UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September 25, 2021~~March 26, 2022

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

Commission file number: 001-39898

Driven Brands Holdings Inc.

(Exact name of Registrant as specified in its charter)


Delaware
(State or other jurisdiction of incorporation or organization)


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


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


28202
(Zip Code)

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


Title of each class
Common Stock, $0.01 par value


Trading Symbol
DRVN


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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐
Non-accelerated filer ☒


Accelerated filer ☐
Small reporting company ☐
Emerging growth company ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its

internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public

accounting firm that prepared or issued its audit report. ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

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

As of ~~November 5, 2021,~~May 2, 2022, the Registrant had ~~167,379,785~~167,507,521 shares of Common Stock outstanding.

Driven Brands Holdings Inc.

Table of Contents

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, as supplemented by the “Risk Factors” section in our Quarterly Report on Form 10-Q for the quarter ended June 26,~~25, 2021, and in this Quarterly Report as well as in our other filings with the Securities and Exchange Commission, which are available on its website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

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

Part I - Financial Information

Item 1. Financial Statements (Unaudited)

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three months ended Nine months ended
(in thousands, except per share amounts) September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020
Revenue:
Franchise royalties and fees $ 38,953 $ 36,520 $ 107,240 $ 94,214
Company-operated store sales 213,755 140,788 603,808 323,339
Independently-operated store sales 47,941 30,595 160,483 30,595
Advertising fund contributions 19,762 14,927 56,665 42,429
Supply and other revenue 50,737 44,932 147,199 125,115
Total revenue 371,148 267,762 1,075,395 615,692
Operating expenses:
Company-operated store expenses 130,520 85,668 367,095 202,333
Independently-operated store expenses 27,764 17,995 89,664 17,995
Advertising fund expenses 19,762 14,927 56,665 42,429
Supply and other expenses 28,330 25,813 80,417 70,167
Selling, general and administrative expenses 71,565 56,586 218,549 153,107
Acquisition costs 636 12,076 2,674 13,287
Store opening costs 666 119 1,360 1,921
Depreciation and amortization 28,447 16,221 78,722 32,656
Asset impairment charges and lease terminations (270) 321 3,161 6,732
Total operating expenses 307,420 229,726 898,307 540,627
Operating income 63,728 38,036 177,088 75,065
Other expenses, net:
Interest expense, net 17,688 29,594 52,390 64,973
Net loss (gain) on foreign currency transactions 1,074 (2,230) 6,356 55
Loss on debt extinguishment — 673 45,576 673
Total other expenses, net 18,762 28,037 104,322 65,701
Net income before taxes 44,966 9,999 72,766 9,364
Income tax expense 11,880 5,888 24,445 6,109
Net income 33,086 4,111 48,321 3,255
Net (loss) income attributable to non-controlling interests (38) 32 (68) (34)
Net income attributable to Driven Brands Holdings Inc. $ 33,124 $ 4,079 $ 48,389 $ 3,289
Earnings per share(1):
Basic $ 0.20 $ 0.04 $ 0.30 $ 0.03
Diluted $ 0.19 $ 0.04 $ 0.29 $ 0.03
Weighted average shares outstanding(1):
Basic 162,635 111,950 160,030 96,643
Diluted 166,630 111,950 163,968 96,643

~~(1) Shares and earnings (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.~~


