
Property and equipment, net1,481,064 1,350,984 
Operating lease right-of-use assets1,031,731 995,625 
Deferred commissions10,738 10,567 
Intangibles, net733,469 816,183 
Goodwill2,108,002 1,910,392 
Deferred tax assets1,360 1,509 
Total assets$5,913,331 $5,857,369 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable$115,424 $83,033 
Accrued expenses and other liabilities253,742 297,620 
Income tax payable30,021 11,054 
Current portion of long term debt23,590 26,044 
Income tax receivable liability24,255 24,255 
Advertising fund liabilities30,264 26,441 
Total current liabilities477,296 468,447 
Long-term debt2,464,909 2,356,320 
Deferred tax liabilities223,336 257,067 
Operating lease liabilities969,598 931,604 
Income tax receivable liability131,715 131,715 
Deferred revenue39,829 37,576 
Long-term accrued expenses and other liabilities23,188 29,398 
Total liabilities4,329,871 4,212,127 
Commitments and contingencies
Common stock, $0.01 par value, 900 million shares authorized: and 168 million and 167 million shares issued at June 25, 2022 and December 25, 2021.
1,677 1,674 
Additional paid-in capital1,614,927 1,605,890 
Retained earnings19,006 41,607 
Accumulated other comprehensive loss(52,796)(5,028)
Total shareholders’ equity attributable to Driven Brands Holdings Inc.1,582,814 1,644,143 
Non-controlling interests646 1,099 
Total shareholders' equity1,583,460 1,645,242 
Total liabilities and shareholders' equity$5,913,331 $5,857,369 
    
The accompanying notes are an integral part of these consolidated financial statements.
5


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’/MEMBERS’ EQUITY (Unaudited)
in thousandsCommon stockAdditional paid-in capitalRetained earningsAccumulated other
comprehensive
income (loss)
Non-controlling
interests
Total shareholders'/members' equity
Balance as of December 26, 2020
$565 $1,055,172 $31,975 $16,528 $2,120 $1,106,360 
Net income (loss)— — (19,939)— (19,932)
Other comprehensive loss— — — (9,085)— (9,085)
Equity-based compensation expense— 983 — — — 983 
Issuance of common stock upon initial public offering, net of underwriting discounts and commissions1,082 660,418 — — — 661,500 
Common stock issued upon underwriter's exercise of over-allotment48 99,177 — — — 99,225 
Repurchase of common stock(21)(42,956)— — — (42,977)
Exercise of stock options— 25 — — — 25 
Establishment of income tax receivable liability— (155,970)— — — (155,970)
IPO fees— (14,757)— — — (14,757)
Other— — — — (63)(63)
Balance as of March 27, 2021$1,674 $1,602,092 $12,036 $7,443 $2,064 $1,625,309 
Net income (loss)— — 35,204 — (36)35,168 
Other comprehensive loss— — — 11,412 (1)11,411 
Equity-based compensation expense— 1,028 — — — 1,028 
At Pac divestiture— — — — (948)(948)
Other— (25)— (1)— (26)
Balance as of June 26, 2021$1,674 $1,603,095 $47,240 $18,854 $1,079 $1,671,942 
Balance as of December 25, 2021
$1,674 $1,605,890 $41,607 $(5,028)$1,099 $1,645,242 
Net income (loss)— — 34,443 — $(15)34,428 
Other comprehensive income (loss)— — — (5,455)13 (5,442)
Equity based compensation expense— 2,618 — — — 2,618 
Stock issued related to Employee Stock Purchase Plan2,091 — — — 2,092 
Tax withholding on stock option exercises— (14)— — — (14)
Divestiture of Denmark car wash operations— — — — (432)(432)
Balance as of March 26, 2022$1,675 $1,610,585 $76,050 $(10,483)$665 $1,678,492 
Net loss— — (57,044)— — (57,044)
Other comprehensive loss— — — (42,313)(19)(42,332)
Equity based compensation expense— 4,233 — — — 4,233 
Stock option exercised109 — — — 111 
Balance as of June 25, 2022$1,677 $1,614,927 $19,006 $(52,796)$646 $1,583,460 
The accompanying notes are an integral part of these consolidated financial statements.
6


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six months ended
(in thousands)June 25, 2022June 26, 2021
Net income (loss)$(22,616)$15,235 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization71,110 50,275 
Trade name impairment125,450 — 
Non-cash lease cost35,049 37,938 
Loss on foreign denominated transactions14,908 5,707 
Gain on foreign currency derivatives— (425)
Bad debt expense936 1,739 
Asset impairment costs16 3,431 
Amortization of deferred financing costs and bond discounts4,565 3,619 
Benefit (provision) for deferred income taxes(31,908)4,742 
Loss on extinguishment of debt— 45,576 
Other, net(1,925)1,375 
Changes in assets and liabilities, net of acquisitions:
Accounts and notes receivable, net(61,461)(24,174)
Inventory(6,899)(396)
Prepaid and other assets(19,082)(20,885)
Advertising fund assets and liabilities, restricted(1,321)12,548 
Deferred commissions(178)(809)
Deferred revenue497 2,994 
Accounts payable20,209 3,860 
Accrued expenses and other liabilities(45,950)9,707 
Income tax receivable19,640 3,665 
Operating lease liabilities(25,651)(31,034)
Cash provided by operating activities75,389 124,688 
Cash flows from investing activities:
Capital expenditures(148,763)(46,222)
Cash used in business acquisitions, net of cash acquired(394,388)(205,556)
Proceeds from sale-leaseback transactions56,083 49,166 
Proceeds from sale of company-operated stores— 5,775 
Proceeds from disposition of car wash operations1,551  
Proceeds from disposal of property and equipment632  
Cash used in investing activities(484,885)(196,837)
Cash flows from financing activities:
Payment of debt extinguishment and issuance costs— (2,408)
Repayment of long-term debt(9,682)(712,649)
Proceeds from revolving lines of credit and short-term debt105,000 213,800 
Repayments of revolving lines of credit and short-term debt— (152,800)
Repayment of principal portion of finance lease liability(1,156)(1,127)
Proceeds from initial public offering, net of underwriting discounts— 661,500 
Net proceeds from underwriters' exercise of over-allotment option— 99,225 
Repurchases of common stock— (43,040)
Payment for termination of interest rate swaps— (21,826)
Stock option exercises188 — 
Other, net(36)152 
Cash provided by financing activities94,314 40,827 
7


Effect of exchange rate changes on cash(4,454)1,813 
Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted(319,636)(29,509)
Cash and cash equivalents, beginning of period523,414 172,611 
Cash included in advertising fund assets, restricted, beginning of period38,586 19,369 
Restricted cash, beginning of period792 15,827 
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period562,792 207,807 
Cash and cash equivalents, end of period197,853 147,257 
Cash included in advertising fund assets, restricted, end of period44,511 30,882 
Restricted cash, end of period792 159 
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period$243,156 $178,298 
Supplemental cash flow disclosures - non-cash items:
Accrued capital expenditures, end of period$5,464 $5,772 
Supplemental cash flow disclosures - cash paid for:
Interest $51,491 $38,966 
Income taxes $5,457 $5,531 

The accompanying notes are an integral part of these consolidated financial statements.
8


DRIVEN BRANDS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Note 1—Description of Business
Description of Business
Driven Brands Holdings Inc., together with its subsidiaries (collectively, the “Company”), is a Delaware corporation and is the parent holding company of Driven Brands, Inc. and Shine Holdco (UK) Limited (collectively, “Driven Brands”). Driven Brands is the largest automotive services company in North America with a growing and highly-franchised base of more than 4,600 franchised, independently-operated, and company-operated locations across 49 U.S. states and 14 other countries. The Company has a portfolio of highly recognized brands, including Take 5 Oil Change®, Meineke Car Care Centers®, MAACO®, CARSTAR®, and 1-800-Radiator & A/C® that compete in the automotive services industry. Approximately 77% of the Company’s locations are franchised or independently-operated.

Initial Public Offering and Secondary Offering in 2021
On January 14, 2021, the Company completed an initial public offering (the “IPO”) of approximately 32 million shares of common stock at $22 per share. On February 10, 2021, the Company’s underwriters exercised their over-allotment option to purchase approximately 5 million additional shares of common stock. The Company received total proceeds of $761 million from these transactions, net of the underwriting discounts and commissions.

The Company used the proceeds from the IPO, along with cash on hand, to fully repay the term loans and revolving credit facility assumed as part of the acquisition of International Car Wash Group (“ICWG”) in 2020 (collectively, the “Car Wash Senior Credit Facilities”), which totaled $725 million with interest and fees. The Company recognized a $46 million loss on debt extinguishment for six months ended June 26, 2021 related to this settlement, primarily related to the write-off of the unamortized discount. The Company cancelled the interest rate and cross currency swaps associated with these debt agreements as part of the settlement. The Company also used $43 million in proceeds to purchase approximately 2 million shares of common stock from certain of our existing shareholders.

On August 2, 2021, the Company filed a Registration Statement on Form S-1 for a secondary offering of approximately 12 million shares of common stock at $29.50 per share by certain of the Company’s stockholders, Driven Equity LLC and RC IV Cayman ICW Holdings LLC, each of which is a related party of Roark Capital Management, LLC. The Company did not sell any common stock in the offering and did not receive any proceeds from the offering. On September 8, 2021, the underwriters for the secondary offering exercised a portion of their over-allotment option and purchased 881,393 additional shares of common stock. The Company did not receive any proceeds from the exercise of the over-allotment option.

Income Tax Receivable Agreement
The Company expects to be able to utilize certain tax benefits which are related to periods prior to the effective date of the Company’s IPO and are attributed to current and former shareholders. The Company previously entered into an income tax receivable agreement which provides our pre-IPO shareholders with the right to receive payment of 85% of the amount of cash savings, if any, in U.S. and Canadian federal, state, local and provincial income tax that the Company will actually realize. The income tax receivable agreement is effective as of the date of the Company’s IPO. The Company has recorded a total liability of $156 million as of June 25, 2022 and December 25, 2021, of which $24 million and $132 million are recorded under current and non-current liabilities, respectively.

Stock Split
On January 14, 2021, the Company’s shareholders approved an amendment to the Company’s certificate of incorporation (the "Amendment") to effect an implied 88,990-for-one stock split of shares of the Company’s outstanding
common stock. In addition, the Amendment increased the number of authorized shares of the Company's stock from 10,000 shares to 1 billion shares (900 million shares of common stock and 100 million shares of preferred stock). All share and per-share data in the consolidated financial statements and footnotes has been retroactively adjusted to reflect the stock split for all periods presented. The Company does not have any shares of preferred stock outstanding.

9


Note 2— Summary of Significant Accounting Policies

Fiscal Year
The Company operates and reports financial information on a 52- or 53-week year with the fiscal year ending on the last Saturday in December and fiscal quarters ending on the 13th Saturday of each quarter (or 14th Saturday when applicable with respect to the fourth fiscal quarter). The three and six months ended June 25, 2022 and June 26, 2021, each consist of 13 weeks and 26 weeks, respectively. The Car Wash segment is currently consolidated based on a calendar month end.

Basis of Presentation
The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited interim financial data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results of operations, balance sheet, cash flows and shareholders’ equity for the interim periods presented. The adjustments include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

These interim consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 25, 2021. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three and six months ended June 25, 2022 may not be indicative of the results to be expected for any other interim period or the year ending December 31, 2022.

Use of Estimates    
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the related notes to the consolidated financial statements. Estimates are based upon historical factors, current circumstances and the experience and judgment of the Company’s management. Management evaluates its estimates and assumptions on an ongoing basis and may employ outside experts to assist in its evaluations. Changes in such estimates, based on more accurate future information, or different assumptions or conditions, may affect amounts reported in future periods.

Deferred IPO costs
Costs incurred that are directly related to the IPO, such as legal and accounting fees, registration fees, printing expenses, and other similar fees and expenses, totaling $9 million were capitalized and included within prepaid and other assets as of December 26, 2020. Upon completion of the IPO, the Company reclassified these costs, as well as an additional $6 million of IPO costs incurred during the six months ended June 26, 2021 to Additional paid-in capital within the statement of Shareholders’/members’ equity.

Fair Value of Financial Instruments
Financial assets and liabilities are categorized, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. Observable market data, when available, is required to be used in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

The Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
Level 2: Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; or
Level 3: Inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
10


Financial assets and liabilities measured at fair value on a recurring basis as of June 25, 2022 and December 25, 2021 are summarized as follows:

Items Measured at Fair Value at June 25, 2022
(in thousands)Level 1Level 2Total
Mutual fund investments held in rabbi trust$766 $— $766 
Foreign currency derivative assets designated as hedging instruments$— $1,030 $1,030 
Foreign currency derivative liabilities designated as hedging instruments$— $304 $304 
Foreign currency derivative liabilities not designated as hedging instruments$— $1,528 $1,528 

Items Measured at Fair Value at December 25, 2021
(in thousands)Level 1Level 2Total
Mutual fund investments held in rabbi trust$976 $— $976 
Foreign currency derivative liabilities designated as hedging instruments$— $536 $536 

The fair value of the Company’s foreign currency derivative instruments are derived from valuation models, which use Level 2 observable inputs such as quoted market prices, interest rates and forward yield curves. Derivative assets are included in Prepaid and other assets or Notes receivable, net in the consolidated balance sheet depending on the remaining period to maturity. Derivative liabilities not designated as a hedging instrument are included in Accrued expenses and other liabilities in the consolidated balance Sheet. Derivative liabilities designated as a hedging instrument are included in long-term accrued expenses and other liabilities in the consolidated balance sheet.

