Driven Brands Holdings Inc Aktie

Thank you for standing by. My name is Gail, and I will be your conference operator today. At this time, I would like to welcome everyone to the Driven Brands First Quarter 2026 Earnings Call. [Operator Instructions]

I would now like to turn the conference over to Steve Alexander, Investor Relations. You may begin.

Good morning. Welcome to Driven Brands First Quarter 2026 Earnings Conference Call. The earnings release and net leverage ratio reconciliation are available for download on our website at investors.drivenbrands.com. On the call with me today are Danny Rivera, President and Chief Executive Officer; and Mike Diamond, Executive Vice President and Chief Financial Officer. In a moment, Danny and Mike will walk you through our financial and operating performance for the quarter.

Before we begin our remarks, I would like to remind you that management will refer to certain non-GAAP financial measures. You can find the reconciliations to the most directly comparable GAAP financial measures on the company's Investor Relations website and in its filings with the Securities and Exchange Commission.

During this call, we will also make forward-looking statements regarding our current plans, beliefs and expectations. These statements are not guarantees of future performance and are subject to a number of risks and uncertainties and other factors that could cause actual results and events to differ materially from results and events contemplated by these forward-looking statements. Please see our earnings release and our filings with the Securities and Exchange Commission for more information.

Today's prepared remarks will be followed by a question-and-answer session. We ask that you limit yourself to one question and one follow-up. Now I'll turn the call over to Danny.

Good morning, and thank you for joining us to discuss Driven Brands' 2026 first quarter results. Q1 was a solid quarter for Driven as we continue to execute our growth and cash strategy. For the quarter, we grew system-wide sales 6%, revenue 8%, same-store sales 2% and adjusted EBITDA 2%, while delivering adjusted EBITDA margins of 21.5%. The quarter was highlighted by Take 5 Oil Change's 23rd consecutive quarter of same-store sales growth, improvement from our franchise segment and further progress reducing net leverage.

We remain focused on reducing net leverage and strengthening our financial foundation. Net leverage finished the quarter at 3.2x, and we remain on track to achieve our target of 3x by year-end. Our priority remains reaching that target first, after which we intend to provide investors with a clear framework for our long-term capital allocation priorities. We also continue to make progress enhancing our finance and accounting capabilities, strengthening processes and improving controls. While there is more work ahead, we are building a stronger and more scalable foundation to support the next chapter of growth at Driven Brands.

The automotive aftermarket remains one of the most resilient corners of the consumer economy. We continue to benefit from long-term industry trends, including an aging vehicle fleet, a growing car park, increasing vehicle complexity and consumers keeping vehicles longer. Overall, demand remains healthy across our businesses. Within Take 5, we are monitoring some moderation in traffic among newer customers and more value-oriented customers, particularly households earning less than $50,000 annually or are facing greater pressure from inflation and higher living costs. However, our core customer base remains resilient, and we continue to see strong average check, healthy premium mix and solid attachment rates. The essential nature of our services, combined with secular industry tailwinds reinforces our confidence in the business.

Before turning to Take 5, I'd like to highlight an important investment we recently made to strengthen our management team and long-term capabilities. Bart LaCount has recently joined Driven Brands as our Chief Marketing Officer, a newly created position, demonstrating our commitment to building marketing into a core enterprise capability. Bart brings more than 20 years of marketing and brand-building experience from leading consumer brands, including PepsiCo and Restaurant Brands International, where he led marketing for Popeyes. We have centralized marketing leadership under Bart to build a more integrated, data-driven and scalable marketing organization that can accelerate growth, improve customer acquisition efficiency, strengthen customer retention and enhance the value of our brands.

Turning to Take 5 Oil Change. Take 5 delivered another strong quarter, growing system-wide sales 14%, revenue 10%, same-store sales 4.5%, 12.5% on a 2-year basis and adjusted EBITDA by 14%, while expanding margins year-over-year by 120 basis points, resulting in adjusted EBITDA margins of 33.9%. We believe Take 5's performance continues to reflect the strength of its differentiated customer experience. Our stay-in-your-car model, combined with a fast, friendly and simple service experience, continues to resonate with consumers. Strong operational execution, premiumization, increasing attachment rates and disciplined marketing further support customer acquisition, retention and profitable growth.

Take 5 also remains early in its growth journey with approximately 1,400 locations today and a path to more than 2,500 locations over time, we continue to see substantial white space opportunity ahead. Importantly, we also continue to see attractive unit level economics and returns on new store investments across both company and franchise development. Our Franchise segment once again delivered robust profitability, generating adjusted EBITDA margins of 60%, while growing same-store sales 1% during the quarter. Results continue to be led by Meineke with same-store sales for the segment sequentially improving from the fourth quarter.

We expect Franchise Brands to continue generating strong margins and cash flow throughout 2026, although we anticipate same-store sales for the segment to moderate from our first quarter results. Auto Glass Now also delivered a strong quarter, growing revenue 6%, same-store sales 7%, adjusted EBITDA 12% while expanding margins 40 basis points to 9.4%. We continue to see significant long-term growth opportunity as we expand carrier relationships, grow market share and leverage the scale we've built across the platform.

I'll close with 3 key takeaways. First, Take 5 continues to validate our long-term investment thesis. The business is delivering strong growth, expanding margins and remains early in its runway toward more than 2,500 locations. Second, we remain on track to achieve our target of 3x net leverage by year-end while continuing to strengthen the company's financial foundation. Third, we will remain disciplined allocators of capital and active managers of our portfolio, concentrating our resources on our highest growth, highest return opportunities to create long-term shareholder value.

Based on our first quarter performance, we are reiterating our full year 2026 guidance of revenue of $1.95 billion to $2.05 billion, adjusted EBITDA of $430 million to $460 million, same-store sales of flat to 2% and 160 to 190 net new units. I want to sincerely thank our team and our franchise partners for their continued commitment, execution and support.

With that, I'll turn it over to my partner and Driven CFO, Mike.

Thank you, Danny, and good morning, everyone. I want to begin with an update on our progress toward remediating the material weaknesses in our internal control over financial reporting. As a reminder, this is a multi-quarter process. However, our team has made meaningful early progress executing against detailed remediation work plans for each material weakness, and we remain committed to strengthening our control environment as we move forward.

Turning to our financial results. A reminder that with the divestiture of both our U.S. and international Car Wash businesses, the results for those businesses are included in discontinued operations and are not included in quarterly financial details provided today, unless otherwise noted. For Q1, Driven recorded same-store sales growth of 2.1% and added 29 net new units. System-wide sales for the company grew 5.8% in Q1 to $1.6 billion. Total revenue for Q1 was $484.4 million, an increase of 8.2% year-over-year. Q1 operating expenses increased $24.1 million year-over-year, driven primarily by $8.1 million in higher company-operated store expenses from higher sales in more stores and $9.1 million in nonrecurring restatement costs, which were below our initial expectations.

Based on a detailed review of the timing of restatement work performed, we saw some restatement costs shift from Q1 to Q2 versus initial expectations. We still anticipate the full year nonrecurring restatement costs to be between $35 million and $45 million. SG&A for Q1 was $131.8 million or 8.4% of system-wide sales. Excluding the Q1 restatement costs, SG&A declined $1.9 million year-over-year and was 7.8% of system-wide sales, in line with our expectations as a growing multi-business platform with both franchise and company operations.

Q1 operating income increased $12.7 million to $67.4 million, driven primarily by the increase in revenue. Adjusted EBITDA increased 1.7% to $104.1 million for the quarter. Adjusted EBITDA margin for Q1 was 21.5%, a decrease of roughly 140 basis points versus Q1 2025. Excluding restatement costs, adjusted EBITDA margin would have grown approximately 50 basis points. Interest expense declined $12.8 million to $23.5 million, driven primarily by ongoing debt paydown. Income tax expense for the quarter was $9.4 million. Net income from continuing operations for the quarter was $23.8 million. Adjusted net income from continuing operations for the quarter was $49 million. Adjusted diluted EPS for Q1 was $0.30.

Q1 performance for each of our segments include: Take 5 grew same-store sales 4.5% in Q1 and added 29 net new units in the quarter, continuing to execute against its pipeline of both franchise and corporate new units. Adjusted EBITDA grew 13.6% to $109.5 million, driven by sales growth and the lapping of a roughly $4.5 million inventory valuation charge in Q1 of 2025, stemming from our restatement. Adjusting for the inventory valuation charge, Take 5 adjusted EBITDA grew roughly 8.5%.

Franchise Brands reported a 0.9% increase in same-store sales. Revenue declined $0.4 million, driven by the sale of our 2 remaining company-operated collision locations. Adjusted EBITDA was $41.4 million in Q1, a decrease of $1.5 million, driven by increased technology costs and select investments in people to drive future growth. Auto Glass Now reported same-store sales growth of 7.2% in Q1 as we saw sequential growth across our retail, commercial and insurance business. Adjusted EBITDA increased $0.6 million to $5.9 million.

Turning to cash flow and leverage. Our cash flow statement shows a consolidated view of cash flows, inclusive of discontinued operations. Net capital expenditures for Q1 were $26.9 million, a decrease of $32.2 million, primarily driven by the lapping of CapEx from our divested Car Wash businesses. Q1 free cash flow, defined as operating cash flow less net capital expenditures was $30.3 million, an increase of $13 million from Q1 2025. We ended the quarter at 3.2x net leverage and remain on track to achieve our target of 3x by year-end with strong cash flow generation.

Today, we are reiterating our full year 2026 outlook that was previously shared on May 19. As a reminder, we continue to expect revenue of $1.95 billion to $2.05 billion, adjusted EBITDA of $430 million to $460 million, which includes between $35 million and $45 million of estimated nonrecurring restatement costs that we do not intend to add back to adjusted EBITDA in 2026. Adjusted diluted EPS of $1.15 to $1.25, same-store sales of flat to 2%, net store growth between 160 and 190 units, net capital expenditures of approximately 6.5% of revenue, free cash flow between $125 million and $145 million.

As we approach the end of Q2, we want to provide a few notes on Q2 performance. Sales. We expect moderation across all of our brands in Q2. We expect Q2 Take 5 same-store sales growth in the mid-3% range, which would represent approximately 10% on a 2-year stack, reflecting the moderation from newer customers and lower income households. We expect Franchise Brands same-store sales to moderate as compared to the 0.9% growth in Q1, given the uneven nature of recovery for both Maaco and Collision. Restatement costs. We expect restatement costs to exceed $15 million in Q2. The increase from Q1 is driven by a full 3 months of restatement work in the quarter, including the filing of both our 10-K and Q1 10-Q, work on our restated financials for our whole business securitization, ongoing remediation of our internal controls and associated legal costs.

Importantly, these costs are nonrecurring in nature and do not reflect the underlying earnings power of the business. Adjusted EBITDA. As a result, we expect adjusted EBITDA margins to be pressured relative to Q1's 21.5%. To summarize, we had solid Q1 with same-store sales growth across all 3 of our segments and grew adjusted EBITDA in Q1 despite nonrecurring restatement costs. However, we recognize the macro pressures consumers are facing and are appropriately cautious in Q2 given the top line moderation we are seeing across both Take 5 and Franchise Brands. Importantly, we remain on track to deliver our full year outlook, which was constructed to reflect a broad range of macro scenarios.

With that, I will now turn it over to the operator, and we are happy to take your questions.

[Operator Instructions] Your first question comes from the line of Mark Jordan of Goldman Sachs.

Can you just talk a little bit more about the moderation you're seeing in traffic from some of your customers? And I guess, how it's trending during 2Q? And if there's anything you can talk about in your other demographics outside of the new customers and the lower income customers?

Yes. Mark, it's Danny. So yes, look, we continue to see a bit of moderation with 2 very specific groups of customers. So it's newer customers and more value-oriented customers. We mentioned this for the first time last earnings call a few weeks ago. Honestly, nothing's changed from a trends perspective. Things are pretty stable on that front. I think importantly, to the second half of your question, when we look at our core customer and when we look, frankly, across all other customer types, what we're seeing is resilience, right? So ultimately, check is up, attachment rates are up, premiumization is up. So I'd summarize it as, generally speaking, we're seeing a resilient consumer with a bit of moderation across 2 specific groups.

Okay. Perfect. Then if I could just follow on, on the 1Q comp and maybe how it trended for Take 5 throughout the quarter? And I don't know if you'd be willing to give it, but how ticket and traffic contributed for the quarter as well?

Yes. We typically don't break out the sales tree, and we don't go intracompany or intra-quarter numbers. But look, what I'd say is it was a solid start to the year for Take 5, right? So 4.5% comps for the quarter, 12.5% on a 2-year basis. We continue to see that business grow and do well. Ultimately, from an ARO and traffic perspective, like I said, we don't break it out. But I mean, look, the material gain there is really on the ARO side. We continue to see improvement in check, improvement in attachment rates. Our NPS scores remain in the high 70s. So not only are we delivering the services on the kind of check side of the equation, but we're doing so in a way where customers are happy. So strong start to the year for Take 5.

Your next question comes from the line of Phillip Blee of William Blair.

Question, so Franchise Brands comps inflected positive this quarter. Can you maybe talk a bit about how sustainable that is? And then what you're seeing more specifically in the Collision space? Have you seen any reprieve at all around now that insurance premiums are entering into a deflationary territory? And how you're thinking about maybe some pent-up demand in that segment or what could be the key unlock to really stabilize that segment going forward?

Yes. Phillip, a few different things. I'd say, to your point, like we're happy with a solid start to the quarter. 1% comps is good. As we reiterated in our prepared remarks, we're expecting some moderation for the segment towards the back half of the year. The underlying kind of story, so to speak, really hasn't changed a whole lot. So if you look underlying Franchise Brands, we've got 3 kind of main businesses. Maaco has been soft. It was soft tail end of last year. That softness has consisted or has persisted, so to speak, into Q1 of this year, although we are seeing a bit of improvement on the retail side of that business.

Meineke has been strong for some time now. That strength was evident in 2025, and that momentum has carried forward into Q1. The change really sequentially quarter-over-quarter was really Collision. So Q1, we saw the industry pick up a little bit from where it was in Q4. We continue to outperform the general industry anywhere between 100 to 300 basis points. That really hasn't changed into Q1, and we don't expect that to change here anytime soon. But as we look at the Collision industry for the entire year of 2026, what we're really expecting is a year of stabilization, not so much a year of bounce back.

So we expect the industry to moderate towards the back half of the year. And in turn, the overall then the segment will tend to moderate into the back half of the year. I always like to go back to -- so that's loosely speaking, how things are shaking out for Franchise Brands, but important to remember, for us, Franchise Brands is all about cash. So as we think about the framework of growth in cash, I love it when we post a 1% comp quarter, obviously. But at the end of the day, what I love more is 60% margins and irrespective of the moderation of the top line into the back half of the year, we continue to expect really strong margins from that segment.

Okay. Great. That's excellent. And then speaking of cash, so you reiterated your target to reach a 3x leverage point by year-end. So after you've hit your target, can you just talk a bit more about your plans for free cash flow? Are there areas of the business that you need to catch up or that maybe need a bit more investment, more debt paydown on the horizon? Or is there kind of some shareholder returns that you're thinking about?

Phil, this is Mike. I'll take that one. We have stated historically that we are continuing to evaluate our options once we get down to 3x. For now, the focus remains on getting to that important milestone. I'll respond to the one part of your question. I don't think there's any sort of deferred CapEx or anything we need to go into to catch up.

The good news is we have many different ways we can go. We have very high return predictable investments in our Take 5 infrastructure with opportunities to grow there. There's also a possibility of returning cash to shareholders. I think our debt is fixed rate and fairly low. So I'm not sure once we get to 3x, if there's a ton of appetite to delever significantly further, but it's something that we're obviously focused on right now. The main focus in the short term is getting down to that 3x. But in the background, we're working on what that plan is. And as we get closer to the end of the year, we'll be in a position to communicate.

Your next question comes from the line of Simeon Gutman of Morgan Stanley.

This is Skylar Tennant on for Simeon Gutman. First, on the trajectory of EBITDA margins for the rest of the year. Is there upside possibility? And what are some of the puts and takes that you're anticipating?

Yes. I mean there's a couple of different things that go into that. Skylar, I would say, first of all, there's a little bit of seasonality in our business. And so if you think about Q2 and Q3 historically have a little bit more sales as that's peak driving season. That's going to be offset by some of our restatement costs. And so if you think about the commentary we gave on the prepared remarks, we expect restatement costs to be higher in Q2, just given the fact that it's a full 3 months. We've got obviously the K and the Q.

We've got whole business securitization financials. So there's a little bit of puts and takes. I think there is an ability to leverage off of our fixed costs, particularly as we move into Q3 and see higher sales in Q3 in what is a seasonally high time. But my job, our job is to make sure we get the restatement and the remediation plan right. And so we will spend the dollars necessary there to make sure we get that plan right. So that's -- I mean, that's a little bit of the yin and yang of that equation.

Okay. Great. And then given some of the softer trends you're seeing in traffic on the Take 5 side, can you talk about how you might be thinking about pricing and how much flexibility that you have there without necessarily impacting demand?

Yes, I'll take that one. I mean, look, I think what you're getting at is promotional activity. The way that we've thought about promotions historically, I mean, look, we've never shied away from it. It's an arrow in the quiver, so to speak. It's something that we've used surgically over time, depending on certain use cases. When I think about some of the moderation that we're seeing right now, we're talking about moderation with 2 very specific groups of customers that are very readily identifiable.

That sounds like a use case where the arrow, so to speak, of surgical promotions tends to make sense. And so we will continue to use the tools at our disposal. I wouldn't take that as any kind of a broad shift in pricing strategy or anything like that. We don't go to market as a low-cost alternative or anything. So there's no strategic shift that we're contemplating, just using surgical promotional activities where it makes sense.

Your next question comes from the line of Mike Albanese of Benchmark StoneX.

Just excluding restatement costs and now that we're emerging with a cleaner portfolio and I guess, more sales visibility, do you see opportunities to reduce G&A? Or is your expectation more to lever it from here as you grow?

So I think I'd say a couple of things on SG&A. The first is I'd ground you on how we think about SG&A across our business. And we think the best metric for SG&A, particularly for a multi-business platform such as ours is as a percentage of system sales, right? And that -- we do that because that best normalizes for differences in ownership between company-operated and franchise as well as the different royalty rates we may receive across our different franchise portfolio.

And when you look at it through that lens and you exclude restatement costs, you actually -- it came down this quarter year-over-year. And so we think we're doing a decent job of managing that to help us support our growth. I think to the second part and probably the crux of your question, Danny and I will always try to operate as efficiently as possible while supporting future growth. And so I think there is absolutely an opportunity to continue to leverage the fixed costs we have as our various businesses continue to grow. And Danny and I will also challenge ourselves to make sure we're being as efficient as possible with the dollars we spend.

Got it. That's helpful. In terms of the metric percentage of system sales, do you want to put a figure behind that? Or can I kind of take the last quarter and run rate it? I mean, how can I think about quantifying that?

Yes. I mean I think we feel comfortable excluding restatement costs for where we are right now. That puts me roughly at 7.8% of system sales. There's obviously, as I mentioned, a little bit of seasonality as you think about it from Q2s and Q3s tend to have a little bit higher sales, and we still have fixed costs there. So I think for now, that's where we think we are. As I just mentioned, I think there's always opportunity to better leverage our fixed costs as well as try to continue to be more efficient.

Your next question comes from the line of Craig Kennison of Baird.

I wanted to follow up on your earlier comments in the Collision market. I guess why do you expect trends to moderate in the second half? And is there anything you can do to capture more customer pay opportunities while the insurance side of the business is soft?

Craig. So it's a great question. I mean, look, I'll answer the second part first. We do, in fact, capture more customer pay. That's been a growing part of our business here. And we're uniquely positioned as Driven Brands. When you think about the Maaco side of the portfolio, if you have a customer that doesn't want to go to insurance, let's say, they get into like a light fender bender and they don't want to pay or risk their premiums going up or something like that, and they may want to come out of pocket, Maaco is a very real alternative there.

So Maaco features a lot of customer pay, frankly. So we're somewhat uniquely positioned to capture that side of the work. As far as why do we expect the moderation of the industry, that's just based on the data that we're seeing. We saw sequential improvement Q1 over Q4. But as we look at the data that's available, if we look at just what's happening with inflation in the country and some of the most recent numbers, our expectation, again, is that 2026 is a year of stabilization over 2025, not so much a bounce back year. And so we expect a bit of moderation going into the back half of the year.

And do you have any ability to push harder on alternative parts in order to lower repair costs and maybe make a dent in that trend?

We do. I mean, look, one of the really nice things about our business compared to some of our competitors in that space is that we've got a franchise model. So we've got owner operators on the ground. Having owners on the ground covers all manner of sin and those folks are very cognizant of not just delivering an amazing experience for the customers and for our carriers, but also they're very cognizant of making sure that they're taking the appropriate steps to maximize profitability.

Your next question comes from the line of Peter Keith of Piper Sandler.

This is Sarah Morin on for Peter Keith. First, just regarding the CRM database, given the breadth of your customer data across the segments, what is the current strategy for utilizing the database as a marketing engine for Take 5?

Sarah, it's Danny. It's a great question. So I'd say, number one, part of the benefit of Driven Brands is we're a portfolio. We've got a nice platform and some of the services that we provide are at the platform level. So we have the benefit of we pool money together, we create a world-class capability. CRM happens to be one of those areas where we've got one CRM platform that's leveraged across all of the brands. So it's one of those areas where the synergies of Driven Brands tends to really shine, where some of our smaller brands probably wouldn't be able to on their own afford a solution like the one that we have in our CRM engine at the platform level.

We -- I mean, we've been using that engine for a long time now to drive frequency, to drive repeat business. It's different, obviously, by business. So we've got a collection of use cases, let's say, on the Take 5 side. Some of the more basic ones are going to be your typical oil change reminders, where we will remind customers that they're due for an oil change. We do have proprietary algorithms in that CRM engine as far as how we do those reminders, when we do those reminders, and it's not a one size fits all, but it's a fairly complicated set of algorithms to try to personalize that as much as possible. We've got different journeys on the Meineke side, let's say, we've got different journeys on the Maaco side. So the really neat thing is we have a very sophisticated platform that we leverage across all of the businesses.

Okay. And then just on the Collision segment, we're hearing of improved transaction activity, but industry ticket kind of remaining more flat. Is there any update you can provide on the Collision landscape?

I'm not sure that I can provide anything more than I've already provided. I mean, as I think about it, again, 2026, year of stabilization over 2025, sequential improvement Q1 over Q4. We expect the overall industry to moderate a bit into the back half of the year. Importantly, for us, we've historically outperformed the industry anywhere between 100 to 300 basis points. We continue to do so in Q1. We expect that to continue into the back half of the year. And given that Collision for us is part of our Franchise Brands segment, we expect to continue to see really strong margins on that side of the business, which is ultimately the important part, filling in the cash part of the growth in cash framework for Driven Brands.

Your next question comes from the line of Tristan Thomas-Martin of BMO Capital Markets.

I was just curious, you called out moderation of traffic, right, lower income and then newer customers. Is that just -- are they deferring oil changes? Or they may be trying to do it themselves? Any color there would be appreciated. And then just really quick, weakness on the under $50,000 household income. How does that compare to your core customer? What's their household income?

So I guess a couple of different things there. We are calling out some moderation in traffic. I just want to be specific. It's specifically with those 2 groups of customers. As I mentioned a second ago, when we look at our core customer, which is going to have a higher household income, and I'm not going to get into a ton of specifics as to exactly where we price things at, but it's certainly more than $50,000.

We're seeing overall resilience across the board in all groups other than really those 2 very specific groups. What we're seeing ultimately is a bit more churn out of those groups than anything else. So if the question is, are we seeing intervals go up? No. Oil change intervals have been stable for some time now. We haven't really seen any material change to oil change intervals for some time, and that's not what we're seeing today. This is not an elongation, so to speak, of when customers are coming in. What we're seeing is with 2 very specific types of customers, a bit more churn.

With no further questions, that concludes our Q&A session and also today's conference call. Thank you for your participation. You may now disconnect.

Good day, everyone, and welcome to Driven Brands' Fourth Quarter 2025 Earnings Call. Please note, this call is being recorded. [Operator Instructions] I'd now like to hand the call over to Steve Alexander. Please go ahead, sir.