	Three months ended
(in thousands, except per share amounts)	March 26, 2022		March 27, 2021
Revenue:
Franchise royalties and fees	$	37,888	$	30,414
Company-operated store sales	292,391		183,855
Independently-operated store sales	63,089		56,163
Advertising fund contributions	19,698		17,255
Supply and other revenue	55,257		41,733
Total revenue	468,323		329,420
Operating expenses:
Company-operated store expenses	177,867		112,756
Independently-operated store expenses	33,299		31,108
Advertising fund expenses	19,698		17,255
Supply and other expenses	32,774		22,489
Selling, general and administrative expenses	92,220		69,050
Acquisition costs	4,318		1,646
Store opening costs	506		289
Depreciation and amortization	33,023		23,852
Asset impairment charges and lease terminations	898		1,253
Total operating expenses	394,603		279,698
Operating income	73,720		49,722
Other expenses, net:
Interest expense, net	25,353		18,091
Net loss on foreign currency transactions	971		10,511
Loss on debt extinguishment	—		45,498
Total other expenses, net	26,324		74,100
Net income (loss) before taxes	47,396		(24,378)
Income tax expense (benefit)	12,968		(4,446)
Net income (loss)	34,428		(19,932)
Net (loss) income attributable to non-controlling interests	(15)		7
Net income (loss) attributable to Driven Brands Holdings Inc.	$	34,443	$	(19,939)

Earnings per share:
Basic	$	0.21	$	(0.13)
Diluted	$	0.20	$	(0.13)
Weighted average shares outstanding:
Basic	162,762		154,827
Diluted	166,748		154,827

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

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)


		Three months ended				Nine months ended					Three months ended
(in thousands)	(in thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020		(in thousands)		March 26, 2022		March 27, 2021
Net income		$	33,086	$	4,111	$	48,321	$	3,255
Net income (loss)										Net income (loss)		$	34,428	$	(19,932)
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Foreign currency translation adjustment	Foreign currency translation adjustment	(30,844)		(2,850)		(28,675)		(14,096)		Foreign currency translation adjustment		(5,574)		(9,243)
Unrealized gain from cash flow hedges, net of tax	Unrealized gain from cash flow hedges, net of tax	(1)		552		29		552		Unrealized gain from cash flow hedges, net of tax		132		30
Defined benefit pension plan actuarial gain, net of tax	Defined benefit pension plan actuarial gain, net of tax	3		—		131		—		Defined benefit pension plan actuarial gain, net of tax		—		128
Other comprehensive loss, net	Other comprehensive loss, net	(30,842)		(2,298)		(28,515)		(13,544)		Other comprehensive loss, net		(5,442)		(9,085)
Total comprehensive income (loss)	Total comprehensive income (loss)	2,244		1,813		19,806		(10,289)		Total comprehensive income (loss)		28,986		(29,017)
Comprehensive income (loss) attributable to non-controlling interests	Comprehensive income (loss) attributable to non-controlling interests	(47)		97		(8)		(34)		Comprehensive income (loss) attributable to non-controlling interests		(2)		41
Comprehensive income (loss) attributable to Driven Brands Holdings Inc.	Comprehensive income (loss) attributable to Driven Brands Holdings Inc.	$	2,291	$	1,716	$	19,814	$	(10,255)	Comprehensive income (loss) attributable to Driven Brands Holdings Inc.		$	28,988	$	(29,058)

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

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


(in thousands, except share and per share amounts)	(in thousands, except share and per share amounts)	September 25, 2021		December 26, 2020		(in thousands, except share and per share amounts)	March 26, 2022		December 25, 2021
Assets	Assets	(Unaudited)				Assets	(Unaudited)
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	115,365	$	172,611	Cash and cash equivalents	$	270,681	$	523,414
Restricted cash	Restricted cash	135		15,827		Restricted cash	792		792
Accounts and notes receivable, net	Accounts and notes receivable, net	110,907		84,805		Accounts and notes receivable, net	133,809		117,903
Inventory	Inventory	44,259		43,039		Inventory	48,883		46,990
Prepaid and other assets	Prepaid and other assets	26,022		25,070		Prepaid and other assets	24,640		24,326
Income tax receivable	Income tax receivable	2,619		3,055		Income tax receivable	5,070		6,867
Advertising fund assets, restricted	Advertising fund assets, restricted	39,698		29,276		Advertising fund assets, restricted	51,281		45,360