The carrying values of cash, restricted cash, and receivables included in the consolidated balance sheet approximate their fair value. The fair value of long-term debt is estimated based on Level 2 inputs using discounted cash flows and market-based expectations for interest rates, credit risk and contractual terms of the debt agreements.

The carrying value and estimated fair value of total long-term debt were as follows:

June 25, 2022December 25, 2021
(in thousands)Carrying valueEstimated fair valueCarrying valueEstimated fair value
Long-term debt$2,488,499 $2,311,046 $2,382,364 $2,411,987 

11


Accumulated Other Comprehensive Income (Loss)
The following tables present changes in each component of accumulated other comprehensive income (loss), net of tax:

Three months ended June 25, 2022
(in thousands)Foreign currency translation adjustmentCash flow hedgesDefined benefit pension planAccumulated other comprehensive income (loss)
Balance as of March 26, 2022$(9,770)$(626)$(87)$(10,483)
Net change(42,095)(225)(42,313)
Balance as of June 25, 2022$(51,865)$(851)$(80)$(52,796)

Three months ended June 26, 2021
(in thousands)Foreign currency translation adjustmentCash flow hedgesDefined benefit pension planAccumulated other comprehensive income (loss)
Balance at March 27, 2021$7,591 $(57)$(91)$7,443 
Net change11,411 — — 11,411 
Balance as of June 26, 2021$19,002 $(57)$(91)$18,854 

Six months ended June 25, 2022
(in thousands)Foreign currency translation adjustmentCash flow hedgesDefined benefit pension planAccumulated other comprehensive income (loss)
Balance as of December 25, 2021$(4,183)$(758)$(87)$(5,028)
Net change(47,682)(93)(47,768)
Balance as of June 25, 2022$(51,865)$(851)$(80)$(52,796)

Six months ended June 26, 2021
(in thousands)Foreign currency translation adjustmentCash flow hedgesDefined benefit pension planAccumulated other comprehensive income (loss)
Balance as of December 26, 2020$16,834 $(87)$(219)$16,528 
Net change2,168 30 128 2,326 
Balance as of June 26, 2021$19,002 $(57)$(91)$18,854 

Recently Issued Accounting Standards
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of LIBOR, regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This guidance is effective immediately and the amendments may be applied prospectively through December 31, 2022. The Company is evaluating the impact of adopting this new accounting guidance and does not believe it will have a material impact on the Company’s consolidated financial statements.
12


Note 3—Acquisitions and Dispositions
The Company strategically acquires companies and assets in order to increase its footprint and offer products and services that diversify its existing offerings. These acquisitions are accounted for as either business combinations or asset acquisitions, whereby the purchase price is allocated to the assets acquired and liabilities assumed, based on their fair values as of the date of the acquisition.

2022 Acquisitions

The Company completed 12 acquisitions in the Car Wash segment during the six months ended June 25, 2022, representing 17 sites, which were deemed to be business combinations. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was approximately $164.7 million. On June 14, 2022, the Car Wash segment acquired Jimmy Clean Car Wash, which was comprised of 3 sites for a total consideration of $31.9 million.

The Company completed 2 acquisitions in the Maintenance segment during the six months ended June 25, 2022, representing 2 sites, which were deemed to be business combinations. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was $2.9 million.
In addition, the Company completed 4 acquisitions in the Paint, Collision & Glass segment during the six months ended June 25, 2022 representing 115 sites, which were deemed to be business combinations. On December 30, 2021 the Company acquired Auto Glass Now® (“AGN”). AGN had 79 sites at the time of the Company’s acquisition, and is included within the Company’s Paint, Collision & Glass segment. AGN has over 20 years of experience in auto glass repair, replacement, and calibration and expands the Company’s auto glass offering into the U.S. The aggregate cash consideration for this acquisition, net of cash acquired and liabilities assumed, was $170.6 million. On April 28, 2022, the Company acquired All Star Glass (“ASG”), which was comprised of 30 sites for a total consideration of $43.7 million. The Company will amortize the acquired lease right of use assets, customer list intangibles, and definite lived trade name over their estimated remaining lives of 3 to 34 years, 20 years, and one year, respectively.

13


The Company estimated the fair value of acquired assets and liabilities as of the date of acquisition based on information currently available. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The provisional amounts for assets acquired and liabilities assumed for the 2022 acquisitions are as follows:
(in thousands)Jimmy Clean Car WashAll Other Car Wash MaintenanceAll Star Glass
Auto Glass Now
All Other Paint, Collision & Glass
Total
Assets:
Cash$$32 $— $7,553 $$$7,600 
Prepaid assets— — — — 327 30 357 
Land and building11,190 79,100 1,025 23 — 91,338 
Equipment2,210 11,268 85 537 921 902 15,923 
Inventory— — 24 546 — 27 597 
Accounts and Notes receivable— — — 2,436 — — 2,436 
Prepaid expenses— — — 255 — — 255 
Operating lease right of use asset— — — 734 10,693 — 11,427 
Intangibles, net— — — 8,700 49,000 — 57,700 
Leasehold improvements— — — — — — — 
Deferred tax assets2,116 674 55 — — 2,845 
Assets acquired15,522 91,074 1,189 20,761 60,971 961 190,478 
Liabilities:
Trade Payable— — — 1,911 — — 1,911 
Accrued Expenses and other long-term liabilities— — — 303 — — 303 
Taxes Payable— — — 272 — — 272 
Long Term Debt- Current— — — 46 — — 46 
Long Term Debt— — — 59 — — 59 
Prepaid Liabilities110 140 — — — — 250 
Operating lease liabilities— — — 733 10,003 — 10,736 
Total liabilities assumed110 140 — 3,324 10,003 — 13,577 
Net assets acquired15,412 90,934 1,189 17,437 50,968 961 176,901 
Total consideration31,896 132,814 2,922 43,740 170,636 9,381 391,389 
Goodwill$16,484 $41,880 $1,733 $26,303 $119,668 $8,420 $214,488 

Goodwill represents the excess of the consideration paid over the fair value of net assets acquired and includes the expected benefit of synergies within the existing segments and intangible assets that do not qualify for separate recognition. Goodwill, which was allocated to the Car Wash, Maintenance and Paint, Collision & Glass segments, is substantially all deductible for income tax purposes.

14


The following tables present financial information regarding the Car Wash and Glass acquisitions included in our consolidated statements of operations from the date of acquisition through June 25, 2022 under the column “Actual from acquisition date.” The following tables also present supplemental unaudited pro-forma information as if the acquisitions had occurred at the beginning of 2021. The pro-forma information does not necessarily reflect the results of operations that would have occurred had the acquisitions occurred at the beginning of 2021. Cost savings are also not reflected in the unaudited pro-forma amounts for the three and six months ended June 25, 2022 and June 26, 2021.
Three months ended June 25, 2022Three months ended June 25, 2022Three months ended June 26, 2021
Actual from acquisition date
(in thousands)Car Wash AcquisitionsGlass AcquisitionsCar Wash & Glass AcquisitionsDriven Brands Holdings Consolidated
Pro-forma
Driven Brands Holdings Consolidated
Pro-forma
Revenue$4,896 $29,912 $34,808 $516,078 $418,706 
Net income (loss) attributable to Driven Brands Holdings Inc.$1,440 $4,027 $5,467 $(55,172)$46,020 
Six months ended June 25, 2022Six months ended June 25, 2022Six months ended June 26, 2021
Actual from acquisition date
(in thousands)Car Wash AcquisitionsGlass AcquisitionsCar Wash & Glass AcquisitionsDriven Brands Holdings Consolidated
Pro-forma
Driven Brands Holdings Consolidated
Pro-forma
Revenue$5,378 $49,992 $55,370 $1,002,583 $783,960 
Net income (loss) attributable to Driven Brands Holdings Inc.$1,512 $6,076 $7,588 $(15,819)$24,749 

Deferred Consideration and Transaction Costs

Included in the total consideration amounts above for the Car Wash, Maintenance, and Paint, Collision & Glass acquisitions in 2022 was $5 million of consideration not paid on the closing date. The Company had $13 million of deferred consideration related to 2022 and 2021 acquisitions at June 25, 2022. The Company had $23 million of deferred consideration related to 2021 acquisitions at December 25, 2021. The Company paid $15 million of deferred consideration related to 2022 and 2021 acquisitions during the six months ended June 25, 2022. Deferred consideration is typically paid six months to one-year after the acquisition closing date once all conditions related to representations, warranties and indemnification under the purchase agreement have been satisfied.

The Company incurred approximately $3 million of direct transaction costs during the six months ended June 25, 2022 related to 2022 acquisitions.

2022 Disposition
On March 16, 2022, the Company disposed of its 75% owned subsidiary, IMO Denmark ApS, for consideration of $2 million. As a result of the sale, a $1 million loss was recognized within selling, general, and administrative expenses during the six months ended June 25, 2022. Also, a noncontrolling interest of less than $1 million was derecognized.

2021 Acquisitions

2021 Car Wash Segment

The Company completed 38 acquisitions in the Car Wash segment, representing 110 car wash sites, (the “2021 Car Wash Acquisitions”), which were deemed to be business combinations, during the year ended December 25, 2021. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was $732 million.
15



On October 27, 2021, the Car Wash segment acquired Magic Tunnel Car Wash, which was comprised of 16 sites for total consideration of $88 million. On July 14, 2021, the Car Wash segment acquired Frank’s Car Wash, which was comprised of 18 sites for total consideration of $107 million. On May 20, 2021, the Car Wash segment acquired Racer Classic Car Wash, which was comprised of 10 sites for total consideration of $65 million.

The Company estimated the fair value of acquired assets and liabilities as of the date of acquisition based on information currently available. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The amounts for assets acquired and liabilities assumed for the 2021 Car Wash Acquisitions (which are provisional unless otherwise noted with an *) are as follows:

(in thousands)Magic Tunnel Car WashFranks Car Wash ExpressRacer Classic Car Wash*All OtherTotal Car Wash
Assets:
Cash$26 $38 $18 $165 $247 
Right of use assets— — 2,587 12,277 14,864 
Land and improvements13,020 10,790 6,920 45,455 76,185 
Building48,380 48,570 31,490 270,155 398,595 
Equipment13,800 7,377 5,698 59,578 86,453 
Inventory— — 311 — 311 
Intangibles, net700 800 550 — 2,050 
Deferred tax assets— 94 — 1,596 1,690 
Assets held for sale— — — 996 996 
Assets acquired75,926 67,669 47,574 390,222 581,391 
Liabilities:
Accrued liability— 50 155 304 509 
Lease liability— — 2,687 12,277 14,964 
Deferred tax liabilities— — 758 — 758 
Liabilities assumed— 50 3,600 12,581 16,231 
Net assets acquired75,926 67,619 43,974 377,641 565,160 
Total consideration88,026 106,558 64,843 472,721 732,148 
Goodwill$12,100 $38,939 $20,869 $95,080 $166,988 

Goodwill which was allocated to the Car Wash segment is substantially all deductible for income tax purposes.

The following table presents financial information regarding the 2021 Car Wash Acquisitions operations included in our consolidated statements of operations from the date of acquisition through December 25, 2021 under the column “Actual from acquisition date in 2021.” The following table presents supplemental unaudited pro-forma information as if the 2021 Car Wash Acquisitions had occurred at the beginning of 2020. The pro-forma information does not necessarily reflect the results of operations that would have occurred had the 2021 Car Wash Acquisitions occurred at the beginning of 2020. Cost savings are also not reflected in the unaudited pro-forma amounts for the year ended December 25, 2021 and December 26, 2020, respectively.
Actual from
acquisition
date in 2021
Pro-forma for year ended
(in thousands)December 25, 2021December 26, 2020
Revenue$48,648 $1,613,479 $1,026,012 
Net income attributable to Driven Brands Holdings Inc.$11,693 $47,272 $20,558 



16


2021 Maintenance Segment

During the year ended December 25, 2021, the Company also completed 8 acquisitions in the Maintenance segment representing 13 maintenance sites, each individually immaterial (the “2021 Maintenance Acquisitions”), which were deemed to be business combinations. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was $37 million.

The Company estimated the fair value of acquired assets and liabilities as of the date of acquisition based on information currently available. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The finalized amounts for assets acquired and liabilities assumed for the 2021 Maintenance Acquisitions are as follows:
(in thousands)
Assets:
Cash$
Land and improvements4,425 
Building13,220 
Equipment1,450 
Inventory200 
Deferred tax assets90 
Asset held for sale3,275 
 22,662 
Liabilities:
Prepaid liability52 
Liabilities assumed52 
Net assets acquired22,610 
Total consideration37,271 
Goodwill$14,661 
2021 Paint, Collision & Glass Segment

During the year ended December 25, 2021, the Company completed two acquisitions in its Paint, Collision & Glass segment (the “2021 PC&G Acquisitions”) representing 12 collision sites, each individually immaterial, which were deemed to be business combinations. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was $33 million.