Good morning. Welcome to Driven Brands' Fourth Quarter 2025 Earnings Conference Call. The earnings release and net leverage ratio reconciliation are available for download on our website at investors.drivenbrands.com. On the call with me today are Danny Rivera, President and Chief Executive Officer; and Mike Diamond, Executive Vice President and Chief Financial Officer. In a moment, Danny and Mike will walk you through our financial and operating performance for the quarter and full year. Before we begin our remarks, I would like to remind you that management will refer to certain non-GAAP financial measures. You can find the reconciliations to the most directly comparable GAAP financial measures on the company's Investor Relations website and in its filings with the Securities and Exchange Commission.

During this call, we may also make forward-looking statements regarding our current plans, beliefs and expectations. These statements are not guarantees of future performance and are subject to a number of risks and uncertainties and other factors that could cause actual results and events to differ materially from results and events contemplated by these forward-looking statements. Please see our earnings release and our filings with the Securities and Exchange Commission for more information. Today's prepared remarks will be followed by a question-and-answer session. [Operator Instructions] Now with that, I'll hand the call over to Danny.

Good morning, and thank you for joining us to discuss Driven Brands' fourth quarter and full year 2025 results. Before discussing our results, I want to directly address our recent restatement. I'd also like to thank our shareholders for their patience as we completed this work with the rigor and accuracy it required. There are 4 questions I'd like to address directly. What happened, what were the root causes, why these issues were identified now? And what are we doing to help ensure this does not happen again.

Beginning with what happened. During our 2025 year-end closing process, we identified 3 issues requiring further review related to lease accounting, Auto Glass Now cash accounting and expense mischaracterization with Driven Advantage, each related to prior periods. As we review these matters further, we determined that there were material errors requiring the restatement of prior financial statements. We engaged our Audit Committee, external auditors and outside advisers to conduct a comprehensive review of our previously issued financial statements. From the outset, we established 2 guiding principles. We would prioritize accuracy and completeness over speed, and we would take a broad and disciplined approach, reviewing all relevant areas to reduce the risk of identifying additional issues in future periods.

Consistent with that approach, our review identified additional items requiring adjustment. The result is a comprehensive restatement across multiple prior periods and financial statements designed to help establish a reliable financial foundation going forward. In a moment, Mike will walk through some of the specific adjustments in detail. At a high level, the impacts include revenue reductions of $12 million in 2023, $4 million in 2024 and $5 million in 2025 and a reduction in adjusted EBITDA of $57 million in 2023, $12 million in 2024 and $8 million in 2025. Turning to root causes. The majority of the issues trace back to 2023, 2022 and prior, a period of significant acquisition and integration activity for the company. During that time, we expanded into 2 new verticals, car wash and glass and launched a new digital solution for our Driven Advantage marketplace.

While the underlying issues are varied, they can be grouped into 2 primary drivers. First, the pace and complexity of growth outstripped the scale and maturity of certain back-office people, processes and controls. Second, as the business grew in scale and complexity, we recognized the need for a more integrated and scalable ERP environment, which led to the decision in 2023 to consolidate multiple ERPs to Oracle with the system going live in mid-2024. Turning to why this was identified now. The answer is straightforward. We have strengthened both our team and our systems. Mike joined as CFO in the third quarter of 2024 and strengthened the finance leadership team, including the appointment of a new Chief Accounting Officer and other key roles. He also assumed direct oversight of the then in-progress Oracle implementation, helping operationalize the system and enhance the control environment.

These improvements in both personnel and systems enabled us to identify issues that had previously not been accounted for properly. Lastly, what are we doing to help prevent this from happening again? First, as I've outlined, we have strengthened and will continue to invest in our finance leadership, systems and processes. Second, once a restatement became necessary, we deliberately broadened the scope of our review beyond the initially identified issues. Our objective was to address all relevant matters now rather than risk identifying additional issues in future periods. Third, Driven Brands is a simpler, more focused company today. Since 2023, we have streamlined our portfolio, including the divestitures of U.S. Car Wash, International Car Wash and PH Vitres, and we have completed the integration of Auto Glass Now. During that time, we have also not entered into any new verticals.

As a result, Driven today is focused on core businesses that we know well and have operated for many years. This has been a challenging but important process, and it has increased our confidence in the team and systems we now have in place. We identified the issues, restated the financial statements and are strengthening our controls. That foundation positions us well as we move forward. With an improved and still improving financial and control foundation in place, our focus now is on executing our strategy, delivering consistent performance and maximizing long-term shareholder value.

Now turning to our 2025 results. 2025 was a foundational year for Driven Brands as we executed our growth and cash strategy. We simplified our portfolio by exiting noncore businesses and sharpening our focus on nondiscretionary automotive services in North America. We also materially strengthened the balance sheet, paying down $545 million of debt and reducing net leverage to 3.7x by year-end. We continued to execute on this strategy in the first quarter of 2026, completing the sale of our International Car Wash business in January and using the proceeds to pay down more than $470 million of additional debt, bringing our pro forma net leverage to 3.3x.

Alongside these portfolio and balance sheet actions, we also executed with discipline across the business, delivering against our 2025 outlook. Collectively, these actions have positioned Driven Brands as a simpler, more predictable and higher cash flow business. For the full year, revenue grew 6.3% to approximately $1.9 billion, and we generated adjusted EBITDA of $449 million. System-wide sales increased 2.7%, supported by 175 net new stores, while same-store sales increased 1%. Driven Brands today is a simpler, more focused company centered on nondiscretionary automotive services in North America that generate scalable growth and sustainable cash flow. A historical view reinforces the strength of our model. Since 2021, Take 5 has grown revenue by $627 million, added 634 locations and grown EBITDA by 171%, while expanding margins from 27% to 34% by the end of 2025.

Over the same period, our franchise segment delivered a sales CAGR of 5.3% and expanded margins by over 1,200 basis points, finishing 2025 with margins of 62.7%. Auto Glass Now provides another lever for future growth. Since entering the automotive glass market in 2022, we have scaled the business to become the second largest operator in the industry. Over time, we see additional opportunities to expand through additional locations and increased market share across retail, commercial and insurance. Together, these businesses create a model designed to deliver sustained growth, strong cash generation and long-term value creation. Turning to Take 5 Oil Change, home of the stay-in-your-car 10 Minute Oil Change. In 2025, Take 5 achieved its 22nd consecutive quarter of same-store sales growth while opening 161 net new stores.

System-wide sales grew 17%, same-store sales grew 6% and adjusted EBITDA increased 10% with margins of 34% Operational execution remains strong with baytimes consistently under 12 minutes, Net Promoter Scores in the high 70s, premium mix up 300 basis points and ancillary attachment rates up 380 basis points. Looking ahead, we remain highly confident in Take 5's long-term runway to more than 2,500 total locations, supported by a strong development pipeline of approximately 900 sites. We continue to see outstanding engagement from our franchise partners with over 65% signing second or third area development agreements. This strong partnership gives us excellent visibility into unit growth in 2026 and beyond. Our franchise segment did exactly what it is designed to do, generate robust, reliable cash flow with EBITDA margins of 63% for the year.

Auto Glass Now also made solid progress in 2025. Revenue and EBITDA improved 9% and 105% year-over-year respectively, with EBITDA margins improving 470 basis points. While still in incubation, we are encouraged by the foundation that has been built and continue to see meaningful long-term potential at Auto Glass Now. Turning to 2026. Our priorities remain consistent, disciplined execution, continued growth from Take 5, strong cash generation from the franchise segment and achieving our target of reducing net leverage to 3x by year-end. Mike will walk through the details, but at a high level, we expect revenue of approximately $1.95 billion to $2.05 billion, approximately $430 million to $460 million in adjusted EBITDA.

Importantly, that includes approximately $35 million to $45 million of restatement-related nonrecurring costs and excludes International Car Wash. Same-store sales growth in the range of flat to 2% and approximately 160 to 190 net new units. I'd like to close with a few key takeaways. 2025 was a foundational year for Driven Brands. We delivered on our business commitments, growth from Take 5, strong cash generation from our franchise businesses, portfolio simplification and meaningful deleveraging. We also addressed prior period accounting issues through a comprehensive restatement, and we are implementing stronger financial controls, improved systems and a more disciplined financial foundation.

Looking ahead, our focus remains firmly on executing our growth and cash strategy. We expect another year of strong growth led by Take 5, and we'll deploy the cash we generate to achieve our targeted 3x net leverage by year-end 2026. I want to thank our 7,100 Driven Brands team members and our franchise partners for their commitment and execution throughout 2025. Their focus on delighting our customers every day is what drives our results. With that, I'll turn it over to my partner and Driven CFO, Mike.

Thank you, Danny, and good morning, everyone. Today, we are reporting our fiscal Q4 and full year 2025 results and filing our restated financial statements for fiscal years 2023 and 2024. I'd like to start by echoing Danny and thanking our investors for their patience throughout this process. As Danny noted, once we identified a restatement was necessary, we initiated a comprehensive review of our historical accounts across our financial statements to identify and incorporate all necessary adjustments. Given the scope of that review and the fact that findings evolved as the work progressed, we believed it would have been premature to provide interim updates that could later prove incomplete or inaccurate. The priority for the company and for our investors was to deliver financial information that is accurate, complete and provides a solid foundation for the company to move forward.

In April, once we had sufficient visibility, we provided preliminary unaudited results. Today, we are filing our complete restated financials. With that, let me walk you through the primary restatement topics and the actions we've taken to date. A common theme across many of these items was the need for additional accounting resources, particularly with an appropriate level of technical accounting knowledge and experience, including knowledge in establishing effective internal controls. We have already begun strengthening the organization through a combination of targeted hires and external support. As mentioned in our initial 8-K in late February, the restatement primarily impacts 2023 and prior periods and relates to the following areas: Cash. Cash and cash equivalents, as stated on our balance sheet were overstated dating back to 2022.

A majority of this overstatement occurred at AGN in 2022 and 2023 and was the result of 12 acquisitions with different ERP systems during a time when our back-office processes did not keep pace with our rapid expansion. It is important to note that there was no impact on actual cash leaving the company, but rather the reporting of cash balances on the balance sheet following our acquisitions. With the correction of the historical balances, cash reported on the balance sheet now appropriately reflects cash in the business. Leases. Lease-related right-of-use assets and right-of-use liabilities were understated dating back to at least 2023, primarily driven by incorrect lease details in our lease database. As part of our year-end close process, we undertook a thorough review of our existing leases and have been implementing process improvements to better monitor new and modified leases.

Operating expense classification. Within operating expenses, certain costs were misclassified between company-operated store expenses and supply and other expenses in 2023 and 2024. This correction did not impact total operating expenses, operating income or segment level profitability in any period. Starting in 2025, we removed the intercompany upcharge that drove this initial misapplication. In addition to those 3 topics addressed in the February 8-K, our comprehensive management review identified 2 additional significant areas, accounts payable. When we launched our new digital platform for Driven Advantage, our internal marketplace in 2023, technology integrations between the new ordering platform and our prior ERP were not correctly established. This issue was largely addressed with the rollout of Oracle in mid-2024. But during this restatement, we identified incorrect manual journal entries that were made in 2023. The impact of these incorrect entries resulted in an understatement of accounts payable. Correcting this understatement increased COGS for Take 5 in 2023.

Accounts receivable. As part of the restatement process, we conducted a thorough retesting of our accounts receivable balances. As part of this retesting, we identified historical balances that should have been reserved for in 2023, duplicated AR amounts as part of our Oracle transition and a misapplication of certain credit balances. Our quarter end processes now include a robust evaluation of reserve amounts and the operational steps necessary to collect outstanding balances. In addition to these items, we identified other adjustments that were quantitatively insignificant individually and in the aggregate, but are reflected in the restated financials. The full impact of these adjustments on the income statement and statement of cash flows for the full year 2023 and 2024 and the balance sheet as of year-end 2024 are included in today's earnings release.

Additionally, this annual detail plus quarterly detail for 2024 and 2025 will be included in Notes 3 and 19 of the 10-K that we are filing this afternoon. The restatement impacts to adjusted EBITDA are as follows: 2023, a decrease of $57 million; 2024, a decrease of $12 million; 2025 year-to-date through September, a decrease of $8 million. In addition, retained earnings decreased $32 million from restatement impacts that occurred in 2022 and earlier periods. As a reminder, in addition to the restatement impacts, the resegmentation and discontinued operations of both our international and U.S. Car Wash businesses also impact previously reported adjusted EBITDA for these periods.

We identified this restatement now for several reasons. 2025 was our first full fiscal year with Oracle as well as my first full fiscal year at Driven. We implemented additional accounting procedures tied to both the divestiture of our Car Wash businesses and the ensuing resegmentation. We hired a new Chief Accounting Officer in April 2025, who has been instrumental in driving process improvement, higher expectations and better execution across our organization. Our CAO joins a complement of other strong finance leaders who have joined us over the last 18 months across tax, AR and AP, internal audit, treasury and Investor Relations to give us the leadership we need to continue making the necessary foundational improvements. By strengthening our finance function, 2025 was a foundational year for the company. We simplified our portfolio through the divestiture of our Car Wash businesses, streamlined our segment reporting to provide better visibility into each business and significantly deleveraged our balance sheet, reducing pro forma net leverage to 3.3x.

These actions have positioned us as a more focused company centered on nondiscretionary services in North America with enhanced balance sheet flexibility. With the divestiture of the Car Wash segment, we are reporting Auto Glass Now as a stand-alone segment. Moving forward, our 3 reportable segments are Take 5, Franchise Brands and Auto Glass Now. As a reminder, with the divestiture of both our U.S. and international Car Wash businesses, the results for those business are included in discontinued operations and are not included in quarterly or annual financial details provided today unless otherwise noted. Turning to our financial results for Q4. Driven recorded same-store sales growth of 0.5% and added 81 net new units. System-wide sales for the company grew 2.1% in Q4 to $1.5 billion.

Total revenue for Q4 was $460.1 million, an increase of 7.7% year-over-year. Q4 operating expenses decreased $29.5 million year-over-year, driven by lower stock and performance-based compensation, lower bad debt expense in Q4 of this year and lapping losses in Q4 of 2024 related to the divestitures of PH Vitres and U.S. Car Wash assets. Operating income increased $62.4 million to $78.2 million in Q4, driven by higher revenue and lower SG&A. Adjusted EBITDA increased 7.3% to $111.9 million for the quarter. Adjusted EBITDA margin for Q4 was 24.3%. Interest expense declined $7.4 million to $28.6 million, driven primarily by ongoing debt paydown. Income tax expense for the quarter was $7.9 million. Net income from continuing operations for the quarter was $40.7 million. Adjusted net income from continuing operations for the quarter was $56.4 million.

Adjusted diluted EPS for Q4 was $0.34. Q4 performance for each of our segments include: Take 5 grew same-store sales 3.7% in Q4. Take 5 added 60 net new units in the quarter, continuing to execute against a deep pipeline of both franchise and corporate new units. Adjusted EBITDA grew 8.4% to $107.3 million. Franchise Brands recorded a 1% decline in same-store sales, driven by continued softness in the broader collision industry. Adjusted EBITDA was $42.4 million in Q4, a decrease of $0.2 million. We added 23 net new units in Q4, demonstrating the continued interest in our franchise concepts despite lower sales in 2025. Auto Glass Now reported same-store sales growth of 6.3% in Q4 as we saw sequential growth across our retail, commercial and insurance business. Adjusted EBITDA decreased $0.4 million to $3.2 million, driven by higher performance-based compensation in Q4 2025.

Turning to our full year income statement results. System-wide sales grew 2.7% to $6.1 billion, reflecting same-store sales growth of 1% and net new unit growth of 175 units or 4.3% Revenue grew 6.3% to $1.9 billion. Operating expenses increased to $1.6 billion, driven primarily by higher company-owned store expenses and increased SG&A. Operating income increased $31.3 million to $231.1 million. Adjusted EBITDA grew 1.3% to $449.1 million. Pro forma for the divestiture of PH Vitres in 2024, adjusted EBITDA grew 3.7%. Net income from continuing operations was $132.1 million. Adjusted net income from continuing operations was $199.2 million. Diluted EPS from continuing operations was $0.80. Adjusted diluted EPS from continuing operations was $1.21.

Full year performance for each of our segments include Take 5 grew same-store sales 6.2% in 2025. Take 5 added 161 new units, 94 company-owned stores and 67 franchise stores. Total revenue increased 13.6% to $1.2 billion, driven by increases in same-store sales and unit count. Adjusted EBITDA grew 10.1% to $418.7 million. Adjusted EBITDA margin was 34.4%, in line with our expectation of Take 5 as a mid-30s adjusted EBITDA margin business. Franchise Brands reported a 1.1% decline in same-store sales, driven by softness in the broader collision industry in our most discretionary business, makeup. This segment added 20 net new units in 2025 across a combination of Meineke, Uniban and our Collision brands. Revenue declined 3.5% year-over-year. Adjusted EBITDA was $178.8 million for 2025, a decline of $11.9 million, driven primarily by the decline in revenue.

Adjusted EBITDA margin was 62.7%, continuing the segment's role as a high-margin cash generator. Auto Glass Now reported same-store sales growth of 7.9% in 2025. Adjusted EBITDA grew $13.3 million, driven by the increase in same-store sales and a better focus on store level operating performance. Adjusted EBITDA margin of 10% increased 470 basis points from 2024, driven by operating leverage from increased sales and better cost discipline at store level. Turning to cash flow and leverage. Our cash flow statement shows a consolidated view of cash flow, inclusive of discontinued operations. For the full year, net capital expenditures were $149.7 million, of which approximately $25 million was related to our International Car Wash business and $5 million was related to our U.S. Car Wash business. Full year free cash flow, defined as operating cash flow less net capital expenditures was $180.9 million, an increase of $174.2 million over 2024.

We ended Q4 with a net debt to adjusted EBITDA ratio of 3.7x, reflecting net debt paydown of $58.7 million in the quarter. In January, we used proceeds from the sale of our International Car Wash business to fully extinguish our 2019-2 senior notes, make an $80 million prepayment to our 2020-1 senior notes and pay down our revolving credit facility to 0, more than $470 million of debt repaid in total. Pro forma for the transaction, our net leverage ratio is 3.3x, and our outstanding debt is 100% securitized fixed rate debt with a weighted average interest rate of 4.3%.

I'd now like to provide our outlook for fiscal year 2026, along with preliminary Q1 results. For the full year, we expect revenue of $1.95 billion to $2.05. Adjusted EBITDA $430 million to $460 million. This number includes between $35 million to $45 million of estimated nonrecurring restatement costs that we do not intend to add back to adjusted EBITDA in 2026. Adjusted diluted EPS of $1.15 to $1.25. In addition, we are providing additional color on other important operating metrics for fiscal year 2026. Same-store sales of flat to 2%, net store growth between 160 and 190 units, net capital expenditures of approximately 6.5% of revenue. Approximately 60% of our net CapEx will support Take 5 company-operated unit growth in targeted markets. The remaining 40% covers maintenance capital for existing Take 5 and AGM locations and general corporate purposes. Interest expense of roughly $90 million, reflecting lower debt balances, effective annual tax rate of 26% to 27%.

Our outlook reflects a range of outcomes from Collision and Maaco given the recent softness, continued growth in AGN and some moderation in growth in Take 5 reflective of post Q1 trends. While our overall distribution remains largely similar despite our portfolio changes, the additional costs related to our restatement work will impact Q1 and Q2 more heavily, and therefore, we expect the first half to contribute less than 50% of our adjusted EBITDA for 2026. With these assumptions, we expect to generate between $125 million and $145 million of free cash flow in 2026. We will continue to direct that cash toward debt reduction and maintain our focus on achieving 3x net leverage by the end of 2026. While we are working to report Q1 results as efficiently as possible, we will require additional time to complete and file our 10-Q.

With that, as previously disclosed in our April 21 release, I'd like to provide a few preliminary Q1 financial metrics that we currently expect to report. Same-store sales between 1.9% and 2.1% for consolidated Driven with Take 5 same-store sales between 4.3% and 4.5%. Revenue between $475 million and $485 million. Adjusted EBITDA, while we are still reviewing adjusted EBITDA, we expect Q1 to be moderately lower year-over-year driven by the increased corporate expenses from our financial restatement. As we close the book on 2025 and exit the first quarter of 2026, we are focused on strengthening our foundation, driving growth and managing our portfolio of brands and capital allocation policy in a way that delivers value to our shareholders. Danny and I will be speaking with investors over the next few days before we step back prior to our Q1 earnings call. With that, I will now turn it over to the operator, and we are happy to take your questions.

[Operator Instructions] Your first question comes from the line of Phillip Blee of William Blair.

So the midpoint of your comp guide assumes a deceleration throughout the remainder of the year after the first quarter. And then you spoke a bit about a subsequent slowdown in trends. Is that more of a function of more difficult comparisons? Or do you think it's more attributable to the macro? Or is there something else in the underlying business that we should be considering here?

Phil, good to talk to you. A couple of different things to unpack there. I think consolidated driven and then probably a couple of the specific drivers. So we did have a decent Q1 across both consolidated and the Take 5 number. That said, we want -- we continue to be conservative in our approach towards the Collision and the Maaco businesses, just given the industry challenges we've seen there. As a reminder, for our collision business, that overweights towards our same-store sales growth calculation given the amount of system sales that go there. And so goes Collision goes -- the overall consolidated driven comp. From a Take 5 perspective, I would say Q1 is kind of right in line on a 2-year stack from what you're seeing given the tougher lap we had in Q1 of last year. But as I mentioned in my comment, we have seen a little bit of moderation headed post Q1 into Q2 of this year.

Yes. And Phillip, this is Danny. Just to kind of elaborate on the moderation a little bit. Specifically with Take 5, we're seeing a little bit of moderation in traffic coming into this year. And that's really with 2 specific cohorts of customers, a little bit with newer customers and then with more value-oriented customers. So super important for us. We're very focused on making sure that we're focused on our value proposition. We believe and we know that we win when we're the fastest, friendliest and simplest oil change on the planet. And so the team is really focused on value proposition and focusing on long-term customer relationships.

Okay. That's very helpful color. I appreciate that. And then just a quick follow-up on the EBITDA piece. So you touched a bit about it on the prepared remarks. But when looking at the year-over-year decline in the adjusted EBITDA margin outlook, can you provide maybe a bit more color on what is more accounting change related versus incremental costs related to recurring remediation efforts or then potentially higher input costs now with the volatile macro or anything else big that we should be considering? I guess what I'm trying to get at, is this the new baseline? Or is this sort of kind of a one-off year and then kind of returning back to normal?

Yes, absolutely. I mean I would say where we are today, we view it more of the latter, which is that $430 million to $460 million incorporates $35 million to $45 million of restatement costs that we view as nonrecurring. Now obviously, as we talk about building some of the team, we will hire some additional folks, but we expect to be able to drive efficiencies with a continued complement of additional accounting resources. But that $35 million to $45 million, which we're laying out here today to provide that clarity for the investor community, we also will, every quarter, give an update of how much we've spent quarter-by-quarter so that those who want to use that as a pro forma can.

As we looked at it, we believe that the costs to incur appropriate financials are best embedded in the adjusted EBITDA, but we want to be as transparent as we can. So as for now, we view $35 million to $45 million, that's 2026 expense that we don't see recurring once we get into 2027.

Your next question comes from the line of Brian McNamara of Canaccord Genuity.

A bit of a follow-up to the first question. I wanted to drill down on competitive intensity in oil change. So I think for the 12 quarters prior to Q4, Take 5 materially outperformed its larger public peer, but that reversed in Q4 and now Q1 where it's expected to underperform in concept by nearly 400 bps. So what's driving that? Is that simply just taking the eye off the ball while prioritizing the restatement of financials? Is it macro? I know you had used the term choppiness to characterize demand last year and this competitor did not. And you just -- obviously just mentioned the value proposition answering the prior question.

Yes. Brian, it's Danny. Look, I'd say, first off, Q1, we're looking to come in at about 4.3% to 4.5%. That's about 12.5%-ish on a 2-year basis. So if you look at the 2-year stacks, we continue to feel quite good, and we think our performance is solid. As I did mention a second ago, I mean, we are seeing a bit of moderation in traffic with Take 5 coming into 2026. We're seeing that moderation in 2 specific cohorts, newer customers and more value-oriented customers. So one hot day doesn't make a summer, but we're seeing that moderation right now, and the team is taking obviously the appropriate actions. For us, it's all about just the value proposition and making sure that we're delivering to our customers a great experience. Our NPS scores remain high in the high 70s, but really doubling down on making sure we're the fastest, friendliest and simplest oil chain on the planet and making sure that we're focused on the long term and not on the short term.

Your next question comes from the line of Simeon Gutman of Morgan Stanley.

