annualreport.drivenbrands.comDriven Brands 2022 Annual Report

2022 Annual Report Dear Stockholders Large and Growing, Needs-Based Category Diversified and Differentiated Platform Network Benefits Track Record of Strong Financial Results Continued in 2022 Our People are Our Greatest Asset The Communities We Serve Closing 2022 Annual Report Download PDF Dear Stockholders, 2022 was a defining year for Driven Brands, proving that our diversified platform could outperform even in a challenging macroeconomic environment. We delivered record financial performance, market share gains in each of our segments, and made significant strategic progress across Driven Brands. We deepened our competitive moat by expanding our network benefits and our differentiated offerings continue to resonate with our expanding customer base. I could not be prouder of our dedicated team of over 11,000 employees and our incredible franchisees who remained nimble, innovative and resilient to deliver exceptional value to our customers. While it’s not possible to know exactly what the next year will hold, we do know that our customers will depend on us more than ever to keep one of their most valuable assets, their vehicles, in good working order so they can get to work, take care of their families and focus on the road ahead. As the largest provider ofautomotive services in North America with over 4,800 global locations, serving more than 70 million vehicles annually, we are a trusted partner and we take that responsibility very seriously. Over the past few years, we’ve expanded our needs-based offering, with a service for almost any auto care occasion. We are redefining the industry by embracing simplicity and a customer-first mindset to make car care faster, friendlier and more convenient for consumers and commercial customers alike. Leveraging our national account structure, commercial sales have grown to roughly half of total sales as customers enjoy the synergies of meeting all their auto care needs with a single company. Large and Growing, Needs-Based Category We continue to gain significant share in this needs-based category by leveraging our proven playbook to drive long-term sustainable growth. This over $350 billion category has delivered steady, 4% growth over the last 15 years driven by growth in Vehicles Miles Traveled (VMT”), increases in the average age of vehicles and vehicle complexity. LARGE, GROWING AND HIGHLY-FRAGMENTED U.S. AUTO CARE INDUSTRY ($B) Has grown at a 4% Compound Annual Growth Rate (CAGR”) since 2007, driven by a 2% CAGR in VMT, increase in the average age of vehicles and increasing vehicle complexity. U.S. AUTOMOTIVE CARE INDUSTRY ($B) Source: 2023 Auto Care Factbook, digital.autocare.org, U.S. Department of Transportation and S&P Global Mobility 290M+ Car parc 12 YEARS+ Average age of vehicles 80% Independents market share +2% CAGR VEHICLES MILES TRAVELED The category remains highly fragmented. Even as the largest provider of automotive services in North America, we still have less than 5% of the market share. Approximately 80% of the category is comprised of smaller chains and independent shops, providing significant white space and creating a long runway for unit growth, same-store sales growth and market share expansion in the future. Powered by our proven playbook for growth, we believe no one is better positioned to capitalize on that opportunity than Driven Brands. Importantly, there has been more innovation in the automotive industry in the last decade than in the last century. That creates opportunities for sophisticated companies, like Driven Brands, that are able to support their customers with more complicated repairs and new services like Advanced Driver Assistance Systems (ADAS”) calibration. There will continue to be significant opportunities in the changing automotive landscape and an opportunity to evolve to meet consumers’ needs. While we have not yet seen standardization of electric vehicles, we continue to monitor for attractive entry points where we can capitalize on new opportunities. One example of that is our choice to enter into the U.S. glass business last year, which is expected to see multi-year category tailwinds from the rise of calibration. Diversified and Differentiated Platform Whether our customers need an oil change, car wash, paint job, collision repair, glass replacement or more, we’re focused on simplifying car care so they can focus on the road ahead. Building on a 50-year history in the category, with some of the most recognizable brands in the industry, our diversified platform caters to almost any automotive service occasion. Our carefully curated portfolio of automotive services not only enables us to provide our customers exceptional service, but they each serve an important purpose in our growth journey. Our more mature brands such as Carstar ® , Maaco ® , Meineke ® and 1-800 Radiator ® are primarily franchised businesses that provide predictable performance, growth as well as significant cash flow for Driven Brands. We use that cash flow generation to reinvest in the flywheel of growth in our three growth priorities: Take 5 Oil Change ® , Take 5 Car Wash ® and Auto Glass Now ® . Take 5 Oil Change ® Take 5 Car Wash ® Auto Glass Now ® The diversification and breadth of our offering provide significant benefits of scale as well as a natural balance and added resilience to our business. That balance also provides multiple levers to sustain our significant growth trajectory and to deliver on our operational and financial targets and outperform the market. We remain well-positioned to continue our long track record of market share gains through same-store sales growth, organic unit growth and acquisitions in these highly fragmented service categories. Our pipeline of approximately 1,600 units provides us with a long runway of sustainable predictable unit growth. Network Benefits Beyond the breadth and depth of our brands, the unmatched scale and sophistication of our shared service capabilities generates significant network benefits that deepen our competitive moat and differentiate our business. The network benefits deliver tangible results across our business, including: More value for and sales from our commercial customers, including insurance and fleet customers Revenue growth and cost savings from procurement Accelerated, profitable growth through real estate development and complementary M&A Share of wallet opportunity from the largest database in the category with 30 million unique customers These network benefits continue to compound as we grow our diversified platform, driving further unit growth, same-store sales growth and incremental profits. We are still in the early innings of fully harnessing these capabilities, and the value creation opportunity we see ahead gives us further confidence in our ability to deliver on our short, medium and long-term goals. Track Record of Strong Financial Results Continued in 2022 Our 2022 results are a testament to the resilience of our business model and growing magnitude of the network benefits across our platform. We gained significant market share with 39% revenue growth supported by 14% same-store sales growth and 9% new store growth. That translated to 42% Adjusted EBITDA 1 growth as we realize operating leverage on our revenue growth. We delivered Adjusted EBITDA 1 10% ahead of our expectations entering the year. +393 Net new units We drove 9% net new store growth focused in our 3 growth categories 14% Same-store sales growth We delivered seven consecutive quarters of double digit same store sales growth translating to 14% growth for full year 2022 39% Revenue growth We gained significant share through both same-store sales and unit growth 42% Adjusted ebitda 1 growth Our significant top-line growth translated to even greater bottom-line Adjusted EBITDA 1 growth 25% Adjusted ebitda 1 margin +62bps from the prior year as we benefited from leverage on our growth $197M Operating cash flow Our strong operating...