17


The Company estimated the fair value of acquired assets and liabilities as of the date of acquisition based on information currently available. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The finalized amounts for assets acquired and liabilities assumed for the 2021 PC&G Acquisitions are as follows:
(in thousands)
Assets:
Right of use asset$7,672 
Equipment1,512 
Inventory107 
Intangibles, net6,707 
Assets acquired15,998 
Liabilities:
Accrued liability
Lease liability7,664 
Off-market lease component99 
Liabilities assumed7,768 
Net assets acquired8,230 
Total consideration32,972 
Goodwill$24,742 

In addition, during the twelve months ended December 25, 2021, the Company completed 11 acquisitions composed of one site each, each individually immaterial, each of which were deemed to be asset acquisitions as the fair value of assets acquired is substantially all land and buildings. Two of these acquisitions were included in the Car Wash segment and nine were included in the Maintenance segment. The aggregate consideration paid for the Car Wash acquisitions and Maintenance assets acquisitions was $9 million and $7 million, respectively.

Deferred Consideration and Transaction Costs

Included in the total consideration amounts above for the Car Wash and Maintenance acquisitions in 2021 was $24 million of consideration not paid on the closing date. The Company had $23 million of deferred consideration related to 2021 and 2020 acquisitions at December 25, 2021. The Company had $5 million of deferred consideration related to 2020 acquisitions at December 26, 2020. The Company paid $6 million of deferred consideration related to 2021 and 2020 and prior acquisitions during the year ended December 25, 2021. Deferred consideration is typically paid six months to one-year after the acquisition closing date once all conditions under the purchase agreement have been satisfied.

The Company incurred approximately $3 million of transaction costs during the year ended December 25, 2021 related to 2021 acquisitions.

2021 Disposition
On April 27, 2021, the Company disposed of its 70% owned subsidiary, At-Pac Auto Parts Inc., for consideration of $2 million. As a result of the sale, a loss of less than $1 million was recognized within selling, general, and administrative expenses during the year ended December 25, 2021. Also, a noncontrolling interest of $1 million was derecognized.
Note 4— Revenue from Contracts with Customers

The Company records contract assets for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year and if such costs are material. Commission expenses, a primary cost associated with the sale of franchise licenses, are amortized to selling, general and administrative expenses in the consolidated statements of operations ratably over the life of the associated franchise agreement.
Capitalized costs to obtain a contract were $11 million as of both June 25, 2022 and December 25, 2021, and are presented within deferred commissions on the consolidated balance sheets. The Company recognized an immaterial amount of costs during the three and six months ended June 25, 2022 and June 26, 2021 that were recorded as a contract asset at the beginning of the periods.
18


The Company had Deferred Revenue of $40 million and $38 million as of June 25, 2022 and December 25, 2021, respectively, which includes contract liabilities, consisting primarily of deferred franchise fees and deferred development fees, of $38 million and $27 million as of June 25, 2022 and December 25, 2021, respectively. The Company recorded less than $1 million of revenue during the three months ended June 25, 2022 and June 26, 2021, and $2 million and $1 million of revenue during the six months ended June 25, 2022 and June 26, 2021, respectively, that was recorded as a contract liability as of the beginning of the period.
Note 5—Segment Information
The Company’s worldwide operations are comprised of the following reportable segments: Maintenance; Car Wash; Paint, Collision & Glass; and Platform Services.

In addition to the reportable segments, the Company’s consolidated financial results include “Corporate and Other” activity. Corporate and Other incurs costs related to advertising fund revenues and expenses and shared service costs, which are related to finance, information technology, human resources, legal, supply chain and other support services. Corporate and Other activity includes the adjustments necessary to eliminate intercompany transactions, namely sales by the Platform Services segment to the Paint, Collision & Glass and Maintenance segments.
Segment results for the three and six months ended June 25, 2022 and June 26, 2021 are as follows:
Three months ended June 25, 2022
(in thousands)MaintenanceCar WashPaint,
Collision &
Glass
Platform
Services
Corporate
and Other
Total
Franchise royalties and fees$11,326 $— $23,605 $9,919 $— $44,850 
Company-operated store sales168,648101,796 52,120 1,392 (71)323,885 
Independently-operated store sales— 54,942 — — — 54,942 
Advertising fund contributions— — — — 22,091 22,091 
Supply and other revenue14,331 1,841 19,715 41,891 (14,922)62,856 
Total revenue$194,305 $158,579 $95,440 $53,202 $7,098 $508,624 
Segment Adjusted EBITDA$64,076 $53,677 $32,916 $20,541 $(35,123)$136,087 
Three months ended June 26, 2021
(in thousands)MaintenanceCar WashPaint,
Collision &
Glass
Platform
Services
Corporate
and Other
Total
Franchise royalties and fees$9,090 $— $19,988 $8,795 $— $37,873 
Company-operated store sales126,107 65,705 13,019 1,463 (96)206,198 
Independently-operated store sales— 56,379 — — — 56,379 
Advertising fund contributions— — — — 19,648 19,648 
Supply and other revenue9,813 1,831 17,567 34,583 (9,064)54,730 
Total revenue$145,010 $123,915 $50,574 $44,841 $10,488 $374,828 
Segment Adjusted EBITDA$44,561 $43,069 $21,856 $17,602 $(25,845)$101,243 
19


Six months ended June 25, 2022
(in thousands)MaintenanceCar WashPaint,
Collision &
Glass
Platform ServicesCorporate
and Other
Total
Franchise royalties and fees$20,961 $— $44,970 $16,807 $— $82,738 
Company-operated store sales325,476 196,291 92,118 2,544 (153)616,276 
Independently-operated store sales— 118,031 — — — 118,031 
Advertising fund contributions— — — — 41,789 41,789 
Supply and other revenue26,610 3,532 37,795 77,017 (26,841)118,113 
Total revenue$373,047 $317,854 $174,883 $96,368 $14,795 $976,947 
Segment Adjusted EBITDA$116,561 $109,397 $61,928 $34,706 $(67,485)$255,107 
Six months ended June 26, 2021
(in thousands)MaintenanceCar WashPaint,
Collision &
Glass
Platform
Services
Corporate
and Other
Total
Franchise royalties and fees$17,016 $— $37,298 $13,973 $— $68,287 
Company-operated store sales240,174 122,753 24,949 2,446 (269)390,053 
Independently-operated store sales— 112,542 — — — 112,542 
Advertising fund contributions— — — — 36,903 36,903 
Supply and other revenue15,970 3,284 32,219 63,018 (18,029)96,462 
Total revenue$273,160 $238,579 $94,466 $79,437 $18,605 $704,247 
Segment Adjusted EBITDA$85,001 $77,224 $39,495 $28,610 $(50,864)$179,466 
The reconciliations of Income (loss) before taxes to Segment Adjusted EBITDA for the three and six months ended June 25, 2022 and June 26, 2021 are as follows:
Three months endedSix months ended
(in thousands)June 25, 2022June 26, 2021June 25, 2022June 26, 2021
Income (loss) before taxes$(75,892)$52,179 $(28,496)$27,800 
Depreciation and amortization38,087 26,423 71,110 50,275 
Interest expense, net26,270 16,612 51,623 34,702 
Acquisition related costs(a)
3,338 389 7,656 2,038 
Non-core items and project costs, net(b)
1,719 2,522 2,585 2,553 
Store opening costs666 405 1,172 694 
Straight-line rent adjustment(c)
4,217 3,358 8,310 5,843 
Equity-based compensation expense(d)
4,233 1,028 6,851 2,011 
Foreign currency transaction (gain) / loss, net(e)
13,937 (5,229)14,908 5,282 
Trade name impairment(f)
125,450 — 125,450 — 
Asset sale leaseback (gain) loss, impairment and closed store expenses(g)
(5,938)3,478 (6,062)2,692 
Loss on debt extinguishment(h)
— 78 — 45,576 
Segment Adjusted EBITDA$136,087 $101,243 $255,107 $179,466 

(a)     Consists of acquisition costs as reflected within the consolidated statements of operations, including legal, consulting and other fees and expenses incurred in connection with acquisitions completed during the applicable period, as well as inventory rationalization expenses incurred in connection with acquisitions. We expect to incur similar costs in connection
20


with other acquisitions in the future and, under GAAP, such costs relating to acquisitions are expensed as incurred and not capitalized.
(b)     Consists of discrete items and project costs, including (i) third party consulting and professional fees associated with strategic transformation initiatives and (ii) other miscellaneous expenses, including non-capitalizable expenses relating to the Company’s initial public offering and other strategic transactions.
(c)     Consists of the non-cash portion of rent expense, which reflects the extent to which our straight-line rent expense recognized under GAAP exceeds or is less than our cash rent payments.
(d)     Represents non-cash equity-based compensation expense.
(e)    Represents foreign currency transaction net gains and losses primarily related to the remeasurement of our intercompany loans which are partially offset by unrealized gains and losses on remeasurement of cross currency swaps and forward contracts.
(f)     Relates to an impairment of certain Car Wash trade names for which the Company elected to discontinue their use.
(g)     Relates to (gain) loss on sale leasebacks, impairment of certain fixed assets and operating lease right-of-use assets related to closed locations. Also, represents lease exit costs and other costs associated with stores that were closed prior to the respective lease termination dates.
(h)     Represents the write-off of unamortized discount associated with the repayment of the Car Wash Senior Credit Facilities.
Note 6 —Other Intangible Assets
The Company acquired a number of car wash businesses over the past two years. As part of those acquisitions, the Company determined a fair value for each of the associated intangible assets including trade names and customer relationships. During the quarter ended June 25 2022, the Company made the strategic decision to rebrand the majority of its U.S. car wash locations to operate under the name “Take 5 Car Wash”, and therefore will be discontinuing the use of certain car wash trade names that were previously determined to have indefinite lives. Using a projected discounted cash flow analysis based on the relief from royalty method, the fair value of the trade names was determined to be $6 million while their carrying value was $131.5 million. As a result, the Company recognized a $125.5 million impairment charge, which is reported as Trade name impairment charge in the consolidated statement of operations. The transition will take approximately two and a half years to complete, and therefore the remaining carrying value will be amortized over 30 months.
Note 7—Long-Term Debt
The Company’s long-term debt obligations consist of the following:
(in thousands)June 25, 2022December 25, 2021
Series 2018-1 Securitization Senior Notes, Class A-2$263,313 $264,688 
Series 2019-1 Securitization Senior Notes, Class A-2289,500 291,000 
Series 2019-2 Securitization Senior Notes, Class A-2267,437 268,813 
Series 2019-3 Variable Funding Securitization Senior Notes, Class A-1— — 
Series 2020-1 Securitization Senior Notes, Class A-2171,500 172,375 
Series 2020-2 Securitization Senior Notes, Class A-2443,250 445,500 
Series 2021-1 Securitization Senior Notes, Class A-2446,625 448,875 
Term Loan Facility500,000 500,000 
Revolving Credit Facility105,000 — 
Other debt (a)
45,344 39,082 
Total debt2,531,969 2,430,333 
Less: unamortized debt issuance costs(43,470)(47,969)
Less: current portion of long-term debt(23,590)(26,044)
Total long-term debt, net$2,464,909 $2,356,320 
(a) Consists primarily of finance lease obligations. See Note 8.

Series 2019-3 Variable Funding Securitization Senior Notes

In December 2019, the Company issued Series 2019-3 Variable Funding Senior Notes, Class A-1 (the “2019 VFN”) in the revolving amount of $115 million. The 2019 VFN have a final legal maturity date of January 20, 2050. The commitment
21


under the 2019 VFN has an expiration date of July 20, 2023, and subject to two one year extensions at the election of the Company. The 2019 VFN is secured by substantially all assets of Driven Brands Funding LLC (the “Issuer”) and are guaranteed by the Securitization Entities. The Issuer may elect interest at the Base Rate plus an applicable margin or LIBOR plus an applicable margin (the LIBOR rate as the applicable interest rate). No amounts were outstanding under the 2019 VFN as of June 25, 2022 and no borrowings or repayments were made during the quarter or six months ended June 25, 2022. As of June 25, 2022, there were $18 million of outstanding letters of credit which reduced the borrowing availability under the 2019 VFN.

Driven Holdings Revolving Credit Facility

In May 2021, the Company entered into a credit agreement to secure a revolving line of credit with a group of financial institutions (“Driven Holdings Revolving Credit Facility”), which provides for an aggregate principal amount of up to $300 million, and has a maturity date of May 27, 2026. Eurocurrency borrowings incur interest at an adjusted London Interbank Offered Rate (“LIBOR”) plus an applicable margin of 1.50%, which may increase to 1.75% based on the Net First Lien Leverage Ratio under the Driven Holdings Revolving Credit Facility. The Driven Holdings Revolving Credit Facility also includes periodic commitment fees based on the available unused balance and a quarterly administrative fee.