This is Skylar Tennant on for Simeon Gutman. So the 1% comp outlook for '26, could you decompose the contribution from each business? And then if Take 5 is growing that may imply that franchise and AGN are slowing. So can you speak to why that may be happening?

Yes. Well, so I'd start by just saying it's not 1%, it's a flat to 2%, right? We give a range just because there are some variations there. As I mentioned on the earlier question, one of the unique aspects of Driven is our Collision business outweighs the impact on same-store sales versus profit given the royalty structure we have there. So if you think about what would drive to the low end of the range, it would be continued pressure on the overall collision industry. We are one of the largest players in the Collision industry. We believe we are taking share and outperforming the industry as a whole. But when the industry is soft, that does mean we end up coming down towards the lower end of the range.

We've also talked for several quarters Maaco, which has sequentially improved, but also is our most discretionary business. And so faces some pressure and at the low end of the range may continue to face some pressure. Danny mentioned this in his comments, AGN is an incubation period. It's still slow, but we expect that business to grow. So I wouldn't read anything into no sales growth at AGN. It's also a very small business. And so even significant growth at AGN will contribute modestly to the overall same-store sales growth. And then you get Take 5. As we mentioned, we were in the mid-single digits of Q1. As Danny mentioned, that's a very strong 2-year stack given the strong Q1 of last year. And even with a little bit of moderation post Q1, we still feel very good about the long-term trajectory of that business. So I think that's kind of how I would break out the flat to the 2%. A lot of it depends on kind of where the Collision industry goes given the outweighing and then our ability to continue to round up on Take 5 versus some of the pressure we've currently seen.

Okay. Great. And then on the EBITDA, if we adjust that $40 million nonrecurring cost at the midpoint, it implies that next year, EBITDA would be up about $35 million. So can you just break out where that growth is coming from?

Yes. I'm not quick enough this morning to do your exact math on the $35 million pro forma, but I'll take your word for it. So I think -- look, I mean, I think it's a lot of things. I think, one, we expect to see mid-single-digit growth for Take 5 going forward and in general, sales growth across our business, right? Take 5 continues to grow. We're adding new stores. We continue to see comp growth in that business and flow it through the bottom line.

AGN continues to be a good growth platform. And then Franchise Brands, I don't want to say regardless of its sales trajectory, but whether it's up a couple of hundred basis points or down still flows through strong profit. And so to some degree, it's just the continuation of the Driven platform, highlighting the features of our sales growth across our various brands and then working hard to be efficient on our G&A and make sure that flows through to the bottom line.

Your next question comes from the line of Mark Jordan of Goldman Sachs.

Just a quick one here on Take 5. With everything going on, can you talk about your current supply of oil? Any concerns you might have regarding ability to secure oil going forward? And maybe what levers you have to pull to offset these higher costs you're seeing?

Yes. I mean, in a word, no. Not concerned. We have very good relationships with our partners. We have over a month's worth of supply more than that, and we're in constant communication with those partners. So not worried. As you would expect any organization in this environment, we've got several people focused on this on a daily basis to make sure that stays the case. But no concerns at this point about our availability of supply.

Mark, the only thing that I would add is Driven scale matters in times like these, right? So we buy a lot of oil. And so we tend to be, thanks to our contractual arrangements, first to trough and have really good procurement team. So we feel really good right now.

Okay. Perfect. And then one quick kind of unrelated follow-up. But on the collision space, we talked about some variability in the outlook for the rest of the year. I think if we think outside of Maaco, the rest of the business, underlying trends in Collision repair got much better in '25. The first quarter looks like kind of repairable claims industry were in a normalized range. I guess what does your outlook assume for the rest of the year? Is it just some concerns noting that there's some more challenging macro? Or is it something specific to collision repair you're thinking about?

No. I mean, I think you've kind of highlighted it well, right? So if I think about 2025, estimates were down high single digits. It got progressively better throughout the year, and that momentum has continued into Q1. So sitting here today, it seems like the industry is normalizing. We continue to outperform the industry at large based on all the metrics and data that we see here, anywhere between kind of 100 to 300 basis points ahead of the industry. So I think those 2 things, we've seen normalization of the industry through the beginning of the year, I think that, that will continue through 2026, and we certainly expect to continue to outperform the industry as we have been historically.

[Operator Instructions] Your next question comes from the line of Marvin Fong of BTIG.

Just a follow-up on the Take 5 guidance. I think it has been mentioned that elsewhere in the industry that some pricing pass-through ahead of motor oil baseline fuel increases have been occurring. I was just wondering if you're seeing that in your system, either from your franchisees or through your own company store actions. And then I have a follow-up.

Yes. I mean, look, franchisees, we do not control directly franchisee pricing. So they can -- they will take or ebb on pricing as they see fit in their current markets. From a kind of system-wide level, our corporate stores sitting here today through the first quarter, we have not taken any price increases. As we go through the remainder of the year and we see what our input costs are vis-a-vis our suppliers, we will take the appropriate actions over time. But sitting here today through Q1, we haven't taken any systemic or corporate-wide pricing increases.

Okay. Great. And then just a follow-up on corporate overhead, taking some investor questions on this. So just maybe you could just double-click on that expense line for some investors that may see it as an opportunity for some further cost efficiencies. Is that an area where you might see some additional opportunities to kind of decrease that expense line?

Yes. Marvin, absolutely. I'll take that. So let me answer that in a couple of different ways. I think first and foremost, stepping back, we view SG&A as a percentage of system-wide sales as the best metric to view efficiency. Doing that, we think, helps normalize for different ownership structures, company-owned versus franchise. And given the diversity and the breadth of the Driven platform and the different royalty structures and everything else that comes into play, that helps kind of normalize for the various revenue generation from a royalty and other revenue drivers as well as the ownership. And so that's how we tend to think about that from an efficiency perspective.

I think that said, if you take a step back and look at how that has performed, it has ticked up modestly over the last couple of years. And there's a couple of drivers there, right? I think first, in the '25 SG&A number, you've got, call it, $40 million that's related to the portfolio management activities over the last 18 months, everything from the loss on the sale of the seller note, various professional fees related to the preparation and execution of the various transactions we've had and some write-offs from the various fixed assets and assets held for sale. So while that is real expense that has to flow through the P&L, that is far more tied to the portfolio management activities we have been taking over the last couple of years as opposed to true dollars for hands-on keyboards. That said, there have been some underlying investments we've made. We talked about this in the prepared remarks. We've invested in new ERP systems, both for our HR team and for Oracle, which we've obviously mentioned several times in the prepared remarks as being a catalyst for helping us make sure we improve our accounting infrastructure.

And then I mentioned a couple of times, investments in new leadership under my organization to make sure we have that right complement of resources. So I think there is always an opportunity for any organization. I'm not sure any organization should say they're totally comfortable. We will continue to find ways to drive efficiency. Part of the underlying pro forma growth for us is baked on making sure that the sales growth we have flows through the bottom line. But I also think there's a couple of reasons why that number may appear higher than you'd otherwise normally think. So we'll remain focused on it, but some of it is just investment in the business because we want to make sure we get the most out of Driven.

Your next question comes from the line of Robby Ohmes of Bank of America.

Just a quick one. Any -- you probably can't answer this, but any color on strategy changes contemplated during this process in terms of either the outlook on M&A or divestitures from here that you can comment on?

Robby, it's Danny. So look, I guess the way I'd answer that question is Mike and I have said historically that we're going to be active portfolio managers. More than saying it, we've acted on that, right? So we've divested 3 companies in the last 18 months. We view portfolio management as one of the levers at our disposal to make sure that we're driving long-term shareholder value. And we will continue to be active portfolio managers towards that end, right? So I'd say from an M&A perspective, that's our stance. From a strategy perspective, nothing has changed. So the way that I think about our long-term strategy is really 2 things that we're focused on. Number one is driving growth in cash. So we've talked about this historically. Growth is really about Take 5 and making sure that, that continues to be the growth engine that it has been for Driven Brands for some time.

As it relates to franchise, it's really -- that's the cash side of the equation, right? So it's really about generating robust cash flow and making sure that we have nice healthy margins, which we've been able to do. So that's one thing that we're focused on from a strategy perspective. And then the second one is we want to be disciplined allocators of capital, right? And for us, what that means is really 3 things. Number one, we want to fund Take 5. Number two, we want to continue to pay down debt and get to the 3x net leverage that we've set out. And number three, we want to be disciplined about the portfolio, and we want to make sure that we stay focused on nondiscretionary North American automotive services businesses.

Your next question comes from the line of Chris O'Cull of Stifel.

This is Patrick on for Chris. Danny, I had a quick follow-up on lubricant supply. Is there a force majeure clause in your contract that allows you to source alternative lubricants if you were to be in an event where your primary supplier couldn't meet its obligations?

Patrick, I appreciate the question, but I'm not going to disclose what's in our contracts here publicly.

Okay. And then I guess my main question is just on waste oil. I'm curious if you guys have seen signs the value of waste oil is moving up? And to what extent do you anticipate that to serve as an offset to rising lubricant prices? And Mike, is there any way to sensitize the impact to company margin or the ticket increase needed to offset an increase in lubricant prices to help us understand the impact?

Yes. So there's a couple of different embedded questions in there, Patrick. I'll try to tease them out if I can follow them all. So to your first question, yes, as oil prices go, so goes oil reclamation. That actually was a bit of a headwind on the Take 5 margin in 2025 as we saw some oil reclamation give back in our flow-through. And as oil prices go up, we would expect that to offset a little bit in 2026 here given the increase in oil prices. I don't think I'm going to get into specific dollar amounts other than to say we have historically had the ability to cover price increases. I think just as an aside, an increase in $1 of a barrel of oil does not necessarily flow through 1:1 for cost, right?

Base oil price is at most 50% of the cost of oil that goes into what we sell and that because it covers everything from the other additives, the shipping, the storage and everything else. And so while base oil prices do contribute to COGS, it's not the sole driver of COGS. So like while that is an input, it's not the only input. And that, therefore, gives us some flexibility to figure out how we can, if we choose to pass along price. Obviously, we also sell a lot of different types of oil. And so there's some flexibility in how we think about that as well. So given we're in a nondiscretionary category, given we have such a high reputation in the market, we take that seriously, and we want to make sure we think about that prudently. But we feel comfortable with the levers we have to manage input cost pressure should we see it.

Your next question comes from the line of Tristan Thomas-Martin with BMO Capital Markets.

Just one kind of follow-up clarification question for Danny. When you called out moderation in new and value-oriented customers, was that across all businesses? And was that only about '25? Or are you also seeing that in '26?

So that comment was specific to our Take 5 business, and it was specific coming into 2026. What I would say generally, I mean, each one of our industries performed slightly different, right? So those are the comments on Take 5. I should note that there's 2 sides to the sales equation with Take 5. There's traffic, which is what the comment is based on, but there's also average check. And we continue to see very strong average check for us, and we continue to be very good at driving non-oil change revenue, and that continues to be a strength. The other industries are slightly different, right? We talked earlier about collision and how 2025, that business estimates were down kind of high single digits and how that improved through the back half of the year and that improvement and that normalization we've seen continue into '26.

If we look at the Meineke business, Meineke actually had a strong '25 and continues that strength into '26. And if we look at the Maaco business, which is our most discretionary business sitting here today, that business saw some softness last year. That softness has continued into the beginning of '26, although the retail side of that business, we have seen a bit of a trajectory change here recently. So a little bit of a mixed bag depending on which part of the business you're talking about. I think if we take a step back, growth in cash is very much still on the table and Take 5 in the long term continues to be a great growth engine for Driven Brands.

Just a quick follow-up. What do you think is driving that kind of the -- I don't want to call it a rebound, but maybe the inflection in makeup following the softness?

Yes. I mean I can tell you from what we're seeing internally, it's -- a lot of it is just execution of our team, right? So at the end of the day, we've really doubled down on efforts on the leads that are in front of us. Retail leads are very actionable leads. We're focused on making sure that we're actioning those leads. We're taking those calls. We're focused on our call scripts. We're focused on our sales process. So I'd say, certainly, at least part of the change in trajectory on the retail side has been better operational execution on our side.

Thank you. I would now like to hand the call back to the management for closing remarks.

Great. Thank you, Ellie. We want to thank you again for your patience as we work through the restatement with the rigor and accuracy that it required. As we close the call, there are a few key points I want to leave you with. First, we have a stronger foundation. We've invested in and we'll continue to invest in our leadership, our systems and our processes across Driven. Second, we have a simpler and more focused business. Through disciplined portfolio management, we've created a business centered on nondiscretionary automotive services in North America. Third, the business continues to execute against our growth and cash strategy. Adjusted EBITDA grew 7% in Q4 and pro forma for the PH Vitres divestiture, adjusted EBITDA grew 4% for the full year. Again, we thank you for your time today.

Thank you for attending today's call. You may now disconnect. Goodbye.

Hi, everyone. It's Simeon Gutman. I'm Morgan Stanley's hardline, broadline and food retail analyst. We're in the home stretch and we get treated by Driven Brands, represented by Danny Rivera, President and CEO; Mike Diamond, Executive VP and CFO.

I'm just going to grab my disclosures real quick. I'm going to read disclosures, make a very quick introduction and then ask the first question. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

This -- I guess it's rare where companies have transformation almost at this conference. This is an example of a minor but important transformation that I think the market has been waiting for a cluster of brands that are all leading in their subsegments. There was some growth challenges in one part of this business, and it actually led to a little bit of maybe a bloated balance sheet, which has been slowly getting cleaned up, and this feels like the last step. So without taking the thunder, I want to talk about the announcement you made today and then I'll sit down and ask the first question.

Thank you. Yes. So to Simeon's point, he was -- well, first and foremost, thank you for the invite. Mike and I love being here talking about Driven. So yes, we sold our U.S. -- our international car wash business. And I think -- so if you take several steps back, right, what we've been saying about Driven for a long time is Driven, growth in cash. And so we are at our best, ultimately, when we operate within that framework, right? And if you look at the U.S. car wash business and the international car wash business, both of which we sold over the course of the last year, neither one of those businesses neatly fit into either one of those buckets, right?

Neither one rightly was a growth business. Neither one rightly was a cash business. You can make an argument that CWI, the international car wash business may be more neatly fit into a cash business. It's a good business. It has a nice margin profile to that business. But contextually, when you compare that business to our franchise businesses, it really doesn't align. You're talking margins that are north of 60%.

The second thing is we used to say that the international car wash business was a franchise-like business, and that's fairly accurate. However, it is not asset-light. So that is -- those are our buildings. We do have to deploy our capital. And so ultimately, again, if you go back to growth in cash, that's what we want to center driven around. That's what we've been talking about. These moves, combined with things like the resegmentation that we did earlier in the year, just take the strategy and take the portfolio. It takes how we manifest the business in terms of reporting and aligns into that strategy and lets us focus our attention and our capital on our core.

Can we do a very fast forward to capital structure then in leverage because this piece, I don't know if it culminates in where you want to get the leverage of the business down to, but can you talk about it?

Yes, absolutely. So I mean, I would start with a couple of things. We remain committed to getting down to 3x net leverage by the end of 2026. This obviously helps accelerate that. We were going to get that regardless of this deal, but this helps accelerate it. We estimate the pro forma impact about 0.3x from a leverage perspective once this deal is finally closed.

One of the many advantages, Danny mentioned the strategic, I think always good to have the cash on the balance sheet. We will use that to pay down debt. We've got some outstanding revolver and some upcoming securitization maturities that we'll use once we have the cash in hand. First and foremost, we're going to get down to 3x. We recognize that's an important metric for many investors. We think it's important to demonstrate with credibility that we will do what we say in terms of getting down there.

Danny and I are having active conversations now around what happens once we get there. But we don't want to confuse the message. Like this helps us accelerate the path there. We remain committed to getting down to 3x. And as we get much closer to that 3x, we'll start sharing kind of what we think we're going to do from a capital allocation perspective after.

And since you sold the U.S. car wash. Danny, you've been spending a lot of time on international or this was already somewhat put aside.

So international actually funnily enough rolled up on Mike. So Mike got the pleasure of working with that business.

So again, it's a great business. I don't mind going to Europe occasionally. So it's fun to go over there. It is a good business with a good management team that -- well run, kind of being able to run by itself, which is why it's a perfect transition to a financial buyer. But it's good for all of us to be able to focus our attention on our core North American nondiscretionary services that, as Danny mentioned, fits more closely into the growth in cash framework.

So growth in cash framework, can you -- so since we last spoke or met on this stage, leadership transitions, there's been some additional under you. And obviously, we had asset sales. We just culminated with the big one. So can you talk about, I guess, besides growth and cash vision for the brand, structure of the business?

Yes. I mean -- but I think it's important. So the vision for the brand is anchored in growth in cash, right, maybe to unpack that for a second. So growth for us is Take 5. Amazing oil change business. To give some historical context, we bought that business back in 2016. At the time, it was 40-ish units, mostly outside of New Orleans or around New Orleans, 100% company-owned business. You fast-forward 9 years. You're talking 1,350-ish locations, 40% of which are franchised, just an amazing scaled, rapidly growing business. So growth is all around just continuing to take this amazing asset that is Take 5 and continuing to blow it out and grow the way that we have been.

And then cash is all about our franchise businesses, right? So as Mike alluded to, so you're talking about North American iconic scaled franchise locations across a couple of different industries that have been around some of them. I mean if you look at Meineke and Maaco have been around for over 55 years at this point. So these are businesses that are very steady -- we have an amazing group of franchisees. And so when you think about the vision of driven, it's really returning to what got us where we are, which is we are operators of simple, great businesses in North America, and it's all about that kind of growth and cash perspective.

If we have the timing right, you've been CEO for now 1.5. What has surprised you. I think your priorities are clear, but in case we missed any of the priorities within that, if you canreiterate.

Yes. It hasn't been 1.5 years yet. It hasn't been a year yet. But the more important thing is, look, I've been with the business for, gosh, over 13 years at this point. I ran the Meineke business personally. I ran the Take 5 business personally. I had all the segments reporting up to me when I was COO. So after 13 years, I mean, very little is going to surprise me at this point about Driven. I mean, I bleed red, yellow and black, which is our colors. So very little is going to surprise me.

What I would say is what continues to energize me as we have an amazing team, talented group of individuals, both at the corporate side and then we have amazing franchisees that we work with, right? So it's just a really, really good group of people.

As far as the priorities, the priorities for me really haven't changed, and I'm going to say growth in cash over and over again because it is what we're centered on, right? So priority #1 is to continue to deliver growth in cash. Take 5, we've committed to growing that business. We are growing that business. We'll continue to open 150-plus locations a year. We're going to continue to grow 4-wall EBITDA. We're going to continue to grow in terms of sales, whether it's car count, whether it's check, so we'll continue to grow that business. continuing to grow our franchise portfolio, that should be ultimately low single-digit grower. Margins need to be in excess of 60%, which we've talked about, and we'll continue to do that.

So that's priority number one, growth in cash. Priority number 2, as Mike already alluded to a second ago is delevering the balance sheet, which we've been doing.

So the business has generated a 19th consecutive quarter of positive comp growth. Can you talk about the continuity of that? Talked a little bit about what the growth engines are, but how do the stable of businesses together continue to let that be positive?

Yes. And I think not only 19 overall, but Take 5 is on its 21st quarter of same-store sales growth. So it's a combination of both the overall business and just the powerhouse of Take 5. I think, look, it speaks to the to the benefit of being in a nondiscretionary category and the fact that we serve an asset, someone's car that is really important to them and critical to them, kind of independent of the overall economic cycles.

If you think about Take 5, we've got tremendous tailwinds across both the ticket and the traffic. From a ticket perspective, increased premiumization of oil the additional non-oil change services now north of 25%. We just rolled out another service differentials, attachment rates are still low for that service, and we have a pipeline of other services we can add over time that provide natural tailwinds.

From a traffic perspective, we continue to see new unit ramps over the first 3 years that provide continued tailwinds. And as the business continues to grow, we add units, we have mid-single-digit comps. We have a bigger marketing fund that helps us drive increased awareness and both kind of big level awareness and then small level activation to get people into the shops.

For the rest of the business, I think it speaks to the nature of the diversified portfolio. You think about like the Meinekes, which have done really well. And then even some of our other brands that have been under pressure over the last year in the Maacos or the Collision World. Maaco as a category of one. It's very well differentiated with a strong market recognition. And even Collision, we're one of the market leaders, and so we outperformed the overall market. And so you put it all together, and I think not only with the growth in cash, we're able to drive growth from many of our brands. And then with that, by making sure we're really focused on how we spend our capital. We generate a lot of CapEx -- sorry, a lot of cash flow given the modest CapEx, which helps us continue to delever the balance sheet.

On the near term, the word choppy was used a handful of times on the prior conference call. Can you describe if you can, what you're seeing in the quarter, whether that top line choppiness is persisting? I had just come from a panel of a data provider, and we're talking about Black Friday, which apparently was a little weaker overall, but they said the one standout category was tire stores because the weather got cold somewhat quickly.

Yes, we did -- so I'd say, first and foremost, so we did mention on the last call, I would say, look, we had a great Q3. So Q3 was a strong quarter for us. Take 5 was up 7%. Our franchise segment was up 1%. So it was a good quarter. It's been a dynamic year overall. So the comment out Q4 and the choppiness that we we're seeing was -- Q4 was a little bit unique compared to the rest of the year where it's just -- I mean it's just the plain English definition of the word, up and down, right? I mean we -- if we look out a few Sundays ago, we had one of our best Sundays of the year. So we've had some really good days, but we've equally had some really bad days in terms of how the fourth quarter has looked.

It's a little hard sitting here today figuring out root cause, what happened in Q4 as of that call, right? There's a few new variables that got introduced, so you had a prolonged government shutdown, you have furloughed government employees, you've got at least the threat of income disruption for a bunch of Americans in terms of SNAP and programs like that. You put that all in the blender all at the same time, a likely outcome is going to be choppiness, right, as people start to think about maybe prolonging or putting off decisions.

The really nice thing when you take a step back and you go to Driven is, at the end of the day, this is need-based nondiscretionary services, right? So you may put off an oil change for a week, 2 weeks, 3 weeks, depending on certain macroeconomic events that are going on. But that oil lights still on, you still need that oil change. If your car doesn't start, you're going to need to do something about that. So we continue to see choppiness. The other good thing, I guess, is, as Mike and I reissued guidance for the quarter, we put all that choppiness into the blender when we looked at the numbers pretty long and hard, and we feel good about the guidance that we've put out.

Take 5, that's been the standout, the shiny object for this business. Can you talk about the growth aspirations, long-term unit growth, end goal? And then is there anything changing about the level of oil changers within the industry? I don't want to say the word saturation. It's not a Take 5 issue but an industry issue.

Yes. So nothing has changed in terms of our conviction around the business. If anything, there's more conviction around the business. It's an amazing business. As we think about number of units, our North Star has been for some time, and that hasn't changed is 2,500 units, right? So we think 2,500 units for Take 5 is ultimately doable. We think it's a matter of when, not if. And nothing has changed in that. We publicly stated we'll continue to open 150-plus locations a year, we opened 170 this last year. We'll continue down that trajectory. And so yes, it continues to just be a great business that we continue to put capital behind quite happily because the 4-wall economics are fantastic.

As we look at the overall industry, at the end of the day, there are a few players in the space. There are some really nice competitors out there that do a nice job. And I think about an industry where it's not a zero-sum game. I think there's plenty of white space for all of us to grow. We're in a meeting earlier today, and Mike probably said it like there's -- we'll be eating for a long time to come. We run a great business. It's a great model, and there's plenty of white space for everybody to play in the same sandbox.

You mentioned the maturation curve immature is a part of the growth equation, especially from Take 5. But there is a maturity slowing or deceleration over time as well. Can you put that any -- well, how significant does that mean like after the 3 years of ramp? And then you teed up a couple of initiatives. I'm going to get to some of these add-ons as well. But what can you do to offset that?

Yes. I mean, I would say some of it is just math. And so I don't know if you offset -- I think it's actually a feature, not a bug that we go from 900,000 AUV in year 1 to 1.4 million in year 3, if we can find a business that does that for the next 15 years, we probably should all go home and invest in that business. I think as you get to maturation, the beauty of our model, the oil change in general model is there are these tailwinds that are going to happen. When you think about premiumization, additional attach rate, I think the key on the new store maturation is we continue to see it even as we grow more stores, even as we get more scale. We continue to see this build from the 900,000 year 1 AUV to the 1.4 million.

