SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Delaware
(State or other jurisdiction of incorporation or organization)


47-3595252
(I.R.S. Employer Identification No.)


440 South Church Street, Suite 700
Charlotte, North Carolina
(Address of principal executive offices)


28202
(Zip Code)

Registrant’s telephone number, including area code: (704) 377-8855


Title of each class
Common Stock, $0.01 par value


Trading Symbol
DRVN


Name of each exchange on which registered
The Nasdaq Global Select Market

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

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

Large accelerated filer ☐☒

Non-accelerated filer ☒☐

Accelerated filer ☐

Small reporting company ☐

Emerging growth company ☐

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

Driven Brands Holdings Inc.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, and expected market growth are forward-looking statements. In particular, forward-looking statements include, among other things, statements relating to: (i) our strategy, outlook and growth prospects; (ii) our operational and financial targets and dividend policy; (iii) general economic trends and trends in the industry and markets; and (iv) the competitive environment in which we operate. Forward-looking statements are not based on historical facts, but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions, and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. It is not possible to predict or identify all such risks. These risks include, but are not limited to, the risk factors that are described under the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December ~~26, 2020, and~~31, 2022 as well as in our other filings with the Securities and Exchange Commission, which are available on its website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

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

Part I - Financial Information

Item 1. Financial Statements (Unaudited)

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Weighted average shares outstanding(1):

~~(1) Shares and loss per share for 2020 have been adjusted to reflect an implied 88,990-for-one stock split that became effective on January 14, 2021. See Note 1 for additional information.~~

The accompanying notes are an integral part of these ~~condensed~~unaudited consolidated financial statements.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

The accompanying notes are an integral part of these ~~condensed~~unaudited consolidated financial statements.

~~CONDENSED~~ CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands, except share and per share amounts)

Common stock, $0.01 par value, 900 million shares authorized at March 27, 2021 and December 26, 2020, respectively; 167 million and 89 million shares issued and outstanding at March 27, 2021 and December 26, 2020, respectively(1)

~~(1) Common stock at December 26, 2020 has been adjusted to reflect an implied 88,990-for-one stock split that became effective on January 14, 2021. See Note 1 for additional information.~~

The accompanying notes are an integral part of these ~~condensed~~unaudited consolidated financial statements.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF SHAREHOLDERS’/MEMBERS’ EQUITY (Unaudited)


	Three Months Ended
	July 1, 2023			June 25, 2022
(in thousands, except share amounts)	Shares	Amount		Shares	Amount
Preferred stock, $0.01 par value per share	—	$	—	—	$	—
Common stock, $0.01 par value per share
Balance at beginning of period	167,560,449	$	1,675	167,506,829	$	1,675

Shares issued for exercise/vesting of share-based compensation awards	48,259	1		5,745	—
Forfeiture of restricted stock awards	(242,147)	(2)		(68,466)	(1)
Balance at end of period	167,366,561	$	1,674	167,444,108	$	1,674
Additional paid-in capital
Balance at beginning of period		$	1,633,460		$	1,610,585
Equity-based compensation expense		4,485			4,233
Exercise of stock options		—			109


Balance at end of period		$	1,637,945		$	1,614,927
Retained earnings
Balance at beginning of period		$	114,544		$	76,050
Net income (loss)		37,749			(57,044)
Balance at end of period		$	152,293		$	19,006
Accumulated other comprehensive income (loss)
Balance at beginning of period		$	(51,267)		$	(10,483)
Other comprehensive income (loss)		6,369			(42,313)
Balance at end of period		$	(44,898)		$	(52,796)
Non-controlling interests
Balance at beginning of period		$	630		$	665

Other comprehensive income (loss)		14			(19)


Balance at end of period		$	644		$	646

Total shareholders’ equity		$	1,747,658		$	1,583,457

in thousands Common stock Additional paid-in capital Retained earnings Accumulated other
comprehensive
income (loss) Non-controlling
interests Total shareholders'/members' equity
Balance as of December 26, 2020 $ 565 $ 1,055,172 $ 31,975 $ 16,528 $ 2,120 $ 1,106,360
Net income (loss) — — (19,939) — 7 (19,932)
Other comprehensive income (loss) — — — (9,085) — (9,085)
Equity-based compensation expense — 983 — — — 983
Issuance of common stock upon initial public offering, net of underwriting discounts and commissions 1,082 660,418 — — — 661,500
Common stock issued upon underwriter's exercise of over-allotment 48 99,177 — — — 99,225
Repurchase of common stock (21) (42,956) — — — (42,977)
Exercise of stock options — 25 — — — 25
Establishment of income tax receivable liability — (155,970) — — — (155,970)
IPO fees — (14,757) — — — (14,757)
Other — — — — (63) (63)
Balance at March 27, 2021 $ 1,674 $ 1,602,092 $ 12,036 $ 7,443 $ 2,064 $ 1,625,309
Balance as of December 28, 2019 $ 565 $ 242,240 $ 41,983 $ 3,626 $ 1,464 $ 289,878
Net loss — — (3,848) — (99) (3,947)
Other comprehensive income (loss) — — — (15,767) 0 (15,767)
Equity-based compensation expense — (101) 0 — — (101)
Balance at March 28, 2020 $ 565 $ 242,139 $ 38,135 $ (12,141) $ 1,365 $ 270,063

The accompanying notes are an integral part of these ~~condensed~~unaudited consolidated financial statements.

Three months ended
(in thousands) March 27,
2021 March 28,
2020
Net loss $ (19,932) $ (3,947)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 23,852 7,799
Noncash lease cost 20,028 0
Loss on foreign denominated transactions 13,000 3,479
Gain on foreign currency derivative (2,489) 0
Bad debt expense 657 523
Asset impairment costs 1,253 2,912
Amortization of deferred financing costs and bond discounts 2,139 1,140
Benefit for deferred income taxes (8,018) (1,345)
Loss on extinguishment of debt 45,498 0
Other, net (749) 39
Changes in assets and liabilities:
Accounts and notes receivable, net (19,693) (14,067)
Inventory 135 (1,851)
Prepaid and other assets (8,184) 2,435
Advertising fund assets and liabilities, restricted 2,621 4,890
Deferred commissions (573) (428)
Deferred revenue 1,551 (1,173)
Accounts payable 638 21,404
Accrued expenses and other liabilities (6,451) (15,920)
Income tax receivable 3,061 (7)
Operating lease liabilities (15,758) 0
Cash provided by operating activities 32,586 5,883
Cash flows from investing activities:
Capital expenditures (23,280) (16,172)
Cash used in business acquisitions, net of cash acquired (26,732) (975)
Proceeds from sale-leaseback transactions 41,023 0
Proceeds from sale of company-operated stores 4,481 0
Cash used in investing activities (4,508) (17,147)
Cash flows from financing activities:
Payment of contingent consideration related to acquisitions 0 (1,783)
Payment of debt issuance cost 0 (104)
Repayment of long-term debt (707,384) (3,263)
Proceeds from revolving lines of credit and short-term debt 114,800 39,501
Repayments of revolving lines of credit and short-term debt (132,800) 0
Repayment of principal portion of finance lease liability (409) 0
Proceeds from initial public offering, net of underwriting discounts 661,500 —
Net proceeds from underwriters' exercise of over-allotment option 99,225 0
Repurchases of common stock (42,977) 0
Payment for termination of interest rate swaps (21,826) 0
Cash provided by (used in) financing activities (29,871) 34,351
Effect of exchange rate changes on cash 650 3,850
Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted (1,143) 26,937


	Six months ended
	July 1, 2023			June 25, 2022
(in thousands, except share amounts)	Shares	Amount		Shares	Amount
Preferred stock, $0.01 par value per share	—	$	—	—	$	—
Common stock, $0.01 par value per share
Balance at beginning of period	167,404,047	$	1,674	167,380,450	$	1,674
Stock issued relating to Employee Stock Purchase Plan	26,358	—		111,924	1
Shares issued for exercise/vesting of share-based compensation awards	178,303	2		20,200	—
Forfeiture of restricted stock awards	(242,147)	(2)		(68,466)	(1)
Balance at end of period	167,366,561	$	1,674	167,444,108	$	1,674
Additional paid-in capital
Balance at beginning of period		$	1,628,904		$	1,605,890
Equity-based compensation expense		7,049			6,851
Exercise of stock options		1,500			2,200
Stock issued relating to Employee Stock Purchase Plan		612			—
Tax withholding equity-based transactions		(120)			(14)
Balance at end of period		$	1,637,945		$	1,614,927
Retained earnings
Balance at beginning of period		$	84,795		$	41,607
Net income (loss)		67,498			(22,601)
Balance at end of period		$	152,293		$	19,006
Accumulated other comprehensive income (loss)
Balance at beginning of period		$	(62,435)		$	(5,028)
Other comprehensive income (loss)		17,537			(47,768)
Balance at end of period		$	(44,898)		$	(52,796)
Non-controlling interests
Balance at beginning of period		$	631		$	1,099
Net loss		—			(15)
Other comprehensive income (loss)		13			(6)
Divestiture of Denmark car wash operations		—			(432)

Balance at end of period		$	644		$	646

Total shareholders’ equity		$	1,747,658		$	1,583,457

Cash and cash equivalents, beginning of period 172,611 34,935
Cash included in advertising fund assets, restricted, beginning of period 19,369 23,091
Restricted cash, beginning of period 15,827 0
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period 207,807 58,026
Cash and cash equivalents, end of period 175,371 60,154
Cash included in advertising fund assets, restricted, end of period 21,160 24,809
Restricted cash, end of period 10,133 0
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period $ 206,664 $ 84,963

Supplemental cash flow disclosures - non-cash items:
Accrued capital expenditures $ 3,804 $ 4,283
Supplemental cash flow disclosures - cash paid for:
Interest $ 16,424 $ 16,020
Income taxes 1,373 10

The accompanying notes are an integral part of these ~~condensed~~unaudited consolidated financial statements.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Six Months Ended
(in thousands)	July 01, 2023		June 25, 2022
Net income (loss)	$	67,498	$	(22,616)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	83,617		71,110
Trade name impairment	��		125,450

Equity-based compensation expense	7,049		6,851
(Gain) loss on foreign denominated transactions	(1,723)		14,908
Gain on foreign currency derivatives	(1,254)		—
Gain on sale of businesses, fixed assets, and sale-leaseback transactions	(12,230)		(9,059)
Reclassification of interest rate hedge to income	(1,039)		—
Bad debt expense	602		936
Asset impairment costs	6,211		16
Amortization of deferred financing costs and bond discounts	4,343		4,565
Provision (benefit) for deferred income taxes	18,812		(31,908)

Other, net	9,641		9,681
Changes in assets and liabilities, net of acquisitions:
Accounts and notes receivable, net	(30,373)		(59,579)
Inventory	(11,108)		(6,899)
Prepaid and other assets	(7,894)		(19,082)
Advertising fund assets and liabilities, restricted	(8,768)		(1,321)
Other Assets	(25,456)		(1,882)
Deferred commissions	330		(178)
Deferred revenue	1,585		497
Accounts payable	16,231		20,209
Accrued expenses and other liabilities	(1,171)		(45,950)
Income tax receivable	(320)		19,640

Cash provided by operating activities	114,583		75,389
Cash flows from investing activities:
Capital expenditures	(320,071)		(148,763)
Cash used in business acquisitions, net of cash acquired	(44,868)		(394,388)
Proceeds from sale-leaseback transactions	143,622		56,083



Proceeds from sale or disposal of businesses and fixed assets	217		2,183
Cash used in investing activities	(221,100)		(484,885)
Cash flows from financing activities:




Repayment of long-term debt	(13,961)		(9,682)
Proceeds from revolving lines of credit and short-term debt	230,000		105,000
Repayments of revolving lines of credit and short-term debt	(120,000)		—
Repayment of principal portion of finance lease liability	(1,889)		(1,156)



Purchase of equity securities	(716)		—

Stock option exercises	1,758		188
Other, net	(64)		(36)
Cash provided by financing activities	95,128		94,314


Effect of exchange rate changes on cash	2,087		(4,454)
Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted	(9,302)		(319,636)
Cash and cash equivalents, beginning of period	227,110		523,414
Cash included in advertising fund assets, restricted, beginning of period	32,871		38,586
Restricted cash, beginning of period	792		792
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period	260,773		562,792
Cash and cash equivalents, end of period	212,123		197,853
Cash included in advertising fund assets, restricted, end of period	38,691		44,511
Restricted cash, end of period	657		792
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period	$	251,471	$	243,156


Supplemental cash flow disclosures - non-cash items:
Capital expenditures included in accrued expenses and other liabilities	$	43,191	$	5,464
Deferred consideration included in accrued expenses and other liabilities	16,129		14,227

Supplemental cash flow disclosures - cash paid for:
Interest	$	78,955	$	51,491
Income taxes	13,614		5,457

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

DRIVEN BRANDS HOLDINGS INC.

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1—Description of Business

Description of Business

Driven Brands Holdings Inc., together with its subsidiaries (collectively, the “Company”), is a Delaware corporation and is the parent holding company of Driven Brands, Inc. and Shine Holdco (UK) Limited (collectively, “Driven Brands”). Driven Brands is the largest automotive services company in North America with a growing and highly-franchised base of more than ~~4,200~~4,900 franchised, independently-operated, and company-operated locations across 49 U.S. states and 1413 other countries. The Company has a portfolio of highly recognized brands, including Take 5 Oil ~~Change®~~Change®, Take 5 Car Wash®, Meineke Car Care ~~Centers®~~Centers®, ~~MAACO®~~MAACO®, ~~CARSTAR®~~CARSTAR®, Auto Glass Now®,and 1-800-Radiator & A/C®C® that compete in the automotive services industry. Approximately ~~82%~~74% of the Company’s locations are franchised or independently-operated.