There was $105 million outstanding on the Driven Holdings Revolving Credit Facility as of June 25, 2022 with $105 million borrowings and no repayments made during the quarter or six months ended June 25, 2022. As of June 25, 2022, there were $2 million of outstanding letters of credit which reduced the borrowing availability under the Driven Holdings Revolving Credit Facility.

The Company’s debt agreements are subject to certain quantitative and qualitative covenants. As of June 25, 2022, the Company and its subsidiaries were in compliance with all covenants.
Note 8—Leases
The following table details our total investment in operating and finance leases where the Company is the lessee:
(in thousands)
June 25, 2022December 25, 2021
Right-of-use assets
Finance leases (a)
$37,081 $29,766 
Operating leases1,031,731 995,625 
Total right-of-use assets$1,068,812 $1,025,391 
 
Current lease liabilities
Finance leases (b)
$3,768 $3,101 
Operating leases (c)
65,563 57,588 
Total current lease liabilities$69,331 $60,689 
 
Long-term lease liabilities
Finance leases (d)
$35,178 $27,957 
Operating leases969,598 931,604 
Total long-term lease liabilities$1,004,776 $959,561 
(a) Finance lease right-of-use assets are included in Property and equipment, net on the consolidated balance sheet.
(b) Current finance lease liabilities are included in Current portion of long-term debt on the consolidated balance sheet.
(c) Current operating lease liabilities are included in Accrued expenses and other liabilities on the consolidated balance sheet.
(d) Long-term finance lease liabilities are included in Long-term debt on the consolidated balance sheet.

The lease cost for operating and finance leases recognized in the consolidated statement of operations for the three and six months ended June 25, 2022 and June 26, 2021 were as follows:
22


Three months endedSix months ended
(in thousands)
June 25, 2022June 26, 2021June 25, 2022June 26, 2021
Finance lease expense:
Amortization of right-of-use assets$1,658 $365 $2,392 $717 
Interest on lease liabilities484 220 861 436 
Operating lease expense32,216 28,669 63,208 56,480 
Short-term lease expense487 593 977 1,235 
Variable lease expense433 226 786 487 
Total lease expense$35,278 $30,073 $68,224 $59,355 
The Company also subleases certain facilities to franchisees as a component of supply and other revenue on the consolidated statements of operations. The Company recognized $2 million, $4 million, $2 million, and $4 million in sublease revenue in the three and six months ended June 25, 2022 and June 26, 2021, respectively, as a component of Supply and other revenue on the consolidated statements of operations.

During the six months ended June 25, 2022, the Company sold 10 car wash and six maintenance properties in various locations throughout the United States for a total of $55 million, resulting in a net gain of $7 million. Concurrent with the closing of these sales, the Company entered into various operating lease agreements pursuant to which the Company leased back the properties. These lease agreements have terms of 15 years to 20 years and provide the Company with the option to extend the lease for up to an additional 20 years to 25 years. The Company does not include option periods in its determination of the lease term unless renewals are deemed reasonably certain to be exercised. The Company recorded an operating lease right-of-use asset and operating lease liability of $47 million and $47 million, respectively, related to these lease arrangements as of June 25, 2022.

Supplemental cash flow information related to the Company’s lease arrangements for the six months ended June 25, 2022 and June 26, 2021, respectively, was as follows:
Six months ended
(in thousands)June 25, 2022June 26, 2021
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows used in operating leases$57,330 $52,273 
     Operating cash flows used in finance leases785 436 
     Financing cash flows used in finance leases829 641 
Right-of-use assets obtained in exchange for lease obligations:
     Operating leases$68,251 $54,235 
     Finance leases4,584 623 
Note 9 — Equity-based Compensation

The Company granted new awards during the three months ended June 25, 2022, including 14,670 restricted stock units (“RSUs”) and 29,390 performance stock units (“PSUs”). The Company granted new awards during the six months ended June 25, 2022, including 254,474 restricted stock units (“RSUs”) and 475,738 performance stock units (“PSUs”).

Awards are eligible to vest provided that the employee remains in continuous service on each vesting date. The RSUs vest ratably in three installments on each of the first three anniversaries of the grant date. The PSUs vest after a three-year performance period. The number of PSUs that vest is contingent on achieving certain performance goals, one being a market condition and the other being a performance condition. The number of PSU shares that vest may range from zero to 200% of the original grant, based upon the level of performance. The awards are considered probable of meeting vesting requirements, and therefore, the Company has started recognizing expense.

23


The fair value of the RSUs, performance based PSUs and market based PSUs granted during the three months ended June 25, 2022 were less than $1 million each. The fair value of the total RSUs, performance based PSUs and market based PSUs granted during the six months ended June 25, 2022 were $7 million, $8 million and $7 million, respectively. The Company based the fair value of the RSUs and performance based PSUs on the Company’s stock price on the grant date. The Company determined the fair value of the market based PSUs granted during the three months ended June 25, 2022 by using a Monte Carlo simulation, using the following assumptions: (i) an expected term of 3 years, (ii) an expected volatility of 43.90%, (iii) a correlation of the S&P Mid-cap Index peer group of 59.50%, and (iv) no expected dividend. The Company determined the fair value of the market based PSUs granted during the three months ended March 26, 2022 by using a Monte Carlo simulation, using the following assumptions: (i) an expected term of 3 years, (ii) an expected volatility of 40.90%, (iii) a correlation of the S&P Mid-cap Index peer group of 50.70%, and (iv) no expected dividend.

The Company recorded share-based compensation expense during the three and six months ended June 25, 2022 and June 26, 2021 within selling, general and administrative expenses on the consolidated statements of operations as follows:
Three months endedSix months ended
(in thousands)
June 25, 2022June 26, 2021June 25, 2022June 26, 2021
Share-based compensation expense$4,000 $1,000 $7,000 $2,000 

24


Note 10—Earnings (loss) per share

The Company calculates basic and diluted earnings (loss) per share using the two-class method. The following table sets forth the computation of basic and diluted earnings (loss) per share attributable to common shareholders:
Three months endedSix months ended
(in thousands, except per share amounts)
June 25, 2022June 26, 2021June 25, 2022June 26, 2021
Basic earnings (loss) per share:
Net income (loss) attributable to Driven Brands Holdings Inc.$(57,044)35,204 (22,601)15,265 
Less: Net income (loss) attributable to participating securities, basic(1,210)755 (481)337 
Net income (loss) after participating securities, basic(55,834)34,449 (22,120)14,928 
Weighted-average common shares outstanding162,781 162,626 162,772 158,727 
Basic earnings (loss) per share$(0.34)$0.21 $(0.14)$0.09 
Three months endedSix months ended
(in thousands, except per share amounts)
June 25, 2022June 26, 2021June 25, 2022June 26, 2021
Diluted earnings (loss) per share:
Net income (loss) attributable to Driven Brands Holdings Inc.$(57,044)$35,204 (22,601)15,265 
Less: Net income attributable to participating securities, diluted (1,080)673 (430)300 
Net income after participating securities, diluted$(55,964)$34,531 (22,171)14,965 
Weighted-average common shares outstanding162,781 162,626 162,772 158,727 
Dilutive effect of share-based awards— 3,886 — 3,544 
Weighted-average common shares outstanding, as adjusted162,781 166,512 162,772 162,271 
Diluted earnings (loss) per share$(0.34)$0.21 $(0.14)$0.09 

Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to Driven Brands Holdings Inc. by the weighted-average number of common shares outstanding for the period. Because the Company reported a net loss for the three and six months ended June 25, 2022, the number of shares used to calculate diluted loss per share is the same as the number of shares used to calculate basic loss per share because the potentially dilutive shares, if any, would have been antidilutive if included. The dilutive effect of share-based awards excluded from the above table was 3,878,231 and 3,919,991 for the three and six months ended June 25, 2022, respectively. Also, the Company’s participating securities are related to certain restricted stock awards issued to Section 16 officers which include non-forfeitable dividend rights.

The Company has 4,739,895 shares of performance awards that are contingent on performance conditions which have not yet been met, and therefore have been excluded from the computation of weighted average shares for the three and six months ended June 25, 2022.

The following securities were not included in the computation of diluted shares outstanding because the effect would be antidilutive:
Three months endedSix months ended
Number of securities (in thousands)
June 25, 2022June 26, 2021June 25, 2022June 26, 2021
Restricted stock awards— — — — 
Restricted stock units— — — — 
Performance stock units— 127 — 127 
Total— 127 — 127 
25


Note 11—Income Taxes

The Company’s tax provision is comprised of the most recent estimated annual effective tax rate applied to year-to-date ordinary income before taxes. The tax impacts of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are recorded discretely in the interim period in which they occur.

Income tax expense (benefit) was $(19) million and $17 million for the three months ended June 25, 2022 and June 26, 2021, respectively. The effective income tax rate for the three months ended June 25, 2022 was 24.8% compared to 32.6% for the three months ended June 26, 2021. The decrease in income tax expense and tax rate was primarily driven by a favorable discrete tax adjustment related to the trade name impairment charge for the three months ended June 25, 2022.

Income tax expense (benefit) was $(6) million and $13 million for the six months ended June 25, 2022 and June 26, 2021, respectively. The effective income tax rate for the six months ended June 25, 2022 was 20.6% compared to 45.2% for the six months ended June 26, 2021. The net decrease in income tax expense and tax rate was primarily driven by a favorable discrete tax adjustment related to the trade name impairment charge for the six months ended June 25, 2022, and favorable discrete tax adjustments related to non-deductible loss on debt extinguishment as well as tax deductible costs incurred related to the initial public offering for the six months ended June 26, 2021.
Note 12—Commitments and Contingencies

The Company is subject to various lawsuits, administrative proceedings, audits, and claims arising in the ordinary course of business. Some of these lawsuits purport to be class actions and/or seek substantial damages. The Company is required to record an accrual for litigation loss contingencies that are both probable and reasonably estimable. Legal fees and expenses associated with the defense of litigation are expensed as incurred.

While the Company does not presently believe that any of the legal proceedings to which it is currently a party will ultimately have a material adverse impact, there can be no assurance that the Company will prevail in all of the proceedings or that the Company will not incur material losses from them.
Note 13—Subsequent Events

From June 26, 2022 through August 4, 2022, the Company acquired Jack Morris Auto Glass and K & K Glass for approximately $54 million and $40 million, respectively. The acquisition of these 18 glass sites further expand the Company’s U.S. auto glass offering. The Company also acquired 4 car wash sites including Speedy Shine Express Car Wash and Clearwater Car Wash for approximately $34 million and $24 million, respectively. The initial accounting for these acquisitions is incomplete had as the valuation of the assets acquired and liabilities assumed and residual goodwill has not yet been performed.
From June 26 through August 4, 2022, the Company drew $149 million on the Driven Holdings Revolving Credit Facility primarily to fund acquisitions.


26


MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion and analysis for Driven Brands Holdings Inc. and Subsidiaries (“Driven Brands”, “the Company”, “we”, “us” or “our”) should be read in conjunction with our consolidated financial statements and the related notes to our consolidated financial statements included elsewhere in this quarterly report. We operate on a 52/53-week fiscal year, which ends on the last Saturday in December. The three months ended June 25, 2022 and June 26, 2021 were both 13 week periods. The six months ended June 25, 2022 and June 26, 2021 were both 26 week periods..
Overview of Operations
Driven Brands is the largest automotive services company in North America with a growing and highly-franchised base
of more than 4,600 locations across 49 U.S. states and 14 other countries. Our scaled, diversified platform fulfills an extensive range of core consumer and commercial automotive needs, including paint, collision, glass, repair, car wash, oil change and maintenance. Driven Brands provides a breadth of high quality and high-frequency services to a wide range of customers, who rely on their cars in all economic environments to get to work and in many other aspects of their daily lives. Our asset-light business model has generated consistent recurring revenue and strong operating margins with limited maintenance capital expenditures, which has resulted in significant cash flow generation and capital-efficient growth.

We have a diversified portfolio of highly-recognized brands, including Take 5 Oil Change®, Meineke Car Care Centers®, MAACO®, CARSTAR®, and 1-800-Radiator & A/C® that compete in the large, growing, recession-resistant and highly-fragmented automotive care industry. Our U.S. industry is underpinned by a large, growing population of more than 284 million vehicles in operation, and is expected to continue its long-term growth trajectory given (i) long-term increases in annual miles traveled; (ii) consumers more frequently outsourcing automotive services due to vehicle complexity; (iii) increases in average repair costs and (iv) average age of the car on the road getting older. We serve a diverse mix of customers, with sales coming from retail customers and commercial customers such as fleet operators and insurance carriers. Our success is driven in large part by our mutually beneficial relationships with more than 2,800 individual franchisees and independent operators.