The fact that once you get to year 3, you're mature isn't a problem because there still is this mid-single-digit growth potential both through increased marketing and awareness as we drive that forward as well as the other ticket, not even necessarily price, but ticket drivers related to the premiumization and the increased services.

Differential fluid services, can you talk about attach rates? How do you not harm the customer experience while driving that business?

Yes. So we recently rolled out differentials. We've been into it now for less -- at least nationally for less than 6 months. I'd say the rollout is going extremely well. The team is doing a phenomenal job from an execution perspective, not just the company-owned team but the franchisees as well and their teams just continue to do a great job.

From a cannibalization perspective, there's nothing material that we're seeing. It's operating as we would expect it to. NPS scores remain high. They remain steady, which means the customers ultimately like the service, number one; they want the service, number two; they're happy with the service that they're getting. So all in all, as we look at the rollout of differentials, I'd say it's going fantastically well.

The more important thing for me as I think about differentials is what differential stands for. It's not so much the service itself. The rollout is going great. We're happy with it. It's proof point that there are multiple growth levers to this business that we can pull, right?

So we've talked about net unit growth. We'll continue to open units, 150 plus, as we've already mentioned. We've proven historically that we can take the existing basket of services and we can continue to grow our attachment rates. When we bought the business, again, back in 2016, attachment rates were in the mid-30s. A few years ago, we're talking kind of low 40s, mid-40s, sitting here today, our attachment rates are in the low 50s. So we've continuously grown attachment, and we've proven that, that's another growth lever for the business. This now proves a third growth lever, which is not only can we grow the existing basket of services but we can successfully add a new service and grow that as well.

What is then the long-term vision for attachment rate and then the incremental revenue it could add to the model?

Yes. So look, I'm not going to sign a number to it. I would say, if you step back and you think about it, first and foremost, in terms of through the lens of the consumer through the lens of how we go to market, for me, it all starts there, right? So Take 5 is the home of the stay in your car 10 Minute Oil Change. That statement is both a promise to the consumer about how we're going to go to market and why they should consider us. But it's also a framework that governs the services that you can provide, right? So if you say you're going to be stay in your car to a minute oil change, well, you're not going to do brakes. Like in my lifetime, we're not going to do brakes because I ran the Meineke business, and you can't do brakes in a stay in your car 10 minute environment, right? That's a 45-minute to an hour to 1.5 hours kind of environment.

So how we go to market and the promise we've made puts a logical kind of ceiling on what the business can do. Now that being said, we offer 6 services today. Will we offer a seventh? Yes. An eighth, a 10th? Yes. There are more service that we will introduce over time. We have a pipeline of services. And so we will continue to I would say, methodically roll those services out. So you'll see us add services over time but there is a bit of logic that at the end of the day, governs what we do.

And are the largest attachments, so the #1 attachment, whatever, that is still #1 that has not lost #1 even as you rolled out additional?

That has not changed. No, the placement hasn't really changed. Technically, one of them has changed towards the lower end. We don't have to get into that level of detail. But generally speaking, what you're seeing is the same placement, it's just more attachment happening and then we're introducing you. So obviously, if you look at differential which is the newest, that's the lowest attachment. If nothing else, it's a brand new service for us.

We haven't gotten a question on electric vehicle in a while. I don't think new car dealers really care to sell them that much. But what is there -- is there an attach for that? And is that something you can address within your lane?

So the way I'd probably take several steps back, right? So if we're going to talk to EV for a second, First and foremost, now I have to talk about Driven, and I have to talk about the fact that we're a diversified portfolio. And so is -- if you're talking pure EV, is that super relevant to Take 5? No, obviously, it's not, but it's very relevant to Meineke, it's very relevant to the rest of our businesses, right? That's number one.

Number two, I mean, very little talk these days about pure EV. If you're talking hybrid, now we're talking, again, Take 5 world, you need to get your oil change and nothing really changes as far as what we've been talking about. But I mean, I know you remember when we IPO-ed, Mike and I talked about it. He wasn't here, but we would kind of talk about what happened in those days. I mean every other question was EV and the sentiment behind the question was kind of like EV is going to take over the world tomorrow. And so what are you guys going to do? It was a little lonely at the time sitting there saying like, I'm not sure that, that's exactly how things are going to play out.

And by the way, it felt a little defensive at the time, right? But we've seen that, that's not necessarily how things are going to play out.

There is a consumer out there that wants EV. That's great. There's also a consumer out there that wants a Porsche, neither one of which are a core customer for Take 5. So we look at the business, we've modeled it out every which way from Sunday. We will have a very lucrative profitable business for a long time to come.

EBITDA for Take 5. EBITDA margins have been steady around 35% in the last few quarters. What are the top margin drivers say, now and into '26, if you can't talk about '26, we'll use the now?

Yes. I'll start with the boiler plate if I'm not going to give you any specifics on '26. We're still working through that ourselves. Look, I think I would start with we feel good with the overall EBITDA margin profile of Take 5. We think a mid-30s business is exactly where we want to be. There's a little bit of choppiness quarter-over-quarter as you think about timing, et cetera. But in general, mid-30s which is where we have been, we feel really good about that business.

I think as we continue to come back to some of the service things I've talked about, increased premiumization, higher quality oil, additional attach rate and just in general, efficiency through the box. There are opportunities to grow that margin further. Each of these attachments does drive additional margin through the same box, and so that's helpful. But in general, we feel really good with where we are, and we feel really good with the mid-single-digit growth we feel like over the long term for that business. And now there's an opportunity to translate that growth into EBITDA margin.

Want to skip to glass. And it's got -- it's a new segment now, a new division, partly recognition, I guess, some other things happening in the business. But from a glass stand-alone perspective, there's been some evolution in how you approach M&A versus pausing internal execution. So can you talk about how that division stands up and then how we should think about its own growth rate.

Yes. So maybe take a step back and look at kind of the historical context, right? So first and foremost, we decided to get into the space for a lot of the same reasons that we decided to get into the space with Take 5 and Quick Lube, right? So you've got fragmentation, great white space, fairly simple business to operate, great kind of labor perspective on that business and really nice unit level economics. So the decision to get in was grounded in a framework that I'd say was sitting behind the Quick Lube business, which led to a very kind of lucrative Quick Lube business that we're able to grow. Nothing there has changed, right?

The way to get into that business was we wanted to very quickly build up a #2 position from nothing. And the way that we did that was through a series of 13 acquisitions of call them regional players but ultimately, 13 different businesses, different owners, slightly different models, some similarity, but largely just different businesses and different cultures and different models, everything from how -- if you break out the revenue, some are more retail oriented, some are more commercial, some are more insurance, et cetera, et cetera. So we made 13 acquisitions.

You now have to take these 13 different businesses and you have to make them act and operate and look and go to market as one business. And so we decided to go under the auto glass now umbrella, and we went through this period of about 2 years of integration. Integration is a fancy word that covers all manner of sins. It's everything from how do you pay people, point-of-sale systems, all sorts of detailed operator stuff that most folks don't really care about, but it's real work that has to happen, so you can actually go to market consistently. All of that's kind of come to fruition now.

What's been happening over the last, call it, 12 to 18 months is we've been steadily growing that business from a top line perspective, while making it operationally better. And what we've said is our priority is we're going to grow top line revenue. Specifically, we really want to lean in on insurance and commercial and that's what we've been doing. So we'll break it out now as its own segment. You will see, as we break that out, the numbers have been growing. It's a profitable business. The sales have been growing as well. And it's as a result of we have been landing. We announced some early deals. We're not going to announce every quarter, every deal that we get. But we've been landing both insurance and commercial deals, and that's been growing the business steadily.

The interesting thing with that business over time is, look, we're big believers in the business. We think it's a great space, and we're clearly the #2 player at this point. That business will not be a linear straight into the right kind of business because it doesn't lend itself to that kind of a model. This will be a step-change business. We will land a big insurance carrier. I'm not going to name any of them because I don't people to take read of anything into that. But at some point, we will land a big insurance carrier and you're going to see a step unit change to the business.

And then it may plateau for a little bit. I mean, we'll continue to grow it, but kind of your mid-single-digit growth. And then you'll get another one and you'll get another one. So that business will step change over time. It won't be straight and to the right but it has been growing, and it is a -- nothing has changed fundamentally and why we got into that business and our belief into the business.

Does landing an insurance carrier move you to first in line as a provider or it puts you into the network and then you have to win the business based on quotes?

So a little bit of both, I guess. So if you look at it, when we say land a national insurance provider, what we mean is that they're TPA, right? So the way the industry works is you can land the TPA deal, you're now taking the calls the first notice of loss from the customers and you're directing that work. Where that work ultimately lands is up to the consumer or up -- well, it's up to the consumer ultimately, right? So that process. We sitting here today already get work from national insurers, from all the national insurers because we do, in fact, have locations out there. And so if a consumer calls in, even if they're going through pickup State Farm, I'm going to claim it on my insurance. If they say they want to go to auto glass now, well, they're going to auto glass. Now we'll get that work.

But what we mean is really landing that TPA work where you have now that firm contractual commitment with a carrier for a series of years.

Does it go without saying that you're organizationally and operationally ready to handle the largest insurance providers as an advertisement for...

The short answer is yes. I mean interestingly, and some of the stuff the theory comes off the page over time, right? 2 years ago, we wouldn't even get invited to these meetings, right? And rightly so. I mean, at the end of the day, we're nascent, we just bought 13 different businesses. We're integrating them. If pick your insurance provider of choice, if they're going to RFP the work, we're not getting invited to that conversation. Even though through our collision businesses, we've been working with all the major insurance carriers for a long, long time.

Sitting here today, as work comes up for RFP and every carrier has a different calendar to that, some do it annually, so maybe every 3 years, so on, et cetera, we are in those rooms, we're participating in those RFPs, and we are competing for the business.

That's a great transition to collision. Thank you. So that industry has been facing some headwinds from claim avoidance, I think repairable claims declining. Low-income consumer, maybe the cash pay decision not there. How would you characterize the backdrop? And Mike, how would you think about growth for '26?

I'll give the backdrop and you can give the -- It's been a dynamic year for that industry, right? So at the end of the day, inflation obviously is a thing that's no surprise to anybody. If you double-click within inflation and you look at inflation specifically in the automotive insurance space, it's been particularly hit hard, right? So when you look at consumers and you look at the effect on consumer on consumers vis-a-vis premiums vis-a-vis deductibles, that's been, let's just say, an issue, right? You've got that going on.

At the same time, you've got total loss rates you're kind of at historical highs. So you put both of those things in the blender at the same time and what we've seen and what we've talked about pretty openly is that and our competitors have as well, is that the collision industry overall is down, first quarter, second quarter, about 10%-ish year-over-year.

We saw a little bit of improvement for the industry as a whole we've made the argument we certainly said at our last call that we think that, that will moderate down into Q4. Q4 will be moderated down, not continue to go linearly up into the right. If you take a step back from a Driven perspective, the important thing there is, number one, we continue to take share. So we've said all along, although the collision industry overall is down, we are taking share in that industry. We see the industry metrics. We obviously see our metrics, and we continue to take share.

In Q3, as the industry went up, we also kind of went up with that. So we continue to take share, and we went up with the industry. And we think for the foreseeable future, we like our position in the space. We are one of the big consolidators. We're the only big consolidator that its franchise in nature. I do believe that, that business model lends itself to an owner-operator being on the ground managing that business day in and day out. That is a very skilled labor pool. That skilled labor pool is diminishing over time.

It is really important that you keep those folks there energized and wanting to work for you, and there is no substitute for having the owner-operator on the ground to try to make that happen.

The structural growth outlook, forget about '26, but these headwinds of cars going to total losses quicker, if that's the case, if that's not the right premise, how do you think about the growth of the industry outside of market share?

So I mean, look, I think there are some pressures as we talk about, just in general, the more sophistication of the cars and the balance longer term of total loss versus actually getting it repaired. I also think as you take a step back, cyclically, we are probably at a cyclical high of that happening. And so I think it will be a sign curve kind of regardless of what direction that sign curve is moving. And as Danny has mentioned, we have reason to believe that over the medium term, the business -- we have -- the industry has a chance to get better even if the longer term is a little bit questionable.

I would go back to what Danny said, which is we're one of the market leaders. And to the extent there is share to be had, we are a place when the industry is in trouble, people like to have the shingle of a CARSTAR or an ABRA or a Fix. We provide relationships with the DRPs with the insurers. And so there are several good market leaders in the collision space. We respect all of them. But in particular, if you're an independent, we are a safe port in the storm for example, because we have the access to the DRPs in a way that if you're a mom-and-pop independent you may not be able to have.

So like I think, in general, we see we see an ability to continue to take share in this category. I think there's a lot of different moving pieces, some of which will be positive, some of which may be negative. The trends are trending back better. That will be inconsistent as well, as we mentioned on the Q3 call, just because Q3 was a little better, and it doesn't necessarily mean Q4 will improve linearly, but we feel good about our position in that industry.

Why was Q3 better industry, your share? Was it weather? I don't think.

I'm not sure that -- I'm not sure that I can answer that question. Like if you look at the overall numbers, claims were just better on a year-over-year basis. Did anything -- so the 2 things that I pointed to as far as inflation and the effects of that and total loss rates, did that change materially? No. So I'm not sure that I can answer that question.

The mix of franchise versus company-owned, structurally, where should that be in the next 3 to 5 years? And then any outliers in terms of the stable of brands and companies that you own?

So let me take a step back. In a driven perspective, I really do think you have to separate it out. Our franchise brands are 99.9% franchised, and we expect that to remain 99.9% franchised, right?

AGN is 100% company-owned. I think in the near term, that will be 100% company-owned. Our focus there is mainly top of the funnel, sales generation with our insurance, commercial and retail partners.

Take 5, which is where I think the question is probably has its most meat is currently 60% company-owned, 3% franchised. This year, we will probably open a few more company-owned stores than franchise. If we talked on our Q3 call, 170 total units, of which 90 are company-owned, 80 are going to be franchised. That's not because I necessarily think 90 out of 170 is the right answer. In general, our target right now is probably 50-50 in the short term. However, the unit economics are so strong that when we get opportunistic good company-owned stores that have some 3-year paybacks, very low net investment. I don't want to be dogmatic on a particular hard percentage when I can drive shareholder value by putting capital to work in an efficient manner.

Over time, we feel very good about our franchise pipeline. We feel very good about our overall pipeline. We feel really good about our franchisee pipeline. I think one of the strong suits of Take 5 is our diversified, well-capitalized franchisee pipeline. We've got a lot of franchisees who are eager to grow, many of whom are on their second or third ADAs many of whom are growing in their second or third geographical area as well.

They started somewhere near our origins in the Sunbelt and have since taken on other responsibilities elsewhere in the U.S. and are having tremendous success. And so I think you'll continue to see a blend. The company-owned unit economics, EBITDA margins in the 30s, if not higher, is so compelling. It's hard for me even as the CFO to say, "No, don't spend any of that capital. We are generating such good EBITDA."

That said, part of the power of the franchise network is the ability to, one, deliver entrepreneurial ownership of a great endeavor but also accelerate use of capital to grow out the base even further. And so I would see us continue to do that over the near term, probably over time, drifting more towards franchise ownership than corporate ownership in terms of the new units. But we'll get to 50-50 as an overall portfolio and then kind of figure out, I think, where we need to go from there.

A couple of follow-ups. The economics to the Take 5 division from the increasing franchise mix does what? And then how does that roll into the enterprise?

Yes. I mean I think in the short to immediate term, like we feel good with the -- I'm going to come back to it. We feel good at the mid-30s because there are several different levers that move there. Obviously, a royalty rate, as you think about it, is a much higher EBITDA margin percentage, some of the procurement revenue and sales we get there is good dollars but a little bit of a lower percentage, which is why that mid-30s, I see sticking even as the franchisees come through because of the several different levers that happen.

You get really good company store economics, obviously, get really good franchisee economics from the royalty. You get good EBITDA dollars as we continue to serve as kind of a sourcing mechanism given our scale and everything, but the percentage is there may be a little lower just given how much oil costs and the margin you take from that.

And for either of you, the 2 to 3 per franchise, you're starting to move in that direction. Is there a law of gravity a limit that you're recognizing. What's the biggest franchisee in the network? And have you seen this in the franchise business over the years, there's a certain breaking point for individual business owners?

I mean the way I'd probably answer that, so we had the luxury when we bought the business, there was no franchising component, right? So we built the franchise business from the ground up. And we took at the time in the room, there's probably 100 years of franchising experience between myself and Jonathan at the time and other executives, right? And we really were able to blueprint out exactly how we want this franchising business to work, right? One of the things that we took into consideration is, and because I've been part of the system, as has Mike, where you get the 2 big to fail kind of franchisees, and we consciously built it up where that's not the case, right? So there is a limit. I'm not going to share it publicly, but there are numbers where franchisees get to where it will be a hard not for me to say, no, the growth stops there.

They've got that size of business that's amazing, let's go continue to grow with either other franchisees or with new franchisees because I don't want to create a system consciously where the tail can wag the dog.

And then getting to 2,500, if that's the right long-term goal, is that to proficiently mapped out across the United States, roughly where each of these locations will end up over the next, call it, 10 years?

Yes. I mean the short answer is yes. So we do have a statistical model. So every single piece of dirt that we approve, whether it's at the micro level, like we're looking at a site in highly, or Florida or something like that, two, we're talking about nationwide 2,500 locations and what can we do there? We do have a statistical model that plays all that out for us. So yes, we know theoretically, 2,500 locations loosely would go here, all the way down to this location specifically should produce -- we think it's going to produce this range of sales and therefore, this range of EBITDA, et cetera, et cetera.

Maybe to close, I'm going to try to talk to Mike one more time about '26.

Good luck.

In this context of looking at what we're lapping in '25 if there's been any unusual good guys, bad guys that were unique to 2025.

I mean I think the biggest one would have been with our international car wash business, given the strength in Q1 and Q2 of that business. But I think, no. I think the beauty of our model is the nondiscretionary nature I think to frame it slightly differently and maybe a little light on how the business looks post divestiture, we still expect it to be a heavy free cash flow world.

Obviously, we're losing about $80 million of EBITDA from the international car wash business, but we're also losing some CapEx from that business as well. Hence, in the press release, we talked about 6.5% to 7% this year pro forma. Interest should come down as we use the cash to pay off debt. And so we feel really good about the free cash flow potential of this business going forward.

I think as you break apart the components of the business, AGN continues to grow. Take 5 is a growth engine, both from a comp perspective as well as the new units. And franchise Brands is doing exactly what it needs to, which is topping along, modestly growing and generating a lot of cash with very limited CapEx.

Appreciate it. Congratulations on replatforming. It's been a quick replatformization and path to getting the leverage in place. So congratulations. Have a great end of '25. Good luck in 2026.

Appreciate it.

Thank you.

Thank you.

Good morning, ladies and gentlemen, and welcome to the Driven Brands' Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Tuesday, November 4, 2025. I would now like to turn the conference over to Steve Alexander. Please go ahead.

Good morning. Welcome to Driven Brands Third Quarter 2025 Earnings Conference Call. The earnings release and net leverage ratio reconciliation are available for download on our website at investors.drivenbrands.com. On the call with me today are Danny Rivera, President and Chief Executive Officer; and Mike Diamond, Executive Vice President and Chief Financial Officer. In a moment, Danny and Mike will walk you through our financial and operating performance for the quarter and full year. Before we begin our remarks, I would like to remind you that management will refer to certain non-GAAP financial measures. You can find the reconciliations to the most directly comparable GAAP financial measures on the company's Investor Relations website and in its filings with the Securities and Exchange Commission.

During this call, we may also make forward-looking statements regarding our current plans, beliefs and expectations. These statements are not guarantees of future performance and are subject to a number of risks and uncertainties and other factors that could cause actual results and events to differ materially from results and events contemplated by these forward-looking statements. Please see our earnings release and our filings with the Securities and Exchange Commission for more information. Today's prepared remarks will be followed by a question-and-answer session. We ask you to limit yourself to 1 question and 1 follow-up. Now I'll turn the call over to Danny.

Good morning, and thank you for joining us to discuss Driven Brands' Third Quarter 2025 financial results. We delivered a strong third quarter with top to bottom strength on all key financial metrics. Driven grew revenue by 7% and delivered adjusted EBITDA of $136 million. System-wide sales increased 5%, supported by 167 net new stores over the last 12 months, including 39 additions this quarter alone. Same-store sales rose 3%, marking our 19th consecutive quarter of positive same-store sales. We also continued to strengthen our balance sheet, reducing net leverage to 3.8x as we progress toward our target of 3x by the end of 2026. We remain focused on our growth and cash strategy, driving strong consistent growth through Take 5 generating reliable free cash flow from our franchise and carwash segments. Take 5 of the car 10-minute oil change delivered its 21st consecutive quarter of same-store sales growth and continue to perform across every key metric.

Through the third quarter, we opened 101 net new stores, including 38 in the third quarter. System-wide sales grew 18% year-over-year and same-store sales grew 7% and driving adjusted EBITDA growth of 15%. Adjusted EBITDA margins expanded to 35%, up 40 basis points versus last year. These results reflect disciplined execution and a relentless focus on the customer, evidenced by our Net Promoter Score, which remained in the high 70s. We continue to see meaningful growth in non-oil change revenue, which accounted for more than 25% of Take 5 sales for the quarter. Over the past 24 months, we've added new services while simultaneously growing the attachment rates of non-oil change services from the mid-40s to the low 50s. We've now completed the rollout of our differential fluid service across the entire system. Early results have been positive. We've seen strong attachment rates, healthy margins, great customer feedback and no meaningful cannibalization of existing services. We expect to open approximately 170 new Take 5 locations in 2025, 90 company-owned and 80 franchised.

We remain committed to opening 150 or more new units annually supported by the strong performance of our 2023 and prior vintages, which ramped above $1 million in average unit volumes within 24 months. Our new unit pipeline remains robust with approximately 900 locations at the end of Q3, of which over 1/3 are sites secured or further along. Finally, we continue to innovate to drive traffic and efficiency across the system. We recently implemented a new media mix model to better allocate advertising dollars and maximize return on advertising spend. At the shop level, we're testing AI-driven camera technology that detects queuing issues in real time, helping managers adjust staffing and workflow to move more cars more efficiently and ultimately serve more customers where Take 5 drives growth, our franchise and car wash segments anchor cash generation. Our franchise segment built around some of the most trusted names in the industry, including Meineke, Maaco and CARSTAR delivered same-store sales growth of 1% for the quarter versus prior year. That performance was driven by strength at Meineke and sequential improvements at Maaco and CARSTAR.

The segment also delivered adjusted EBITDA margins of 66%, an improvement of 90 basis points versus the prior year. Turning to IMO, our international car wash business, Growth remained solid but moderated as previously communicated, with worse weather conditions in Q3 versus the first half of the year. Same-store sales and revenue for the segment grew 4% versus the prior year resulting in adjusted EBITDA margins of 28%. Now turning to our expectations for the remainder of 2025. As we've discussed throughout the year, we continue to operate in a dynamic consumer environment. While the consumer faces ongoing pressure, our diversified portfolio has demonstrated resilience across varying market conditions. Q4 has been particularly choppy with several factors creating a higher degree of macroeconomic uncertainty, including the ongoing government shutdown and the potential disruption of funding for the military and social programs. Given this uncertainty, we believe it's prudent to take a more conservative stance as we close out the year.

Accordingly, we're narrowing our full year guidance ranges to reflect both our strong third quarter performance and the evolving macro environment. Mike will provide more details on the outlook in a moment. I recently announced 2 important organizational changes that strengthen our foundation for the future. First, Mo Khalid has been named Chief Operating Officer of Driven Brands. In this role, Mo will lead the Take 5 and franchise segments, those a seasoned executive, exceptional leader and a driven brands veteran, he and I first worked together in 2015 when he led operations for me at Meineke. After several years with driven, Mo went on to hold a series of senior roles at Great Wolf Lodge, culminating in his final role of Senior Vice President of Field Operations. He returned to Driven in 2023 as President of Take 5 Oil Change, where he and the team have grown the business to almost 1,300 locations with system-wide sales of $1.6 billion and adjusted EBITDA of over $400 million on a trailing 12-month basis. As COO, Mo will work across both segments to drive operational rigor, predictability and sustainable growth.

Next, Tim Austin has been named President of Take 5 Oil Change. Tim most recently served as President of Take 5 Car Wash where he did an outstanding job stabilizing the brand, culminating in our successful sale of the business in Q2 of this year. Tim is a fantastic leader and an exceptional operator. He began his career at Walmart, starting as an assistant store manager and rising to Vice President of Store Planning. Over the past 6 months, Tim has served as COO of Take 5 under Mo, experience that perfectly positions him for this role. These moves reflect the depth of talent we've built across the organization. Our meritocratic culture continues to identify, develop and promote talent from within, ensuring we have the right leaders in place to drive performance and deliver results.