~~Initial Public Offering~~

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

The Company used the proceeds from the IPO, along with cash on hand, to fully repay the First Lien Term Loan, Second Lien Term Loan, and revolving credit facility assumed as part of the acquisition of International Car Wash Group (“ICWG”) in 2020 (collectively, the “Car Wash Senior Credit Facilities”), which totaled $725 million with interest and fees. The Company recognized a $45 million loss on debt extinguishment related to this settlement, primarily related to the write-off of unamortized discount. The Company cancelled the interest rate and cross currency swaps associated with these debt agreements as part of the settlement. The Company also used $43 million in proceeds to purchase approximately 2 million shares of common stock from certain of our existing shareholders.

~~Income~~ Tax Receivable Agreement

The Company expects to be able to utilize certain tax benefits which are related to periods prior to the effective date of the Company’s IPO and are attributed to current and former shareholders. The Company previously entered into ~~an income~~a tax receivable agreement which provides our pre-IPO shareholders with the right to receive payment of 85% of the amount of cash savings, if any, in U.S. and Canadian federal, state, local, and provincial income tax that the Company will actually realize. The ~~income~~ tax receivable agreement iswas effective as of the date of the Company’s ~~IPO, and the~~IPO. The Company ~~has~~ recorded a current tax receivable liability of ~~$156~~$54 million and $53 million as of ~~March 27, 2021, which is recorded under long-term liabilities as the income~~July 1, 2023 and December 31, 2022, respectively, and a non-current tax receivable liability of $118 million as of July 1, 2023 and December 31, 2022, on the ~~condensed~~ consolidated balance ~~sheet.~~

~~Stock Split~~

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

sheets.

Note 2— Summary of Significant Accounting Policies

Fiscal Year

The Company operates and reports financial information on a 52- or 53-week year with the fiscal year ending on the last Saturday in December and fiscal quarters ending on the 13th Saturday of each quarter (or 14th Saturday when applicable with respect to the fourth fiscal quarter). The three and six months ended ~~March 27, 2021~~July 1, 2023 and ~~March 28, 2020, respectively, consist~~June 25, 2022, each consisted of 13 ~~weeks.~~

~~In August 2020, the Company acquired ICWG, which~~weeks and 26 weeks, respectively. The Car Wash segment is currently consolidated based on a calendar month ~~that ended on March 31, 2021. See Note 3 for additional discussion regarding the acquisition of ICWG.~~

end.

Basis of Presentation

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

Certain amounts in the 2020 condensed consolidated financial statements have been reclassified to conform to the 2021 presentation. In the Company's consolidated statements of operations, $1 million of franchise royalties and fees within the Platform Services segment has been reclassified to supply and other revenue to conform to the current year presentation.

These unaudited interim ~~condensed~~ consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December ~~26, 2020.~~31, 2022. Certain information and note disclosures normally included in the unaudited financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three and six months ended ~~March 27, 2021~~July 1, 2023 may not be indicative of the results to be expected for any other interim period or the year ending December ~~25, 2021.~~30, 2023.

Certain prior year amounts have been reclassified to conform to current year presentation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts ~~reported~~ in the unaudited consolidated financial statements and the related notes to the ~~condensed~~unaudited consolidated financial statements. ~~Estimates~~Significant items that are ~~based upon historical factors, current circumstances~~subject to estimates and ~~the experience~~assumptions include, but are not limited to, valuation of intangible assets and ~~judgment~~goodwill; income taxes; allowances for credit losses; valuation of ~~the Company’s management.~~derivatives; self-insurance claims; and stock-based compensation. Management evaluates its estimates ~~and assumptions~~ on an ongoing basis and may employ outside experts to assist in its evaluations. Changes in such estimates, based on ~~more accurate future~~historical experience, current conditions, and various other additional information, ~~or different assumptions or conditions,~~ may affect amounts reported in future periods. Actual results could differ due to uncertainty inherent in the natures of these estimates.

~~Deferred IPO costs~~

Costs incurred that are directly related to the IPO, such as legal and accounting fees, registration fees, printing expenses, and other similar fees and expenses, totaling $9 million were capitalized and included within prepaid and other assets as of December 26, 2020. Upon completion of the IPO, the Company reclassified these costs, as well as an additional $6 million of IPO costs incurred during the three months ended March 27, 2021, to additional paid-in-capital.

Fair Value of Financial Instruments

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

The Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories:

•Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity ashas the ability to access at the measurement date;

•Level 2: Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; or

•Level 3: Inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

Financial assets and liabilities measured at fair value on a recurring basis as of ~~March 27, 2021~~July 1, 2023 and December ~~26, 2020~~31, 2022 are summarized as follows:


Items Measured at Fair Value at July 1, 2023
(in thousands)	Level 1		Level 2		Total
Mutual fund investments held in rabbi trust	$	207	$	—	$	207

Derivative assets, recorded in other assets	—		560		560
Derivative liabilities, recorded in accrued expenses and other liabilities	—		494		494

Items Measured at Fair Value at March 27, 2021
(in thousands) Level 1 Level 2 Total
Mutual fund investments held in rabbi trust $ 941 $ 0 $ 941
Derivative liabilities designated as hedging instruments $ 0 $ (990) $ (990)

Items Measured at Fair Value at December 26, 2020
(in thousands) Level 1 Level 2 Total
Mutual fund investments held in rabbi trust $ 704 $ 0 $ 704
Derivative assets not designated as hedging instruments 0 227 227
Total assets measured at fair value on a recurring basis $ 704 $ 227 $ 931
Derivative liabilities designated as hedging instruments $ 0 $ (9,561) $ (9,561)
Derivative liabilities not designated as hedging instruments 0 (12,197) (12,197)
Total derivative liabilities $ 0 $ (21,758) $ (21,758)


Items Measured at Fair Value at December 31, 2022
(in thousands)	Level 1		Level 2		Total
Mutual fund investments held in rabbi trust	$	758	$	—	$	758
Derivative assets, recorded in prepaid and other assets	—		158		158
Derivative assets, recorded in other assets	—		2,148		2,148
Derivative liabilities, recorded in accrued expenses and other liabilities	—		5,005		5,005

The fair value of the Company’s foreign currency derivative instruments ~~are~~is derived from valuation models, which use Level 2 observable inputs such as quoted market prices, interest rates, and forward yield curves.

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


	July 1, 2023				December 31, 2022
(in thousands)	Carrying value		Estimated fair value		Carrying value		Estimated fair value
Long-term debt	$	2,850,789	$	2,592,533	$	2,784,175	$	2,477,456

March 27, 2021 December 26, 2020
(in thousands) Carrying value Estimated fair value Carrying value Estimated fair value
Long-term debt $ 1,445,902 $ 1,499,384 $ 2,125,207 $ 2,169,597
Recently Issued Accounting Standards

In March 2020, the FASB issued ASU 2020-04,

~~Accumulated Other Comprehensive Income (Loss)~~

Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of LIBOR, regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The ~~following tables present changes, net of tax, in each component of accumulated other comprehensive income (loss).~~

Three months ended March 27, 2021
(in thousands) Foreign currency translation adjustment Cash flow hedges Defined benefit pension plan Accumulated other comprehensive income
Balance at December 26, 2020 $ 16,834 $ (87) $ (219) $ 16,528
Net change (9,243) 30 128 (9,085)
Balance at March 27, 2021 $ 7,591 $ (57) $ (91) $ 7,443

ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This guidance is effective immediately and the amendments may be applied prospectively through December 31, 2024. On June 2, 2023, the Company entered into a loan amendment to transition our

Three months ended March 28, 2020
(in thousands) Foreign currency translation adjustment Cash flow hedges Defined benefit pension plan Accumulated other comprehensive income (loss)
Balance at December 28, 2019 $ 3,626 $ 0 $ 0 $ 3,626
Net change (15,767) 0 0 (15,767)
Balance at March 28, 2020 $ (12,141) $ 0 $ 0 $ (12,141)

~~Recently Adopted Accounting Standards~~

~~In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions~~LIBOR-based loans to the ~~general principles in Topic 740~~Secured Overnight Financing Rate (“SOFR”). The amendment went into effect on July 1, 2023 and ~~improve consistency by clarifying and amending existing guidance. The Company adopted the ASU on December 27, 2020, and the adoption~~ did not have a material impact on ~~our consolidated financial statements.~~the loans affected.

Note 3—~~Business Combinations~~Acquisitions and Dispositions

The Company strategically acquires companies and assets in order to increase its footprint and offer products and services that diversify its existing ~~offerings.~~offerings, primarily through asset purchase agreements. These acquisitions are accounted for as business combinations using the acquisition method, whereby the purchase price is allocated to the assets acquired and liabilities assumed, based on their ~~estimated~~ fair values atas of the date of the ~~acquisition.~~acquisition with the remaining amount recorded in goodwill.

~~2021~~2023 Acquisitions

~~During~~The Company completed three acquisitions in the ~~three~~Maintenance segment during the six months ended March 27, 2021, the Company completed the acquisition of 4 car wash sites, each individually immaterial, which are included within the Company’s Car Wash segment (the “2021 Car Wash Acquisitions”).July 1, 2023, representingthree sites. The aggregate cash consideration ~~paid~~ for these acquisitions, net of cash acquired and liabilities assumed, was ~~$26~~approximately $6 million.

The Company completed two acquisitions in the Car Wash segment during the six months ended July 1, 2023, representing three sites. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was approximately $15 million.

The Company completed two acquisitions in the Paint, Collision & Glass segment during the six months ended July 1, 2023, representing two sites. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was approximately $6 million.

~~A preliminary estimate~~The Company estimated the fair value of acquired assets and liabilities as of the date of acquisition based on information currently available. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The provisional amounts for assets acquired and liabilities assumed for the ~~2021 Car Wash Acquisitions is~~2023 acquisitions are as follows:

Maintenance Segment

(in thousands)

~~Assets:~~

~~Cash~~

~~Land and improvements~~

~~4,065~~

~~Building~~

~~13,445~~

~~Equipment~~

~~2,260~~

~~Deferred tax assets~~

~~Assets acquired~~

~~19,844~~

~~Liabilities:~~

~~Deferred revenue~~

~~Liabilities assumed~~

~~Net assets acquired~~

~~19,798~~

~~Total consideration~~

~~25,542~~

~~Goodwill~~

~~5,744~~

~~All goodwill was allocated to the Car Wash segment and $6 million is deductible for income tax purposes.~~

~~2020 Acquisitions~~

~~Acquisition of International Car Wash Group~~

On August 3, 2020, the Company completed the acquisition of Shine Holdco (UK) Limited, the holding company of ICWG, to expand on its service offerings by entering into the car wash business (the “ICWG Acquisition”). The ICWG Acquisition resulted in the Company acquiring 940 car wash centers in 14 countries across the United States, Europe, and Australia. The following table presents an updated preliminary estimate of the purchase price allocation for the ICWG Acquisition:


~~(in thousands, except shares)~~	August 3, 2020Maintenance
Assets:
~~Cash~~	$	~~37,011~~
~~Accounts and notes receivable~~	~~2,591~~
~~Inventory~~	~~12,761~~
~~Fixed assets~~	~~692,486~~
Operating lease right-of-use assets			~~479,787~~$	658
~~Definite-lived intangibles~~Property and equipment, net			~~5,972~~3,705
~~Indefinite-lived intangibles~~Goodwill			~~165,730~~2,445
~~Other assets~~	~~7,476~~
~~Total assets~~Assets acquired			~~1,403,814~~6,808
Liabilities:
~~Accounts payable~~	~~13,435~~
~~Long-term debt~~Accrued Expenses and other liabilities	~~656,684~~
~~Deferred income tax liability~~	~~133,776~~20
Operating lease liabilities	~~476,216~~
~~Derivative liabilities~~	~~12,714~~
~~Other liabilities~~	~~82,394~~641
Total liabilities assumed			~~1,375,219~~661
~~Net assets~~Cash consideration, net of cash acquired	~~28,595~~
~~Non-controlling interest acquired~~	~~400~~
~~Total consideration paid (39,169,857 common shares)(1)~~	~~809,000~~
~~Goodwill~~	$	~~780,805~~

~~(1)~~ ~~Common shares issued as consideration have been adjusted to reflect an implied 88,990-for-one stock split that became effective on January 14, 2021. See Note 1 for additional information.~~

The preliminary fair value of the equity consideration was determined based on an estimated enterprise value using a market approach and income approach as of the purchase date, reduced by borrowings assumed. The Company updated its purchase accounting estimates during the three months ended March 27, 2021 related to the deferred tax liability and, as a result, reduced goodwill related to the ICWG Acquisition by approximately $1 million.

~~Acquisition of Fix Auto~~

On April 20, 2020, the Company acquired 100% of the outstanding equity of Fix Auto USA (“Fix Auto”), a franchisor and operator of collision repair centers, for $29 million, net of cash received of approximately $2 million. This acquisition resulted in the Company acquiring 150 franchised locations and 10 company-operated locations and increased the Company’s collision services footprint.