Assets held for sale						Assets held for sale	3,275		3,275
Total current assets	Total current assets	339,005		373,683		Total current assets	538,431		768,927
Notes receivable, net	Notes receivable, net	2,748		3,828		Notes receivable, net	8,918		3,182
Property and equipment, net	Property and equipment, net	1,121,204		827,392		Property and equipment, net	1,384,770		1,350,984
Operating lease right-of-use assets	Operating lease right-of-use assets	905,527		884,927		Operating lease right-of-use assets	1,026,537		995,625
Deferred commissions	Deferred commissions	9,878		8,661		Deferred commissions	10,623		10,567
Intangibles, net	Intangibles, net	817,665		829,308		Intangibles, net	862,761		816,183
Goodwill	Goodwill	1,810,085		1,727,351		Goodwill	2,044,594		1,910,392
Deferred tax assets						Deferred tax assets	1,477		1,509
Total assets	Total assets	$	5,006,112	$	4,655,150	Total assets	$	5,878,111	$	5,857,369
Liabilities and shareholders' equity	Liabilities and shareholders' equity					Liabilities and shareholders' equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	72,458	$	67,802	Accounts payable	$	85,468	$	83,033
Accrued expenses and other liabilities	Accrued expenses and other liabilities	217,589		190,867		Accrued expenses and other liabilities	241,730		297,620
Income tax payable	Income tax payable	2,791		3,513		Income tax payable	20,642		11,054
Current portion of long term debt	Current portion of long term debt	18,342		22,988		Current portion of long term debt	22,969		26,044
Income tax receivable liability						Income tax receivable liability	24,255		24,255
Advertising fund liabilities	Advertising fund liabilities	25,457		20,276		Advertising fund liabilities	29,022		26,441
Total current liabilities	Total current liabilities	336,637		305,446		Total current liabilities	424,086		468,447
Long-term debt, net		1,677,337		2,102,219
Deferred tax liability		261,906		249,043
Long-term debt						Long-term debt	2,358,379		2,356,320
Deferred tax liabilities						Deferred tax liabilities	256,535		257,067
Operating lease liabilities	Operating lease liabilities	843,925		818,001		Operating lease liabilities	961,182		931,604
Income tax receivable liability	Income tax receivable liability	155,970		—		Income tax receivable liability	131,715		131,715
Deferred revenue	Deferred revenue	24,770		20,757		Deferred revenue	39,541		37,576
Long-term accrued expenses and other liabilities	Long-term accrued expenses and other liabilities	30,070		53,324		Long-term accrued expenses and other liabilities	28,181		29,398
Total liabilities	Total liabilities	3,330,615		3,548,790		Total liabilities	4,199,619		4,212,127
Common stock, $0.01 par value, 900 million shares authorized at September 25, 2021 and December 26, 2020; 167 million and 127 million shares issued and outstanding at September 25, 2021 and December 26, 2020, respectively(1)		1,674		565
Common stock, $0.01 par value, 900 million shares authorized and 167 million shares issued at March 26, 2022 and December 25, 2021.						Common stock, $0.01 par value, 900 million shares authorized and 167 million shares issued at March 26, 2022 and December 25, 2021.	1,675		1,674
Additional paid-in capital	Additional paid-in capital	1,604,342		1,055,172		Additional paid-in capital	1,610,585		1,605,890
Retained earnings	Retained earnings	80,364		31,975		Retained earnings	76,050		41,607
Accumulated other comprehensive income (loss)		(12,047)		16,528
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(10,483)		(5,028)
Total shareholders’ equity attributable to Driven Brands Holdings Inc.	Total shareholders’ equity attributable to Driven Brands Holdings Inc.	1,674,333		1,104,240		Total shareholders’ equity attributable to Driven Brands Holdings Inc.	1,677,827		1,644,143
Non-controlling interests	Non-controlling interests	1,164		2,120		Non-controlling interests	665		1,099
Total shareholders' equity	Total shareholders' equity	1,675,497		1,106,360		Total shareholders' equity	1,678,492		1,645,242
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	5,006,112	$	4,655,150	Total liabilities and shareholders' equity	$	5,878,111	$	5,857,369

~~(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 consolidated financial statements.