Let me close with a few key takeaways. First, we delivered a strong third quarter across same-store sales, revenue, adjusted EBITDA and adjusted EPS. Second, Take 5 continued to deliver industry-leading growth. Third, our franchise and car wash segments grew same-store sales in the quarter and remains reliable cash-generating engines. And finally, we've reduced our net leverage to 3.8x and remain on track to reach 3x by the end of 2026. I want to thank our more than 7,500 Driven Brands team members and hundreds of franchise partners who rally every day around our mission and our customers. Your hard work, focus and execution are what drives our results and our continued success. With that, I'll turn it over to my partner and Driven CFO, Mike?

Thank you, Danny, and good morning, everyone. Q3 2025 demonstrated driven consistent execution, led by another quarter of strong growth in our Take 5 Oil Change business improved performance in our Franchise Brands segment and the continued reduction of our net debt to adjusted EBITDA ratio. These results demonstrate the power of our diversified platform with Take 5 driving continued growth and our disciplined capital allocation, moving us closer to our 3x net leverage target by the end of 2026. As a reminder, with the divestiture of our U.S. car wash business, the results for that business are included in discontinued operations and are not included in financial details provided today, unless otherwise noted. Driven recorded its 19th consecutive quarter of same-store sales growth, increasing 2.8% in Q3. We added 39 net units in the quarter, led by continued expansion in our Take 5 segment. System-wide sales for the company grew 4.7% in Q3 to $1.6 billion. Total revenue for Q3 was $535.7 million, an increase of 6.6% year-over-year.

Q3 operating expenses increased $21 million year-over-year, including an increase in company and independently operated store expenses of $16.4 million driven by higher sales volumes and additional stores in Q3 of 2025 versus Q3 of 2024. Operating income for Q3 was $61.9 million, an increase of $12.3 million. Adjusted EBITDA for Q3 was $136.3 million, roughly $4.3 million above Q3 last year. As a reminder, Q3 of this year comes without the benefit of PHI, which we divested in August 2024 but 2 months of which are still included in Q3 2024 results. Adjusted EBITDA margin for Q3 was 25.4%, a decrease of roughly 85 basis points versus Q3 last year as sales growth was offset primarily by the aforementioned increase in store expenses and investments in growth initiatives. Net interest expense for Q3 was $23.6 million, down $20.1 million from Q3 last year, led by lower debt balances, including the payoff of our term loan balance and the benefit of the acceleration of our interest rate hedge on our 2022 notes.

Income tax was a benefit for the quarter of $21.7 million, driven by a discrete change during Q3 in our tax valuation allowances related to the One big beautiful Bill Act, which increased the company's interest deduction. Of note, this positive valuation adjustment is excluded from adjusted EPS in the quarter. Net income from continuing operations for the quarter was $60.9 million, adjusted net income from continuing operations for the quarter was $56.2 million. Adjusted diluted EPS from continuing operations for Q3 was $0.34 and an increase of $0.11 versus Q3 last year, driven by higher operating income on increased sales and lower interest expense. Q3 performance for each of our segments include: Take 5 Oil Change, which represents more than 75% of Driven's overall adjusted EBITDA, had another strong quarter with same-store sales increasing 6.8% and revenue growth of 13.5%. Danny mentioned earlier, the ongoing advancements we're making to the Take 5 business model, including better marketing efficiency, technology-led operational improvements and additional service offerings.

Take 5 continues to build on its strong operational foundation by driving attachment of non-oil change services, now over 25% of Take 5's total system-wide sales and continued growth in the penetration of our most premium synthetic offerings. Adjusted EBITDA for the quarter was $107.3 million, reflecting growth of 15% compared to Q3 2024. Adjusted EBITDA margin was 35%. we opened 38 net new units in the quarter, of which 21 were company-operated stores and 17 were franchise-operated. Franchise Brands reported a 0.7% increase in same-store sales despite ongoing headwinds in Maaco, our most discretionary business. Segment revenue declined $1.8 million or 2.3% in the quarter due to a decline in weighted average royalty rate in the quarter. The segment continued its strategic role as a cash generator in our growth in cash portfolio, delivering an adjusted EBITDA margin of 66% in the quarter. Adjusted EBITDA was $49.7 million, down $0.5 million from the prior year due to the decline in revenue. During the quarter, we added 3 net new units. Our car wash segment, representing our international car wash business, grew again in Q3 with a 3.9% increase in same-store sales.

The segment continued to benefit from improved operations and expanded service offerings while experiencing more normalized weather that resulted in moderated growth as compared to the previous 2 quarters. Adjusted EBITDA decreased $1 million to $15 million or 27.8% of sales, driven by higher independent operator commissions due to higher sales and higher utility and rent costs. We closed 1 store in the quarter. Turning to our liquidity, leverage and cash flow performance for Q3. Our cash flow statement shows a consolidated view of cash flows for Q3, inclusive of discontinued operations. Net capital expenditures for the quarter were $27.3 million, consisting of $39.8 million in gross CapEx, offset by $12.5 million in sale-leaseback proceeds. Free cash flow for the quarter defined as operating cash flow less net capital expenditures, was $51.9 million, driven by strong operating performance. As we discussed last quarter, on July 25, we monetized the seller note received from our divestiture of our U.S. carwash business for $113 million. We used the net proceeds to fully retire our term loan and pay down our revolving credit facility.

Strong free cash flow, combined with the proceeds from the sale of the seller note, helped us reduce debt by approximately $171 million during the quarter. At the end of the quarter, our net leverage stood at 3.8x net debt to adjusted EBITDA as compared to 4.1x at the end of Q2 2025. On October 20, after the third quarter closed, we issued $500 million of new 5-year securitized notes combined with the drawn revolver of approximately $130 million to prepay and retire in full our Class 2019-1 and Class 2221 securitized notes. This leverage-neutral transaction simplifies and extends our maturity wall while reducing our annualized interest expense. We used our revolver as part of the transaction to permit us to deploy future free cash flow to continue delevering our balance sheet in a capital-efficient manner. As of the close of the transaction, our revolving credit facility had a balance of $187 million and represents the only nonsecuritized debt we have outstanding. Following the refinancing, our debt is now 92% fixed rate with a weighted average rate of 4.4%. Year-to-date through the end of Q3, we have repaid approximately $486 million of debt.

As a reminder, you will see on our balance sheet an increase in current portion of long-term debt related to our Class 20191 securitized notes that were addressed as part of this recent refinancing. We continue to make progress on our goal of achieving net leverage of 3x net debt to adjusted EBITDA by the end of 2026. We are actively assessing how our capital allocation priorities will change once we achieve this important milestone but for now, our focus remains on executing on our deleverage commitment while investing in the Take 5 business, which generates a predictable high return on capital spend. I'd now like to provide an update on our full year outlook. As we enter the fourth quarter, we are narrowing our fiscal 2025 outlook ranges to reflect our year-to-date performance and current expectations for the remainder of the year. As Danny mentioned earlier, we have seen additional choppiness across our portfolio beginning in Q4 as recent macroeconomic factors weigh on the consumer. Our revised ranges reflect an appropriate caution for the current economic climate despite the strong third quarter for Take 5 and despite the sequential Q3 improvement in Franchise Brands.

For the full year, we now expect revenue of $2.1 billion to $2.12 billion, driven by new unit growth and Take 5 strong performance through Q3, combined with a more measured Q4 outlook. Adjusted EBITDA of $525 million to $535 million, balancing Take 5's strong execution throughout the year with a more conservative view for the portfolio in Q4. Adjusted diluted EPS from continuing operations of $1.23 to $1.28, supported by our operational efficiencies and lower interest and income tax expense. Same-store sales at the low end of our original 1% to 3% range, reflecting the current consumer environment and ongoing dynamics in Maaco and collision. As for other important operating metrics, we reiterate net store growth between 175 and 200 units Net capital expenditures near the high end of our original range of 6.5% to 7.5% of revenue, driven by opportunistic builds in our Take 5 segment. For interest, we now expect full year interest expense of approximately $120 million. In closing, Q3 was another strong quarter for Driven's diversified growth-focused business model. We combined same-store sales growth across each of our segments with strong cash flow generation that enabled us to continue our progress toward achieving 3x net leverage by the end of 2026. With that, I will turn it over to the operator for Q&A, and we are happy to take your questions.

[Operator Instructions] Your first question comes from Justin Kleber of Baird.

Just was hoping you could share a bit more color maybe on how the comps progressed across the quarter, what the exit rate looked like? And then Mike, you alluded to the choppy start here in the fourth quarter. Is that fairly broad-based across your business, your various segments? And then just the math would seem to suggest you could see a negative comp in 4Q. I just want to ask if that's within a reasonable range of outcomes as you sit here today?

Yes. So I'll unpack those questions. Justin, good to hear from you. So starting from the top, I would say Q3, in general, performance was consistent within the quarter. Obviously, we're happy with those results that we saw in Q3 and think that it demonstrated broad-based consistency and strength across most of the brands that we have. I think turning to Q4, as Danny and I both mentioned, we did see some choppiness as it relates to really the broader consumer environment, which did impact all of our brands. It's inconsistent, hence the word choppy, right? There are some good days, there are some bad days. And we felt it appropriate to demonstrate an appropriate amount of caution as we sit here only 1 month into Q4. In terms of your question on negative comp for Q4, I'd answer it a couple of different ways. I think one, it's important to start with our Take 5 brand overall continues to be healthy.

And so we expect that brand to grow in Q4 kind of regardless of where we ultimately end up for the quarter and the full year within that lower end of the range. mathematically, yes, it is possible if we hit the very low end of that 1% given the strength we've seen in Q1 through Q3, it could be a negative Q4 from the consolidated. That will likely largely be driven by franchise brands, given the overweighting collision can play in our same-store sales growth calculation. But I think in general, the takeaway for Q4 is we're seeing some uncertainty. There is a little bit of choppiness across the entire consumer as it relates to our brands. But overall, we think Take 5 is healthy. And that despite an incredibly strong Q4 '24, we'll be lapping, we expect that business to grow this quarter.

Okay. Perfect. And then a question for you, Mike, just on kind of free cash flow conversion. It looks like you've converted about 70% of your adjusted EBITDA year-to-date in the free cash flow. Is that a good benchmark in terms of how we should think about this business on a go-forward basis could actually get better to the extent CapEx maybe declines in 2026? Just would love to hear your perspective on that topic.

Yes. I'm not sure I'm going to get into specifics of 2026 yet. Is that something Danny and I are still working through I think we've demonstrated in in all of 2025, our focus on delevering the balance sheet and achieving our commitment of 3x, not leveraged by the end of 2026. I mean I think we pair that with the fact that our business because it is so strong because we have such a good pipeline of both franchise and cost units, those corporate stores give us such an ability for a predictable high rate of return that we want to be opportunistic. Danny mentioned in his remarks, the 170-ish total units, a little bit more corporate owned this year. That's largely driven by the opportunism we see when a good location comes about, we want to take advantage of that. So I think at a high level, yes, we will continue to be focused on driving EBITDA to free cash flow, making sure we return that cash to our stakeholders, which right now is focused on debt. But we want to leave ourselves a little bit of flexibility so that as we see good opportunities to build, take 5 corporate stores, we have the ability to do that.

Okay. Makes sense.

Next question comes from Simeon Gutman of Morgan Stanley. This is [ Zach ] on for Simeon. Take 5 has been among the fastest unit growers in the industry since 2019. At the same time, it looks like units for this year 2025 will end a tad below original expectations. So what are your unit growth expectations over the next few years given competition is increasing and new units are slowing more broadly across the industry?

Yes. I'd have to go back and check expectations specifically related to Take 5 in 2025 because I would tell you that we feel very good with the the numbers we're going to put up around 170. I think, obviously, as we've discussed over previous calls, there's always going to be a little bit of fluctuation on the mix between franchise and corporate, not because the franchisees don't want to build, but because they deliver such high returns for us, we lean in when we find good opportunities that give us such strong returns. We mentioned on the call, we see a pipeline across the entire driven portfolio, of which a large part is Take 5 of over -- almost 900 locations, of which about our sites secured or better, which means we actually have the lease in moving forward.

To the extent what you're talking about is the fact that Q1 through Q3 is a little bit light relative to the full year that's just the natural nature of a franchise business. Danny and I have been experienced with many of them, and you always see additional growth in Q4. I wish there was a way to make that not the case, but that's just the nature of the game. And so we feel really good with the pipeline. And I think longer term, as we've talked about, we see 150 or more Take 5 for the next several years given the strong franchise relationships we have. and the additional pipeline of company-owned stores, we can build to deliver a consistent, predictable high return.

Yes, [ Zach ], this is Danny. I'd just underscore what Mike has said. I mean I think everything was spot on. But we've committed for a while now to be 150-plus locations a year. Nothing's changed with that. The pipeline is quite strong. And just to give you 1 data point, the franchise side of the business is incredibly healthy. We've got about 40% of our franchisees on that side of the business that are either on their second area development agreement or their third so that is probably the best data point I can put out there in terms of the health of the franchise side of that business.

That's helpful. And then just as a quick follow-up. In what ways does Take 5's value proposition make it more likely to succeed as it continues to scale those units because it does seem like there will continue to be industry growth in units over the next few years. So what what differentiates the Take 5 model?

Yes. I mean I think it's a great question. I mean at the end of the day, Take 5 is the home of the state in your car 10-minute oil change. And we're the only national provider that provides a 10-minute oil changes experience stay in your car with NPS scores in the high 70s. So at the end of the day, it comes back to the consumer and what is it that the consumer values but what we've seen and where we've won historically is there's a consumer out there that wants a high-quality oil change and 10 minutes stay in your car, that's an amazing experience, and the consumer that wants that, that's where we win.

Next question comes from Chris O'Cull of Stifel.

Danny, you mentioned a new media mix model being used to Take 5. Could you just elaborate on the changes that were made and why you expect them to kind of benefit brand awareness?

Sure. Yes, happy to. I mean at the end of the day, just to be clear, so we've had media mix models for me for some time now in Take 5. We just introduced a new partner, and we have let's say, big aspirations for what the tool can do for us. At the end of the day, the media mix model kind of does 2 things for you, and we're in our first iteration of it with the new media mix model that we're using right now. But number one, it helps you just optimize spend across channels and so it really lets you get pinpoint accuracy in terms of what channels are working in specific parts of the country and how should you optimize that spend.

And then the second thing it does for you is it helps you understand should you be investing more or less at the macro level, right? So is there room on the curve kind of your return curve to actually invest more money into marketing and what's the incremental return you're going to get on that investment. So we are leveraging both sides of that tool. Again, it's kind of early going. We just deployed it now the new tool anyway for the first quarter here. But we think that over time, it's going to improve our return on advertising spend, and we think that it's going to inform just the level of investment that we're making.

Okay. Are there any specific spending milestones that could open up access to maybe new marketing channels as the ad fund grows in the system just has more units and better concentration?

Yes. I mean, look, we're a national company today talking about take 5, but there are obviously pockets where we have more concentration, let's say, in some areas that we're a little bit more sparse as we fill out the map, we talked about getting to 2,500 locations. We still think that, that's the North Star, and that's very doable as we fill in the map and we get more concentration across the country, it does open up some upper funnel mass media where you can do let's say, national TV or national radio buys that you're hitting a lot of eyeballs and per eyeball you're getting a good return, and it's a good very efficient buy, so to speak. So I think the short answer, Chris, is yes. As we continue to put dots on the map, it does open up more channels for us.

Okay. And just one last one, and I apologize if I missed this, but of sales trends among lower-income consumers at Take 5 shifted in the current quarter, maybe compared to the first half of the year?

Yes. I mean I'll answer maybe at the higher level. Just in terms of driven, I mean, we've been saying all year long, there's been pressure, right, on that lower income consumer. That's been true the entire year. That hasn't really changed in what we've seen in Q4, as we talked about in our prepared remarks and as Mike highlighted, a bit of choppiness. Some days are up, some days are down. It's been choppier than it's been the rest of the year. There's some new variables here in Q4 that haven't existed. We mentioned them also in the prepared remarks. You've got government shutdown, you've got furloughed employees. You have at least the potential for millions of Americans to have their income disrupted as military or government programs may go unfunded. So there's some uncertainty out there. I think the thing that makes us feel good is, number one, we're coming from a position of strength.

Third quarter is quite strong for us. 7% comps were Take 5, 1% comps for the franchise segment. It was strong quarter. I'd say secondarily, we're nondiscretionary. So at the end of the day, if there's any disruption -- maybe you delay that oil change for a period of time. But at the end of the day, you're still going to need to change that oil, you're still going to need to get those breaks. You need to get your car back on the road. And so if there's any temporary dislocation, we tend to see a bounce back. And look, at the end of the day, all of the uncertainty when Mike and I reissued our outlook for the quarter and we narrowed our ranges, all of that uncertainty is baked into that. So we feel good about hitting our ranges here in the back half of the year.

Your next question comes from Brian McNamara of Canaccord Genuity.

This is [ Mason Calnan ] on for Brian. Going off with the low-income consumer question, are you seeing any evidence of oil change referrals? And how would you measure that by location?

Yes. I'd say, look, in general, we've just seen the low-income consumer pressure. As we look at the entire year, we've had a strong year quarters 1 through 3 we've reiterated our outlook for the fourth quarter. All we're seeing is just a bit of choppiness here in the fourth quarter. So we continue to see strength at Take 5 non-oil-change revenue, we talked about is 25% right now. We've continued to grow our attachment rates from the mid-40s. If we're going back about a year to 1.5 years now, we're sitting here today in the low 50s. We've rolled out a new service. That new rollout of the service differentials in this case, has gone quite well. So the business has shown a lot of strength. All we're seeing is just a bit of choppiness. And again, there's some new variables in play here in Q4. So a bit of uncertainty in Q4. But again, we feel good about the ranges that we put out there from an outlook perspective.

And then what do you think it will take for the collision industry to inflect as insurance premiums and deductibles don't agree going down anytime soon.

I'm sorry, you kind of broke up there at the beginning. Can you reask the question?

Yes. What do you think it will take for the collision industry to inflect as insurance premiums and deductibles don't appear to be going down anytime soon?

Yes. Look, I think actually, as you've seen the year play out, right? So if we look at the insurance industry in general, Q1, Q2, we talked about estimates being down high single digits, call it, around 10%. And there's 2 big drivers to that. Number one is claim avoidance. We've just seen as inflation has ticked up here in the last 24 months, it hit that part of the industry particularly hard. And so you've seen deductibles and premiums go up. The second reason is you've seen total loss rates historically high. And the combination of the 2 things has driven estimates to be down, call it, 10% or so percent first quarter, second quarter. The industry did rebound in Q3. It did improve sequentially from Q2 to Q3. If we look into the future, we think Q4 may look a little bit more like the positive thing for us is when we look at driven collision, our specific businesses, we continue to take share.

So in a world where the industry maybe had some headwinds, we've consistently outperformed the industry. That continued in Q3. We mentioned a really strong third quarter with 1% comps for the segment at large, our best quarter from a comp perspective for the year. And I'd say most importantly, and I keep kind of going back to this for our businesses, in particular, when you look at the franchise segment, Ultimately, the role that, that plays in the portfolio's cash generation. So what I'm most interested in and what I'm most excited about is when I look at third quarter, I see 66% EBITDA margins that's exactly what we need from that part of the business, and that's what that part of the business has delivered for us.

Next question comes from Mark Jordan of Goldman Sachs.

On Take 5, same-store sales growth came in much better than expected for the quarter. And I know you don't break out traffic versus ticket. But just wondering if there's any commentary you can provide there about how the contribution was compared to maybe your initial expectations? Because I think looking back on the 2Q call, there was some discussion about trends potentially moderating in take 5 for the second half of this year. So I guess on that note, how did the quarter trend relative to your initial expectations?

Yes. So I'd say a couple of things, Mark. Good to talk to you. I think first of all, we've always said we believe the Take 5 business is a mid-single-digit grower over the long term in this quarter, no exception, obviously, a little bit higher I think mathematically, there still is this issue that as the new stores ramp, that's a helpful tailwind for us both in terms of traffic and ticket. But as we grow over a larger base, the impact of that will continue to be less and less. And so over time, we expect that to contribute less to the overall story, although it's still a positive tailwind I would say the other thing to your point, we don't break out the sales tree, but we feel good in terms of where we are from both a traffic perspective and an ARO perspective.

We've obviously mentioned some of the various drivers we have in ARO around the ability to do more premiumization as well as the additional attach. And then as you think about some of our commentary on Q4, in addition to the state of the consumer, which we've obviously covered, I'd also just remind you that Q4 of last year was an impressive comp at 9.2% and so there is a little bit of moderation we expect, just given how we're going to be lapping that comp this year. But in general, the Take 5 system is healthy, we continue to grow. We feel good about the numbers we put up in Q3 and kind of regardless of where we land in the range for consolidated driven in Q4, feel good about Take 5's growth prospects.

Right. And then just one follow-on, if I could. Thinking about the differential service offering you rolled out. I know you might not go into detail about product-specific attachment rates. But it sounds like a catchment is trending maybe above your initial expectations. Is that the right way to think about it?

I'd say, Mark, look, the way to think about it is we're really happy with the results we're seeing. So we're fully rolled out nationwide at this point, both company and franchise the team is doing an amazing job executing. So we just building the muscle rolling out the new service has been quite good. We haven't seen NPS scores budget all. So we're able to introduce a new service while continuing to deliver NPS scores in the high 70s, which is obviously fantastic. Margin profile is good. We're not seeing cannibalization. So I'd say check marks across the board for me, the most exciting things that proves out another growth vector for Take 5, right? So we've shown historically that we can grow organically and we can take our attachment rates and grow the existing kind of basket of services, so to speak. But now we're showing that we can add a new service to the mix that fits within the fast, friendly and simple model that we have and successfully execute that other growth vector. So for me, that's very exciting.

Congrats on the great quarter.

Thanks.

Your next question comes from Robby Ohmes of Driven Brands (sic) [ BofA ].

Mike, just a quick follow-up on choppiness. You guys have kind of been answering it, but maybe going to ask for a little more clarification. So on the take side, choppiness is a deferral traffic situation? Or -- and you would -- you're seeing no change kind of in attachment rates or premiumization trends or maybe some color on that?

Yes. So welcome to driven brands, Robby, by the way. Nice to have you on the team. So yes, choppiness, look, choppiness that take is what we've kind of alluded to. It's just we're seeing up and down days. I'd say on the non-oil change revenue side of the equation and attachment rates, we're not really seeing any changes there. So attachment rates continue to be strong. We talked about we've grown them now into the low 50s. We talked about differential and how that's a positive behind the business. As we come into Q4, though, we're just seeing a little bit of choppiness in terms of traffic here and there. And again, it's across the portfolio.

And to Mike's point, I mean, he emphasized this earlier, it's choppiness, right? It's -- there's some really good days and then there are some days where it's not so good. So I'd say no changes to non-oil-change revenue, no changes to premiumization. We continue to see both of those be quite strong. But as we look across the portfolio, just a bit of uncertainty here in the fourth quarter and a bit of just up and down given any given day.

That's really helpful. And then just...

Sort of taking choppiness over to Maaco and CARSTAR, et cetera.

The -- there's -- is it similar choppiness in direct repair program trends? Or is that more stable what are you seeing on the direct repair program trends?

Yes. I'd say it's choppiness across the portfolio right now as it relates to DRPs, right? So that's specifically in the collision business. I mentioned this a second ago, but if you look at what's been happening with that industry, call it, estimates down high single digits, Q1 and Q2. The overall industry had a bit of a recovery in the third quarter and improved sequentially Q2 to Q3. And we think that Q4 is going to probably soften a little bit, and it's going to look more like so that's just the industry trends that we're seeing. And that it's obviously related to the DRP, that's all kind of related. But again, as I think about our collision business, we've been steadily taking share of the entire year. that didn't change Q1 to Q3. We don't expect it's going to change in Q4. So even if the industry softens a little bit in Q4, we expect to continue to take share.

Our next call comes from Peter Keith of Piper Sandler.

[indiscernible] is on for Pete. Can you just break down the comp improvement within franchise a bit more, specifically in maintenance? And then are you seeing underlying improvement in collision demand? Or are you seeing that improvement from Mako's continuous improvement framework and then just when did you start to see the sequential improvements throughout the quarter.