~~The assets acquired and liabilities assumed from Fix Auto are as follows:~~


~~(in thousands)~~	April 20, 2020
~~Assets:~~
~~Cash~~	$	~~2,020~~
~~Accounts and notes receivable, net~~	~~2,317~~
~~Inventory~~	~~414~~
~~Prepaid and other assets~~	~~293~~
~~Operating lease right-of-use assets~~	~~7,520~~
~~Fixed assets~~	~~1,023~~
~~Definite-lived intangibles~~	~~15,200~~
~~Assets acquired~~	~~28,787~~
~~Liabilities:~~
~~Accounts payable~~	~~1,835~~
~~Accrued expenses and other liabilities~~	~~2,919~~
~~Operating lease liability~~	~~7,520~~
~~Income taxes payable~~	~~673~~5,862
Deferred ~~income tax liability~~consideration	~~3,770~~
~~Liabilities assumed~~	~~16,717~~
~~Net assets acquired~~	~~12,070~~285
Total consideration, net of cash acquired	~~31,460~~
~~Goodwill~~	$	~~19,390~~6,147

~~A summary of total consideration for Fix Auto is as follows:~~

Car Wash Segment


~~(in thousands)~~
~~Cash~~	$	~~28,517~~
~~Fair value of contingent consideration~~	~~2,943~~
~~Total consideration~~	$	~~31,460~~

~~Other Acquisitions~~

During 2020, the Company completed the acquisition of 17 car wash sites, each individually immaterial, which are included within the Company’s Car Wash segment (the “2020 Car Wash Acquisitions”). The aggregate cash consideration paid for these acquisitions, net of cash acquired and liabilities assumed, was approximately $109 million.

~~The assets acquired and liabilities assumed for the 2020 Car Wash Acquisitions are as follows:~~

(in thousands)

Car Wash

Assets:

~~Cash~~Property and equipment, net

4111,052

~~Land and improvements~~Goodwill

~~18,635~~

~~Building~~

~~42,570~~

~~Equipment~~

~~12,125~~

~~Deferred tax assets~~

~~5,117~~3,948

Assets acquired

~~78,488~~15,000

~~Liabilities:~~Total consideration, net of cash acquired

15,000

Paint, Collision & Glass Segment

{in thousands)

Paint, Collision & Glass

Assets:

Inventory

~~Deferred revenue~~Property and equipment, net

~~368~~

~~Liabilities assumed~~

~~368~~

~~Net assets acquired~~

~~78,120~~

~~Total consideration~~

~~108,771~~ 667

Goodwill

4,940

Assets acquired

5,642

Cash consideration, net of cash acquired

4,947

Deferred consideration

695

Total consideration, net of cash acquired

~~30,651~~5,642

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

Deferred Consideration and Transaction Costs

Deferred consideration is typically paid six months to one-year after the acquisition closing date once all conditions under the purchase agreement have been satisfied.


	Six Months Ended
(in thousands)	July 1, 2023		June 25, 2022
Deferred consideration at beginning of period	$	35,007	$	16,000
Change in accrual	1,230		5,552
Payments	(20,108)		(7,325)
Deferred consideration at end of period	$	16,129	$	14,227

The ~~valuation for the acquisitions requires significant estimates~~Company incurred less than $1 million and assumptions. The estimates are inherently uncertain and subject to revision as additional information is obtained during the measurement period for the acquisitions. There were no measurement period changes related to Fix Auto and the 2020 Car Wash Acquisitionsapproximately $1 million of transaction costs during the three months ended July 1, 2023 and June 25, 2022, respectively. The Company incurred less than $1 million and approximately $3 million of transaction costs during the six months ended July 1, 2023 and June 25, 2022, respectively.

2022 Disposition

On March ~~27, 2021.~~16, 2022, the Company disposed of its 75% owned subsidiary, IMO Denmark ApS, for consideration of $2 million. As a result of the sale, a $1 million loss was recognized within selling, general, and administrative expenses during the three months ended June 25, 2022. Also, a noncontrolling interest of less than $1 million was derecognized. The Company allocated less than $1 million of goodwill as part of the sale.

Note 4— Revenue from Contracts with Customers

The Company records contract assets for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year and if such costs are material. Commission expenses, a primary cost associated with the sale of franchise licenses, are amortized to selling, general and administrative expenses in the ~~condensed~~ consolidated statements of operations ratably over the life of the associated franchise agreement.

Capitalized costs to obtain a contract as of ~~March 27, 2021~~July 1, 2023 and December ~~26, 2020~~31, 2022 were $9$6 million and $9$7 million, respectively, and are presented within deferred commissions on the ~~condensed~~ consolidated balance sheets. The Company recognized ~~an immaterial amount~~less than $1 million of costs during the three and six months ended ~~March 27, 2021~~July 1, 2023 and ~~March 28, 2020, respectively,~~June 25, 2022 that were recorded as a contract asset at the beginning of the ~~period.~~periods.

Contract liabilities consist primarily of deferred franchise fees and deferred development fees. The Company had contract liabilities of ~~$22~~$31 million and ~~$21~~$29 million as of ~~March 27, 2021~~July 1, 2023 and December ~~26, 2020,~~31, 2022, respectively, which are presented within deferred revenue on the ~~condensed~~ consolidated balance sheets. The Company ~~recorded an immaterial amount~~recognized $1 million and less than $1 million of revenue relating to contract liabilities during the three months ended ~~March 27, 2021~~July 1, 2023 and ~~March 28, 2020, respectively, that was recorded as a~~June 25, 2022, respectively. The Company recognized $2 million of revenue relating to contract ~~liability as of~~liabilities during the ~~beginning of the period.~~six months ended July 1, 2023 and June 25, 2022.

Note 5—Segment Information

The Company’s worldwide operations are comprised of the following reportable segments: ~~Maintenance;~~Maintenance, Car ~~Wash;~~Wash, Paint, Collision & ~~Glass;~~Glass, and Platform Services. ~~The Car Wash segment was formed in connection with the acquisition of ICWG in August 2020.~~

In addition to the reportable segments, the Company’s consolidated financial results include “Corporate and Other” activity. Corporate and Other incurs costs related to advertising fund revenues and expenses and shared service costs, which are related to finance, ~~IT,~~information technology, human resources, legal, supply chain, and other support services. Corporate and Other activity includes the adjustments necessary to eliminate intercompany transactions, namely sales by the Platform Services segment to the Paint, Collision & Glass and Maintenance ~~segments, respectively.~~segments.

Segment results for the three and six months ended July 1, 2023 and June 25, 2022 are as follows:


	Three months ended July 1, 2023
(in thousands)	Maintenance		Car Wash		Paint, Collision & Glass		Platform Services		Corporate and Other		Total
Franchise royalties and fees	$	14,215	$	—	$	26,530	$	9,060	$	—	$	49,805
Company-operated store sales	205,673		101,615		86,110		1,180		—		394,578
Independently-operated store sales	—		61,533		—		—		—		61,533
Advertising fund contributions	—		—		—		—		24,749		24,749
Supply and other revenue	22,439		1,607		20,518		47,098		(15,476)		76,186
Total revenue	$	242,327	$	164,755	$	133,158	$	57,338	$	9,273	$	606,851
Segment Adjusted EBITDA	$	85,753	$	43,263	$	41,249	$	22,537	$	(40,417)	$	152,385


	Three months ended June 25, 2022
(in thousands)	Maintenance		Car Wash		Paint, Collision & Glass		Platform Services		Corporate and Other		Total
Franchise royalties and fees	$	11,326	$	—	$	23,605	$	9,919	$	—	$	44,850
Company-operated store sales	168,648		101,796		52,049		1,392		—		323,885
Independently-operated store sales	—		54,942		—		—		—		54,942
Advertising fund contributions	—		—		—		—		22,091		22,091
Supply and other revenue	14,331		1,841		19,715		41,891		(14,922)		62,856
Total revenue	$	194,305	$	158,579	$	95,369	$	53,202	$	7,169	$	508,624
Segment Adjusted EBITDA	$	64,076	$	53,677	$	32,916	$	20,541	$	(35,123)	$	136,087

1514

~~Segment results for the three months ended March 27, 2021 and March 28, 2020 are as follows:~~


	Six months ended July 1, 2023
(in thousands)	Maintenance		Car Wash		Paint, Collision & Glass		Platform Services		Corporate and Other		Total
Franchise royalties and fees	$	26,658	$	—	$	50,828	$	15,834	$	—	$	93,320
Company-operated store sales	400,933		204,061		163,589		2,061		—		770,644
Independently-operated store sales	—		114,065		—		—		—		114,065
Advertising fund contributions	—		—		—		—		46,426		46,426
Supply and other revenue	42,404		3,609		39,544		91,476		(32,170)		144,863
Total revenue	$	469,995	$	321,735	$	253,961	$	109,371	$	14,256	$	1,169,318
Segment Adjusted EBITDA	$	158,739	$	87,572	$	76,961	$	39,567	$	(81,601)	$	281,238


		Three months ended March 27, 2021													Six months ended June 25, 2022
(in thousands)	(in thousands)	Maintenance		Car Wash		Paint, Collision & Glass		Platform Services		Corporate and Other		Total		(in thousands)	Maintenance		Car Wash		Paint, Collision & Glass		Platform Services		Corporate and Other		Total
Franchise fees and royalties		$	7,927	$	0	$	17,309	$	5,178	$	0	$	30,414
Franchise royalties and fees														Franchise royalties and fees	$	20,961	$	—	$	44,970	$	16,807	$	—	$	82,738
Company-operated store sales	Company-operated store sales	114,067		57,048		11,930		983		(173)		183,855		Company-operated store sales	325,476		196,291		91,965		2,544		—		616,276
Independently-operated store sales	Independently-operated store sales	0		56,163		0		0		0		56,163		Independently-operated store sales	—		118,031		—		—		—		118,031
Advertising		0		0		0		0		17,255		17,255
Supply and other		6,157		1,453		14,652		28,435		(8,964)		41,733
Advertising fund contributions														Advertising fund contributions	—		—		—		—		41,789		41,789
Supply and other revenue														Supply and other revenue	26,610		3,532		37,795		77,017		(26,841)		118,113
Total revenue	Total revenue	$	128,151	$	114,664	$	43,891	$	34,596	$	8,118	$	329,420	Total revenue	$	373,047	$	317,854	$	174,730	$	96,368	$	14,948	$	976,947
Segment Adjusted EBITDA	Segment Adjusted EBITDA	$	40,440	$	34,155	$	17,639	$	11,008	$	(25,019)	$	78,223	Segment Adjusted EBITDA	$	116,561	$	109,397	$	61,928	$	34,706	$	(67,485)	$	255,107

Three Months Ended March 28, 2020
(in thousands) Maintenance Paint,
Collision &
Glass Platform
Services Corporate
and Other Total
Franchise fees and royalties $ 7,333 $ 17,746 $ 4,345 $ (12) $ 29,412
Company-operated store sales 87,740 5,846 1,978 (673) 94,891
Advertising 0 0 0 14,883 14,883
Supply and other 4,624 15,354 25,835 (4,892) 40,921
Total revenue $ 99,697 $ 38,946 $ 32,158 $ 9,306 $ 180,107
Segment Adjusted EBITDA $ 21,466 $ 15,877 $ 7,465 $ (13,047) $ 31,761

The reconciliations of Income before taxes to Segment Adjusted EBITDA ~~to loss before taxes~~ for the three and six months ended ~~March 27, 2021~~July 1, 2023 and ~~March 28, 2020~~June 25, 2022 are as follows:

Three months ended
(in thousands) March 27,
2021 March 28,
2020
Segment Adjusted EBITDA $ 78,223 $ 31,761
Acquisition related costs(a)
1,646 195
Non-core items and project costs, net(b)
32 1,256
Store opening costs 289 1,175
Sponsor management fees(c)
0 539
Straight-line rent adjustment(d)
2,485 850
Equity-based compensation expense(e)
983 (101)
Foreign currency transaction loss, net(f)
10,511 3,479
Asset impairment and closed store expenses(g)
(786) 4,321
Loss on debt extinguishment(h)
45,498 0
Depreciation and amortization 23,852 7,799
Interest expense, net 18,091 17,516
Loss before taxes $ (24,378) $ (5,268)


	Three Months Ended				Six Months Ended
(in thousands)	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Income (loss) before taxes	$	58,024	$	(75,892)	$	98,744	$	(28,496)
Depreciation and amortization	45,419		38,087		83,617		71,110
Interest expense, net	40,871		26,270		79,012		51,623
Acquisition related costs(a)	3,750		3,338		5,597		7,656
Non-core items and project costs, net(b)	2,803		1,719		4,627		2,585
Store opening costs	1,377		666		2,402		1,172

Straight-line rent adjustment(c)	4,638		4,217		9,003		8,310
Equity-based compensation expense(d)	4,485		4,233		7,049		6,851
Foreign currency transaction (gain) / loss, net(e)	(1,302)		13,937		(2,977)		14,908

Trade name impairment(f)	—		125,450		—		125,450
Asset sale leaseback loss (gain), impairment and closed store expenses(g)	(7,680)		(5,938)		(5,836)		(6,062)

Segment Adjusted EBITDA	$	152,385	$	136,087	$	281,238	$	255,107

(a)Consists of acquisition costs as reflected within the ~~condensed~~unaudited consolidated statements of operations, including legal,

consulting and other fees, and expenses incurred in connection with acquisitions completed during the applicable period,

as well as inventory rationalization expenses incurred in connection with acquisitions. We expect to incur similar costs in

connection with other acquisitions in the future and, under U.S. GAAP, such costs relating to acquisitions are expensed as

incurred and not capitalized.

(b)Consists of discrete items and project costs, including ~~(i)~~ third party consulting and professional fees associated with

strategic transformation initiatives ~~and (ii) other miscellaneous expenses, including non-capitalizable expenses relating to the~~

~~Company’s initial public offering and other strategic transactions.~~as well as non-recurring payroll-related costs.

(c)~~Includes management fees paid to Roark Capital Management, LLC.~~

~~(d)~~Consists of the non-cash portion of rent expense, which reflects the extent to which our straight-line rent expense

recognized under U.S. GAAP exceeds or is less than our cash rent payments.

~~(e)~~(d)Represents non-cash equity-based compensation expense.