Our organic growth is complemented by a consistent and repeatable M&A strategy, having completed more than 100 acquisitions since 2015. Notably, in August 2020 we acquired ICWG, the world’s largest conveyor car wash company by location count with more than 900 locations across 14 countries, demonstrating our continued ability to pursue and execute upon scalable and highly strategic acquisitions. We further complemented our expansion into the car wash segment by acquiring 112 locations in 2021 and 17 additional car wash locations during the first half of 2022. We grew our glass service offerings in the United States through four glass business acquisitions in the first half of 2022 (115 sites in aggregate).
Significant Factors Impacting Financial Results
As noted above, we completed the acquisition of 112 car wash sites during fiscal year 2021 and 17 additional car wash locations during the first half of 2022, which are included in our Car Wash segment. The acquisitions of AGN, All Star Glass and several other glass businesses during the first half of 2022, which are included in our Paint, Collision & Glass segment, represented 115 sites and expands our glass operations into the U.S. market. These acquisitions were a core driver of growth in our key performance indicators and our financial results for the three and six months ended June 25, 2022, as compared to the three and six months ended June 26, 2021. For additional information on our acquisitions, see Note 3 to the consolidated financial statements.

We recognized a net loss of $(57) million, or $(0.34) per diluted share for the three months ended June 25, 2022, compared to net income of $35 million, or $0.21 per diluted share, for the three months ended June 26, 2021. This decrease was primarily due to a $125 million non-cash impairment charge related to the change in intended use of certain existing Car Wash trade names migrating them to the Take 5 brand and a $19 million increase in net loss on foreign currency transactions. This was partially offset by an increase in revenue, primarily related to four U.S. glass business acquisitions (115 sites) as well as a number of car wash acquisitions in the second half of 2021 and the first half of 2022, organic growth from store count growth and same store sales growth, partially offset by higher operating, interest and income tax expenses associated with this growth.
Adjusted Net Income was $60 million for the three months ended June 25, 2022, an increase of $18 million, compared to $42 million for the three months ended June 26, 2021. The increase in Adjusted Net Income was primarily due to an increase in revenue, primarily related to acquisitions in our glass and car wash businesses, as well as organic growth from store growth and same store sales growth, partially offset by an increase in operating, interest and income tax expenses associated with this growth. See Note 3 to our consolidated financial statements for additional information regarding acquisitions.
27


Adjusted EBITDA was $135 million for the three months ended June 25, 2022, an increase of $35 million, compared to $101 million for the three months ended June 26, 2021. The increase in Adjusted EBITDA was primarily due to an increase in revenue, primarily related to acquisitions in our glass and car wash businesses, as well as organic growth from store growth and same store sales growth, partially offset by an increase in operating expenses associated with this growth.
We recognized a net loss of $(23) million, or $(0.14) per diluted share for the six months ended June 25, 2022, compared to net income of $15 million, or $0.09 per diluted share, for the six months ended June 26, 2021. This decrease was primarily due to a $125 million non-cash impairment charge related to the change in intended use of certain existing Car Wash trade names migrating them to the Take 5 brand and a $9 million increase in net loss on foreign currency transactions. This was partially offset by an increase in revenue, primarily related to four U.S. glass business acquisitions (115 sites) as well as a number of car wash acquisitions in 2021 and the first quarter of 2022, organic growth from store growth and same store sales growth, partially offset by higher operating, interest and income tax expenses associated with this growth. Also, for the six months ended June 26, 2021 there was $45 million in debt extinguishment costs in related to the repayment of the ICWG debt.
Adjusted Net Income was $107 million for the six months ended June 25, 2022, an increase of $35 million, compared to $72 million for the six months ended June 26, 2021. The increase in Adjusted Net Income was primarily due to an increase in revenue, primarily related to acquisitions andin our glass and car wash businesses, as well as organic growth from store growth and same store sales growth, partially offset by an increase in an increase in operating, interest and income tax expenses associated with this growth. See Note 3 to our consolidated financial statements for additional information regarding acquisitions.
Adjusted EBITDA was $254 million for the six months ended June 25, 2022, an increase of $75 million, compared to $179 million for the six months ended June 26, 2021. The increase in Adjusted EBITDA was primarily due to an increase in revenue, primarily related to acquisitions in our glass and car wash businesses, as well as organic growth from store growth and same store sales growth, partially offset by an increase in operating expenses associated with this growth.
Adjusted Net Income and Adjusted EBITDA are non-GAAP financial measures of performance. For a discussion of our use of these non-GAAP measures and a reconciliation from net income (loss) to Adjusted Net Income and Adjusted EBITDA, see “Reconciliation of Non-GAAP Financial Information”.

Strong operational execution, improving consumer and driving trends and acquisitions led to total system-wide sales of $1.4 billion and $2.7 billion during the three and six months ended June 25, 2022, an increase of 22% and 24% from the three and six months ended June 26, 2021.
Key Performance Indicators

Key measures that we use in assessing our business and evaluating our segments include the following:
System-wide sales. System-wide sales represent the total of net sales for our franchised, independently-operated and company-operated stores. This measure allows management to better assess the total size and health of each segment, our overall store performance and the strength of our market position relative to competitors. Sales at franchised stores are not included as revenue in our results from operations, but rather, we include franchise royalties and fees that are derived from sales at franchised stores. Franchise royalties and fees revenue represented 9% and 10% of our total revenue for the three months ended June 25, 2022 and June 26, 2021, respectively and 8% and 10% for the six months ended June 25, 2022 and June 26, 2021, respectively. For the three months ended June 25, 2022 and June 26, 2021, approximately 94% and 96% respectively, of franchise royalties and fees revenue is attributable to royalties, with the remaining balance attributable to license and development fees. For the six months ended June 25, 2022 and June 26, 2021, approximately 94% and 95%, respectively, of franchise royalties and fees revenue is attributable to royalties, with the remaining balance attributable to license and development fees. Revenue from company-operated stores represented 64% and 55% of total revenue for the three months ended June 25, 2022 and June 26, 2021, respectively, and 63% and 55% for the six months ended June 25, 2022 and June 26, 2021, respectively. Revenue from independently-operated stores represented 11% and 15% of our total revenue for the three months ended June 25, 2022 and June 26, 2021, respectively. Revenue from independently-operated stores represented 12% and 16% of our total revenue for the six months ended June 25, 2022 and June 26, 2021, respectively.
Store count. Store count reflects the number of franchised, independently-operated and company-operated stores open at the end of the reporting period. Management reviews the number of new, closed, acquired and divested stores to assess net unit growth and drivers of trends in system-wide sales, franchise royalties and fees revenue, company-operated store sales and independently-operated store sales.
28


Same store sales. Same store sales reflect the change in sales year-over-year for the same store base. We define the same store base to include all franchised, independently-operated and company-operated stores open for comparable weeks during the given fiscal period in both the current and prior year, which may be different from how others define similar terms. This measure highlights the performance of existing stores, while excluding the impact of new store openings and closures, and acquisitions and divestitures.
Segment Adjusted EBITDA. We define Segment Adjusted EBITDA as earnings before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, straight-line rent, equity compensation, loss on debt extinguishment, foreign currency transaction related gains or losses, store opening costs, and certain non-recurring and non-core, infrequent or unusual charges. Segment Adjusted EBITDA is a supplemental measure of operating performance of our segments and may not be comparable to similar measures reported by other companies. Segment Adjusted EBITDA is a performance metric utilized by our Chief Operating Decision Maker to allocate resources to and assess performance of our segments. Refer to Note 5 in our consolidated financial statements for a reconciliation of income before taxes to Segment Adjusted EBITDA for the three and six months ended June 25, 2022 and June 26, 2021.

29


The following table sets forth our key performance indicators for the three and six months ended June 25, 2022 and June 26, 2021:
Three months endedSix months ended
(in thousands, except store count or as otherwise noted)June 25, 2022June 26, 2021June 25, 2022June 26, 2021
System-Wide Sales
System-Wide Sales by Segment:
Maintenance$399,153 $321,190 $756,265 $599,111 
Car Wash156,738 122,083 314,322 235,295 
Paint, Collision & Glass724,736 597,578 1,383,703 1,140,011 
Platform Services131,320 117,473 222,114 186,830 
     Total$1,411,947 $1,158,324 $2,676,404 $2,161,247 
System-Wide Sales by Business Model:
Franchised Stores$1,033,049 $895,652 $1,941,944 $1,658,383 
Company-Operated Stores323,956 206,293 616,429 390,322 
Independently-Operated Stores54,942 56,379 118,031 112,542 
     Total $1,411,947 $1,158,324 $2,676,404 $2,161,247 
Store Count
Store Count by Segment:
Maintenance1,559 1,485 1,559 1,485 
Car Wash1,074 979 1,074 979 
Paint, Collision & Glass1,771 1,655 1,771 1,655 
Platform Services202 200 202 200 
     Total4,606 4,319 4,606 4,319 
Store Count by Business Model:
Franchised Stores2,813 2,802 2,813 2,802 
Company-Operated Stores1,075 784 1,075 784 
Independently-Operated Stores718 733 718 733 
     Total4,606 4,319 4,606 4,319 
Same Store Sales %
Maintenance15.0 %41.9 %16.9 %28.9 %
Car Wash(2.7 %)N/A1.8 %N/A
Paint, Collision & Glass16.1 %37.3 %16.6 %12.3 %
Platform Services11.8 %37.2 %18.9 %31.1 %
     Total13.2 %38.7 %15.2 %19.2 %
Segment Adjusted EBITDA
Maintenance$64,076 $44,561 $116,561 $85,001 
Car Wash53,677 43,069 109,397 77,224 
Paint, Collision & Glass32,916 21,856 61,928 39,495 
Platform Services20,541 17,602 34,706 28,610 
Reconciliation of Non-GAAP Financial Information
To supplement our consolidated financial statements prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures throughout this quarterly report, as described further below, to provide investors with additional useful information about our financial performance, to enhance the overall understanding of our past performance and future prospects and to allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making.

30


Non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. As a result, non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, our consolidated financial statements prepared and presented in accordance with GAAP.

Adjusted Net Income/Adjusted Earnings per Share. We define Adjusted Net Income as net income calculated in accordance with GAAP, adjusted for acquisition-related costs, straight-line rent, equity compensation, loss on debt extinguishment and certain non-recurring, non-core, infrequent or unusual charges, amortization related to acquired intangible assets and the tax effect of the adjustments. Adjusted Earnings Per Share is calculated by dividing Adjusted Net Income by the weighted average shares outstanding. Management believes this non-GAAP financial measure is useful because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions.

The following table provides a reconciliation of Net Income (Loss) to Adjusted Net Income and Adjusted Earnings per Share:

Adjusted Net Income/Adjusted Earnings per Share
Three months endedSix months ended
(in thousands, except per share data)June 25, 2022June 26, 2021June 25, 2022June 26, 2021
Net income (loss)$(57,044)$35,168 $(22,616)$15,235 
Acquisition related costs(a)
3,338 389 7,656 2,038 
Non-core items and project costs, net(b)
1,719 2,522 2,585 2,553 
Straight-line rent adjustment(c)
4,217 3,358 8,310 5,843 
Equity-based compensation expense(d)
4,233 1,028 6,851 2,011 
Foreign currency transaction (gain) loss, net(e)
13,937 (5,229)14,908 5,282 
Trade name impairment(f)
125,450 — 125,450 — 
Asset sale leaseback (gain) loss, impairment and closed store expenses(g)
(5,938)3,478 (6,062)2,692 
Loss on debt extinguishment(h)
— 78 — 45,576 
Amortization related to acquired intangible assets(i)
5,930 5,558 11,072 9,210 
Provision for uncertain tax positions(j)
— — 76 — 
Adjusted net income before tax impact of adjustments95,842 46,350 148,230 90,440 
Tax impact of adjustments(k)
(36,184)(4,441)(40,796)(18,082)
Adjusted net income59,658 41,909 107,434 72,358 
Net income (loss) attributable to non-controlling interest— (36)(15)(30)
Adjusted net income attributable to Driven Brands Holdings Inc.$59,658 $41,945 $107,449 $72,388 
Adjusted earnings per share
Basic$0.36 $0.25 $0.65 $0.45 
Diluted$0.35 $0.25 $0.63 $0.44 
Weighted average shares outstanding
Basic162,781 162,626 162,772 158,727 
Diluted166,659 166,512 166,692 162,271 
31


Adjusted EBITDA. We define Adjusted EBITDA as earnings before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, straight-line rent, equity compensation, loss on debt extinguishment and certain non-recurring, non-core, infrequent or unusual charges. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation. Management believes this non-GAAP financial measure is useful because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions.