So yes, happy to take that. So I will start by saying, in general, we don't break out the full brand performance across our franchise brands. I would call it a couple of things, though, that we mentioned in the prepared remarks. Meineke continues to operate well. Maaco, which is our most discretionary brand has been under pressure really for the entire year. And while that improved some in Q3, that continues to probably be our most pressured franchise brand. As Danny mentioned, we have -- we did see some improvement in in collision. That has an outsized impact on our same-store sales, if not our revenue, given the amount of system sales that run through our collision boxes. So I think in general, we feel good about the Q3 performance. But as you probably heard on the call cautious heading into Q4 for that section. The good news is it continues to do what it needs to in the portfolio. margin for Q3, strong cash flow generator. So feel good about its role within the driven portfolio to generate cash and help us pay down debt as we needed to.

Your next question comes from Christian Carlino of JPMorgan.

Could you maybe quantify your exposure to first brands or lack thereof? And whether that's more take 5 versus the franchise brand? I think within Take 5. It doesn't look like you source filters from them, but maybe source wiper blades from one of their brands. So could you quantify your exposure there? And then any color you can provide around that.

Yes. I mean very limited impact. And to the extent there is, we've got various other suppliers. So not -- I don't believe it's a read-through on anything in the auto category and not really worried about the impact to us.

Got it. That's helpful. And could you talk about trends by region? Any notable outperformers or underperformers? And then similarly, on the quarter-to-date, is the choppiness more apparent in any particular regions, maybe the D.C. and Mid-Atlantic region, given the government shutdown or maybe some of your lower income markets. Any comments there?

Yes. Look, I'd say the general choppiness that we're seeing coming into Q4 is, I'd say, generally speaking, across the board, yes, I could pick a data point here or there. If there happens to be a location that's in particular the distressed neighborhood, maybe it's a little bit. But just I generalize it to choppiness across the portfolio coming into the fourth quarter. And as I think about just overall regional, Take 5, in particular, is a growing brand. So you're going to see differences more than anything else based on the maturity of the stores, right? So if we've got a market where the vast majority of the stores are less than 2 years old where that market is still ramping. If you talk about a market like New Orleans, where the brand originated and we've been in that market for 30 years, that's a completely different profile. So Take 5 is still a dynamic growing new business. And if you're looking for regional trends, it's going to be more proportionate to just the maturity of the stores in that market than anything else.

Your next question comes from Mike Albanese of Benchmark.

Can you just comment on the labor market and I guess, overall strength of the labor pool in terms of hiring and retention?

Yes. I mean specifically for Take 5. Yes. Look, I'd say from our perspective at least, the team is having a fine job or doing a fine job hiring. It's not -- I'd say it's not any better or any worse than it's been trending kind of the entire year. We have a really strong and robust pipeline for bringing in employees at all levels of the organization, and it's something that we stay on top of. But I wouldn't say from a trends perspective, it's any more or less worrisome than it's been the whole year.

Your next question comes from Marvin Fong of BTIG.

Nice quarter here. Most of my questions have been asked here, but just thought I'd ask on like Take 5 specifically, are you seeing any changes to the unit economic story? Is there some opportunity given sort of the macro to kind of take advantage of maybe from lower lease expenses or conversely, are you seeing any increase in equipment costs or anything like that? Just any impact there to break?

Maybe I'll take kind of the first part of your question, and maybe Mike wants to take the second part. Generally speaking, we're really happy with the ramps that we're seeing across all of our vintages, right? I think some of the things that we've put out there, if you look at the vintages 2023 and prior, they're all ramping well, on average, they're ramping to $1 million AUVs within 24 months. So that continues to be true. We're quite happy with that. We see nice returns on our new stores and consistent ramps. And I'll put the same data point out there that I mentioned a second ago, if you're looking for 1 of the best testaments to the growth of the system and to the steadiness of the ramps, I'd look to 40% of our franchisees are on their -- either their second or their third ADA. So the reality is that if the units weren't ramping consistently and predictably, you just wouldn't see that level of investment. So we continue to be quite happy with the ramps that we're seeing.

To the other point, I'll answer it in a couple of different ways, which is, I mean, absolutely, always look forward to opportunity to take cost out of the box and make sure we're getting the best rates possible. I think given the relative youth of our footprint, we still have a lot of lease term left in a lot of these as well as the fact that a small box size means that the lease expense doesn't necessarily carry the same weight as it does in some other instances. That said, we never missed an opportunity to have a discussion around what a good partner we are. And so making sure that we have those conversations with our landlord.

On the build cost, again, one of the advantages of the Take 5 model is a relatively low build cost to begin with, lower than some of our competitors in the industry but that doesn't change our focus on making sure we continue to keep that advantage and find ways to make sure we are deploying money correctly to deliver the right experience, but not more than we need to. So it is absolutely an opportunity we continue to take a look at it. But I would say it's probably more of an opportunistic opportunity that a big thing we need to focus on. Most importantly, like Danny said before, the unit level economics continue to be strong. We have a strong pipeline of both franchise builds and corporate stores going forward and feel really good about where Take 5 is positioned for future.

Great. And maybe as a follow-up -- my follow-up on the commentary that the insurance side of the collision business could be more like the second quarter I'm acknowledging that there was a positive trend here in the third quarter. Could you just kind of double click a little bit more on what you're seeing there. Is it the claims avoidance aspect of it? Or are you actually seeing something in the loss rates and the behavior of the insurance companies that also kind of driving kind of backpedaling in the trends there.

Yes. I think it's nothing new per se, right? So you're talking it's claim avoidance, it's total loss rates. And then I think it's also just the uncertainty that we're talking about heading into the fourth quarter, right? So I think when you put those 3 things in the blender, it leads us to believe that the fourth quarter will look more like the second quarter.

Ladies and gentlemen, there are no further questions at this time. That concludes today's conference call. Thank you for your participation. You may now disconnect.

All right. Well, good afternoon, everyone. Thank you for joining us at the Goldman Sachs 32nd Annual Global Retailing Conference. My name is Mark Jordan. I'm an analyst here at Goldman Sachs. And it's my pleasure to introduce Driven Brands and to moderate our fireside chat. We have with us today Danny Rivera, President and CEO; and Mike Diamond, Executive Vice President and Chief Financial Officer. Danny and Mike, it's a pleasure to have you here today.

Yes. pleasure, Mark. Thank you.

Excellent. Well, being a diversified auto services business, I think it's probably best to take this segment by segment and what better segment to start with than the Take 5. I think some in the audience may not be too familiar with how the quick lube model is differentiated by maybe their local corner repair shop where oil changes are done. So could you talk about what makes the quick lube model different? What makes Take 5 different from its competitors? And what's the value proposition that you provide to customers?

Yes, amazing. First and foremost, thank you. We've been looking forward to this, and we're happy to be here. So look, maybe I'll take a quick step back, spend 30 seconds on Driven Brands. Maybe some folks are new to that, and then we'll double-click into the Take 5 business. So if you look at Driven Brands, we are the largest provider of automotive services in North America. So it's about 4,800 locations, roughly 85% of those locations are franchised. The rest are company-owned stores, about $6.5 billion of system-wide sales, $2 billion of revenue, mostly nondiscretionary services. So think oil changes, brakes, shocks, rusts, collision. So it's the type of work that you need to do, not necessarily that you want to do.

And the way that we tend to think about Driven Brands, just to keep it simple because it's a nice collection of businesses is its growth and cash, right? So growth really comes from the Take 5 business, which we're going to talk about here in a second. And then cash mostly comes from our franchise business, which I'm sure we'll get to hear a little bit later. When it comes to Take 5 and the premise of your question, so what does the average person kind of expect out of that general repair in the corner of your neighborhood kind of a thing? So I think, look, the average person, if they're going to get their car serviced, they're probably thinking, I'm going to drive into a shop. Hopefully, the shop is clean, let's just start there, right? I'm going to park the car. I'm going to get out of the car, I'm going to sit in the lobby.

Maybe there is somebody in the lobby, maybe there's 10 people in the lobby, right? This technician is going to work on the car. I don't really see what they're doing. They're going to come, they're going to make these recommendations to me. I'm going to choose some things. And then, look, hopefully, I'm out of here in a couple of hours. Maybe I need to leave the car next day and pick it up. So I think, generally speaking, that's what folks have come to expect. If you look at the quick lube space, and then specifically, I'll talk obviously about Take 5, which is our crown jewel business, we are the home of the stay in your car 10-minute oil change. So in that one sentence, you get a sense of how we're differentiated and why you may want to come to a Take 5. So stay in your car, right? There's no dirty lobby. You're not sitting with anybody. You're going to stay in the comfort of your car, be on your phone, whatever it is that you want to do with your time. It's a 10-minute oil change.

So you're going to be in and out pretty quickly. And we also enjoy the fact that our customer service is fantastic. We enjoy NPS scores in the high 70s, right? So you're going to get a world-class experience, not just world-class as defined by automotive, but even in retail, NPS scores in the high 70s are pretty amazing. So that's the Take 5 experience. That's really from a consumer's eyes what makes it different. When we look at Driven, again, it's our growth vehicle, and I'll put maybe some context to that statement. So we bought the business in 2016. When we bought the business, it was about 40 units, mostly in New Orleans, call it, $50-ish million in system-wide sales, 100% company-owned. Fast forward to today, 1,300 locations, both company and franchised, we're going to hit close to $1.4 billion in system-wide sales in 9 years. So it's just been an absolute juggernaut of the business for us and why it's the growth part of the equation.

Excellent. Yes. And I think one of the thing that really resonates with investors is when you say you're making convenient, what is an otherwise inconvenient aspect of automotive maintenance. Nobody likes doing oil changes, nobody likes getting out of their vehicle and sitting in a dirty waiting room and taking time. So Takes 5 to stay in your car 10-minute oil change. It's just adding convenience to a customer who craves convenience.

That's right. That's right.

And I think same-store sales growth for Take 5, it's been great, fairly consistent to mid- to high single-digit range. Can you talk about what's driving that? And a portion of it may be the maturation of some of your younger stores in the store fleet. But there's also other initiatives that you're working on and other avenues you have to drive the growth.

Yes. I think you called out part of it, but I really break it into 3 separate buckets. You've got -- as you mentioned, the maturation of the store fleet. So our stores grow typically in the first 3 years of being open, a fairly meaningful step change year 1 to year 2, year 2 to year 3. They continue to grow after that, but it's more of a normalized growth rate. We expect that to continue. We expect to continue to open a lot of new stores. We do comment that as a contributor to the overall growth, that will moderate. When you open up 150-odd stores and your base is only 500, that contributes a lot more than when you open up 150 stores and you've got 1,500 locations. So we continue to expect that growth from new stores, but the share that it has to the broader equation goes down.

The second, as I mentioned, is just ongoing continued growth that you expect to see from existing mature locations. We have a great advertising fund that enables us to spend nationally, building awareness in places where Take 5 is not as well penetrated, driving conversion at the bottom end of the funnel where we are really well known. The beauty about being part of a chain that is growing both units and top line sales is that advertising power continues to grow and gives us more dollars to help communicate. And then third is ticket. And I use that word carefully because I say ticket, not necessarily price.

We have the ability to take price. We can if we need to, but we have not pulled that lever nor have we really needed to. When I talk about ticket, there are really 2 big drivers here. The first is the continued premiumization of oil. So 90% of the oil we sell is in some way premium, but only 30% is that full synthetic top of the line. So if you think about the overall premiumization pyramid, we still have a ways to go to take people who are at the semisynthetic all the way up to the top. And that comes with additional ticket growth for us.

The second is the non-oil change revenue, right? We are currently at about 20% non-oil change revenue. When I say non-oil change revenue, think filters, wipers, your fuel additive, the differential service that we just announced in Q2. These are additional services that stay within the stay in your car 10-minute oil change that customers want and value, but also give us an ability to add additional price to the ticket. The advantage of that is we're at 20%. Our attach rate is in the 40s that has grown from the 30s. We're actually into the upper 40s at this point. But we look at our fleet, whether corporate or franchise owned, and we see stores that have 60% attach rates. And so we know between the premiumization, ongoing premiumization and the ability to continue to drive attachment, we have natural tailwinds on the ticket in addition to some of the other transaction levers that we have as well.

And so digging into premiumization a little bit, 90% is great. And I think it's above some of your peers. And I think there's 2 drivers of it, right? So one is the natural shift from OEMs requiring the fully synthetic and synthetic blend that will go into your car park. And then the next is just the trade-up opportunity you get when those higher mileage vehicles come in and maybe they require synthetic, but they can use blend or fully and you get that trade up. And so how does the company think about the balance there? And then getting someone to trade up from blend to fully? Is there an upselling aspect there and an educational aspect where you can say, the full synthetic is better for your higher mileage vehicle?

Yes. So I think you kind of hit the nail on the head in that really, there are 2 drivers, right? So number one, the newer cars, as newer cars roll off the lots and they come into the car park, those newer cars, generally speaking, require higher viscosities, right? So with fuel efficiency standards being what they are, as they continue to go up, and I'll nerd out for a second. I'm an engineer by background, right? But these engines are getting more and more compact, which means you need higher viscosity oils. And as that happens, just naturally, there's a nice tailwind into it. Secondarily, and you said it, not me, so I'll take advantage that you said it. We're world-class at selling premium oil, right? If you come into a Take 5, it's a very natural experience. We're going to -- first and foremost, we're going to scan the barcode on the door jam.

That's going to automatically load your car information. We're going to know the make model year of the car. We know, therefore, what viscosity you should get. So we're good. We're telling you this is what Ford recommends or Chevy or whatever manufacturer is. And then from there, we're going to look at your odometer. And if you're at 120,000 miles, let's say, we're going to naturally ask you to get into a high-mileage oil, which is better for your vehicle. If not, we're going to recommend a different oil. So it's a very natural non-salesy, non-pressure environment. We're just telling you kind of what your car is calling for.

And that trade-up must be pretty sticky, right? Because when you tell someone who -- this is the second most important asset or expensive asset they own, right, next to their property, for most of them, you say, hey, we've trade up this higher mileage vehicle or oil is better for your vehicle. It's going to maintain it longer. They're happy to do it generally, right? And so you don't -- it's generally a very sticky behavior.

It's sticky behavior, and it's a very natural question, right? The way that we lead the transaction and you lead the customer, you're not operating from a position of I know more than you do. And any time that there's a relationship where I know more than you do that all of a sudden, your defenses go up, you're bringing the customer along for the journey. You're explaining why it is that this oil is better for them. And to your point, it is a big investment for the average American, and so they're more than willing to spend the money.

Excellent. And then I touched a bit upon the non-oil change revenue, and I think it's great to be announced the differential service recently. Certainly, more extended interval cycles for changing it versus oil, but it's an important part of maintenance and it's OEM required. So -- when you have that come in, you scan the VIN, you know the intervals, you look at the odometer. It's a pretty natural sell, and there wasn't any CapEx you had to put in, right? You're leveraging your existing infrastructure. So how should we think about future non-oil change services? The 10 minutes change in your car -- oil change probably won't go into many involved under the hood type of service, big repairs, but what else can we expect to roll out in the future? I just something adjacent to the quick and easy changes?

Yes. So I think, first and foremost, what you should expect is continued growth, right? So Take 5 is our growth business. We're going to continue to grow that business. When we think about growth, we think about 2 main avenues, right? Number one, new unit growth, right? So we're going to open, we said pretty publicly, 150-plus locations a year. We're going to open, roughly speaking, 2 franchise locations for every one company location. We've been doing that for some time now. We're committed to doing that well into the future. So that's one avenue of growth. The second avenue of growth is organic growth at the 4-wall level, right? And so one of the strategies there, to your point, is, over time, we're going to continue to introduce new services to make sure that we can continue to grow organically kind of the 4-wall AUVs of the box.

The way that we think about it, there's basically 2 things that have to be true for us to roll out a service. There's operational fit and there's financial fit. Operational fit is exactly what you said. We are the home of the stay in your car 10-minute oil change. That is the promise that we've made to consumers. When you come to a Take 5, this is what you should expect. We have to uphold that promise. So the first thing that we're looking at is, okay, can we continue to deliver a 10-minute oil change experience in the car with NPS scores in the high 70s. Check -- you got to check that box. Second one is financial fit. At the end of the day, the margin profile of the service has to be in line with the rest of the basket of services that we offer. In the case of differentials, it's kind of a textbook example of how we're thinking about new services, right? So operational fit, the team spent 2 quarters testing this every which way from Sunday, processes, procedures, training, making sure that we can deliver this experience, 10 minutes, stay in your car, NPS scores in the high 70s.

So great, we could check that box. And then on the financial fit side, this one was easy because differentials is margin accretive to the rest of the basket. So in this case, another big check mark. So it gives you a good sense of how we're thinking about things and how we're not going to butcher what Take 5 is in the future, right? Take 5 means something, it has to continue to mean something.

Excellent. Excellent. Yes. That's perfect. And then kind of adjacent to that, one of the things we hear from investors, and it's much less of a concern now than it was, say, 3 years ago, is the looming concern of battery electric vehicle penetration, right? At one time, it was considered a much larger threat, and now it's just kind of adjacent to the story. But can you tell us how you approach your framework of thinking about that? And how you expect the addressable market for your service to shift over time?

Yes, it's a great question. And to your point, I mean, when we IPO-ed a few years ago, it was the question. It was every other question. And so we're very prepared for that. I think of 2 things when I think of this question. The first thing that always comes to mind is if I'm talking to a prospective investor and they're concerned about this, the first answer is you're not investing in Take 5. You're investing in Driven Brands. And Driven Brands is a diversified platform, of which only one of our businesses has some exposure to EV. The rest of the portfolio is EV agnostic. So that's one thing.

The second thing is whenever you think about a question like this, again, the engineer in me want to go straight to the numbers, right? I think you have to ground yourself in the numbers. So if we look at the numbers in the U.S., EVs make up less than 2% of the U.S. car park. If you look at new EV growth, right? So new car sales, if you look at the EVs as a percentage of sales in the last quarter, it was 10%, down from 11% in Q4 of last year.

So not only are EVs a very, very small part of the overall car park, it's also not growing tremendously fast, and that growth has moderated at least here recently. So you put that all in the blender, and obviously, this is very top of mind for us. We're serious about running our Take 5 business, all of the models that we have internally say not only do we have a business that survives, that goes without saying, we have a business that thrives and is growing well through the 2020s, well through the 2030s. And I'm not going to speculate further than that because you got to put a time limit on something. But suffice it to say, I think Take 5 is going to be doing quite well for a long period of time.

And hybrid vehicles become the electrified powertrain of choice, then you win there as well.

That's right because you still need oil changes in a hybrid vehicle, 100%.

Perfect. And then as I think of Take 5, there's tremendous white space opportunity for future growth and franchisees play a very important role here, as you mentioned, too, for every one company -- as we look forward, at the end state, is there a specific mix you're looking for or franchise versus company-operated clear asset-light model? Is it more capital-light and better margins on that?

Yes. I mean I think you nailed it. I would say, in general, we -- our goal is to open 2 franchise for every 1 corporate store. We are opportunistic, right? I think last year, probably this year will be a little bit more 50-50, but that's not strategic driven as much as it is. We find good real estate that we like in the corporate markets we own. It is such a good return on capital that we wouldn't be doing our duty if we didn't try to open those stores. I think in general, though, we see an opportunity to continue to grow the franchise model. I love franchising and I love franchising for a concept that is at this part of the retail growth curve because it helps you grow more quickly than if I was trying to put in $1 million plus a site for every site I wanted to build across the entire company -- and country, and we have great partners doing it.

So for the foreseeable future, expect it to be 2: 1 for every franchise to corporate. That probably gets us over time to more of a 50-50 blend. And then at that point, we'll assess where we want to go from there. But I think for me, great company returns, like we get fantastic sub 3-year paybacks on the sites that we open ourselves. It is a great company-owned model as I think about deploying capital and make sure it continues to return and grow the box. Great franchisee returns, some of the best in the industry. And we've got franchise partners who are excited, some of them on their second and third ADAs to continue developing. And so I think we actually have the best of both worlds, which is the ability to deploy capital in a high-return environment when we need to and the ability to provide that same upside to our franchise partners as well.

That actually goes great to the next question for unit economics. I mean they're tremendous for the Take 5 business. So can you talk about the investment that's required for the company to open a new location, the maturity curve, which I think you mentioned is 3 years. And then what are the cash-on-cash returns? And is all that very similar to the franchise business as well?

Yes. I mean I would say, in general, it doesn't look that much different. Obviously, there's a royalty for a franchise business. It takes a little more than $1 million for us to open a store. In some instances, we buy the land and then sale lease it back. And so that sometimes gives us an ability to get that net CapEx down below $1 million depending on the location and the cap rate. That's not a requirement. We'll open with ground leases. We'll open buying the dirt underneath it. It really is opportunistic based on where we want to be and what's available to get the right location in town, tend to be a 3-year ramp, year 1, year 2, year 3, pretty predictable across each of those 3 years, topping out, topping out, maturing at about $1.4 million AUV in year 3.

We still get growth above that. But by year 3, you'll kind of have a mature at which point the growth becomes more normalized. And then look, EBITDA margins, 4-wall EBITDA margins in the 40s. payback is sub-3 years. Again, if we can get the net investment cost down either through sale leaseback or sometimes conversions require a lot less CapEx, that can be even less than that. But I think in general, it's great. Again, it's great to have this problem around capital allocation, which is making sure we continue to adhere to some of our other objectives around debt paydown and deleverage while also finding the capital to prudently continue to grow this fantastic asset.

Excellent. And then last question on Take 5 here. If we look at the segment margin, the EBITDA margin has been pressured the last couple of quarters. Some of that, I think, is due to higher maintenance spending in the platform. Is that right?

Yes. Yes. So I think take a step back, in general, we feel really good with margins in the mid-30s. And I think, obviously, there's been some quarter-over-quarter variations and some year-over-year variations. Q2 of last year was a particularly high-margin quarter. Q2 of this year was a little bit lower. We have been investing in our repair and maintenance and our new store opening costs. This is a tremendous asset. And I think both Danny and I have experience with assets that maybe aren't -- don't keep up with the maintenance, and we don't want to lose what we have, which is a fantastic consumer forward brand that has such high NPS and sometimes that comes with the state of the fleet.

If you take a step back, mid-30s is where we want to be, and it's where we are. So there will be some variation quarter-over-quarter, potentially in a given quarter year-over-year, but we feel good with the mid-30s. It's a very good, strong, sustainable business in the mid-30s. We feel really good with the assets we're opening. And our job is just to continue nurturing this growth so we can continue to explore how much runway we really have.

Excellent. Excellent. And then moving to the Franchise Brands segment, obviously, your largest segment in turn of system-wide sales. And I think one of the businesses that have gotten a larger portion of the discussion today is the Maaco business, which generally, a very stable business, but in the last couple of quarters has seen some demand headwinds. Can you talk about what's going on there?

Sure, sure. And I'll double-click on to Maaco here in a second, but maybe take a step back and talk about the franchise segment and kind of lay some groundwork there. So we resegmented Driven Brands. Last year it was Mike's brainchild. It's worked really well for us. It just helps simplify the story. So at the end of the day, we are a platform. We own a collection of businesses, but you need to not understand all of the businesses to understand the power of Driven Brands. And so the franchise segment, in particular, is a collection of businesses that have a lot of commonality. These are fairly mature businesses, mostly nondiscretionary in nature, 100% franchise, asset-light. And ultimately, these businesses collectively over a period of time are going to operate very predictably.

This is low single-digit growth, both top and bottom line. And most importantly, they're going to generate EBITDA margins north of 60%, and they're going to have very robust cash flow. And we can take that cash flow and then reinvest it back into the juggernaut that is Take 5 that we just spoke about. So that's the franchise segment. As far as Maaco, to your point, so Maaco has been a little bit softer this year. There's really kind of 2 reasons for that. The main reason is Maaco of all of our franchise businesses is the most nondisc -- or sorry, the most discretionary in nature. So a typical use case out of Maaco, I'd say 2 typical use cases, so you understand kind of the types of transactions that a Maaco would perform. So think you have a car, it's 9 years old, you want to hand it down to your son or daughter. But before you do so, you want to paint the car. That's a really typical use case.

Obviously, almost by definition, that's a fairly discretionary use case, right? You don't have to paint the car, but you're choosing to do so. Another really common use case is you get into a very light fender bender, you don't want to claim it on the insurance, you don't want to pay for the deductible. So you're just going to take it to a Maaco and get the bumper replaced or something like that. Now again, fairly discretionary service. You don't have to fix the bumper, you may choose to do so. So given that it's more discretionary in nature and it also, just for historical reasons, tends to over-index as far as the driven portfolio of businesses, it over-indexes a little bit more into lower income consumer. That business is feeling a little bit of headwinds right now.