~~(f)~~(e) Represents foreign currency transaction (gains) losses, net ~~losses~~that primarily related to the remeasurement of our intercompany ~~loans. These~~

~~losses~~loans, which are ~~slightly~~partially offset by unrealized gains and losses on remeasurement of cross currency ~~swaps.~~swaps and forward contracts.

(f) Relates to an impairment of certain Car Wash trade names as the Company elected to discontinue their use.

(g)~~Represents non-cash charges incurred related~~ Relates to ~~the~~(gains) losses, net on sale leasebacks, impairment of certain fixed assets and operating lease right-of-use assets related to closed locations, and lease exit costs and other costs

associated with stores that were closed prior to ~~their~~the respective lease ~~terminations~~termination dates.

~~(h)Represents the write-off of unamortized discount associated with the repayment of the Car Wash Senior Credit Facilities.~~

Note ~~6—Long-term~~6 —Other Intangible Assets

The Company has acquired a number of car wash businesses since 2020. As part of those acquisitions, the Company determined a fair value for each of the associated intangible assets including trade names and customer relationships. During the quarter ended June 25 2022, the Company made the strategic decision to rebrand the majority of its U.S. car wash locations to operate under the name “Take 5 Car Wash”, and therefore discontinued the use of certain car wash trade names that were previously determined to have indefinite lives. Using a projected discounted cash flow analysis based on the relief from royalty method, the fair value of the trade names was determined to be $6 million while their carrying value was $131.5 million. As a result, the Company recognized a $125.5 million impairment charge, which is reported as trade name impairment charge in the unaudited consolidated statement of operations. The transition will take approximately two and a half years to complete from the date of impairment, and therefore the remaining carrying value is being amortized over 30 months.

Note 7—Long-Term Debt

~~Our~~The Company’s long-term debt obligations consist of the following:


(in thousands)	(in thousands)	March 27, 2021		December 26, 2020		(in thousands)	July 1, 2023		December 31, 2022
Series 2018-1 Securitization Senior Notes, Class A-2	Series 2018-1 Securitization Senior Notes, Class A-2	$	266,750	$	267,438	Series 2018-1 Securitization Senior Notes, Class A-2	$	260,563	$	261,938
Series 2019-1 Securitization Senior Notes, Class A-2	Series 2019-1 Securitization Senior Notes, Class A-2	293,250		294,000		Series 2019-1 Securitization Senior Notes, Class A-2	286,500		288,000
Series 2019-2 Securitization Senior Notes, Class A-2	Series 2019-2 Securitization Senior Notes, Class A-2	270,875		271,563		Series 2019-2 Securitization Senior Notes, Class A-2	264,688		266,063
Series 2020-1 Securitization Senior Notes, Class A-2	Series 2020-1 Securitization Senior Notes, Class A-2	173,688		174,125		Series 2020-1 Securitization Senior Notes, Class A-2	169,750		170,625
Series 2020-2 Securitization Senior Notes, Class A-2	Series 2020-2 Securitization Senior Notes, Class A-2	448,875		450,000		Series 2020-2 Securitization Senior Notes, Class A-2	438,750		441,000
Car Wash First Lien Term Loan		0		528,858
Car Wash Second Lien Term Loan		0		175,000
Car Wash Revolving Credit Facility		0		18,000
Series 2021-1 Securitization Senior Notes, Class A-2						Series 2021-1 Securitization Senior Notes, Class A-2	442,125		444,375
Series 2022-1 Securitization Senior Notes, Class A-2						Series 2022-1 Securitization Senior Notes, Class A-2	362,263		364,088
Term Loan Facility						Term Loan Facility	493,750		496,250
Revolving Credit Facility						Revolving Credit Facility	110,000		—
Other debt (a)	Other debt (a)	25,729		26,763		Other debt (a)	22,400		51,836
Total debt	Total debt	1,479,167		2,205,747		Total debt	2,850,789		2,784,175
Less: unamortized discount		0		(46,030)
Less: debt issuance costs		(33,265)		(34,510)

Less: unamortized debt issuance costs						Less: unamortized debt issuance costs	(39,234)		(45,908)
Less: current portion of long-term debt	Less: current portion of long-term debt	(17,142)		(22,988)		Less: current portion of long-term debt	(32,044)		(32,986)
Total long-term debt, net	Total long-term debt, net	$	1,428,760	$	2,102,219	Total long-term debt, net	$	2,779,511	$	2,705,281

(a)~~Amount~~Consists primarily ~~consists~~ of finance lease obligations.

Series 2019-3 Variable Funding Securitization Senior Notes

Driven Holdings Revolving Credit Facility

In May 2021, ~~related~~Driven Holdings, LLC, (“the Borrower”) a Delaware limited liability company and indirect wholly-owned subsidiary of Driven Brands Holdings Inc., entered into a credit agreement to ~~this settlement.~~secure a revolving line of credit with a group of financial institutions (“Revolving Credit Facility”), which provides for an aggregate amount of up to $300 million, and has a maturity date in May 2026 (“Credit Agreement”). On June 2, 2023, the Credit Agreement was amended pursuant to which as of July 1, 2023, borrowings will incur interest at the Base Rate plus an applicable margin or SOFR plus an applicable term adjustment. The Revolving Credit Facility also includes periodic commitment fees based on the available unused balance and a quarterly administrative fee.

There was $110 million outstanding on the Revolving Credit Facility as of July 1, 2023 with $230 million of borrowings and $120 million of repayments made during the six months ended July 1, 2023.

~~The following table details our total investment in operating and finance leases where~~During the ~~Company is the lessee:~~

(in thousands) March 27,
2021 December 26,
2020
Right-of-use assets
Finance leases (a)
$ 12,235 $ 14,211
Operating leases 910,255 884,927
Total right-of-use assets $ 922,490 $ 899,138

Current lease liabilities
Finance leases (b)
$ 1,752 $ 2,149
Operating leases (c)
59,491 60,095
Total current lease liabilities $ 61,243 $ 62,244

Long-term lease liabilities
Finance leases (d)
$ 16,234 $ 16,726
Operating leases 846,360 818,001
Total long-term lease liabilities $ 862,594 $ 834,727

~~(a)Finance lease right-of-use assets are included in property and equipment, net on the condensed consolidated balance sheet.~~

~~(b)Current finance lease liabilities are included in current portion of long-term debt on the condensed consolidated balance sheet.~~

~~(c)Current operating lease liabilities are included in accrued expenses and other liabilities on the condensed consolidated balance sheet.~~

~~(d)Long-term finance lease liabilities are included in long-term debt on the condensed consolidated balance sheet.~~

~~The lease cost for operating and finance leases recognized in the condensed consolidated statement of operations for the three~~six months ended ~~March 27, 2021 and March 28, 2020 were as follows:~~

Three months ended
(in thousands) March 27,
2021 March 28,
2020
Finance lease expense:
Amortization of right-of-use assets $ 614 $ 138
Interest on lease liabilities 237 105
Operating lease expense 27,748 12,782
Short-term lease expense 1,314 66
Variable lease expense 246 144
Total lease expense, net $ 30,159 $ 13,235

The Company also subleases certain facilities to franchisees and recognized $2 million in sublease revenue during each of the three months ended March 27, 2021 and March 28, 2020, respectively, as a component of supply and other revenue on the condensed consolidated statements of operations.

~~In March 2021,~~July 1, 2023, the Company sold 11four maintenance and 33 car wash properties in various locations throughout the United States for a total of ~~$41~~$144 million, resulting in a net gain of $2$25 million. ~~Concurrently~~Concurrent with the closing of these sales, the Company entered into various operating lease agreements pursuant to which the Company leased back the properties. These lease agreements have initial terms ~~ranging from 17~~of 18 to 20 ~~years~~years. The Company does not include option periods in its determination of the lease term unless renewals are deemed reasonably certain to be exercised. The Company recorded an

operating lease right-of-use asset and ~~provide~~operating lease liability of $112 million and $112 million, respectively, related to these lease arrangements as of July 1, 2023.

~~The weighted average remaining lease term~~arrangements as of March 27, 2021 was 11.0 years for finance leases and 14.9 years for operating leases. The weighted average discount rate as of March 27, 2021 was 5.79% for finance leases and 4.82% for operating leases.June 25, 2022.

Supplemental cash flow information related to the Company’s lease arrangements for the ~~three~~six months ended ~~March 27, 2021~~July 1, 2023 and ~~March 28, 2020,~~June 25, 2022, respectively, was as follows:

Note ~~8—Share-based~~9 — Equity-based Compensation

On January 6, 2021, the Company’s Board of Directors approved the 2021 Omnibus Incentive Plan (the “Plan”) and effective January 14, 2021, the Company’s shareholders adopted and approved the Plan. The Plan provides for the granting of stock options, stock appreciation rights, restricted stock awards, restricted stock units, other stock-based awards, other cash-based awards or any combination of the foregoing to current and prospective employees and directors of, and consultants and advisors to, the Company and its affiliates. The maximum number of shares of common stock available for issuance under the Plan is 12,533,984 shares. In conjunction with the closing of the IPO, our Board granted awards under the Plan to certain of our employees, representing an aggregate of 5,582,522 shares of common stock. At March 27, 2021, 6,853,489 shares of common stock were reserved for additional grants under the Plan.

Prior to IPO, the Parent’s equity awards included Profits Interest Units. There were two forms of Profits Interest - Time Units and Performance Units. Time Units generally vested in 5 installments of 20% on each of the first ~~five~~ anniversaries of the grant date or vesting date, provided that the employee remained in continuous service on each vesting date. All outstanding Time Units were to vest immediately prior to the effective date of a consummated sale transaction. The Time Units were exchanged for time-based restricted stock awards in connection with the IPO. In addition, the Company granted time-based and performance-based options in connection with the IPO to most employees with Profit Interests (each an “IPO Option”). The time-based restricted stock awards did not require modification accounting.

The Performance Units were to vest immediately prior to the effective date of a consummated sale transaction or qualified public offering, including the IPO (a “Liquidity Event”). The percentage of vesting was based on achieving certain performance criteria. No vesting occurred as a result of the IPO as the minimum performance criteria threshold was not achieved. In connection with the IPO, the Performance Units were exchanged for performance-based restricted stock awards. The vesting conditions of the performance-based restricted stock awards were modified to vest subject to an additional performance condition. Employees who received IPO Options have the same vesting conditions for the performance-based portion of the IPO Options as the performance-based restricted stock awards.

There was approximately $7 million of unrecognized compensation expense related to the time-based restricted stock awards and time-based IPO Options at March 27, 2021, which is expected to be recognized over a weighted-average vesting period of 4.34 years. Forduring the three months ended ~~March 27, 2021 and March 28, 2020, respectively, less than $1 million~~July 1, 2023, consisting of ~~compensation expense was recognized in both periods for the time-based restricted stock awards and time-based IPO Options.~~

There was approximately $92 million of unrecognized compensation expense related to the performance-based restricted stock awards and performance-based IPO Options at March 27, 2021. For the three months ended March 27, 2021 and March 28, 2020, no compensation cost was recognized for the performance-based restricted stock awards and performance-based IPO Options given that none of the performance criteria were met or probable. Once the performance conditions are deemed probable, the Company will recognize compensation cost equal to the portion of the requisite service period that has elapsed. Certain former employees continued to hold performance-based awards after the IPO.

~~The Company established other new awards in connection with the IPO, including~~68,119 restricted stock units (“RSUs”) and 72,092 performance stock units (“PSUs”). The Company granted new awards during the six months ended July 1, 2023 consisting of 380,736 RSUs and 647,359 PSUs.

Awards ~~established in connection with the IPO may only~~are eligible to vest provided that the employee remains in continuous service on each vesting date. ~~The~~Generally, the RSUs vest ratably in 3three installments ~~of 33%~~ on each of the first three anniversaries of the grant date. The PSUs ~~may~~ vest after athree-year ~~period and are~~performance period. The number of PSUs that vest is contingent on the Company achieving certain performance goals, one being a market condition and the other being a performance condition. The number of PSU shares that vest may range from zero to 200% of the original grant, based upon the level of performance. The awards are considered probable of meeting vesting requirements, ~~or vest upon achieving a market condition,~~ and therefore, ~~have~~the Company has started recognizing expense.

The fair value of the total RSUs, performance based PSUs ~~was determined by~~and market based PSUs granted during the three months ended July 1, 2023 were $2 million, $1 million, and $1 million, respectively. The fair value of the total RSUs, performance based PSUs and market based PSUs granted during the six months ended July 1, 2023 were $11 million,$11 million and$9 million, respectively. The Company based the fair value of the RSUs and performance based PSUs on the Company’s stock price on the grant date.

The range of assumptions used for issued PSUs with a market condition valued using athe Monte Carlo ~~simulation, using the following assumptions: (i) an expected term of 2.96 years, (ii) an expected volatility of 41.16%, (iii) a risk-free interest rate of 0.23%, and (iv) no expected dividend.~~model were as follows:

At March 27, 2021, there was approximately $1 million of total unrecognized compensation cost related to the unvested RSUs, which is expected to be recognized over a weighted-average vesting period of 2.94 years, and there was approximately $3 million of total unrecognized compensation cost related to the unvested PSUs, which is expected to be recognized through December 30, 2023.

For all of the Company’s awards, excluding RSUs and PSUs, if the grantee’s continuous service terminates for any reason, the grantee shall forfeit all right, title, and interest in and to any unvested units as of the date of such termination, unless the grantee’s continuous service period is terminated by the Company without cause within the ~~six~~-month period prior to the date of consummation of a Liquidity Event. In addition, the grantee shall forfeit all right, title, and interest in and to any vested units if the grantee resigns, is terminated for cause, breaches any post-termination covenants, or for failing to execute any general release required to be executed. For RSUs and PSUs, if the grantee’s continuous service terminates for any reason, the grantee shall forfeit all right, title, and interest in any unvested units as of the termination date.