The following table provides a reconciliation of Net income to Adjusted EBITDA:
Adjusted EBITDA
Three months endedSix months ended
June 25, 2022June 26, 2021June 25, 2022June 26, 2021
Net income (loss)$(57,044)$35,168 $(22,616)$15,235 
Income tax expense(18,848)17,011 (5,880)12,565 
Interest expense, net26,270 16,612 51,623 34,702 
Depreciation and amortization38,087 26,423 71,110 50,275 
EBITDA(11,535)95,214 94,237 112,777 
Acquisition related costs(a)
3,338 389 7,656 2,038 
Non-core items and project costs, net(b)
1,719 2,522 2,585 2,553 
Straight-line rent adjustment(c)
4,217 3,358 8,310 5,843 
Equity-based compensation expense(d)
4,233 1,028 6,851 2,011 
Foreign currency transaction (gain) loss, net(e)
13,937 (5,229)14,908 5,282 
Trade name impairment(f)
125,450 — 125,450 — 
Asset impairment and closed store expenses(g)
(5,938)3,478 (6,062)2,692 
Loss on debt extinguishment(h)
— 78 — 45,576 
Adjusted EBITDA$135,421 $100,838 $253,935 $178,772 
a.Consists of acquisition costs as reflected within the consolidated statements of operations, including legal, consulting and other fees and expenses incurred in connection with acquisitions completed during the applicable period, as well as inventory rationalization expenses incurred in connection with acquisitions. We expect to incur similar costs in connection with other acquisitions in the future and, under GAAP, such costs relating to acquisitions are expensed as incurred and not capitalized.
b.Consists of discrete items and project costs, including (i) third-party consulting and professional fees associated with strategic transformation initiatives and (ii) other miscellaneous expenses, including non-capitalizable expenses relating to the Company’s initial public offering and other strategic transactions.
c.Consists of the non-cash portion of rent expense, which reflects the extent to which our straight-line rent expense recognized under GAAP exceeds or is less than our cash rent payments.
d.Represents non-cash equity-based compensation expense.
e.Represents foreign currency transaction gains/losses, net that primarily related to the remeasurement of our intercompany loans. These losses are offset by unrealized gains/losses on remeasurement of cross currency swaps and forward contracts.
f.Relates to an impairment of certain Car Wash trade names for the Company elected to discontinue their use.
g.Relates to (gain) loss on sale leasebacks, impairment of certain fixed assets and operating lease right-of-use assets related to closed locations. Also, represents lease exit costs and other costs associated with stores that were closed prior to the respective lease termination dates.
h.Represents the write-off of unamortized discount associated with early termination of debt.
i.Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statements of operations.
j.Represents uncertain tax positions recorded for tax positions inclusive of interest and penalties.
k.Represents the tax impact of adjustments associated with the reconciling items between net income and Adjusted Net Income, excluding the provision for uncertain tax positions and valuation allowance for certain deferred taxes. To determine the tax impact of the deductible reconciling items, we utilized statutory income tax rates ranging from 9% to 36%, depending upon the tax attributes of each adjustment and the applicable jurisdiction.
32


Results of Operations for the three months ended June 25, 2022 compared to the three months ended June 26, 2021
To facilitate review of our results of operations, the following tables set forth our financial results for the periods indicated. All information is derived from the Consolidated Statements of Operations.
Revenue
Three months ended
(in thousands)
June 25, 2022June 26, 2021
Change
Franchise royalties and fees$44,850 $37,873 $6,977 18 %
Company-operated store sales323,885 206,198 117,687 57 %
Independently-operated store sales54,942 56,379 (1,437)(3)%
Advertising fund contributions22,091 19,648 2,443 12 %
Supply and other revenue62,856 54,730 8,126 15 %
    Total revenue$508,624 $374,828 $133,796 36 %
Franchise Royalties and Fees
Franchise royalties and fees increased $7 million primarily due to same store sales growth and benefited from a net increase of 11 franchise stores. Franchise system-wide sales increased by $137 million or 15%.

Company-operated Store Sales
Company-operated store sales increased $118 million of which $43 million, $36 million, and $39 million related to the Maintenance, Car Wash and Paint, Collision and Glass segments, respectively. The sales increase in Maintenance segment was primarily due to same store sales growth and 54 net new stores. The sales increase in Paint, Collision and Glass segment was primarily due to same store sales growth as well as net store growth from acquisitions. The acquisition of four glass businesses, (which had 115 stores in aggregate) in the first half of 2022 and the acquisition of 10 CARSTAR franchise sites in the fourth quarter of 2021 generated $30 million and $7 million of sales for three months ended June 25, 2022, respectively. The sales increase in Car Wash segment was primarily due to the addition of 110 net new company-operated stores primarily from a number of acquisitions in the second half of 2021 and first quarter of 2022 and new greenfield store openings, which was partially offset by a decrease in same store sales. In aggregate, the Company added 291 company-operated stores year-over-year.

Independently-operated Store Sales
Independently-operated store sales (comprised entirely of the international car wash locations) decreased by $(1) million as the benefit of increased volume was more than offset by unfavorable currency translation.

Advertising Fund Contributions
Advertising fund contributions increased by $2 million primarily due to an increase in franchise system-wide sales of approximately $137 million or 15% from same store sales growth and additional net new franchise stores. Our franchise agreements typically require the franchisee to pay continuing advertising fund fees based on a percentage of franchisee gross sales.

Supply and Other Revenue
Supply and other revenue increased $8 million primarily from growth in product and service revenue within the Platform Services, Paint, Collision and Glass and Maintenance segments due to an increase in system wide sales.

33


Operating Expenses
Three months ended
(in thousands)
June 25, 2022June 26, 2021
Change
Company-operated store expenses$192,939 $123,820 $69,119 56 %
Independently-operated store expenses28,843 30,792 (1,949)(6)%
Advertising fund expenses22,091 19,648 2,443 12 %
Supply and other expenses35,800 29,598 6,202 21 %
Selling, general, and administrative expenses
97,977 77,935 20,042 26 %
Acquisition costs3,338 389 2,949 758 %
Store opening costs666 405 261 64 %
Depreciation and amortization38,087 26,423 11,664 44 %
Trade name impairment125,450 — 125,450 NM
Asset impairment charges and lease terminations(882)2,178 (3,060)(140)%
    Total operating expenses$544,309 $311,188 $233,121 75 %
Company-operated Store Expenses
Company-operated store expenses increased $69 million. The increase in expenses is commensurate with the increase in Company-operated store sales.

Independently-operated Store Expenses
Independently-operated store expenses, which are entirely related to the Car Wash segment, decreased $(2) million due to a decrease in Independently-operated store sales which were negatively impacted by unfavorable foreign currency translation.

Advertising Fund Expenses
The $2 million increase in advertising fund expenses represents a commensurate increase to advertising fund contributions during the period. Advertising fund expenses generally trend consistent with advertising fund contributions.

Supply and Other Expenses
Supply and other expenses increased $6 million due to an increase in Supply and other revenue as well as higher oil and freight costs incurred in the Platform Services segment.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $20 million primarily due to an increase in employee compensation and other employee-related expenses resulting from increased headcount and acquisitions as well as an increase in infrastructure costs, travel costs and legal and professional fees, which were offset by an increase in gain on sale of property primarily related to real estate sale leasebacks.

Acquisition Costs
Acquisition costs increased by $3 million. The three months ended June 25, 2022 included costs associated with three glass acquisitions as well as several tuck-in car wash acquisitions while the three months ended June 26, 2021 included costs associated with several car wash tuck-in acquisitions.
Store Opening Costs
Store opening costs increased slightly due to an increase in company-operated new store openings and conversions of acquired stores to the Take 5 Quick Lube brand. There were eleven new company-operated store openings and four Take 5 store conversion in the three months ended June 25, 2022, compared to six company-operated store openings and one Take 5 store conversion during the three months ended June 26, 2021.
34


Depreciation and Amortization
Depreciation and amortization expense increased $12 million due to additional fixed assets and finite-lived intangible assets recognized in conjunction with recent acquisitions and higher current period capital expenditures, primarily car wash new site development.
Trade Name Impairment
The Company acquired a number of car wash businesses over the past two years and determined a fair value of each of the associated intangibles including trademarks and customer relationships. During the three months ended June 25, 2022, the Company made the strategic decision to rebrand the majority of its U.S. car wash locations to operate under the name “Take 5 Car Wash”, and therefore are discontinuing the use of certain Car Wash trade names that had indefinite lives. As a result, the Company recognized a $125 million non-cash impairment charge

Asset Impairment Charges and Lease Terminations
Asset impairment charges (benefits) were approximately $(1) million for the three months ended June 25, 2022 compared to $2 million for three months ended June 26, 2021, which consisted of a favorable lease settlement in the current period compared to the impairment related to certain property and equipment and operating lease right-of-use assets at closed locations in the prior year period.

Interest Expense, Net
Three months ended
(in thousands)
June 25, 2022June 26, 2021Change
Interest expense, net$26,270 $16,612 $9,658 58 %
Interest expense, net increased $10 million as a result of higher average debt outstanding which was partially offset by a lower average interest rate in the current period. The Company issued debt in the fourth quarter of 2021 to fund the AGN and other acquisitions and for general corporate purposes.
Loss (Gain) on Foreign Currency Transactions, Net
Three months ended
June 25, 2022June 26, 2021Change
Loss (gain) on foreign currency transactions, net$13,937 $(5,229)$19,166 (367)%
The loss on foreign currency transactions for the three months ended June 25, 2022 was comprised of a $16 million net remeasurement loss on our non U.S. dollar entities including third party long-term debt and intercompany notes as well as a $2 million unrealized gain incurred on foreign currency hedges that are not designated as hedging instruments. The loss on foreign currency transactions for the three months ended June 26, 2021 was comprised of a $7 million net remeasurement gain on our foreign third party long-term debt and foreign intercompany notes partially offset by $2 million of unrealized translation losses on other foreign currency hedges.

Loss on Debt Extinguishment
Three months ended
(in thousands)
June 25, 2022June 26, 2021Change
Loss on debt extinguishment$— $78 $(78)100 %

The loss on debt extinguishment for the three months ended June 26, 2021 was due to the write-off of unamortized discount associated with the settlement of the Car Wash Senior Credit Facilities, which were primarily repaid during the three months ended March 27, 2021 with proceeds from the IPO and cash on hand.

35


Income Tax Expense
Three months ended
(in thousands)
June 25, 2022June 26, 2021Change
Income tax expense (benefit)$(18,848)$17,011 $(35,859)(211)%

Income tax expense decreased by $36 million. The effective income tax rate for the three months ended June 25, 2022 was 24.8% compared to 32.6% for the three months ended June 26, 2021. The decrease in income tax expense and tax rate was primarily driven by a favorable discrete tax adjustment related to the $125 million trade name impairment charge for the three months ended June 25, 2022.
Results of Operations for the six months ended June 25, 2022 compared to the six months ended June 26, 2021
To facilitate review of our results of operations, the following tables set forth our financial results for the periods indicated. All information is derived from the consolidated statements of operations.
Revenue
Six months ended
(in thousands)
June 25, 2022June 26, 2021
Change
Franchise royalties and fees$82,738 $68,287 $14,451 21 %
Company-operated store sales616,276 390,053 226,223 58 %
Independently-operated store sales118,031 112,542 5,489 %
Advertising fund contributions41,789 36,903 4,886 13 %
Supply and other revenue118,113 96,462 21,651 22 %
    Total revenue$976,947 $704,247 $272,700 39 %
Franchise Royalties and Fees
Franchise royalties and fees increased $14 million primarily due to same store sales growth as well as additional 11 franchised stores. Franchised system-wide sales increased $284 million or 17%.

Company-operated Store Sales
Company-operated store sales increased $226 million of which $85 million, $74 million and $67 million related to the Maintenance, Car Wash and Paint, Collision and Glass segments, respectively. Company-operated store sales increased primarily due to the addition of 291 company-operated stores year-over-year primarily from the acquisitions of four glass businesses (which had 115 stores in aggregate), a number of car wash tuck in acquisitions and 10 Carstar franchise sites. The acquisition of four glass businesses in the first half of 2022 and the acquisition of 10 Carstar franchise sites in the fourth quarter of 2021 generated $50 million and $14 million of sales, respectively, for the six months ended June 25, 2022. Company-operated store sales also increased due to same store sales growth.

Independently-Operated Store Sales
Independently-operated store sales (comprised entirely of the international car wash locations) increased $5 million as the benefit of higher volume (same store sales growth) was partially offset by unfavorable currency translation.

36


Advertising Fund Contributions
Advertising fund contributions increased by $5 million primarily due to a $284 million, or 17%, increase in franchised system-wide sales from same store sales growth and additional net new franchise stores. Our franchise agreements typically require the franchisee to pay continuing advertising fund fees based on a percentage of franchisee gross sales.

Supply and Other Revenue
Supply and other revenue increased $22 million primarily due to growth in product and service revenue within the Platform Services, Paint, Collision and Glass and Maintenance segments due to an increase in system wide sales.

Operating Expenses
Six months ended
(in thousands)
June 25, 2022June 26, 2021
Change
Company-operated store expenses$370,806 $236,575 $134,231 57 %
Independently-operated store expenses62,142 61,900 242 — %
Advertising fund expenses41,789 36,903 4,886 13 %
Supply and other expenses68,574 52,087 16,487 32 %
Selling, general, and administrative expenses
190,197 146,984 43,213 29 %
Acquisition costs7,656 2,038 5,618 276 %
Store opening costs1,172 694 478 69 %
Depreciation and amortization71,110 50,275 20,835 41 %
Trade name impairment charges
125,450 — 125,450 NM
Asset impairment charges16 3,431 (3,415)(100)%
    Total operating expenses$938,912 $590,887 $348,025 59 %
Company-Operated Store Expenses
Company-operated store expenses increased $134 million which is commensurate with the increase in Company-operated store sales from the addition of new stores, acquisitions and same store sales growth. Company-operated store expenses continue to increase at a slower rate than company-operated store sales due to effective cost management and operational leverage.