But all of that being said, look, Maaco is a 50 -- more than 50-year-old business. I think it's a 53-year-old business. Franchisees are amazing. If we went back to 2022, 2023, '24, really strong comps in that business. So this is a short-term phenomenon. The business has survived many in the economic cycle, and it's going to be fine. And ultimately, most importantly, what we need from the franchise segment is strong cash flow and 60% margins that we delivered 61% margins last quarter.

Perfect. And actually, that goes nicely being Maaco going to the collision repair aspect of your business, generally, again, also a generally stable and great end market. But recently, the industry has seen some pressure from repairable claims going down for some changes in consumer behavior from insurance premiums rising and whatnot. But generally, when I think of your collision repair business, your franchisees, I think, have more of an entrepreneurial spirit than some of the larger chains. Is that fair to say and that they're able to kind of outperform in their local markets because they have a little more spirit to them?

Yes, I think you've hit the nail on the head. I mean, to take a step back to the premise of the question, right? So the industry overall is facing some headwinds right now. So it's down about 10% year-over-year in terms of estimate count. There's really 2 big drivers to that. So number one, you're seeing some claim avoidance. So if you look at deductibles and premiums and what's happened in the last few years vis-a-vis inflation, inflation really hit hard in that area. And so you're seeing some consumers holding back a little bit in terms of putting claims through. So that's part of the reason. The other part of the reason is you're seeing total loss rates at historic highs. So you combine those 2 things and you end up with estimates down 10%. Now that being said, we've said this on the last 2 quarterly earnings calls, we're taking share even though the industry is down, we -- there's really good industry data in that space. And we know that our collision business is taking share even though the overall industry is down.

So while I hate the fact that the industry is down, we are taking share. And I think to the second part of your question, I think a lot of it has to do with the very unique way that we go to market in that business, which is through a franchise model. So the body shop space, the collision space is a fairly complicated business, and it makes the world of difference to have an owner-operator on the ground every single day, making sure the technicians are taking care of, making sure that the customers are getting taken care of, making sure that we can hit the quality KPIs. Folks that don't know this industry that well, the collision space as far as getting work from insurance carriers, that is a very meritocratic process. They -- the insurance carriers will insist on a variety of quality-related KPIs, customer satisfaction KPIs. And if you're not hitting those KPIs, you're just not getting the work. So having that owner on the ground is a huge differentiator.

And it's a very fragmented industry, right? Over 50% of the rooftops are single shop operators that they're competing against. And so having your CARSTAR platform be part of a number of DRP programs just helps naturally flow the volumes in, right? So that's another way you're helping to compete further. And then switching to Meineke, largely vehicle maintenance, right, one of your other larger Franchise Brands segment businesses. I'd expect trends there to be fairly stable, particularly as owners in this environment continue to maintain their vehicles, you can see the average age continue to tick up every year. Can you talk about what your franchisees are seeing in that market? And if they're seeing any signs of deferral or just any signs of customer hesitation there?

Yes. No, I mean, it's a very stable market right now. We're not seeing any real signs of deferral. If you look at that space, there's really 2 nice tailwinds going on right now. So the average age of a vehicle in the United States is at an all-time high. So the car park is at 12.8 years on average. Older cars are good for Meineke, right? The older your car is, and reason, the more repair and maintenance you're likely to need. The other thing is the older your car is, the less likely you are to take it to the dealership.

So those are both kind of really good things for Meineke. The other nice tailwind in the industry is if you look at miles driven, that's completely bounced back post-COVID, right? So miles traveled is very, very high. Average age of a car in the car park is very, very high as well. And so both of those are really nice tailwinds for Meineke. And Meineke is kind of that quintessential example of a franchise business for us. So another business, more than 50 years old, 100% franchise, great group of franchisees. It's a really solid business, and it's performing solidly for us right now.

And very similar to your Take 5 business, you also benefit from just a secular shift from DIY to DIFM as -- I don't know many people that DIY these days, but it's a shrinking population, right? And so you get some natural benefit there. That's perfect. And as I think about the Collective Franchise Brands segment, I think you had alluded to this earlier, you have a great margin profile, very stable long-term business, business that have been around for a long time that just generate a tremendous amount of cash flow. And you can use that cash flow to fund your growth and Take 5 and deleverage. Is that a fair characterization?

Yes, absolutely. I mean I think you look, like that is the cash part of the growth and cash playbook that Danny mentioned earlier. It is incredibly high margin. It is an incredibly stable business. When you kind of step back and look at it over multiyear. It helps us with the red thread, if you think about why the Driven platform exists, our relationship with insurance companies, fleet, et cetera. It really helps us bring the power of the automotive aftermarket to bear. And as we've talked about with capital allocation, it's nice to have an internal source of cash flow to be able to fund some of our other higher growth objectives to help us advance them all forward.

Excellent. Okay. That's great. And then switching to your remaining car wash business, largest platform in Europe, independent operator model, a little bit -- it's different than the franchise model, but different than the company operates kind of in between. Can you talk about the profile there because I view that as also a great cash generative business.

It really is. And I think let me take a step back and talk about why is it different than the U.S. And I think, first of all, we are the market leader. We are the clear market leader, and there really is no second player. And so if you think about what has been part of the Car Wash business domestically, which is a lot of competition, a lot of regional players. If you think about our international Car Wash business, over 700 locations, about 1/3, 1/3, 1/3; 1/3 in the U.K., 1/3 in Germany and 1/3 scattered through all the smaller countries. The defensive moat is a little bit deeper. We recycle 80% of our wash washer, which is not only a nice thing to say, but it's one of the requirements you have in many of these municipalities so that you're actually recycling the water.

In a place like Germany, hand car washing is actually banned because of the risk of runoff and the environmental impact. And so we are the only tunnel operator in the U.K. There are other smaller tunnel operators in Germany, but we are the clear #1. So we have a defensive moat there. The business is incredibly well run. That team has done a great job, whether you think about offering new products like the ceramic covering or graphene, which we've just started to roll out, a way to continue to build check size there. We've recently remodeled most of the fleet across, in particular, the U.K. and Germany, not only does it look prettier, but it helps get us on some more advantageous paper that further incentivizes our independent operators to drive up the choice from a wash up from a basic car wash into the ceramic or the graphene.

The independent operator, I think, is an attractive model, particularly in high regulatory Europe because we don't have to deal with the employment issues. We are responsible for the capital, but that gives us some form of control. But even with that capital, to your point, it's a cash-generative machine. So it's a really strong business. It's really well run, and it helps generate cash, which we can then repatriate and use to help fund our other growth initiatives back here in the States.

That's perfect. And then switching quickly to your U.S. class business, relatively small part of your business today. You're incubating the growth there, but I think it's growing nicely. Can you talk about your position in the market and your overall aspirations for that business?

Yes. I mean, so to your point, we're incubating that business right now. Let's take a step back and maybe understand why did we get into that business and where we are in our journey. So if you look at that industry, we really liked everything that we saw in the industry in the terms of -- it's a very big industry. So you're talking about a $5 billion TAM, highly fragmented, plenty of white space, great unit level economics, fairly simple business from a 4-wall operations perspective. So all of that looks really kind of the things that we look for in terms of entering a new segment, right? There's this other interesting dynamic where you had this really strong #1 player. They do a really nice job and really no #2, certainly no #2 with any kind of national presence or with much capital to work with.

So it seemed like there is a hole in the marketplace that we could uniquely fill being the largest provider of automotive services in North America. So we stepped into that space. Nothing's changed in terms of the underlying thesis, right? All those things remain true. And what we've been doing is we resegmented Driven Brands. We put that in the corporate that AGN, Auto Glass Now into the corporate and other segment because we're just incubating that business. We're giving it a little bit of time to breathe and to grow. What we've said is, look, we're going to lean pretty heavily into the top of the sales funnel. We're really going to focus in on insurance and commercial. That work tends to be stickier. It tends to be a little bit better margin. And so we're really leaning into that.

But the nature of that business is it's a bit of a longer sales cycle, right? So if you're talking about a top 10 insurance carrier, and I won't mention any names, but you all know who they are, if they've been doing business with somebody for 20 years, you don't just show up and say, hey, so we're here and 3 months later, get the business. You have to earn the credibility to get that business, and that's what we're doing. So I think we have a fantastic leadership team there. They have the right priorities, 4-wall operations look great, and we're just putting our heads down and working.

That's excellent. Yes, another end market where there's tremendous fragmentation in the operators, you can take advantage of at scale.

That's right.

Well, this has been excellent. We have a couple of minutes left here. So there are 5 questions that we're asking every company. It's just kind of get a broader feel of your view of the consumer and the broader economy. I guess with regard to the health of your core consumer, I think Driven Brands as a whole, all your different businesses, what do you expect for the second half of the year relative to the first? Will they be stronger, weaker or about the same in terms of their economic position?

Yes. Look, I think when we did earnings last time, we reiterated our outlook for the second half of the year. We did note there are some headwinds. But with all that being said, we're reiterating our outlook. We did mention weather in Europe, certainly in July, and I'm not going to say anything forward from there. That's the only thing we've mentioned on the call, but weather was tough in July in Europe, and so that was a thing. There's still some pressure on anything that's very discretionary in nature. So that harkens back a little bit to Maaco and certainly that lower income per consumer, again, more so as it relates to Maaco, we're feeling a little bit of that softness there. But still, you put all of that in the blender, and we felt very comfortable reiterating our outlook for the year, and we stand by that today.

Perfect. And then understanding you haven't given '26 guidance yet, so I'm not trying to get any insight there. But as we think about next year, do you see anything changing in the -- for your consumer? Or are they in about the same position they are today?

We are -- so I'm going to completely punt on that question. We are heads down in 2025. As we go into the second half of the year, we'll go through AOP, we'll do our whole thing, and we'll talk about next year. But for right now, we just want to close the year out strong.

Perfect. And then as we think about pricing, everyone is trying to figure out pricing and the impact of pricing today on elasticity. To the extent you've taken it in any of your -- if you've seen tariff costs come through and you've taken pricing in any aspect of your business, has there been any elasticity response...

I mean I would start with, in general, we're a nondiscretionary business. And so one of the advantages of being nondiscretionary is not only the ability to pass along price if we have to. But as I said earlier, we don't really pass along a lot of price. The growth we're seeing in our check is more ticket-driven based on services and premiumization. Also because you slipped it in there, like our tariff exposure is fairly limited. We are largely subject to the USMCA, which helps us limit tariffs, and we've got a broad-based supply chain that enables us to optimize where we source our product when we need to.

So we haven't seen those pressures. I think we have an ability to if we needed to from a pricing perspective, but we haven't had to and nor do we just take it because we want to. It's nondiscretionary. People care about their cars. They continue to invest in their cars because they want to and because the niceness of the car demands it, and we're here to serve that need.

Perfect. And then the last one, as we think about market consolidation in all of your end markets, looking towards next year, as an industry in general, would you expect it to slow down, speed up or be about the same?

I think the general trends, I mean, roughly stay about the same, right? I mean if you think about the automotive industry in general, it is a space that for some time now has a few consolidators. We're obviously the biggest one, and we've made -- we've done quite well acquiring businesses, and we've been very acquisitive historically. But the general trend of few consolidated players gobbling up smaller players, I don't see that trend changing. I'm not sure it accelerates or not, but it's a trend for a long time to come.

Excellent. Well, this has been a pleasure. Danny and Mike, thank you very much for being here today. It's been amazing.

Thanks, Mark.

Thank you, Mark. Appreciate it.

Good morning, ladies and gentlemen, and welcome to the Driven Brands Second Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Tuesday, August 5, 2025.

I would now like to turn the call over to Joel Arnao. Please go ahead.

Good morning and welcome to Driven Brands Second Quarter 2025 Earnings Conference Call. The earnings release and the net leverage ratio reconciliation are available for download on our website at investors.drivenbands.com.

On the call today with me are Danny Rivera, President and Chief Executive Officer; and Mike Diamond, Executive Vice President and Chief Financial Officer. In a moment, Danny and Mike will walk you through our financial and operating performance for the quarter.

Before we begin our remarks, I'd like to remind you that management will refer to certain non-GAAP financial measures. The reconciliations to the most directly comparable GAAP financial measures on the company's Investor Relations website and in its filings with the Securities and Exchange Commission.

During the course of this call, we may also make forward-looking statements in regards to our current plans, beliefs and expectations. These statements are not guarantees of future performance and are subject to a number of risks and uncertainties and other factors that could cause actual results and events to differ materially from results and events contemplated by these forward-looking statements.

Please find the earnings release and our filings with the Securities and Exchange Commission for more information. Today's prepared remarks will be followed by a question-and-answer session. We ask you to limit yourself to 1 question and 1 follow-up. Now I'll turn it over to my partner, Danny.

Good morning. Thank you for joining us today to discuss Driven Brands' second quarter 2025 financial results. I want to begin by thanking the more than 7,500 Driven Brands team members and franchise partners whose hard work and execution continue to drive results in a dynamic macro environment. .

One of my first actions as CEO was to hit the road on a listening tour, visiting many of our offices and shops across the country to hear directly from our team. I wanted to solidify what's working, where we can improve and how we shape the next chapter of driven brands together. That effort continued with our annual talent week where driven senior leaders came together to review key roles, invest in leadership development, and hold open conversations about driven our talent and our future.

What came through loud and clear in every location and every conversation is that we have an incredible team. I left both the tour and talent week more energized than ever about our future. We have the right people, the right model and the right momentum to win.

Shifting gears to our second quarter results. Driven Brands grew revenue by 6% and delivered adjusted EBITDA of $143 million. System-wide sales increased 3%, supported by 184 net new stores over the last 12 months, and 52 additions this quarter alone. Same-store sales rose 1.7%, marking our 18th consecutive quarter of positive same-store sales.

We remain focused on our key priorities, delivering consistent growth fueled by Take 5, generating strong free cash flow from our franchise brands and executing on our deleveraging plan to create long-term shareholder value. Take 5 Oil Change once again led the way with industry-leading growth, inclusive of 10% adjusted EBITDA growth year-over-year, 169 net new stores over the past 12 months and 41 for the quarter, and same-store sales up 7%, marking our 20th consecutive quarter of same-store sales growth.

Take 5 is the home of the stain your car 10 Minute Oil Change. Our unique operating model paired with the passion and consistency of our team members and franchisees continues to deliver Net Promoter Scores in the high 70s, resulting in strong customer loyalty. As we continue to open over 150 new locations annually, many in new markets, brand awareness and customer trial continues to grow and those first-time visitors become repeat customers. We're also seeing meaningful contribution from our non-oil change revenue, which accounted for more than 20% of Take 5 sales for the quarter, driven by continued strong attachment rates.

As part of our strategy to grow non-oil change revenue and expand our service offerings, we began piloting different the replacement of a vehicle's differential fluid last year. Today, that service is fully rolled out across all company-owned locations and roughly half of our franchise locations with full rollout expected by the end of Q3.

This brings our total number of non-oil services to 6, all designed to fit seamlessly within our fast friendly simple stain your car model. Importantly, our attachment rates and Net Promoter Scores remain strong underscoring the trust customers placing us to deliver more in every visit.

As we continue to execute, we're unlocking greater value for our customers and greater productivity from every lane. Our franchise and international Car Wash segments, home to iconic brands like Meineke, Macco and CARSTAR continue to be high margin, strong free cash flow generators, allowing us to reinvest in the growth engine that is Take 5.

Our franchise segment generated $45 million in adjusted EBITDA for the quarter, with adjusted EBITDA margins of 61%. We continue to see year-over-year softness in both our Collision business and Macco. In collision, the broader industry remains under pressure, but we're encouraged by Driven's continued market share gains. Macco showed sequential improvement this quarter, though it remains down versus prior year due primarily to a pullback in discretionary spending among lower-income consumers.

While we're pleased with our market share gains in collision and Macco's quarter-over-quarter progress, we anticipate ongoing softness in both for the remainder of the year. Meanwhile, IMO, our international carwash business continues to deliver strong top and bottom line performance with same-store sales for the quarter of 19% adjusted EBITDA of $27 million and adjusted EBITDA margins of 37%. For our comments in Q1, we are thrilled with the performance of our Car Wash segment, but expect the performance to moderate in the back half of the year.

We remain committed and laser-focused on reducing leverage to 3x by the end of 2026. Importantly, we recently monetized the seller note from our U.S. Car Wash transaction for $113 million. While Mike will provide the details shortly. This move allowed us to fully retire our term loan and pay down our revolver, reducing net leverage to 3.9x on a pro forma basis. We first outlined our deleveraging goal at our Investor Day in late 2023 and since the end of that year, we've paid down just under $700 million of debt, reducing net leverage from 5x to 3.9x. I'm pleased with the steady progress we're making and remain fully committed to reaching 3x by the end of 2026.

While the tariff environment remains fluid, we've seen no material change to our tariff posture since our Q1 update. Driven remains well positioned, and we continue to believe that our diversified sourcing strategy and pricing power supported by the nondiscretionary low frequency nature of our services will enable us to manage any foreseeable risk.

I'd summarize my remarks today as follows: first, we delivered a strong second quarter across same-store sales, revenue, adjusted EBITDA and adjusted EPS. Second, Take 5 continues to deliver industry-leading growth. Third, our franchise and carwash segments remain reliable sources of strong free cash flow. And finally, we remain on track and committed to reducing leverage to 3x by the end of 2026.

I want to sincerely thank our thousands of employees and franchise partners for their continued dedication and hard work. Despite a dynamic environment, I remain confident in our team and ability to execute. With that, I'll turn it over to my partner and Driven's CFO, Mike.

Thank you, Danny, and good morning, everyone. Q2 2025 was yet another strong quarter for Driven marked by consistent execution, strong sales growth in our Take 5 Oil Change business and continued debt paydown helped in part by the completion of the sale of our U.S. Car Wash business. As a reminder, with the divestiture of our U.S. Car Wash business, the results for that business are included in discontinued operations and are not included in financial details provided today, unless otherwise noted. .

Driven recorded its 18th consecutive quarter of same-store sales growth, increasing 1.7% in Q2. We added 52 net units in Q2 as continued strength in our Take 5 segment was supplemented by unit growth in our Franchise Brands segment.

System-wide sales for the company grew 3.1% in Q2 to $1.6 billion. Total revenue for Q2 was $551 million, an increase of 6.2% year-over-year. Q2 operating expenses increased $84.2 million year-over-year. Key drivers of this increase include an increase in company and independently operated store expenses of $17.8 million driven by higher sales volumes and more stores in Q2 of 2025 versus Q2 of 2024, an increase in SG&A of $63.3 million approximately $49.7 million of this increase is excluded from adjusted EBITDA, driven by a loss from the seller note receivable, increases in cloud computing amortization and losses from the sale or disposal of fixed assets.

The remaining $14 million increase in SG&A is driven primarily by ongoing investments in growth initiatives and the normalization of certain reserves. Operating income for Q2 was $38.1 million. Adjusted EBITDA for Q2 was $143.2 million, roughly $0.2 million below Q2 last year.

As a reminder, Q2 of this year comes without the benefit of PH feature, which we divested in August 2024 but the results of which are still included in Q2 2024 results. Adjusted EBITDA margin for Q2 was 26%, an increase of roughly 160 basis points versus Q2 last year as sales growth was offset by the aforementioned increases in store expenses and SG&A.

Net interest expense for Q2 was $31.4 million, down $0.5 million from Q2 last year. Income tax expense for the quarter was $7.1 million. Net income from continuing operations for the quarter was $11.8 million. Adjusted net income from continuing operations for the quarter was $59.1 million. Adjusted diluted EPS from continuing operations for Q2 was $0.36, a decrease of $0.01 versus Q2 last year, driven by lapping Q2 2024 earnings from pH Vitro. Q2 performance for each of our segments include, Take 5 Oil Change, which represents approximately 75% of Driven overall adjusted EBITDA had another strong quarter with same-store sales increasing 6.6% and revenue growth of 14.7%.

Danny mentioned earlier the rollout of our differential fluid service system-wide and this expanded service offering was 1 of several contributors to the continued strong sales performance. Revenue from our non-oil change services continues to grow, now comprising over 20% of Take 5's total system-wide sales, and we continue to see expansion in the penetration of premium oils, which account for approximately 90% of our oil changes.

Adjusted EBITDA for the quarter was $108.2 million, reflecting growth of 9.9% compared to Q2 2024. Adjusted EBITDA margin was 35.6%. We opened 41 net new units in the quarter, of which 24 were company-operated stores and 17 were franchise-operated. Franchise Brands reported a 1.5% decline in same-store sales representing a sequential improvement from Q1 of this year despite continued pressure in our most discretionary business, Macco and ongoing softness in the broader collision industry.

Segment revenue decreased $6.4 million or 7.9%, driven by same-store sales and lapping onetime fees from last year. The segment maintained its strong position as a key cash generator in our portfolio, delivering a Q2 adjusted EBITDA margin of 60.9%. Adjusted EBITDA was $45.4 million, down $8.8 million from the prior year, reflecting both the revenue decrease and higher G&A costs.

We continue to grow our footprint, adding 13 net new units in the quarter. Our Car Wash segment, representing our international Car Wash business had another record quarter with same-store sales growth of 19.4%. Similar to trends we experienced last quarter, this performance was driven by improved operations, expanded service offerings and more favorable weather relative to a year ago. Adjusted EBITDA increased $5.1 million to $27.3 million. Adjusted EBITDA margin increased 120 basis points to 37.2%.

As we discussed last quarter, on April 10, we closed the sale of our U.S. car wash business for gross cash proceeds of $255 million and a seller note of $130 million. On July 25, we monetized the seller note for $113 million. We applied these net proceeds to fully retire our term loan and pay down our revolving credit facility by approximately $65 million.

This transaction closed after the quarter closed, and therefore, our Q2 balance sheet reflects a note receivable for $113 million.

Turning to the remainder of our liquidity, leverage and cash flow performance for Q2. Our cash flow statement shows a consolidated view of cash flows for Q2, inclusive of our discontinued operations. Net capital expenditures for the quarter were $48.5 million, consisting of $62.6 million in gross CapEx, offset by $14.1 million in sale-leaseback proceeds.

Proceeds from assets held for sale in Q2 generated an additional $4.1 million of cash. As a reminder, we have now sold through a majority of our assets held for sale and would expect to generate a modest amount of proceeds through the rest of 2025. Free cash flow for the quarter defined as operating cash flow less net capital expenditures was $31.9 million, driven by strong operating performance. Strong cash generation, combined with the sale of our U.S. Car Wash business, enabled us to advance our deleveraging priorities, reducing debt by approximately $265 million during the quarter.

Our net leverage stood at 4.1x net debt to adjusted EBITDA at quarter end. When adjusting for the seller note sale and subsequent debt reduction, our pro forma net leverage improved to 3.9x. As of today, our revolving credit facility has a balance of $110 million and represents the only nonsecuritized debt we have outstanding.

Year-to-date, we have repaid approximately $445 million of debt. Our debt is now 94% fixed rate with a weighted average rate of 4.6%. One final note on debt. You will see in our balance sheet an increase in current portion of long-term debt related to our [ Class 2019-1 ] securitized notes that have an anticipated repayment date of April 2026. Given the nature of the securitized debt market that is common to refinance these notes closer to the repayment date, and we are confident in our ability to refinance.

As a reminder, we also have a revolving credit facility and variable funding note capacity of approximately $700 million, which is available to us in the unlikely event we are unable to refinance the 2019 notes. Our Q2 performance demonstrates meaningful progress on our key financial priorities, generating solid free cash flow, systematically reducing leverage and further strengthening our balance sheet.

With the successful monetization of the seller note and subsequent debt reduction, we've simplified our capital structure and enhanced our financial flexibility for the remainder of the year.

I'd now like to spend a little bit of time on the current operating environment and provide an update on our full year outlook. As Danny mentioned earlier, the driven portfolio benefits from providing generally nondiscretionary services for an asset a person's transportation that is essential for their livelihood. While declining consumer sentiment has the potential to adversely impact our performance, our business model remains resilient overall.

We saw this resilience play out in Q2 with strong, albeit moderating growth in Take 5 and sequential improvement in our Franchise Brands segment, despite some limited pullback from our lowest income consumers and ongoing challenges in the end markets of our Franchise Brands segment.