On January 6, 2021, the Company’s Board of Directors approved the Employee Stock Purchase Plan (the “ESPP”) and effective January 14, 2021, the Company’s shareholders adopted and approved the ESPP. The ESPP provides employees of the Company with an opportunity to purchase the Company’s common stock at a discount, subject to certain limitations set forth in the ESPP. The ESPP authorized the issuance of 1,790,569 shares of the Company’s common stock. The initial offering period is one year. As of March 27, 2021, there were 0 shares of common stock purchased under the ESPP.

On March 22, 2021, the Company's Board of Directors approved the International Employee Stock Purchase Plan (the "International ESPP") that provides employees of certain designated subsidiaries of the Company with an opportunity to purchase the Company's common stock at a discount, subject to certain limitations set forth in the International ESPP. The shares available under the International ESPP are subject to available shares under the ESPP.


	Six months ended
	July 1, 2023	June 25, 2022
Annual dividend yield	—%	—%
Expected term (years)	2.6 - 2.8	2.7 - 2.8
Risk-free interest rate	3.65% - 4.51%	2.32% - 2.76%
Expected volatility	37.9% - 38.8%	40.9% - 43.9%
Correlation to the index peer group	60.2% - 60.3%	50.7% - 59.5%

The Company recorded $1$4 million and $7 million of share-based compensation expense during the three and six months ended ~~March 27, 2021~~July 1, 2023, respectively, and $4 million and $7 million during the three and six months ended June 25, 2022, respectively, within selling, general and administrative expenses on the ~~condensed~~unaudited consolidated statements of operations. ~~Share-based compensation expense for the three months ended March 28, 2020 was immaterial.~~

Note ~~9—Loss~~10—Earnings (loss) per share

The Company calculates basic and diluted ~~loss~~ earnings (loss)per share using the two-class method. The following table sets forth the computation of basic and diluted ~~loss~~earnings per share attributable to common shareholders:

Three months ended
(in thousands, except per share amounts) March 27,
2021 March 28,
2020
Basic and diluted loss per share:
Net loss attributable to Driven Brands Holdings Inc. $ (19,939) $ (3,848)
Weighted-average common shares outstanding, basic and diluted 154,827 88,990
Loss per share, basic and diluted $ (0.13) $ (0.04)


	Three Months Ended				Six Months Ended
(in thousands, except per share amounts)	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Basic earnings (loss) per share:
Net income (loss) attributable to Driven Brands Holdings Inc.	$	37,749	(57,044)		$	67,498	(22,601)
Less: Net income (loss) attributable to participating securities, basic	794		(1,210)		1,420		(481)
Net income (loss) after participating securities, basic	36,955		(55,834)		66,078		(22,120)
Weighted-average common shares outstanding	162,911		162,781		162,848		162,772
Basic earnings (loss) per share	$	0.23	$	(0.34)	$	0.41	$	(0.14)


	Three Months Ended				Six Months Ended
(in thousands, except per share amounts)	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022







Diluted earnings (loss) per share:
Net income (loss) attributable to Driven Brands Holdings Inc.	$	37,749	$	(57,044)	$	67,498	$	(22,601)
Less: Net income (loss) attributable to participating securities, diluted	708		(1,080)		1,267		(430)
Net income (loss) after participating securities, diluted	$	37,041	$	(55,964)	$	66,231	$	(22,171)
Weighted-average common shares outstanding	162,911		162,781		162,848		162,772
Dilutive effect of share-based awards	3,978		—		4,034		—
Weighted-average common shares outstanding, as adjusted	166,888		162,781		166,882		162,772
Diluted earnings (loss) per share	$	0.22	$	(0.34)	$	0.40	$	(0.14)

Basic ~~loss~~earnings (loss) per share is computed by dividing the net ~~loss~~income (loss) attributable to Driven Brands Holdings Inc. by the weighted-average number of common shares outstanding for the period. Because the Company reported a net loss for the three months ended March 27, 2021 and March 28, 2020, the number of shares used to calculate diluted loss per share is the same as the number of shares used to calculate basic loss per share because the potentially dilutive shares, if any, would have been antidilutive if included. In addition, the ~~Company has~~Company’s participating securities are related to certain restricted stock awards issued to Section 16 officers which include non-forfeitable dividend ~~rights,~~rights.

The Company has 4,881,630 shares of performance awards that are contingent on performance conditions which ~~were~~have not ~~included in~~yet been met, and therefore have been excluded from the ~~basic or diluted loss per share calculations given~~computation of weighted average shares for the ~~Section 16 officers do not share in the losses of the Company.~~

three and six months ended July 1, 2023.

The following securities were not included in the computation of diluted shares outstanding because the effect would be antidilutive:


	Three Months Ended		Six Months Ended
Number of securities (in thousands)	July 1, 2023	June 25, 2022	July 1, 2023	June 25, 2022



Stock Options	1,703	—	1,703	—



Total	1,703	—	1,703	—

Note 11—Income Taxes

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


~~Restricted stock awards~~			~~609~~
~~Restricted stock units~~			67
~~Performance stock units~~			~~135~~
~~IPO options~~			~~1,514~~
~~Employee stock purchase plan~~			~~123~~
~~Other options~~			48
~~Total~~			~~2,496~~

~~Note 10—Related-Party Transactions~~

~~The Company had management advisory services agreements with Roark Capital Management, LLC (“Roark”),~~July 1, 2023 compared to an affiliated entity, which provided that the Company pay an annual advisory services fee to Roark. The Company and Roark terminated all advisory services agreements in January 2021 in connection with the Company’s initial public offering. The Company paid $1income tax benefit of $19 million ~~under these service agreements during~~for the three months ended ~~March 28, 2020.~~June 25, 2022. The effective income tax rate for the three months ended July 1, 2023 was 34.9% compared to 24.8% for the three months ended June 25, 2022. The net increase in income tax expense and effective tax rate was primarily driven by a non-recurring tax benefit related to a trade name impairment for the three months ended June 25, 2022, partially offset by the inclusion of foreign disregarded entity losses for the three months ended July 1, 2023.

~~Note 11—Commitments and Contingencies~~six months ended July 1, 2023.

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

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

The following discussion and analysis for Driven Brands Holdings Inc. and Subsidiaries (“Driven Brands”, “the Company”, “we”, “us” or “our”) should be read in conjunction with our ~~condensed~~ consolidated financial statements and the related notes to our ~~condensed~~ consolidated financial statements included elsewhere in this quarterly report. On August 3, 2020, the Company completed the ICWG Acquisition (the “ICWG Acquisition Date”). The Company’s results of operations for the three months ended March 27, 2021 include the operations of ICWG. In this Management’s Discussion and Analysis of Financial Condition and Results of Operations, no comparable information is discussed with respect to ICWG for the three months ended March 28, 2020, which is prior to the ICWG Acquisition Date. We operate on a 52/53-week fiscal year, which ends on the last Saturday in December. The three months ended ~~March 27, 2021~~July 1, 2023 and ~~March 28, 2020~~June 25, 2022 were both 13 week periods. The six months ended July 1, 2023 and June 25, 2022 were both 26 week periods.

Overview ~~of Operations~~

Driven Brands is the largest automotive services company in North America with a growing and highly-franchised base

We have ~~a diversified portfolio~~continued to drive sustained predictable growth and share gain through our robust pipeline of highly-recognized brands, including Take 5 Oil Change®, Meineke Car Care Centers®, MAACO®, CARSTAR®, and 1-800-Radiator & A/C® that compete in the large, growing, recession-resistant and highly-fragmented automotive care industry. Our U.S. industry is underpinned by a large, growing population of more than 275 million vehicles in operation, and is expected to continue its long-term growth trajectory given (i) long-term increases in annual miles traveled; (ii) consumers more frequently outsourcing automotive services due to vehicle complexity; (iii) increases in average repair costs and (iv) average age of the car on the road getting older. During the three months ended March 27, 2021, our network generated $329 million in revenue from $1 billion in system-wide sales. We serve a diverse mix of customers, with sales coming from retail customers and commercial customers such as fleet operators and insurance carriers. Our success is driven in large part by our mutually beneficial relationships with more than 2,500 individual franchisees and independent operators.

~~Our~~ organic growth ~~is complemented by a consistent~~adding 133 new stores during 2023, primarily through greenfield openings to drive density in key target locations.

Q2 2023 Three Months Ended Highlights and ~~repeatable M&A strategy, having completed more than 50 acquisitions since 2015. Notably, in August 2020 we acquired ICWG, the world’s largest conveyor car wash company by location count~~ ~~with more than 900 locations across 14 countries, demonstrating our continued ability to pursue and execute upon scalable and highly strategic acquisitions.~~Key Performance Indicators

~~Significant Factors Impacting Financial Results~~

During the second half of fiscal year 2020, we completed the acquisition of ICWG and several other independently-owned car wash sites, which launched our entry into the car wash market and created a new operating and reportable segment. During the second quarter of fiscal year 2020, we completed the acquisition of Fix Auto, which is included in our Paint, Collision & Glass segment, and we also completed acquisitions of several independently-owned oil change shops, which are included in our Maintenance segment. These acquisitions were a core driver of growth in our key performance indicators and our financial results for the three months ended March 27, 2021, (as compared to same period in the ~~three months ended March 28, 2020. For additional information on our acquisitions, see Note 3 to the condensed consolidated financial statements.~~prior year, unless otherwise noted)

•Revenue increased 19% to $607 million, driven by same-store sales and net store growth.

•Consolidated same-store sales increased 8%.

•The Company added 74 net new stores during the quarter.

•Net Income increased to $38 million or $0.22 per diluted share in the current quarter compared to a Net Loss of $57 million or ($0.34) per diluted share in the prior year period.

•Adjusted Net Income “(non-GAAP)” decreased 18% to $49 million or $0.29 per diluted share.

•Adjusted EBITDA “(non-GAAP)” increased 12% to $151 million.

Q2 2023 Six Months Ended Highlights and Key Performance Indicators

(as compared to same period in the prior year, unless otherwise noted)

•Revenue increased 20% to $1,169 million, driven by same-store sales and net store growth.

•Consolidated same-store sales increased 10%.

•The Company added 133 net new stores during the first six months of 2023.

•Net Income increased to $67 million or $0.40 per diluted share in the current year compared to a Net Loss of $23 million or ($0.14) per diluted share in the prior year period.

•Adjusted Net Income “(non-GAAP)” decreased 15% to $91 million or 0.54 per diluted share.

•Adjusted EBITDA “(non-GAAP)” increased 10% to $279 million.

~~For the~~ ~~three months ended March 27, 2021, we recognized a net loss of $20 million, or $(0.13) per diluted share, compared to a net loss of $4 million, or $(0.04) per diluted share, for the~~ ~~three months ended March 28, 2020~~. This decrease was primarily due to a $45 million loss on debt extinguishment related to the write-off of unamortized discount associated with the early termination of the Car Wash Senior Credit Facilities, $16 million increase in depreciation and amortization expense related to acquisitions, and a $7 million increase in net loss on foreign currency transactions. These additional charges were offset by a $149 million increase in revenue, primarily related to the acquisition of ICWG and Fix Auto, as well as continued organic store growth, offset by a corresponding increase in operating expenses related to this growth. Adjusted Net Income increased $23 million for the three months ended March 27, 2021 to $30 million, compared to $7 million for the three months ended March 28, 2020. The increase in Adjusted Net Income was primarily due to increased store count and associated system-wide sales, driven by a combination of organic growth and acquisitions, particularly the acquisition of ICWG. See Note 3 to our condensed consolidated financial statements for additional information about acquisitions. Adjusted EBITDA was $78 million for the three months ended March 27, 2021, an increase of $47 million compared to Adjusted EBITDA of $31 million for the three months ended March 28, 2020. Adjusted Net Income and Adjusted EBITDA are non-GAAP financial measures of performance. For ~~a discussion of our use of these non-GAAP measures and a reconciliation from net loss to Adjusted Net Income and Adjusted EBITDA, see “Reconciliation of Non-GAAP Financial Information~~”.

As a result of pent-up demand, the economic stimulus package, and rising consumer confidence, total system-wide sales were over $1 billion during the three months ended March 27, 2021, an increase of 28% from the three months ended March 28, 2020. The current outbreak of COVID-19 led to adverse impacts on global economies, including the U.S., Canada and Europe during fiscal year 2020 and into fiscal year 2021. While COVID-19 did not have a material adverse effect on our business operations for the three months ended March 27, 2021, an increased level of volatility and uncertainty still exists, and we are continuing to monitor any potential impact to our business.

Key Performance Indicators

Key measures that we use in assessing our business and evaluating our segments include the following:

System-wide sales. System-wide sales represent the total of net sales for our franchised, independently-operated, and company-operated stores. This measure allows management to better assess the total size and health of each segment, our overall store performance, and the strength of our market position relative to competitors. Sales at franchised stores are not included as revenue in our results from operations, but rather, we include franchise royalties and fees that are derived from sales at franchised stores. Franchise royalties and fees revenue represented 9% and 16%, respectively, of our total revenue for the three months ended March 27, 2021 and March 28, 2020, respectively. For the three months ended March 27, 2021 and March 28, 2020, approximately 97% and 88%, respectively, of franchise royalties and fees revenue is attributable to royalties, with the remaining balance attributable to license and development fees. Revenue from company-operated stores represented 56% and 53% of our total revenue for the three months ended March 27, 2021 and March 28, 2020, respectively. Revenue from independently-operated stores represented 17% of our total revenue for the three months ended March 27, 2021.