Independently-Operated Store Expenses
Independently-operated store expenses increased, but at a slower rate than Independently-operated store sales due to effective cost management and operational leverage.
Advertising Fund Expenses
The $5 million increase in advertising fund expenses represents a commensurate increase to advertising fund contributions during the period. Advertising fund expenses generally trend consistent with advertising fund contributions.

Supply and Other Expenses
Supply and other expenses increased $16 million due to an increase in Supply and other revenue as well as higher oil and freight costs incurred in the Platform Services segment.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $43 million due to an increase in employee compensation and other employee-related expense from increased headcount and acquisitions as well as an increase in infrastructure costs, travel costs, legal and professional fees and marketing expenses, which were offset by an increase in gain on sale of property primarily related to real estate sale leasebacks.
37


Acquisition Costs
Acquisition costs decreased $6 million. The six months ended June 25, 2022 included costs associated with the four glass business acquisition and a number of car wash tuck-in acquisitions while the six months ended June 26, 2021 included costs associated with car wash tuck-in acquisitions.
Store Opening Costs
Store opening costs increased slightly due to an increase in company-operated new store openings and conversions of acquired stores to the Take 5 Quick Lube brand. There were seventeen new company-operated store openings and five Take 5 Quick Lube store conversions in the six months ended June 25, 2022, compared to ten company-operated store openings and one Take 5 Quick Lube store conversions during the six months ended June 26, 2021.

Depreciation and Amortization
Depreciation and amortization expense increased $21 million due to additional property and equipment and definite-lived intangible assets recognized in conjunction with recent acquisitions and higher current period capital expenditures.

Trade Name Impairment Charges
The Company acquired a number of car wash businesses over the past two years and determined a fair value of each of the associated intangibles including trademarks and customer relationships. During the six months ended June 25, 2022, the Company made the strategic decision to rebrand the majority of its U.S. car wash locations to operate under the name “Take 5 Car Wash”, and therefore are discontinuing the use of certain Car Wash trade names that had indefinite lives. As a result, the Company recognized a $125 million non-cash impairment charge.

Asset Impairment Charges
Asset impairment charges were approximately $— million for the six months ended June 25, 2022 compared to $2 million for the six months ended June 26, 2021, due to fewer impairments related to property and equipment and operating lease right-of-use assets at closed locations.

Interest Expense, Net
Six months ended
(in thousands)
June 25, 2022June 26, 2021Change
Interest expense, net$51,623 $34,702 $16,921 49 %
Interest expense, net increased $17 million as a result of a higher average debt outstanding partially offset by lower average interest rates for the six months ended June 25, 2022. The higher interest rate 2015-1 and Series 2016-1 Senior Securitization Notes were repaid in December 2020, substantially replaced by the issuance of lower interest rate Series 2020-2 Securitization Senior Notes. Also, the higher interest rate Car Wash Senior Credit Facilities acquired as part of the ICWG acquisition in August 2020 were repaid in January 2021 from proceeds from the IPO, partially offset by the issuance of the Term Loan in the fourth quarter of 2021 and borrowings under the Driven Holdings Revolving Credit Facility during the six months ended June 25, 2022.

Loss on Foreign Currency Transactions, Net
Six months ended
(in thousands)
June 25, 2022June 26, 2021Change
Loss on foreign currency transactions, net$14,908 $5,282 $9,626 182 %
The loss on foreign currency transactions for the six months ended June 25, 2022 is comprised of a $14 million remeasurement loss on our non U.S. dollar entities including foreign third party long-term debt and intercompany notes and $1 million of unrealized loss incurred on foreign currency hedges that are not designated as hedging instruments. The loss on foreign currency transactions for the six months ended June 26, 2021 is comprised of a remeasurement loss on our foreign third
38


party long-term debt and intercompany notes of $6 million, partially offset by unrealized gains incurred on foreign currency hedges that are not designated as hedging instruments of less than $1 million.
Loss on Debt Extinguishment
Six months ended
(in thousands)
June 25, 2022June 26, 2021Change
Loss on debt extinguishment$— $45,576 $(45,576)(100)%

The loss on debt extinguishment for the six months ended June 26, 2021 was due to the write-off of remaining unamortized discount associated with the settlement of the Car Wash Senior Credit Facilities.
Income Tax Expense
Six months ended
(in thousands)
June 25, 2022June 26, 2021Change
Income tax expense (benefit)$(5,880)$12,565 $(18,445)(147)%
Income tax expense decreased by $(18) million. The effective income tax rate for the six months ended June 25, 2022 was 20.6% compared to 45.2% for the six months ended June 26, 2021. The net decrease in income tax expense and tax rate was primarily driven by a favorable discrete tax adjustment related to the trade name impairment charge for the six months ended June 25, 2022, and favorable discrete tax adjustments related to non-deductible loss on debt extinguishment as well as tax deductible costs incurred related to the initial public offering for the six months ended June 26, 2021.
Segment Results of Operations for the three months ended June 25, 2022 compared to the three months ended June 26, 2021
We assess the performance of our segments based on Segment Adjusted EBITDA, which is defined as earnings before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, store opening and closure costs, straight-line rent, equity compensation, loss on debt extinguishment and certain non-recurring, non-core, infrequent or unusual charges. In addition, shared services costs are not allocated to these segments and are included in Corporate and Other. Segment Adjusted EBITDA may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation.

39


Maintenance
Three months ended
(in thousands, unless otherwise noted)
June 25, 2022June 26, 2021
Change
Franchise royalties and fees$11,326 $9,090 $2,236 25 %
Company-operated store sales168,648 126,107 42,541 34 %
Supply and other revenue14,331 9,813 4,518 46 %
     Total revenue$194,305 $145,010 $49,295 34 %
Segment Adjusted EBITDA
$64,076 $44,561 $19,515 44 %
System-Wide Sales
Franchised stores$230,505 $195,083 $35,422 18 %
Company-operated stores168,648 126,107 42,541 34 %
     Total System-Wide Sales$399,153 $321,190 $77,963 24 %
Store Count (in whole numbers)
Franchised stores1,001 981 20 %
Company-operated stores558 504 54 11 %
     Total Store Count1,559 1,485 74 %
Same Store Sales %15.0 %41.9 %N/AN/A
Maintenance revenue increased $49 million for the three months ended June 25, 2022, as compared to the three months ended June 26, 2021. Franchise royalties and fees increased by $2 million primarily due a $35 million or 18% increase in franchised system-wide sales from same store sales growth and 20 net new franchise stores. Company-operated store sales increased by $43 million primarily due to same store sales growth and 54 net new company-operated stores. Supply and other revenue increased by $5 million primarily due to higher system-wide sales from franchised stores.

Maintenance Segment Adjusted EBITDA increased $20 million primarily due to revenue growth, cost management and operational leverage. We continue to utilize an efficient labor model at company-operated locations.

Car Wash
Three months ended
(in thousands, unless otherwise noted)
June 25, 2022June 26, 2021Change
Company-operated store sales$101,796 $65,705 $36,091 55 %
Independently-operated store sales54,942 56,379 (1,437)(3)%
Supply and other revenue1,841 1,831 10 %
     Total revenue$158,579 $123,915 34,664 28 %
Segment Adjusted EBITDA
$53,677 $43,069 10,608 25 %
System-Wide Sales
Company-operated stores101,796 65,704 36,092 55 %
Independently-operated stores54,942 56,379 (1,437)(3)%
     Total System-Wide Sales$156,738 $122,083 34,655 28 %
Store Count (in whole numbers)
— 
Company-operated stores356 246 110 45 %
Independently-operated stores718 733 (15)(2)%
     Total Store Count1,074 979 95 10 %
Same Store Sales %(2.7)%N/AN/AN/A

The Car Wash segment is comprised of our car wash sites throughout the United States, Europe and Australia.
40


Car Wash Segment revenue increased by $35 million driven by the addition of 95 net new stores primarily from a number of acquisitions in the second half of 2021 and first half of 2022, which was partially offset by a (2.7)% decrease in same store sales. Same store sales were negatively impacted by an unfavorable change in foreign currency rates.
Car Wash Segment Adjusted EBITDA increased by $11 million, primarily driven by higher sales as well as cost management and operational leverage.

Paint, Collision & Glass
Three months ended
(in thousands, unless otherwise noted)
June 25, 2022June 26, 2021
Change
Franchise royalties and fees$23,605 $19,988 $3,617 18 %
Company-operated store sales52,120 13,019 39,101 300 %
Supply and other revenue19,715 17,567 2,148 12 %
     Total revenue$95,440 $50,574 $44,866 89 %
Segment Adjusted EBITDA
$32,916 $21,856 $11,060 51 %
System-Wide Sales
Franchised stores$672,616 $584,559 $88,057 15 %
Company-operated stores52,120 13,019 39,101 300 %
     Total System-Wide Sales$724,736 $597,578 $127,158 21 %
Store Count (in whole numbers)
Franchised stores1,611 1,622 (11)(1)%
Company-operated stores160 33 127 385 %
     Total Store Count1,771 1,655 116 %
Same Store Sales %16.1 %37.3 %N/AN/A

Paint, Collision & Glass revenue increased $45 million for the three months ended June 25, 2022, as compared to the three months ended June 26, 2021. The Company-operated store sales increased $39 million, of which $30 million was related to four glass business acquisitions (115 stores) in the first half of 2022, $7 million from the acquisition of 10 CARSTAR franchise sites in the fourth quarter of 2021 and same store sales growth. Franchise royalties and fees, which were impacted by differences in the revenue mix by brand, increased by $4 million primarily due to a $88 million (15%) increase in franchise system-wide sales primarily generated by same store sales growth. Supply and other revenue increased by $2 million primarily due to higher vendor rebates resulting from an increase in system wide sales.

Paint, Collision & Glass Segment Adjusted EBITDA increased $11 million primarily due to higher revenue from acquisitions and same store sales growth as well as cost management and operational leverage.
.

41


Platform Services

Three months ended
(in thousands, unless otherwise noted)
June 25, 2022June 26, 2021
Change
Franchise royalties and fees$9,919 $8,795 $1,124 13 %
Company-operated store sales1,392 1,463 (71)(5)%
Supply and other revenue41,891 34,583 7,308 21 %
     Total revenue$53,202 $44,841 $8,361 19 %
Segment Adjusted EBITDA
$20,541 $17,602 $2,939 17 %
System-Wide Sales
Franchised stores$129,928 $116,010 $13,918 12 %
Company-operated stores1,392 1,463 (71)(5)%
     Total System-Wide Sales$131,320 $117,473 $13,847 12 %
Store Count (in whole numbers)
Franchised stores201 199 %
Company-operated stores— — %
     Total Store Count202 200 %
Same Store Sales %11.8 %37.2 %N/AN/A
Platform Services revenue increased $8 million primarily due to higher revenue resulting from an increase in distribution sales to the Maintenance segment and higher franchise income resulting primarily from franchisee same store sales growth and an increase in franchise store count.
Platform Services Segment Adjusted EBITDA increased $3 million primarily driven by revenue growth, cost management and operational leverage.

Segment Results of Operations for the six months ended June 25, 2022 compared to the six months ended June 26, 2021
We assess the performance of our segments based on Segment Adjusted EBITDA, which is defined as earnings before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, store opening and closure costs, straight-line rent, equity compensation, loss on debt extinguishment and certain non-recurring, non-core, infrequent or unusual charges. Additionally, shared services costs are not allocated to these segments and are included in Corporate and Other. Segment Adjusted EBITDA may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation.

42


Maintenance
Six months ended
(in thousands, unless otherwise noted)
June 25, 2022June 26, 2021
Change
Franchise royalties and fees$20,961 $17,016 $3,945 23 %
Company-operated store sales325,476 240,174 85,302 36 %
Supply and other revenue26,610 15,970 10,640 67 %
     Total revenue$373,047 $273,160 $99,887 37 %
Segment Adjusted EBITDA
$116,561 $85,001 $31,560 37 %
System-Wide Sales
Franchised stores$430,789 $358,937 $71,852 20 %
Company-operated stores325,476 240,174 85,302 36 %
     Total System-Wide Sales$756,265 $599,111 $157,154 26 %
Store Count (in whole numbers)
Franchised stores1,001 981 20 %
Company-operated stores558 504 54 11 %
     Total Store Count1,559 1,485 74 %
Same Store Sales %16.9 %28.9 %N/AN/A
Maintenance revenue increased $100 million driven primarily by a $85 million increase in company-operated store sales from same store sales growth and 54 net new Company-operated stores. Franchise royalties and fees increased by $4 million primarily due to the $72 million or 20% increase in franchised system-wide sales from same store sales growth and 20 net new franchise stores. Supply and other revenue increased by $11 million primarily due to higher system-wide sales from franchised stores.