As mentioned, last quarter, we believe we are well positioned for any potential tariff impacts, thanks to our strong supply chain team and geographically diversified supply chain. As we enter the back half of the year, we reiterate our fiscal 2025 outlook as follows: revenue of $2.05 billion to $2.15 billion, adjusted EBITDA of $520 million to $550 million, adjusted diluted EPS from continuing operations of $1.15 to $1.25, same-store sales of 1% to 3%.

We believe we are appropriately cautious for the remainder of the year. We expect Take 5 growth to continue to moderate as it grows over a larger base. Our Car Wash segment of pressure from July significantly unsettled weather conditions and ongoing headwinds in the end markets of our Franchise Brands segment. This caution now leads us to anticipate the second half will represent approximately 50% of our full year revenue and adjusted EBITDA. We expect waiting given the timing and nature of the headwinds we've described leading to a more balanced second half distribution.

As for other important operating metrics, we reiterate net store growth between 175 and 200 units, net capital expenditures between 6.5% and 7.5% of revenue. For taxes, we now estimate an effective annual tax rate of 28% to 30%, driven by earnings in our higher tax jurisdiction Car Wash segment. For interest expense, the sale of the U.S. Car Wash seller note will remove the benefit of noncash PIK interest in the back half of the year, offset in part by cash interest savings from additional debt paydown. We now expect full year interest expense between $130 million to $135 million. We believe the strength of the driven platform was on full display during the first half of 2025, demonstrating the resilience and earnings power of our business model.

Looking ahead, we remain focused on achieving our net leverage target of 3x by the end of 2026, with the majority of our free cash flow earmarked for reducing outstanding debt on the revolver. With that, I will turn it over to the operator, and we are happy to take your questions.

[Operator Instructions] And your first question comes from Simeon Gutman with Morgan Stanley.

This is Zach on for Simeon. Can you dive a little deeper into the traffic versus ticket side within Take 5 specifically? And are you seeing anything to call out with respect to deferrals or anything of that nature?

Zach, this is Danny. Thanks for the question. Look, we don't really disaggregate traffic versus ticket. What I would say is, first and foremost, we're really happy with the comps we saw would take 5, right, 7% comps for the quarter on top of -- last quarter, we had really nice comps as well. So really happy there. We're happy to see both sides of the equation are doing what we want them to do in terms of traffic and check. Non-oil-change revenue continues to be a nice driver of the business for us. We continue to see attachment rates in the mid- to high 40s.

Obviously, we just introduced our differential service, which we like what we're seeing there. It's very early innings, but at the end of the day, we continue to see good attachment rates. We continue to see our NPS score is quite high, and we're able to continue to deliver on the promise to our consumers of a stay in your car 10-minute oil change. So overall, again, we don't disaggregate the numbers, but I'd say we're very happy with the comps for the quarter.

Got it. And then just a quick follow-up on the profitability side of that segment. Is there anything you can give us in terms of puts and takes for the Take 5 margin in the back half of the year? .

Yes, Zack. I mean I think stepping back for a second. In general, we feel very pleased with the mid-30s margin that we saw in Q2. If you look at the history of this, even back to '24, there's always going to be some quarter-over-quarter variability. That's natural and expected. Similar to what we saw in the past quarter, there was some increase in repair and maintenance and new store opening costs as we continue to invest behind this fleet and make sure that we're putting the best foot forward for our customers. But if you take a step back and think just overall on an annual basis, mid-30s for the full year, we feel positive about that. We feel that's a realistic number and feel really good with where overall the margins coming in.

Your next question comes from Justin Kleber with Baird.

Just a follow-up there, Mike, on the mid-30s margin for Take 5 on a full year basis. Do you guys think that's effectively the ceiling for the business as you're in aggressive unit growth mode? Or is there still upward migration over time as the mix of unit shifts to more franchise? And then obviously, you have this immature store base that will begin to kind of ramp up the profitability curve. .

Yes. No, I get the question, Justin, good to talk to you. I'm not sure I want to prognosticate more than kind of what we're looking at for the current quarter. Obviously, there's some movements in the model as you think about shifting to franchise, which is definitely a higher flow-through on the royalty, but has a little bit different economics as you think through the oil charges there.

I would just reiterate, in general, feel really good with the mid-30s. We think we've got a sustainable economic model for Take 5. Danny mentioned the strength of the overall same-store sales. We still have a long pipeline of unit growth, both corporate and franchise that, over time, should shift to a more franchise weighting. And if we can continue to print these out at the anywhere near the comps we were looking at with good unit growth, we feel like this business has a really good long runway for growth.

Got it. Okay. That makes sense. And then on the Car Wash business, I know given landscape is much less intense relative to what you faced in the U.S. And we've had some favorable weather trends. But how much of the strength in the past 4 quarters has been in your opinion, internal initiatives? And just how are you thinking about comping these comps in the back half of the year? I think you're cycling like a plus 27 in 4Q, do you expect to be able to grow on top of that? Or should we be thinking that you give some -- as you cycle over this strong performance.

Yes, absolutely. There's a little bit to unpack there, so let me try to tick through them. I think one, in general, in that market, right? We are the market leader in both the U.K. and Germany, at least in the U.K., there really aren't tunnel car washes that exist. And so it does give us a strong competitive advantage. I believe the answer to your other question is both. The team is doing a really good job operating on the ground, highlighting the benefits that the IMO system brings to customers, strong relationships with our independent operators, and we have benefited from weather over the last 4 quarters. And so it will be challenging to grow on the strong growth rates we had in Q3 and Q4 of last year.

Some of that is influenced even by what we've seen in July, as we mentioned in the prepared remarks. July was quite rainy in Northern Europe and even the best operated car wash struggles a little bit with rain. So I do think we will see a meaningful moderation in that business in the back half of the year, just given some of the weather we've seen as well as some of the laps we have.

Your next question comes from Seth Sigman with Barclays.

I wanted to focus on the non-oil change services that accounted for over 20% of sales. Do you have a view on where that can go? And how do you think about the profitability implications from that?

Seth, this is Danny. That's a great question. Look. So non-oil-change revenue for us, to your point, has been a nice growth driver for the recent past. As we think about the ceiling, I would say, look, we don't think that we have a near-term ceiling. We've got company-operated stores and franchise stores with attachment rates well into 60s. Our average, if you look across the entire system, is mid- to high 40s and growing. So not only do we think that we can grow attachment rates just in terms of the existing mix that we have.

We're also introducing new products. Obviously, we just talked about our differential service, which we just introduced and we've rolled out. That's obviously going to help us grow non-oil-change revenue here into the foreseeable future. And that's not -- we're not limited in terms of -- that's not the only new service that we can provide over time. When we acquired the business back in 2016, we had 4 ancillary services that we sold. We call them big 4 sitting here today. We've now got a big 6, and we'll continue to grow that over time. So I don't see a near-term ceiling in terms of where non-oil-change revenue can go.

As far as the margin profile, I'll answer that question vis-a-vis the service that we introduced the differentials whenever we look at a new service, we're basically looking to check kind of 2 boxes, right? It has to fit the model, both from an operating perspective and from a financial perspective. From an operations perspective, what we're looking for is our commitment to our customers and what has made Take 5 successful is we deliver an amazing stay in your car 10-minute experience. And so any new service we introduced has to check that box with differentials, it does, and we're able to continue to generate or to finish oil changes within the 10-minute window and we continue to have really nice NPS scores at least in the early innings here that we're in.

And then the second piece is financially has to make sense vis-a-vis our gross margins in that business. When it comes to differentials, the nice thing there is that, that product from a gross margin perspective is accretive to the basket that we have. So all in all, we feel good about the very high ceiling, let's say, with non-oil-change revenue. .

Okay. Great. That's very helpful. And then my follow-up question is on the glass business. It's sort of tough in there. It's hard to see, but it did seem to accelerate a lot this quarter. Can you maybe just update us on that. And I'm curious, does it face the same headwinds as collision and paint? Or do you feel like you can grow through that just given that it's so early and you have a market share opportunity? .

Yes. Look, when it comes to the glass business, I think we have to remind ourselves, we've put that business into our Corporate and Other segment, a very intentional move on our part, obviously, as we're incubating that business. I would say, look, we got into that space because we really like the industry. Nothing has changed in that underlying thesis. We think it's a great industry. It's got a great white space. It's fragmented, great unit level economics. Margins are good. So that industry continues to make a lot of sense for us. As far as the progress we're seeing with the business, I'm happy with the progress.

But again, it's early innings. That business was always a multiyear strategy for us. We remain focused on growing the top line like we've said in past quarters. And as it continues to improve, we'll share more with it, but right now, we're incubating that business.

Your next question comes from Brian McNamara with Canaccord.

This is Madison Callinan on for Brian. You earlier mentioned industry softness and collision. But given that industry is pretty net-based, could you provide any additional color on that?

Yes. Madison. So to your point, I mean, the collision industry has been down for a few quarters now where there's other public competitors out there that have talked about that. If you look at estimates, they're down in the high single digits. There's 2 main reasons for that. Number 1 is just claim avoidance. So at the end of the day, the consumer in that space has been hit pretty hard with inflation, Premiums are up, deductibles are up. And so there's a lot of claim avoidance going on right now. The second 1 that drives that industry is total loss rates. So total loss rates are at a pretty high mark right now. Both of those things in the blender is going to lead to high single-digit estimates being down year-over-year. We're not immune to that. We're obviously in the industry.

The really nice thing from our perspective is while the industry overall is down, we continue to take market share. We've been taking market share in the entire year based on all the industry reporting that we see. So we think our model is unique. We have a franchise business there. Our franchisees are fantastic. They're doing a great job taking care of our carriers and the end consumer. And we think we're very well positioned whenever the industry normalizes, I think we're in a good spot.

Great. And not to beat a dead horse, I know somebody asked earlier about ticket. But how much upside do you think could still remain there? Or eventually need to lean more on increasing car service per day? And have you seen any evidence of like material oil change deferrals by stretched consumers.

Sure. I wouldn't say we've seen a material change in terms of frequency. As far as the ceiling -- maybe the better way to answer this question is if you look at the space generally, we offer 6 ancillary service sitting here today. One of those is brand-new. We just started rolling out differentials. If you look at the space, folks offer a lot more services than we do. So there's plenty of room for us to continue to add services over time, and we will add services over time. As I mentioned, when I started with the business, we had 4 services. Today, we have 6. So not only can we grow the services and there's a marketplace out there where you can kind of see what other folks have done. But just if you look at our attachment rates with the existing services, again, we're in the mid- to high 40s and growing. We've got stores that are in the mid- to high 60s. So we think that there's plenty of ceiling to go here.

Your next question comes from Chris O'Cull with Stifel.

Danny, can you describe some of the findings you learned on your listening tour regarding the Take 5 business? I'm just wondering if there's any opportunities to provide new support or systems to help kind of fuel that growth for franchisees? .

Yes. Chris, thank you. Great question. Look, I would say, honestly, not so much in terms of findings, I mean, again, I'm not new to the business. I'm a new CEO, but I've been with Take 5 for 12 years now. So for me, the road tour was more about being out there, meeting folks, obviously, my title is different and so there's a different slant to the questions that I get, and there's a different slant to the conversation. It was more about solidifying what I thought I knew and making sure that I was a CEO on the face of the company, and it's really important that I get out there. Whenever I go to the field, Chris, it really crystallizes for me what the priorities are and what's important, right? And at the end of the day, the important thing is our employees are super important, making sure that we're taking care of them and the commitments we've made to our customers and our franchisees is very important.

In terms of continued growth with Take 5, I mean, look, Take 5 is a juggernaut, as Mike has called it historically. It continues to grow extremely well. And honestly, it doesn't matter how you want to slice that business. It's kind of growing across the board. You can slice it franchise or corporate. Both are doing really nicely. If you look at vintages and we don't divulge the vintages, but internally, the mature vintages are doing great, new vintages are doing great. So we'll continue to lean in there. We are committed to continuing to grow 150-plus units per year, and we see no reason that, that can continue for the foreseeable future. So we feel really good about the business.

And then, Mike, can you describe the financial condition of the franchisees that operate Meineke, Macco and CARSTAR? I'm just wondering, is the average franchisee seeing a decline in their profits year-over-year given the comp performance -- and it's hard for us to see, but are you seeing a meaningful number of closures in any of those brands?

Yes, sure, Chris. I think in general, we feel really good with the overall health of the franchise system. Like any franchise system, there are some who are performing better than others. But in general, we stay close to the each of the brands and each of the franchisees in there. And so I think in general, despite some of the top line pressures we've seen a couple of our brands, we feel pretty good overall. We'll continue to keep an eye on that. And and operate as we need to. I think obviously, there have been some closures. We have 1 big closure in -- 1 big exit in the system in Q1 of this year, but we obviously came back and were net positive in Q2. So I think in general, it's full speed ahead and just continue to work on that brand and keep working through any challenges we may see.

Chris, and just I'll double down on something here. I mean just by way of reminder for folks, I mean, if you look at these businesses, these are really mature iconic businesses. I mean, Meineke and Macco have been around for more than 50 years. These businesses have seen all sorts of economic ups and downs. So they are great businesses, very mature, and they're going to be rare for a long time to come.

Your next question comes from Peter Keith with Piper Sandler.

I'm just looking at the full company EBITDA, so it was flat to just slightly down on a year-on-year basis. And I was wondering if you could just kind of highlight the headwinds to EBITDA and then looking forward, it looks like the guidance implies for the back half, some EBITDA growth. So maybe what changes in the back half versus those Q2 pressures?

Yes. I mean I think the first and foremost is PH Vitres. So PH Vitres was in our results for 2024 and not in 2025. We sold that business in mid-August. And so Q1, Q2, we have a little bit of a headwind there as it relates to EBITDA. I think in addition, we talked about some of the quarter-over-quarter variability on margins, particularly as it relates to Take 5 and that obviously moved against us a little bit in Q1 and Q2, but we feel really good about where that business is trending overall. But on a pure dollar's basis, the answer is PH Vitres, but other than that, we feel good about our guidance and where we see the rest of the year coming in relative to that range.

Okay. And maybe I hone in on the Franchise Brands EBITDA where the total EBITDA dollars did come down by a decent amount. And I think you had flagged some G&A investments, maybe could you expand upon what that is within the franchise business? And then is that an investment activity that's going to now continue for the next couple of quarters?

Yes. Let me take a step back because I think 1 of the drivers of that is the delta between the same-store sales and the revenue growth. And that, I think, honestly explains more of the overall G&A hit. And like any franchise business, while same-store sales is the top line, you're always going to have some onetime fees that come in either development fees or termination. And this quarter just happened to be 1 of these quarters where we didn't have many of those fees, and we were lapping a quarter last year where we had a lot of those. And so that actually is part of the big gap between the same-store sales performance and the EBITDA performance. .

The secondary, as I mentioned, was some G&A investments as you run a franchise system with several different brands. There are needs to invest in things like technology improvements and et cetera, to make sure we are a good franchisor for our franchisees. We've had some of those investments so far this year. I would expect those to wane as we move through the rest of the year, but we will continue to do what we need to do to be a good franchisor for our franchisees.

Your next question comes from Robbie Ohmes with Bank of America.

Dan, Actually, just a quick follow-up on the last question. Should we expect franchise brand comps to remain negative in the back half? .

Yes. I mean I think we haven't given obviously a specific number. We were pleased with the performance in Q2 and that it was better than Q1. As you probably heard from both Danny and me, the end markets of several of the brands in that segment, both Macco and collision are under some pressure. And so we'll continue to work hard and fight hard, but we acknowledge that the discretionary component of Macco was under some pressure. And then as I think Danny even gave some more detail earlier in the Q&A, there are some factors related to the collision industry that are going to continue to lag on that part of the business for the foreseeable future. So we're going to continue to fight the good fight. We were obviously pleased with the sequential improvement we saw in Q2 relative to Q1.

Our overall 1% to 3% reiteration of the guide incorporates a multitude of ranges of things that could happen in the back half of the year, and we'll continue to keep our eye on what we can do to help drive that brand forward -- drive that segment forward.

And just is there anything competitively going on in that segment that is new or different than competition in the past? .

I wouldn't say there was anything tremendously new, Robbie. I mean, at the end of the day, collision, that industry has been that industry for a while. Obviously, there's some headwinds right now. If you went back a few years ago, the industry was in a better place. Right now, there's some headwinds. I wouldn't say there's new competitive dynamics per se. Same thing with Macco. The predominant service that we provide there is we paint folks car. There's some new technology in that space. But I'd say overall, the services are the same. And then the other big business in that segment is Meineke. Meineke is doing quite well. It's a repair and maintenance, so you're talking about bigger services on the repair and -- sorry, the mechanical side, so brakes, shocks, struts, AC, stuff like that. But the short answer is that, I wouldn't say there's tremendously new dynamics going on in these industries.

Your next question comes from Mark Jordan with Goldman Sachs.

Just looking at Take 5 store growth year-to-date, only slightly below the prior year, but the mix is much more towards company operated. I guess what's driving the lower franchise growth year-to-date? And how should we think about growth and mix for the second half of the year? .

Yes. I would say if you look within the year, that's pretty typical, which is the corporate stores, we're able to get those open and operating pretty early in the year. franchise stores, and I'm not now speaking just driven, but all of my experience in franchise systems, both now and before that, franchise stores tend to come near the back -- in the later half of the year. So I think if you look at the breakdown right now, it skews more corporate. When you look at the end of the year, the end of the year, we'll skew more franchisee. Overall, this year, it's going to be roughly kind of a 50-50 mix. Ballpark, we're looking at. Over time, we expect that mix to shift more towards franchisees given the robustness of the pipeline we have there. But I wouldn't read too much into the fact that so far this year, we've opened more corporate than franchise. That's just the nature of the calendar in a franchise system.

Okay. Perfect. And then just staying on Take 5, can you talk about how comps kind of progressed through the quarter? And I know you might not get into month the on detail, but was performance fairly consistent there? And then maybe quarter-to-date, are you seeing any changes?

Yes. I mean, I would say, in general, fairly consistent. We don't break down quarter-to-quarter trends. Obviously, there was a little bit of weather late May, early June. In Texas where we have a meaningful presence. So Texas weather can have a little bit of an influence. But I would say, in general, for Q2, it was fairly consistent across the quarter. Look, I don't know if I want to say anything in addition to what we've already said in the prepared remarks as it relates to -- we continue to think that business moderates over time as it grows over a larger base. .

There is some softness in general across all of our industries on the lower-income consumer. We feel good about the 1% to 3% that we reiterate and Take 5 is honestly an important part of that.

Your next question comes from Mike Albanese with Benchmark.

Could you just comment on what your franchisees are seeing in the labor market? I'm just thinking, right, any wage pressures, what are you seeing on retention and then ability to hire, I guess, particularly in Take 5 you're expecting to grow unit comp pretty significantly? .

Yes. Mike, this is Danny. Look, I'll start with Take 5. I'd say the labor market there. The important thing, first and foremost is, when you look at Take 5 in that industry, we're not hiring certified technicians, right? So this isn't a "skilled labor force" right. These folks don't come with certifications ahead of time. We're hiring from a pretty broad-based of folks, and we're training them on how to do the oil changes to Take 5 ways, and that model works really well for us. So I'd say there haven't been any structural changes to that or any industry-wide changes to that here recently.

If you look at the franchise businesses, all the franchise businesses, there you're talking about certified technicians, whether it's body technicians on the Macco side or whether it's tax -- repair and maintenance techs on the Meineke side. That's a different labor pool for sure. But the beautiful thing and part of the reason why we're in the franchise business in those industries is that our franchisees know how to manage that population, right? So these are owner-operators, boots on the ground. They take care of their employees. A lot of those employees have been with their owners with the owners of the businesses for many, many years. So our franchisees are quite adept at managing that labor force, and they do a fantastic job. I don't know that recently, there's been any material changes to that.

That's helpful. I guess just 1 follow-up to that. And I'm thinking on the Take 5 side here. Could you give us a sense of what retention typically looks like?

We don't publicly divulge retention numbers.

Your next question comes from William [indiscernible] with BMO Capital Markets.

Another strong quarter for Take 5. Can you maybe just talk about the competitive dynamic for that business and any market share gains you've observed?

Sure. I mean, look, Take 5 is -- it just continues to do a great job. So as far as the competitive dynamic, I mean, we are -- I talk about it all the time, we're the home of the stay in your car, 10-minute oil change, what we've seen with that business is that the consumer just loves the service that we provide, right? They want to go get their car taken care of. They want to stay in their car. They want it to be a 10-minute fast, simple experience, and we're able to deliver that pretty consistently.

It's a very lucrative business from a financial perspective, hence, all the support and all the interest that we have from our franchisees and our franchisees have a ton of interest in growing and they continue to grow across the country.

So we feel really good about the business. We feel good about how we go to market in that business, both from an operational perspective and then also just marketing and how we're talking to the consumer. So yes, just a great business for us.

Okay. And then with the 150 annual store opening target, I think you mentioned for Take 5, just what new markets are you targeting for those openings?

Sure. So we talk about 150 plus. And as far as new markets, I mean, look, we've -- so if you pulled up a map we've basically sold most of the licenses across the entire country with some spots here and there where we still have some licenses up for sale. So as far as growth, I wouldn't say so much that we're targeting specific locations. We're growing across the country. We've got franchisees throughout the country that are growing most if not all of the markets. From a company-owned perspective there, we're much more disciplined in terms of we hand selected a handful of markets back in 2016, '17 kind of time frame, markets like Texas and Florida, just to name 2. There from a company-owned perspective, we are very disciplined about growing within those markets. We go very deep in those markets. We've got a great leadership team and structure and so we're pretty disciplined about our growth on the corporate-owned side. And then like I said, on the franchise side, we're growing across the country with a great group of partners.

Your next question comes from Christian Carlino with JPMorgan.

Follow up on an earlier question, could you talk about what we're seeing in terms of consumer behavior? I know you mentioned Quick Lube frequency hasn't changed and the collision softness isn't new, but has there been any notable change second quarter, just given all the tariff news and general uncertainty. And just given the full impact of tariffs hasn't hit the consumer as well it yet, does the guide assume any further softening in the consumer backdrop.

So I'll answer the first half of that, and I'll hand it over to Mike for the guidance question. I mean, look, outside of the comments that we've already made, I'm not sure that there's anything material happening within the industry, right? So on the Quick Lube side, we're not seeing any material changes to frequencies. That business, like we said, we're very happy with the 7% comp in Q2. We're happy generally with the comps that we've been seeing in that business for a long time now, 20th consecutive quarter of positive same-store sales. So I'd say the Take 5 business continues to grow and is a solid growth engine for us. As far as the other markets that we operate in, I mean, I've already mentioned some of the comments on collision and what's happening in that industry. That industry has been around a long time. So sitting here today, it's a little bit soft. I'm sure that, that will change over time. And again, I believe that we're well positioned in that space, and we continue to take share.

When it comes to Macco, I've mentioned a little bit of the softness there, the fact that, that business is more discretionary in nature and maybe a little bit more exposed to the low-income consumer cohort. But again, Mako's over 50 years old, a very mature business. And so that business has also seen many economic cycles. So outside of what we've already mentioned, Christian, I'm not sure that there's anything material to talk about. Mike?

I would just add that I think the reiteration of the guide does reflect some of that uncertainty we see in the broader macroeconomic economy, right? I think to the extent the low-income consumer comes back and we see some of those end markets start to perform a little bit better. We start to approach the top end of the range to the extent that the lower-income consumer softens even more and those end markets become a little more compressed. We're down near the low end of the range. But in general, we think we've captured those possibilities with the range we reiterated today.

Got it. That's helpful. And could you talk about the competitive landscape and take 5, just the attractive business model, have you started to see more private equity money flow into the space? And -- if not, how would you diagnose why not? And I guess, similarly, to the extent this occurred over the past few years, are you seeing maybe some platforms starting to bring some assets to market?

This is Danny. So Christian, I'd say in the Quick Lube space, that space has been pretty steady in terms of entrants for some time now. We're not seeing a remarkable change in that. The reasons why not? I mean there's probably a bunch of reasons, but I've simplified us to say, it is not easy to run hundreds, if not thousands of locations across the country with the kinds of manual processes that you have to put in place at the kind of margins that we do, right? So it's easy to rattle off some of the numbers that we rattle off. But in terms of being able to do that at scale, that's actually quite difficult and it's harder than it looks maybe -- so again, there's a bunch of reasons, but I'd say, generally speaking, that industry from an entrant perspective has been pretty stable.

Ladies and gentlemen, as there are no further questions at this time, this marks the conclusion of today's conference call. Thank you so much for your participation. You may now disconnect.