Store count. Store count reflects the number of franchised, independently-operated, and company-operated stores open at the end of the reporting period. Management reviews the number of new, closed, acquired, and divested stores to assess net unit growth and drivers of trends in system-wide sales, franchise royalties and fees revenue, company-operated store sales, and independently-operated store sales.

Same store sales. Same store sales reflect the change in sales year-over-year for the same store base. We define the same store base to include all franchised, independently-operated, and company-operated stores open for comparable weeks during the given fiscal period in both the current and prior ~~year.~~year, which may be different from how others define similar terms. This measure highlights the performance of existing stores, while excluding the impact of new store openings and closures and acquisitions and divestitures.

Segment Adjusted EBITDA. We define Segment Adjusted EBITDA as earnings before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, straight-line rent, equity compensation, loss on debt extinguishment, foreign currency transaction related gains or losses, store opening costs, and certain non-recurring and non-core, infrequent or unusual charges. Segment Adjusted EBITDA is a supplemental measure of operating performance of our segments and may not be comparable to similar measures reported by other companies. Segment Adjusted EBITDA is a performance metric utilized by our Chief Operating Decision Maker to allocate resources to and assess performance of our segments. Refer to Note 5 in our ~~condensed~~ consolidated financial statements for a reconciliation of income before taxes to Segment Adjusted EBITDA ~~to income before taxes~~ for the three and six months ended ~~March 27, 2021~~July 1, 2023 and ~~March 28, 2020.~~June 25, 2022.

The following table sets forth our key performance indicators for the three and six months ended ~~March 27, 2021~~July 1, 2023 and ~~March 28, 2020:~~June 25, 2022:


		Three months ended							Three Months Ended						Six months ended
(in thousands, except store count or as otherwise noted)	(in thousands, except store count or as otherwise noted)	March 27, 2021			March 28, 2020			(in thousands, except store count or as otherwise noted)	July 1, 2023			June 25, 2022			July 1, 2023			June 25, 2022
System-Wide Sales	System-Wide Sales							System-Wide Sales
System-Wide Sales by Segment:	System-Wide Sales by Segment:							System-Wide Sales by Segment:
Maintenance	Maintenance	$	277,884		$	230,500		Maintenance	$	484,624		$	399,153		$	926,567		$	756,265
Car Wash	Car Wash	113,211			—			Car Wash	163,148			156,738			318,126			314,322
Paint, Collision & Glass	Paint, Collision & Glass	542,433			495,635			Paint, Collision & Glass	892,530			724,665			1,708,572			1,383,550
Platform Services	Platform Services	69,356			56,848			Platform Services	118,728			131,320			208,712			222,114
Total	Total	$	1,002,884		$	782,983		Total	$	1,659,030		$	1,411,876		$	3,161,977		$	2,676,251
System-Wide Sales by Business Model:	System-Wide Sales by Business Model:							System-Wide Sales by Business Model:
Franchised Stores	Franchised Stores	$	762,693		$	688,092		Franchised Stores	$	1,202,919		$	1,033,049		$	2,277,268		$	1,941,944
Company-Operated Stores	Company-Operated Stores	184,028			94,891			Company-Operated Stores	394,578			323,885			770,644			616,276
Independently-Operated Stores	Independently-Operated Stores	56,163			—			Independently-Operated Stores	61,533			54,942			114,065			118,031
Total	Total	$	1,002,884		$	782,983		Total	$	1,659,030		$	1,411,876		$	3,161,977		$	2,676,251
Store Count	Store Count							Store Count
Store Count by Segment:	Store Count by Segment:							Store Count by Segment:
Maintenance	Maintenance	1,470			1,431			Maintenance	1,694			1,559			1,694			1,559
Car Wash	Car Wash	954			—			Car Wash	1,131			1,074			1,131			1,074
Paint, Collision & Glass	Paint, Collision & Glass	1,627			1,463			Paint, Collision & Glass	1,905			1,771			1,905			1,771
Platform Services	Platform Services	198			198			Platform Services	208			202			208			202
Total	Total	4,249			3,092			Total	4,938			4,606			4,938			4,606
Store Count by Business Model:	Store Count by Business Model:							Store Count by Business Model:
Franchised Stores	Franchised Stores	2,766			2,598			Franchised Stores	2,948			2,813			2,948			2,813
Company-Operated Stores	Company-Operated Stores	749			494			Company-Operated Stores	1,274			1,075			1,274			1,075
Independently-Operated Stores	Independently-Operated Stores	734			—			Independently-Operated Stores	716			718			716			718
Total	Total	4,249			3,092			Total	4,938			4,606			4,938			4,606
Same Store Sales %	Same Store Sales %							Same Store Sales %
Maintenance	Maintenance	16.5		%	(2.8		%)	Maintenance	10.2		%	15.0		%	11.6		%	16.9		%
Car Wash								Car Wash	(4.0		%)	(2.7%)			(7.7		%)	1.8		%
Paint, Collision & Glass	Paint, Collision & Glass	(9.4		%)	4.6		%	Paint, Collision & Glass	12.2		%	16.1		%	15.8		%	16.6		%
Platform Services	Platform Services	22.0		%	2.2		%	Platform Services	(11.3		%)	11.8		%	(8.7		%)	18.9		%
Total	Total	0.5		%	2.2		%	Total	7.6		%	13.2		%	9.7		%	15.2		%
Segment Adjusted EBITDA	Segment Adjusted EBITDA							Segment Adjusted EBITDA
Maintenance	Maintenance	$	40,440		$	21,466		Maintenance	$	85,753		$	64,076		$	158,739		$	116,561
Car Wash	Car Wash	34,155			—			Car Wash	43,263			53,677			87,572			109,397
Paint, Collision & Glass	Paint, Collision & Glass	17,639			15,877			Paint, Collision & Glass	41,249			32,916			76,961			61,928
Platform Services	Platform Services	11,008			7,465			Platform Services	22,537			20,541			39,567			34,706
Adjusted EBITDA as a percentage of net revenue by segment								Adjusted EBITDA as a percentage of net revenue by segment
Maintenance								Maintenance	35.4		%	33.0		%	33.8		%	31.2		%
Car Wash								Car Wash	26.3		%	33.8		%	27.2		%	34.4		%
Paint, Collision & Glass								Paint, Collision & Glass	31.0		%	34.5		%	30.3		%	35.4		%
Platform Services								Platform Services	39.3		%	38.6		%	36.2		%	36.0		%
Total consolidated								Total consolidated	24.9		%	26.6		%	23.8		%	26.0		%

Reconciliation of Non-GAAP Financial Information

To supplement our consolidated financial statements prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures throughout this quarterly report, as described further below, to provide investors with additional useful information about our financial performance, to enhance the overall understanding of our past performance and future prospects and to allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making.

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

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

The following table provides a reconciliation of Net Income (Loss) to Adjusted Net Income and Adjusted Earnings per ~~Share to net loss as defined by GAAP:~~

Adjusted Net ~~Income/Adjusted~~Income /Adjusted Earnings per Share

Three months ended
(in thousands, except per share data) March 27, 2021 March 28, 2020
Net loss $ (19,932) $ (3,947)
Acquisition related costs(a)
1,646 195
Non-core items and project costs, net(b)
32 1,256
Sponsor management fees(c)
— 539
Straight-line rent adjustment(d)
2,485 850
Equity-based compensation expense(e)
983 (101)
Foreign currency transaction loss, net(f)
10,511 3,479
Asset impairment and closed store expenses(g)
(786) 4,321
Loss on debt extinguishment(h)
45,498 —
Amortization related to acquired intangible assets(i)
3,652 3,965
Adjusted net income before tax impact of adjustments 44,089 10,557
Tax impact of adjustments(j)
(13,641) (3,626)
Adjusted net income 30,448 6,931
Net income (loss) attributable to non-controlling interest 7 (99)
Adjusted net income attributable to Driven Brands Holdings Inc. $ 30,441 $ 7,030
Weighted average shares outstanding(k)
Basic 154,827 88,990
Diluted 158,761 88,990
Adjusted earnings per share(k)
Basic $ 0.19 $ 0.08
Diluted $ 0.19 $ 0.08


	Three Months Ended				Six Months Ended
(in thousands, except per share data)	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Net income (loss)	$	37,749	$	(57,044)	$	67,498	$	(22,616)
Acquisition related costs(a)	3,750		3,338		5,597		7,656
Non-core items and project costs, net(b)	2,803		1,719		4,627		2,585

Straight-line rent adjustment(c)	4,638		4,217		9,003		8,310
Equity-based compensation expense(d)	4,485		4,233		7,049		6,851
Foreign currency transaction (gain) loss, net(e)	(1,302)		13,937		(2,977)		14,908

Trade name impairment(f)	—		125,450		—		125,450
Asset sale leaseback loss (gain), impairment and closed store expenses(g)	(7,680)		(5,938)		(5,836)		(6,062)

Amortization related to acquired intangible assets(h)	8,276		5,930		14,312		11,072
Provision for uncertain tax positions(i)	—		—		—		76
Adjusted net income before tax impact of adjustments	52,719		95,842		99,273		148,230
Tax impact of adjustments(j)	(3,577)		(36,184)		(7,790)		(40,796)
Adjusted net income	49,142		59,658		91,483		107,434
Net loss attributable to non-controlling interest	—		—		—		(15)
Adjusted net income attributable to Driven Brands Holdings Inc.	$	49,142	$	59,658	$	91,483	$	107,449

Adjusted earnings per share
Basic	$	0.30	$	0.36	$	0.55	$	0.65
Diluted	$	0.29	$	0.35	$	0.54	$	0.63

Weighted average shares outstanding
Basic	162,911		162,781		162,848		162,772
Diluted	166,888		166,659		166,882		166,692

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

Acquisition related costs(a)

Non-core items and project costs, net(b)

Sponsor management fees(c)

Straight-line rent adjustment~~(d)~~(c)

Equity-based compensation expense~~(e)~~(d)

Foreign currency transaction loss, net(f)

Foreign currency transaction (gain) loss, net(e)

Trade name impairment(f)

Asset impairment and closed store expenses(g)

Loss on debt extinguishment(h)

a.(a)Consists of acquisition costs as reflected within the ~~condensed~~unaudited consolidated statements of operations, including legal, consulting and other fees, and expenses incurred in connection with acquisitions completed during the applicable period, as well as inventory rationalization expenses incurred in connection with acquisitions. We expect to incur similar costs in connection with other acquisitions in the future and, under U.S. GAAP, such costs relating to acquisitions are expensed as incurred and not capitalized.

b.(b)Consists of discrete items and project costs, including ~~(i) third-party~~third party consulting and professional fees associated with strategic transformation initiatives ~~and (ii) other miscellaneous expenses, including non-capitalizable expenses relating to the Company’s initial public offering and other strategic transactions.~~as well as non-recurring payroll-related costs.

c.(c)~~Includes management fees paid to Roark Capital Management, LLC.~~

d.Consists of the non-cash portion of rent expense, which reflects the extent to which our straight-line rent expense recognized under U.S. GAAP exceeds or is less than our cash rent payments.

e.(d)Represents non-cash equity-based compensation expense.

f.(e) Represents foreign currency transaction (gains) losses, net ~~losses~~that primarily related to the remeasurement of our intercompany ~~loans. These losses~~loans, which are ~~slightly~~partially offset by unrealized gains and losses on remeasurement of cross currency ~~swaps.~~swaps and forward contracts.

g.(f)Relates to an impairment of certain Car Wash trade names as the Company elected to discontinue their use.

(g) Relates to (gains) losses, net on sale leasebacks, impairment of certain fixed assets and operating lease right-of-use assets related to closed ~~locations. Also represents~~locations, and lease exit costs and other costs associated with stores that were closed prior to ~~their~~the respective lease termination dates.

h.~~Represents the write-off of unamortized discount associated with early termination of debt.~~

i.(h) Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the ~~condensed~~unaudited consolidated statements of operations.

j.(i) Represents uncertain tax positions recorded for tax positions, inclusive of interest and penalties.

(j) Represents the tax impact of adjustments associated with the reconciling items between net income and Adjusted Net Income, excluding the provision for uncertain tax ~~positions and valuation allowance for certain deferred taxes.~~positions. To determine the tax impact of the deductible reconciling items, we utilized statutory income tax rates ranging from 9% to ~~38%,~~36% depending upon the tax attributes of each adjustment and the applicable jurisdiction.

k.Share and per share amounts have been adjusted to reflect an implied 88,990-for-one stock split that became effective on January 14, 2021. See Note 1 in the accompanying condensed consolidated financial statements for additional information.

Results of Operations for the ~~three months ended March 27, 2021 compared~~Three Months Ended July 1, 2023 Compared to the Three Months Ended June 25, 2022

We recognized net income of $38 million, or $0.22 per diluted share, for the three months ended ~~March 28, 2020~~July 1, 2023, compared to a net loss of $57 million, or ($0.34) per diluted share, for the three months ended June 25, 2022. This increase was primarily due to the non-recurrence of a $125 million non-cash impairment charge in the three months ended June 25, 2022 related to the change in intended use of certain existing Car Wash trade names migrating to the Take 5 Car Wash brand as well as a benefit from foreign exchange of $15 million, and an increase in gains from sale leaseback transactions. This increase in income was partially offset by reduced operating margins for company-operated stores, primarily within the Car Wash and Paint, Collision & Glass segments, higher interest expense, primarily relating to a higher variable interest rate on the Term Loan Facility in the current period as well as interest relating to borrowings under the Series 2022-1 Class A-2 Securitization Senior Notes issued in the fourth quarter of 2022, and increased depreciation and amortization relating to capital expenditures and business acquisitions over the prior 12 months.