Maintenance Segment Adjusted EBITDA increased $32 million primarily due to revenue growth, cost management and operational leverage.

Car Wash
Six months ended
(in thousands, unless otherwise noted)
June 25, 2022June 26, 2021
Change
Company-operated store sales196,291 122,753 $73,538 60 %
Independently-operated store sales118,031 112,542 5,489 %
Supply and other revenue3,532 3,284 248 %
     Total revenue$317,854 $238,579 $79,275 33 %
Segment Adjusted EBITDA
$109,397 $77,224 $32,173 42 %
System-Wide Sales
Company-operated stores$196,291 122,753 $73,538 60 %
Independently-operated stores118,031 112,542 5,489 %
     Total System-Wide Sales$314,322 $235,295 $79,027 34 %
Store Count (in whole numbers)
Company-operated stores356 246 110 45 %
Independently-operated stores718 733 (15)(2)%
     Total Store Count1,074 979 $95 10 %
Same Store Sales %1.8 %N/AN/AN/A
Car Wash segment is comprised of our car wash sites throughout the United States, Europe and Australia.

43


Car Wash segment revenue increased $79 million driven by the addition of 95 net new stores primarily due to a number of acquisitions and a 1.8% increase same store sales. Same store sales were negatively impacted by an unfavorable change in foreign currency rates.

Car Wash Segment Adjusted EBITDA increased by $32 million primarily driven by revenue growth as well as cost management and operational leverage.

Paint, Collision & Glass
Six months ended
(in thousands, unless otherwise noted)
June 25, 2022June 26, 2021
Change
Franchise royalties and fees$44,970 $37,298 $7,672 21 %
Company-operated store sales92,118 24,949 67,169 269 %
Supply and other revenue37,795 32,219 5,576 17 %
     Total revenue$174,883 $94,466 $80,417 85 %
Segment Adjusted EBITDA
$61,928 $39,495 $22,433 57 %
System-Wide Sales
Franchised stores$1,291,585 $1,115,062 $176,523 16 %
Company-operated stores92,118 24,949 $67,169 269 %
     Total System-Wide Sales$1,383,703 $1,140,011 $243,692 21 %
Store Count (in whole numbers)
Franchised stores1,611 1,622 (11)(1)%
Company-operated stores160 33 127 385 %
     Total Store Count1,771 1,655 116 %
Same Store Sales %16.6 %12.3 %N/AN/A

Paint, Collision & Glass revenue increased $80 million for the six months ended June 25, 2022, as compared to the six months ended June 26, 2021. Company-owned store revenue increased $67 million, of which $50 million was due to four glass acquisitions (115 stores) in the first half of 2022, and $14 million from the acquisition of 10 Carstar franchise sites in the fourth quarter of 2022 and same store sales growth. Franchise royalties and fees revenue increased $8 million due to a $177 million (16%) increase in franchised system-wide sales from same store sales growth. Supply and other revenue increased $6 million due to same store sales growth and higher franchise income resulting from an increase in system wide sales.

Paint, Collision & Glass Segment Adjusted EBITDA increased $22 million primarily due to revenue growth from acquisitions and same store sales growth as well as cost management and operational leverage.
44


Platform Services
Six months ended
(in thousands, unless otherwise noted)
June 25, 2022June 26, 2021
Change
Franchise royalties and fees$16,807 $13,973 $2,834 20 %
Company-operated store sales2,544 2,446 98 %
Supply and other revenue77,017 63,018 13,999 22 %
     Total revenue$96,368 $79,437 $16,931 21 %
Segment Adjusted EBITDA
$34,706 $28,610 $6,096 21 %
System-Wide Sales
Franchised stores$219,570 $184,384 $35,186 19 %
Company-operated stores2,544 2,446 $98 %
     Total System-Wide Sales$222,114 $186,830 $35,284 19 %
Store Count (in whole numbers)
Franchised stores201 199 %
Company-operated stores— — %
     Total Store Count202 200 %
Same Store Sales %18.9 %31.1 %N/AN/A
Platform Services revenue increased $17 million primarily due to higher Supply and other revenue resulting from an increase in distribution sales to the Maintenance segment and higher franchise income from higher system-wide sales. Also, Franchise royalties and fees increased due to higher Franchised stores system-wide sales primarily from same store sales growth.
Platform Services Segment Adjusted EBITDA increased $6 million primarily driven by a combination of revenue growth, cost management and operational leverage.
Financial Condition, Liquidity and Capital Resources
Sources of Liquidity and Capital Resources
Cash flow from operations, supplemented with long-term borrowings and revolving credit facilities, have been sufficient to fund our operations while allowing us to make strategic investments to grow our business. We believe that our sources of liquidity and capital resources will be adequate to fund our operations, acquisitions, company-operated store development, other general corporate needs and the additional expenses we expect to incur for at least the next twelve months. We expect to continue to have access to the capital markets at acceptable terms. However, this could be adversely affected by many factors including a downgrade of our credit rating or a deterioration of certain financial ratios.
Driven Brands Funding, LLC (the “Master Issuer”), a wholly owned subsidiary of the Company, and Driven Brands Canada Funding Corporation (along with the Master Issuer, the “Co-Issuers”) are subject to certain quantitative covenants related to debt service coverage and leverage ratios in connection with the Securitization Senior Notes. Driven Holdings Revolving Credit Facility also has certain qualitative covenants. As of June 25, 2022, the Co-Issuers and Driven Holdings were in compliance with all covenants under their respective credit agreements.
At June 25, 2022, the Company had total liquidity of $488 million, which included $198 million in cash, and cash equivalents, and $97 million and $193 million of undrawn capacity on its 2019 variable funding securitization senior notes and Driven Holdings Revolving Credit Facility, respectively.
45


The following table illustrates the main components of our cash flows for the six months ended June 25, 2022 and June 26, 2021:
Six months ended
(in thousands)
June 25, 2022June 26, 2021
Net cash provided by operating activities$75,389 $124,688 
Net cash used in investing activities(484,885)(196,837)
Net cash provided by financing activities94,314 40,827 
Effect of exchange rate changes on cash(4,454)1,813 
Net change in cash, cash equivalents, restricted cash, and restricted cash included in advertising fund assets$(319,636)$(29,509)
Operating Activities
Net cash provided by operating activities was $75 million for the six months ended June 25, 2022 compared to $125 million for the six months ended June 26, 2021. The decrease was due to $56 million payment of transaction costs associated with the AGN acquisition during the six months ended June 25, 2022 and a $20 million increase in net working capital, which were partially offset by $26 million increase in operating results.

Investing Activities
Net cash used in investing activities was $485 million for the six months ended June 25, 2022 compared to $197 million for the six months ended June 26, 2021. During the six months ended June 25, 2022, there was a $189 million increase in net cash paid for acquisitions, $103 million increase in capital expenditures and $4 million lower proceeds from the sale of company-operated stores, car wash operations and property and equipment, which were offset by a $7 million increase in proceeds from sale-leaseback transactions.
For the six months ended June 25, 2022, we invested $149 million in capital expenditures, compared to $46 million for the six months ended June 26, 2021. This increase is primarily due to new company-operated store openings within our Car Wash and Maintenance segments, as well as expenditures related to the maintenance of our existing store base and technology initiatives.
Financing Activities
Net cash provided by financing activities was $94 million for the six months ended June 25, 2022 primarily related to borrowings on the revolving credit facility, which was partially offset by the repayment of senior securitization notes. Net cash used in financing activities was $41 million for the six months ended June 26, 2021 primarily resulting from our $725 million repayment of the Car Wash Senior Credit Facilities, $43 million in repurchases of our common stock, and $22 million payment related to the termination of our interest rate swaps. These were offset by the $761 million in proceeds from our IPO and the underwriters’ exercise of their over-allotment option, net of underwriting discounts. See Note 7 to our consolidated financial statements for additional information regarding the Company’s debt.
Income Tax Receivable Agreement
We expect to be able to utilize certain tax benefits which are related to periods prior to the effective date of the Company’s initial public offering, which we therefore attribute to our existing shareholders. We expect that these tax benefits (i.e., the Pre-IPO and IPO-Related Tax Benefits) will reduce the amount of tax that we and our subsidiaries would otherwise be required to pay in the future. We have entered into an income tax receivable agreement which provides our Pre-IPO shareholders with the right to receive payment by us of 85% of the amount of cash savings, if any, in U.S. and Canadian federal, state, local and provincial income tax that we and our subsidiaries actually realize as a result of the utilization of the Pre-IPO and IPO-Related Tax Benefits.
For purposes of the income tax receivable agreement, cash savings in income tax will be computed by reference to the reduction in the liability for income taxes resulting from the utilization of the Pre-IPO and IPO-Related Tax Benefits. The term of the income tax receivable agreement commenced upon the effective date of the Company’s initial public offering and will continue until the Pre-IPO and IPO-Related Tax Benefits have been utilized, accelerated or expired.
Because we are a holding company with no operations of our own, our ability to make payments under the income tax receivable agreement is dependent on the ability of our subsidiaries to make distributions to us. The securitized debt facility
46


may restrict the ability of our subsidiaries to make distributions to us, which could affect our ability to make payments under the income tax receivable agreement. To the extent that we are unable to make payments under the income tax receivable agreement because of restrictions under our outstanding indebtedness, such payments will be deferred and will generally accrue interest at a rate of LIBOR plus 1.00% per annum until paid. To the extent that we are unable to make payments under the income tax receivable agreement for any other reason, such payments will generally accrue interest at a rate of LIBOR plus 5.00% per annum until paid.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in Note 2 of the consolidated financial statements. Refer to our annual report for the year ended December 25, 2021 for a full discussion of our critical accounting policies. There have been no material changes to our critical accounting policies from those disclosed in our Form 10-K for the year ended December 25, 2021.
Application of New Accounting Standards
See Note 2 of the consolidated financial statements for a discussion of recently issued accounting standards.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Refer to the Company’s annual report for the year ended December 25, 2021 for a complete discussion of the Company’s market risk. There have been no material changes in the Company’s market risk from those disclosed in the Company’s Form 10-K for the year ended December 25, 2021.
Item 4. Controls and Procedures
a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our CEO and CFO, has evaluated the design effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of June 25, 2022. The term “disclosure controls and procedures,” means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on evaluation of the design of our disclosure controls and procedures as of June 25, 2022, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures were designed effectively and will provide a reasonable level of assurance.

b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended June 25, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
47


Part II.    Other Information
Item 1.    Legal Proceedings.
We are subject to various lawsuits, administrative proceedings, audits, and claims arising in the ordinary course of business. Some of these lawsuits purport to be class actions and/or seek substantial damages. We are required to record an accrual for litigation loss contingencies that are both probable and reasonably estimable. Legal fees and expenses associated with the defense of all of our litigation are expensed as such fees and expenses are incurred. Management regularly assesses our insurance deductibles, analyzes litigation information with our attorneys and evaluates our loss experience in connection with pending legal proceedings. While we do not presently believe that any of the legal proceedings to which we are currently a party will ultimately have a material adverse impact on us, there can be no assurance that we will prevail in all the proceedings we are party to, or that we will not incur material losses from them.
Item 1A. Risk Factors

For a discussion of risk factors that could adversely affect our results of operations, financial condition, business reputation or business prospects, we refer you to Part I, Item 1A "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended December 25, 2021, as supplemented by the following risk factor.

High levels of economic inflation may affect our ability to pay interest on and principal of our long-term debt obligations
The United States is experiencing historically high levels of price inflation across a wide variety of economic sectors. There can be no assurances as to how high such inflation will go and/or how long such elevated levels of inflation may persist. High levels of inflation may influence employee and staffing costs and costs of goods and services required to be purchased by the Company and Franchisees. Driven and its Franchisees may not be able to offset the negative impact of inflation with increased prices. In addition, high levels of inflation may influence demand for products purchased by Driven Brands’ customers. Any of the above could have a material adverse effect on Retained Collections, which in turn could materially and adversely affect each Company’s ability to pay interest on and principal of its long-term debt obligations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 5. Other Information.
On August 3, 2022, the Board of Directors approved a special, one-time cash bonus of $357,153 for Michael Macaluso, Executive Vice President and President of Paint, Collision & Glass segment, to partially offset an unintended Canadian tax liability incurred by Mr. Macaluso in connection with the grant of profits interests by the Company in 2020.
48


Item 6. Exhibits.

Exhibit NumberExhibit Description
3.1
3.2
31.1
31.2
32.1
32.2
101.INSXBRL Instance Document
101.SCHXBRL Schema Document
101.CALXBRL Calculation Linkbase Document
101.DEFXBRL Definition Linkbase Document
101.LABXBRL Label Linkbase Document
101.PREXBRL Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

49


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 4, 2022

DRIVEN BRANDS HOLDINGS INC.
By:/s/ Jonathan Fitzpatrick
Name:Jonathan Fitzpatrick
Title:President and Chief Executive Officer
By:/s/ Michael Beland
Name:Michael Beland
Title:Senior Vice President and Chief Accounting Officer


50