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

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


in thousands	in thousands	Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Non-controlling interests		Total shareholders'/members' equity		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
Balance as of December 28, 2020														Balance as of December 28, 2020	$	565	$	1,055,172	$	31,975	$	16,528	$	2,120	$	1,106,360
Net income (loss)	Net income (loss)	—		—		(19,939)		—		7		(19,932)		Net income (loss)	—		—		(19,939)		—		7		(19,932)
Other comprehensive loss	Other comprehensive loss	—		—		—		(9,085)		—		(9,085)		Other comprehensive loss	—		—		—		(9,085)		—		(9,085)
Equity-based compensation expense	Equity-based compensation expense	—		983		—		—		—		983		Equity-based compensation expense	—		983		—		—		—		983
Issuance of common stock upon initial public offering, net of underwriting discounts and commissions	Issuance of common stock upon initial public offering, net of underwriting discounts and commissions	1,082		660,418		—		—		—		661,500		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	Common stock issued upon underwriter's exercise of over-allotment	48		99,177		—		—		—		99,225		Common stock issued upon underwriter's exercise of over-allotment	48		99,177		—		—		—		99,225
Repurchase of common stock	Repurchase of common stock	(21)		(42,956)		—		—		—		(42,977)		Repurchase of common stock	(21)		(42,956)		—		—		—		(42,977)
Exercise of stock options	Exercise of stock options	—		25		—		—		—		25		Exercise of stock options	—		25		—		—		—		25
Establishment of income tax receivable liability	Establishment of income tax receivable liability	—		(155,970)		—		—		—		(155,970)		Establishment of income tax receivable liability	—		(155,970)		—		—		—		(155,970)
IPO fees	IPO fees	—		(14,757)		—		—		—		(14,757)		IPO fees	—		(14,757)		—		—		—		(14,757)
Other	Other	—		—		—		—		(63)		(63)		Other	—		—		—		—		(63)		(63)
Balance as of March 27, 2021	Balance as of March 27, 2021	$	1,674	$	1,602,092	$	12,036	$	7,443	$	2,064	$	1,625,309	Balance as of March 27, 2021	$	1,674	$	1,602,092	$	12,036	$	7,443	$	2,064	$	1,625,309
Net income (loss)		—		—		35,204		—		(37)		35,167
Other comprehensive loss		—		—		—		11,412		—		11,412
Equity-based compensation expense		—		1,028		—		—		—		1,028
At-Pac divestiture		—		—		—		—		(948)		(948)
Other		—		(25)		—		(1)		—		(26)
Balance at June 26, 2021		$	1,674	$	1,603,095	$	47,240	$	18,854	$	1,079	$	1,671,942

Balance as of December 25, 2021														Balance as of December 25, 2021	$	1,674	$	1,605,890	$	41,607	$	(5,028)	$	1,099	$	1,645,242
Net income (loss)	Net income (loss)	—		—		33,124		—		(38)		33,086		Net income (loss)	—		—		34,443		—		$	(15)	34,428
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		(30,902)		60		(30,842)		Other comprehensive income (loss)	—		—		—		(5,455)		13		(5,442)
Equity-based compensation expense	Equity-based compensation expense	—		933		—		—		—		933		Equity-based compensation expense	—		2,618		—		—		—		2,618
Exercise of stock options		—		314		—		—		—		314
Other		—		—		—		1		63		64
Balance at September 25, 2021		$	1,674	$	1,604,342	$	80,364	$	(12,047)	$	1,164	$	1,675,497
Stock issued related to Employee Stock Purchase Plan														Stock issued related to Employee Stock Purchase Plan	1		2,091		—		—		—		2,092
Tax withholding on stock option exercises														Tax withholding on stock option exercises	—		(14)		—		—		—		(14)
Divestiture of Denmark car wash operations														Divestiture of Denmark car wash operations	—		—		—		—		(432)		(432)
Balance as of March 26, 2022														Balance as of March 26, 2022	$	1,675	$	1,610,585	$	76,050	$	(10,483)	$	665	$	1,678,492