Adjusted net income was $49 million for the three months ended July 1, 2023, a decrease of $11 million, compared to $60 million for the three months ended June 25, 2022. This decrease was primarily due to reduced operating margins for company-operated stores, primarily within the Car Wash and Paint, Collision & Glass segments, higher interest expense, relating to a higher variable interest rate on the Term Loan Facility in the current period as well as interest relating to borrowings under the Series 2022-1 Class A-2 Securitization Senior Notes issued in the fourth quarter of 2022, and increased depreciation relating to capital expenditures and business acquisitions over the prior 12 months.

Adjusted EBITDA was $151 million for the three months ended July 1, 2023, an increase of $16 million, compared to $135 million for the three months ended June 25, 2022. The increase in Adjusted EBITDA was primarily due to an increase in revenue related to same store sales growth, unit growth from the U.S. glass and car wash acquisitions in the trailing twelve month period, and organic store count growth, partially offset by reduced operating margins for company-operated stores, primarily within the Car Wash and Paint, Collision & Glass segments.

To facilitate the review of our results of operations, the following tables set forth our financial results for the periods indicated. All information is derived from the ~~condensed consolidated statements~~unaudited Consolidated Statements of ~~operations. Independently-operated store sales and expenses are derived from our acquisition~~Operations. Certain percentages presented in this section have been rounded, therefore, totals may not equal the sum of ~~ICWG and are only reflected~~the line items in the ~~results of operations from the August 3, 2020 acquisition date through the end of our current period, and, as such, it is not meaningful to compare to prior period results.~~tables below.

Franchise Royalties and Fees

Franchise royalties and fees increased $1$5 million, ~~for the three months ended March 27, 2021 as compared to the three months ended March 28, 2020. This was~~or 11%, primarily due to the addition of 168 franchised stores and a corresponding $75 million increase in franchised system-wide sales as compared to the three months ended March 28, 2020. The increase in franchise system-wide sales was primarily due to the acquisition of Fix Auto in April 2020, which contributed $84 million of system-wide sales during the three months ended March 27, 2021.

~~Company-Operated Store Sales~~

~~Company-operated store sales increased $89 million for the three months ended March 27, 2021 as compared to the three months ended March 28, 2020. This increase was~~ due to same store sales growth and a net increase of 135 franchise stores. Franchise system-wide sales increased by$170 million or16%.

Company-operated Store Sales

Company-operated store sales increased $71 million, or 22%, of which$37 million and$34 million related to the ~~addition of 255~~Maintenance and Paint, Collision & Glass segments, respectively. The sales increase in the Maintenance segment was primarily due to same store sales growth and52 net new company-operated ~~stores year-over-year, including 220 car wash company-operated stores from the acquisition of ICWG and additional tuck-in acquisitions, as well as additional company-operated stores~~stores. The sales increase in the Paint, Collision & Glass segment was primarily due to same store sales growth as well as net store growth from the ~~acquisition~~2022 U.S. glass acquisitions. Car Wash sales were flat year over year as a result of ~~Fix Auto during~~sales from 59 net new company-operated stores offset by decreased same store sales. In aggregate, the ~~second quarter of 2020. Acquisitions contributed an incremental $64 million of~~Company added 199 company-operated ~~store sales during the three months ended March~~ stores year-over-year.

27 ~~2021, and the remaining $25 million was due to the impact of organic growth in our Maintenance segment.~~

~~Advertising Contributions~~

~~Advertising contributions~~Independently-operated Store Sales

Independently-operated store sales (comprised entirely of sales from the international car wash locations) increased by $2$7 million, ~~for the three months ended March 27, 2021, as compared to the three months ended March 28, 2020,~~or 12%, primarily due to an increase in ~~franchised~~same store sales as a result of improved product mix and price as well as a favorable impact from foreign exchange.

Advertising Fund Contributions

Advertising fund contributions increased by$3 million, or 12%, primarily due to an increase in franchise system-wide sales of approximately ~~$75 million.~~$170 million, or 16%, from same store sales growth and additional net new franchise stores. Our franchise agreements typically require the franchisee to pay continuing advertising fund fees based on a percentage of franchisee gross sales.

Supply and Other Revenue

Supply and other revenue increased $1$13 million, ~~for~~or 21%, primarily from growth in product and service revenue within the ~~three months ended March 27, 2021 as compared to the three months ended March 28, 2020.~~ ~~This increase was~~Platform Services segment primarily due to an increase in system-wide sales growth and 135 net new stores within the ~~2020 acquisitions of ICWG and Fix Auto.~~ Maintenance segment.~~These acquisitions generated approximately $2 million of incremental revenue for the three months ended March 27, 2021.~~

Operating Expenses


		Three months ended									Three Months Ended
(in thousands)	(in thousands)	March 27, 2021		March 28, 2020		Change				(in thousands)	July 1, 2023		% of Net Revenues		June 25, 2022		% of Net Revenues
Company-operated store expenses	Company-operated store expenses	$	112,756	$	63,292	$	49,464	78	%	Company-operated store expenses	$	257,040	42.4	%	$	192,939	37.9	%
Independently-operated store expenses	Independently-operated store expenses	31,108		—		31,108		N/M		Independently-operated store expenses	31,958		5.3	%	28,843		5.7	%
Advertising expenses		17,255		14,883		2,372		16	%
Advertising fund expenses										Advertising fund expenses	24,749		4.1	%	22,091		4.3	%
Supply and other expenses	Supply and other expenses	22,489		23,059		(570)		(2)	%	Supply and other expenses	42,106		6.9	%	35,800		7.0	%
Selling, general, and administrative expenses	Selling, general, and administrative expenses	69,050		51,065		17,985		35	%	Selling, general, and administrative expenses	96,815		16.0	%	97,977		19.3	%
Acquisition costs		1,646		195		1,451		744	%
Acquisition related costs										Acquisition related costs	3,750		0.6	%	3,338		0.7	%
Store opening costs	Store opening costs	289		1,175		(886)		(75)	%	Store opening costs	1,377		0.2	%	666		0.1	%
Depreciation and amortization	Depreciation and amortization	23,852		7,799		16,053		206	%	Depreciation and amortization	45,419		7.5	%	38,087		7.5	%
Asset impairment charges		1,253		2,912		(1,659)		(57)	%
Trade name impairment										Trade name impairment	—		—	%	125,450		24.7	%
Asset impairment charges and lease terminations										Asset impairment charges and lease terminations	6,044		1.0	%	(882)		(0.2)	%
Total operating expenses	Total operating expenses	$	279,698	$	164,380	$	115,318	70	%	Total operating expenses	$	509,258	83.9	%	$	544,309	107.0	%

~~Company-Operated~~Company-operated Store Expenses

Company-operated store expenses increased ~~$49~~$64 million, or 33%, primarily due to increased operations relating to 199 company-operated stores added in the trailing twelve months as well as increased operating costs for ~~the three months ended March 27, 2021 as compared~~rent expense at properties converted to leases through prior year sale leasebacks and increased labor costs.

Independently-operated Store Expenses

Independently-operated store expenses, which are entirely related to the ~~three months ended March 28, 2020. This~~Car Wash segment, increased $3 million, or 11%, due primarily to an increase in same store sales and an increase in utilities and rent expenses as well as an unfavorable impact from foreign exchange.

Advertising Fund Expenses

Advertising fund expenses increased $3 million, or 12%, which is commensurate with the addition of 255 company-operated stores since March 28, 2020. Company-operated store expenses continue to increase at a slower rate than company-operated store sales due to our continued use of a leaner and more efficient staffing model.

~~Advertising Expenses~~

~~The $2 million increase in advertising expenses for the three months ended March 27, 2021, as compared~~ to the ~~three months ended March 28, 2020, represents a commensurate~~ increase toin advertising fund contributions during the period. Advertising fund expenses generally trend consistent with advertising fund contributions.

Supply and Other Expenses

Supply and other expenses ~~decreased $1~~increased $6 million, ~~for~~or 18%, due to increased freight costs in the ~~three months ended March 27, 2021~~Platform Services as ~~compared to the three months ended March 28, 2020, resulting from efficient cost management at Automotive Training Institute (“ATI”)~~well as an increase in supply and ~~PH Vitres D’Autos.~~other revenue.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ~~increased $18~~decreased$1 million, ~~for the three months ended March 27, 2021 as compared to the three months ended March 28, 2020. This increase is~~or 1%, primarily due to ~~$17 million of increased~~a decrease in employee compensation and other employee-related expenses ~~resulting from the acquisitions of ICWG~~ and ~~Fix Auto, a $1 million~~an increase in ~~equity-based compensation, and a $1 million increase in rent expense. These increases were~~gains from sale leaseback transactions, partially offset by ~~a $1 million decrease in non-core project~~infrastructure costs, marketing expenses, and ~~a $1 million decrease in sponsor management fees which were eliminated in connection with the Company’s IPO.~~

Acquisition Related Costs

Acquisition related costs ~~increased $1 million for the three months ended March 27, 2021, compared~~remained flat period over period primarily due to the ~~three months ended March 28, 2020, as a result~~timing of ~~the acquisition of four car wash sites during the three months ended March 27, 2021. There were no acquisitions during the three months ended March 28, 2020.~~legal and due diligence procedures for acquisitions.

Store opening costs ~~decreased~~increased by less than $1 million, or 107%, primarily due to costs associated with converting stores from U.S. glass acquisitions to the Auto Glass Now (“AGN”) brand.

Depreciation and Amortization

Depreciation and amortization expense increased$7 million, or 19%, due to additional fixed assets and finite-lived intangible assets recognized in conjunction with recent acquisitions and higher capital expenditures, primarily related to car wash site development.

Trade Name Impairment Charges

During the three months ended June 25, 2022, the Company made the strategic decision to rebrand the majority of its U.S. car wash locations to operate under the name “Take 5 Car Wash”, and therefore are discontinuing the use of certain Car Wash trade names that had indefinite lives. As a result, the Company recognized a $125 million non-cash impairment charge.


			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			3
~~Condensed~~ Consolidated Statements of ~~Operation~~sOperations			3
~~Condensed~~ Consolidated Statements of Comprehensive Income (Loss)			4
~~Condensed~~ Consolidated Balance Sheets			5
~~Condensed~~ Consolidated Statements of Shareholders’/Members' Equity			6
~~Condensed~~ Consolidated Statements of Cash Flows			78
Notes to the ~~Condensed~~ Consolidated Financial Statements			910
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2221
Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk.~~Risk			3544
Item 4 .4. Controls and ~~Procedures.~~Procedures			3544

PART II. OTHER INFORMATION
Item 1. Legal Proceedings			3645
Item 1A. Risk Factors			3645
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3645
Item 3. Defaults Upon Senior Securities			45
Item 5. Other Information			3645
Item 6. Exhibits			3746

Signatures			3847


		Three months ended					Three Months Ended			Six Months Ended
(in thousands)	(in thousands)	March 27, 2021		March 28, 2020		(in thousands)		July 01, 2023		June 25, 2022		July 01, 2023		June 25, 2022
Net loss		$	(19,932)	$	(3,947)
Net income (loss)						Net income (loss)		$	37,749	$	(57,044)	$	67,498	$	(22,616)
Other comprehensive income (loss):	Other comprehensive income (loss):					Other comprehensive income (loss):
Foreign currency translation adjustment		(9,243)		(15,767)
Unrealized gain from cash flow hedges, net of tax		30		0
Actuarial gain of defined benefit pension plan, net of tax		128		0
Foreign currency translation adjustments						Foreign currency translation adjustments		6,165		(42,114)		17,516		(47,688)
Unrealized (loss) gain from cash flow hedges, net of tax benefit of ($19), ($26), ($21), and ($26), respectively						Unrealized (loss) gain from cash flow hedges, net of tax benefit of ($19), ($26), ($21), and ($26), respectively		222		(225)		22		(93)
Actuarial (loss) gain of defined (benefit) expense pension plan, net of tax expense of $0,						Actuarial (loss) gain of defined (benefit) expense pension plan, net of tax expense of $0,		(4)		7		12		7
Other comprehensive income (loss), net	Other comprehensive income (loss), net	(9,085)		(15,767)		Other comprehensive income (loss), net		6,383		(42,332)		17,550		(47,774)
Total comprehensive income (loss)	Total comprehensive income (loss)	(29,017)		(19,714)		Total comprehensive income (loss)		44,132		(99,376)		85,048		(70,390)
Comprehensive income attributable to non-controlling interests		41		34
Comprehensive income (loss) attributable to non-controlling interests						Comprehensive income (loss) attributable to non-controlling interests		14		(19)		13		(21)
Comprehensive income (loss) attributable to Driven Brands Holdings Inc.	Comprehensive income (loss) attributable to Driven Brands Holdings Inc.	$	(29,058)	$	(19,748)	Comprehensive income (loss) attributable to Driven Brands Holdings Inc.		$	44,118	$	(99,357)	$	85,035	$	(70,369)


(in thousands, except share and per share amounts)	(in thousands, except share and per share amounts)	March 27, 2021 (Unaudited)		December 26, 2020		(in thousands, except share and per share amounts)	July 1, 2023		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	175,371	$	172,611	Cash and cash equivalents	$	212,123	$	227,110
Restricted cash	Restricted cash	10,133		15,827		Restricted cash	657		792
Accounts and notes receivable, net	Accounts and notes receivable, net	104,215		84,805		Accounts and notes receivable, net	200,377		179,888
Inventory	Inventory	42,913		43,039		Inventory	83,036		72,040
Prepaid and other assets	Prepaid and other assets	45,697		25,070		Prepaid and other assets	52,353		40,084
Income tax receivable	Income tax receivable	2,057		3,055		Income tax receivable	14,344		15,075

