DRVN - Balance Sheet
Description
Driven brands (DRVN) was last written up on VIC in September of 2023 just after its investor day and has been a vibrant thread since thanks to Nola18 and team. That write up does a phenomenal job walking through the various segments and their economics so we won’t rehash that here in full. We plan to focus on the catalyst path and thesis drivers over the next 18-36 months. DRVN is now at an inflection point over the next 18-36 months where the US car wash business has stabilized, management investment priorities have refocused on organic growth/integration, debt paydown and the crown jewel Take 5 segment is set to become 70%+ of total company EBITDA YE 2026. Trading at 8x NTM EBITDA, DRVN has the potential in a bull case to be assigned the compounder label and subsequent multiple (see YAVB interesting blog on this topic) over the next 18-36 months through steady organic growth and a simplification of its financial statements opening the Street’s eyes to Take 5’s underlying quality. DRVN is a $2.3B revenue, $550M EBITDA/$230M UFCF automotive services platform with a $2.6B market cap. Roark-backed, DRVN went public in January 2021 and treaded water, burning off its multiple until May 2023 when they announced the abrupt and unforeseen exit of then-CFO Tiffany Mason. Three months later they cut the EBITDA guide by 9% due to increasing competition in the car wash space causing the stock to fall 40% and de-rated to 12.5x EBITDA. One year later, shares fell another 20% after the 2nd CFO resignation in 12 months and the car wash and glass businesses continued to struggle. We believe this opportunity exists due to 1) poor historic capital allocation, 2) PE-spaghetti rapid roll-up (and overhang – Roark still owns 60%+ of the company) with poor integration and 3) poor segment reporting creating a complex narrative and making tracking the crown jewel (Take 5 Oil Change) difficult. As a result, the Street has chosen to focus on the business they know best, car wash (15% of EBITDA and shrinking), largely thrown their hands up at the complex modeling, and deemed this management team as untrustworthy/bad. Our bet hinges on management refocusing on internal integration spurring organic growth and margin inflection after years of rapid acquisitions and potentially selling some or all of the struggling car wash business — in our view DRVN is a classic Good Co/Bad Co setup with abating complexity. Maintenance (62% of adj. EBITDA) is made up of two businesses Meineke and Take 5 Oil Change. Meineke performs total aftermarket car care through its network of 775+ stores, is 100% franchised and did ~$40m in 2023 EBITDA with 0-3% SSS growth. Take 5 Oil Change is the hidden gem of the DRVN platform and made up almost 90% of maintenance segment EBITDA (~$285m) in 2023. Take 5 performs DIFM quick oil change & related maintenance services through its network of 1,007 stores. Take 5 is 66% franchised and grew LTM SSS ~6% (17% 2 year stack).