Advertising fund assets, restricted	Advertising fund assets, restricted	31,072		29,276		Advertising fund assets, restricted	51,210		36,421
Total current assets	Total current assets	411,458		373,683		Total current assets	614,100		571,410
Notes receivable, net		3,845		3,828
Other assets						Other assets	36,923		30,561
Property and equipment, net	Property and equipment, net	766,511		827,392		Property and equipment, net	1,677,804		1,545,738
Operating lease right-of-use assets	Operating lease right-of-use assets	910,255		884,927		Operating lease right-of-use assets	1,449,708		1,299,189
Deferred commissions	Deferred commissions	9,253		8,661		Deferred commissions	6,400		7,121
Intangibles, net	Intangibles, net	829,406		829,308		Intangibles, net	755,990		765,903
Goodwill	Goodwill	1,718,249		1,727,351		Goodwill	2,299,953		2,277,065
Deferred tax assets						Deferred tax assets	3,030		2,911
Total assets	Total assets	$	4,648,977	$	4,655,150	Total assets	$	6,843,908	$	6,499,898
Liabilities and shareholders' equity	Liabilities and shareholders' equity					Liabilities and shareholders' equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	67,229	$	67,802	Accounts payable	$	81,751	$	60,606
Accrued expenses and other liabilities	Accrued expenses and other liabilities	185,707		190,867		Accrued expenses and other liabilities	311,352		317,318
Income tax payable	Income tax payable	4,388		3,513		Income tax payable	3,145		4,454
Current portion of long term debt		17,142		22,988
Current portion of long-term debt						Current portion of long-term debt	32,044		32,986
Income tax receivable liability						Income tax receivable liability	53,781		53,328
Advertising fund liabilities	Advertising fund liabilities	22,906		20,276		Advertising fund liabilities	36,910		36,726
Total current liabilities	Total current liabilities	297,372		305,446		Total current liabilities	518,983		505,418
Long-term debt, net		1,428,760		2,102,219
Deferred tax liability		241,305		249,043
Long-term debt						Long-term debt	2,779,511		2,705,281
Deferred tax liabilities						Deferred tax liabilities	297,884		276,749
Operating lease liabilities	Operating lease liabilities	846,360		818,001		Operating lease liabilities	1,320,670		1,177,501
Income tax receivable liability	Income tax receivable liability	155,970		0		Income tax receivable liability	117,915		117,915
Deferred revenue	Deferred revenue	22,350		20,757		Deferred revenue	30,155		30,046
Long-term accrued expenses and other liabilities	Long-term accrued expenses and other liabilities	31,551		53,324		Long-term accrued expenses and other liabilities	31,132		33,419
Total liabilities	Total liabilities	3,023,668		3,548,790		Total liabilities	5,096,250		4,846,329
Common stock, $0.01 par value, 900 million shares authorized at March 27, 2021 and December 26, 2020, respectively; 167 million and 89 million shares issued and outstanding at March 27, 2021 and December 26, 2020, respectively(1)		1,674		565

Preferred Stock $0.01 par value; 100,000,000 shares authorized; none issued or outstanding						Preferred Stock $0.01 par value; 100,000,000 shares authorized; none issued or outstanding	—		—
Common stock, $0.01 par value, 900,000,000 shares authorized: and 167,366,561 and 167,404,047 shares outstanding; respectively						Common stock, $0.01 par value, 900,000,000 shares authorized: and 167,366,561 and 167,404,047 shares outstanding; respectively	1,674		1,674
Additional paid-in capital	Additional paid-in capital	1,602,092		1,055,172		Additional paid-in capital	1,637,945		1,628,904
Retained earnings	Retained earnings	12,036		31,975		Retained earnings	152,293		84,795
Accumulated other comprehensive income		7,443		16,528
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(44,898)		(62,435)
Total shareholders’ equity attributable to Driven Brands Holdings Inc.	Total shareholders’ equity attributable to Driven Brands Holdings Inc.	1,623,245		1,104,240		Total shareholders’ equity attributable to Driven Brands Holdings Inc.	1,747,014		1,652,938
Non-controlling interests	Non-controlling interests	2,064		2,120		Non-controlling interests	644		631
Total shareholders' equity	Total shareholders' equity	1,625,309		1,106,360		Total shareholders' equity	1,747,658		1,653,569
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	4,648,977	$	4,655,150	Total liabilities and shareholders' equity	$	6,843,908	$	6,499,898


		Three months ended					Six Months Ended
(in thousands)	(in thousands)	March 27, 2021		March 28, 2020		(in thousands)	July 1, 2023		June 25, 2022
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases	Operating cash flows used in operating leases	$	25,794	$	11,390	Operating cash flows used in operating leases	$	67,107	$	57,330
Operating cash flows used in finance leases	Operating cash flows used in finance leases	216		102		Operating cash flows used in finance leases	810		785
Financing cash flows used in (for) finance leases		317		(13)
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		$	6,849	$	327,349
Finance leases		630		5,375
Financing cash flows used in finance leases						Financing cash flows used in finance leases	953		829


in thousands	Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Non-controlling interests		Total shareholders'/members' equity
Balance as of December 26, 2020	$	565	$	1,055,172	$	31,975	$	16,528	$	2,120	$	1,106,360
Net income (loss)	—		—		(19,939)		—		7		(19,932)
Other comprehensive income (loss)	—		—		—		(9,085)		—		(9,085)
Equity-based compensation expense	—		983		—		—		—		983
Issuance of common stock upon initial public offering, net of underwriting discounts and commissions	1,082		660,418		—		—		—		661,500
Common stock issued upon underwriter's exercise of over-allotment	48		99,177		—		—		—		99,225
Repurchase of common stock	(21)		(42,956)		—		—		—		(42,977)
Exercise of stock options	—		25		—		—		—		25
Establishment of income tax receivable liability	—		(155,970)		—		—		—		(155,970)
IPO fees	—		(14,757)		—		—		—		(14,757)
Other	—		—		—		—		(63)		(63)
Balance at March 27, 2021	$	1,674	$	1,602,092	$	12,036	$	7,443	$	2,064	$	1,625,309

Balance as of December 28, 2019	$	565	$	242,240	$	41,983	$	3,626	$	1,464	$	289,878
Net loss	—		—		(3,848)		—		(99)		(3,947)
Other comprehensive income (loss)	—		—		—		(15,767)		0		(15,767)
Equity-based compensation expense	—		(101)		0		—		—		(101)
Balance at March 28, 2020	$	565	$	242,139	$	38,135	$	(12,141)	$	1,365	$	270,063


Cash and cash equivalents, beginning of period	172,611		34,935
Cash included in advertising fund assets, restricted, beginning of period	19,369		23,091
Restricted cash, beginning of period	15,827		0
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period	207,807		58,026
Cash and cash equivalents, end of period	175,371		60,154
Cash included in advertising fund assets, restricted, end of period	21,160		24,809
Restricted cash, end of period	10,133		0
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period	$	206,664	$	84,963


Supplemental cash flow disclosures - non-cash items:
Accrued capital expenditures	$	3,804	$	4,283
Supplemental cash flow disclosures - cash paid for:
Interest	$	16,424	$	16,020
Income taxes	1,373		10


	Three months ended March 28, 2020
(in thousands)	Foreign currency translation adjustment		Cash flow hedges		Defined benefit pension plan		Accumulated other comprehensive income (loss)
Balance at December 28, 2019	$	3,626	$	0	$	0	$	3,626
Net change	(15,767)		0		0		(15,767)
Balance at March 28, 2020	$	(12,141)	$	0	$	0	$	(12,141)


Adjusted EBITDA	Adjusted EBITDA					Adjusted EBITDA

		Three months ended					Three Months Ended				Six months ended
		March 27, 2021		March 28, 2020			July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Net loss		$	(19,932)	$	(3,947)
Income tax benefit		(4,446)		(1,321)
Net income (loss)						Net income (loss)	$	37,749	$	(57,044)	$	67,498	$	(22,616)
Income tax expense (benefit)						Income tax expense (benefit)	20,275		(18,848)		31,246		(5,880)
Interest expense, net	Interest expense, net	18,091		17,516		Interest expense, net	40,871		26,270		79,012		51,623
Depreciation and amortization	Depreciation and amortization	23,852		7,799		Depreciation and amortization	45,419		38,087		83,617		71,110
EBITDA	EBITDA	17,565		20,047		EBITDA	144,314		(11,535)		261,373		94,237
Acquisition related costs(a)	Acquisition related costs(a)	1,646		195		Acquisition related costs(a)	3,750		3,338		5,597		7,656
Non-core items and project costs, net(b)	Non-core items and project costs, net(b)	32		1,256		Non-core items and project costs, net(b)	2,803		1,719		4,627		2,585
Sponsor management fees(c)		—		539

Straight-line rent adjustment~~(d)~~(c)	Straight-line rent adjustment~~(d)~~(c)	2,485		850		Straight-line rent adjustment~~(d)~~(c)	4,638		4,217		9,003		8,310
Equity-based compensation expense~~(e)~~(d)	Equity-based compensation expense~~(e)~~(d)	983		(101)		Equity-based compensation expense~~(e)~~(d)	4,485		4,233		7,049		6,851
Foreign currency transaction loss, net(f)		10,511		3,479
Foreign currency transaction (gain) loss, net(e)						Foreign currency transaction (gain) loss, net(e)	(1,302)		13,937		(2,977)		14,908

Trade name impairment(f)						Trade name impairment(f)	—		125,450		—		125,450
Asset impairment and closed store expenses(g)	Asset impairment and closed store expenses(g)	(786)		4,321		Asset impairment and closed store expenses(g)	(7,680)		(5,938)		(5,836)		(6,062)
Loss on debt extinguishment(h)		45,498		—

Adjusted EBITDA	Adjusted EBITDA	$	77,934	$	30,586	Adjusted EBITDA	$	151,008	$	135,421	$	278,836	$	253,935


	Three Months Ended						2023			2022
(in thousands, unless otherwise noted)	July 1, 2023			June 25, 2022			% Net Revenue For Segment			% Net Revenue For Segment
Franchise royalties and fees	$	14,215		$	11,326		5.9		%	5.8	%
Company-operated store sales	205,673			168,648			84.8		%	86.8	%
Supply and other revenue	22,439			14,331			9.3		%	7.4	%
Total revenue	$	242,327		$	194,305		100.0		%	100.0	%
Segment Adjusted EBITDA	$	85,753		$	64,076		35.4		%	33.0	%

System-Wide Sales							Change
Franchised stores	$	278,951		$	230,505		$	48,446		21.0	%
Company-operated stores	205,673			168,648			37,025			22.0	%
Total System-Wide Sales	$	484,624		$	399,153		$	85,471		21.4	%

Store Count (in whole numbers)							Change
Franchised stores	1,084			1,001			83			8.3	%
Company-operated stores	610			558			52			9.3	%
Total Store Count	1,694			1,559			135			8.7	%
Same Store Sales %	10.2		%	15.0		%


~~(in thousands)~~	Three months ended March 27, 2021
~~Company-operated store sales~~	$	~~57,048~~
~~Independently-operated store sales~~	~~56,163~~
~~Supply and other revenue~~	~~1,453~~
~~Total revenue~~	$	~~114,664~~
~~Segment Adjusted EBITDA~~	$	~~34,155~~

~~System-Wide Sales~~
~~Company-operated stores~~	$	~~57,048~~
~~Independently-operated stores~~	~~56,163~~
~~Total System-Wide Sales~~	$	~~113,211~~
~~Store Count~~
~~Company-operated stores~~	~~220~~
~~Independently-operated stores~~	~~734~~
~~Total Store Count~~	~~954~~


Exhibit Number						Exhibit Description
~~3.1~~10.1*						~~Amended~~Second Amendment to Credit Agreement dated as of June 2, 2023, by and ~~Restated Certificate of Incorporation of~~among Driven Holdings, LLC the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.
10.2†						Separation Agreement and General Release by and between Driven Brands ~~Holdings Inc.~~Shared Services LLC and Tiffany Mason, dated as of June 5, 2023 (incorporated by reference ~~from Exhibit 3.1~~ to ~~Driven Brands Holdings Inc.’s~~the Company's Current Report on Form ~~10-K,~~8-K, filed ~~March 24, 2021)~~June 8, 2023).
~~3.2~~10.3†*						~~Amended~~Employment Agreement by and ~~Restated Restated Bylaws of~~between Gary Ferrera and Driven Brands Holdings Inc. ~~(incorporated~~, dated as of May 4, 2023.
10.4†*						Restricted Stock Unit Award Agreement by ~~reference from Exhibit 3.2 to~~and between Gary Ferrera and Driven Brands Holdings Inc.~~’s Form 10-K, filed March 24, 2021).~~, dated as of May 10, 2023.
~~31.1~~10.5†*						Performance-Based Restricted Stock Unit Award Agreement by and between Gary Ferrera and Driven Brands Holdings Inc., dated as of May 10, 2023.
31.1*						Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
~~31.2~~31.2*						Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
~~32.1~~32.1*						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 and 18 U.S.C. Section 1350.
~~32.2~~32.2*						Certification of Chief Financial Officer pursuant to to Section 906 of the Sarbanes Oxley Act of 2002 and 18 U.S.C. Section 1350.
~~101.INS~~101.INS*						XBRL Instance Document
~~101.SCH~~101.SCH*						XBRL Schema Document
~~101.CAL~~101.CAL*						XBRL Calculation Linkbase Document
~~101.DEF~~101.DEF*						XBRL Definition Linkbase Document
~~101.LAB~~101.LAB*						XBRL Label Linkbase Document
~~101.PRE~~101.PRE*						XBRL Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
*						Filed herewith.
†						Indicates management contract or compensatory plan.