Balance as of December 28, 2019		565		242,240		41,983		3,626		1,464		289,878
Cumulative effect of ASU 2016-02 adoption		—		—		(4,012)		—		—		(4,012)
Cumulative effect of ASU 2016-13 adoption		—		—		(1,797)		—		—		(1,797)
Balance as of December 29, 2019		565		242,240		36,174		3,626		1,464		284,069
Net income (loss)		—		—		3,289		—		(34)		3,255
Other comprehensive (loss)		—		—		—		(13,544)		—		(13,544)
Equity-based compensation expense		—		508		—		—		—		508
Common stock issued in a business combination		—		809,000		—		—		—		809,000
Acquisition of subsidiary with noncontrolling interest		—		—		—		—		400		400
Balance at September 26, 2020		$	565	$	1,051,748	$	39,463	$	(9,918)	$	1,830	$	1,083,688

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

DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


		Nine months ended					Three months ended
(in thousands)	(in thousands)	September 25, 2021		September 26, 2020		(in thousands)	March 26, 2022		March 27, 2021
Net income		$	48,321	$	3,255
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss)						Net income (loss)	$	34,428	$	(19,932)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:						Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	78,722		32,656		Depreciation and amortization	33,023		23,852
Non-cash lease cost	Non-cash lease cost	56,563		26,254		Non-cash lease cost	17,002		20,028
Loss on foreign denominated transactions	Loss on foreign denominated transactions	9,301		55		Loss on foreign denominated transactions	970		13,000
Gain on derivatives not designed as hedges		(2,945)		—
Gain on foreign currency derivative						Gain on foreign currency derivative	—		(2,489)
Bad debt expense	Bad debt expense	2,535		4,829		Bad debt expense	372		657
Asset impairment costs	Asset impairment costs	3,161		6,732		Asset impairment costs	898		1,253
Amortization of deferred financing costs and bond discounts	Amortization of deferred financing costs and bond discounts	5,139		7,176		Amortization of deferred financing costs and bond discounts	2,224		2,139
Benefit (provision) for deferred income taxes	Benefit (provision) for deferred income taxes	15,898		(4,524)		Benefit (provision) for deferred income taxes	132		(8,018)
Loss on extinguishment of debt	Loss on extinguishment of debt	45,576		673		Loss on extinguishment of debt	—		45,498
Other, net	Other, net	4,257		1,566		Other, net	1,597		(749)
Changes in assets and liabilities, net of acquisitions:	Changes in assets and liabilities, net of acquisitions:					Changes in assets and liabilities, net of acquisitions:
Accounts and notes receivable, net	Accounts and notes receivable, net	(28,787)		(12,349)		Accounts and notes receivable, net	(21,123)		(19,693)
Inventory	Inventory	(3,279)		(1,328)		Inventory	(1,787)		135
Prepaid and other assets	Prepaid and other assets	(18,414)		1,755		Prepaid and other assets	397		(8,184)
Advertising fund assets and liabilities, restricted	Advertising fund assets and liabilities, restricted	5,818		(554)		Advertising fund assets and liabilities, restricted	(1,204)		2,621
Deferred commissions	Deferred commissions	(1,205)		(1,810)		Deferred commissions	(39)		(573)
Deferred revenue	Deferred revenue	3,983		3,438		Deferred revenue	455		1,551
Accounts payable	Accounts payable	(3,903)		10,311		Accounts payable	509		638
Accrued expenses and other liabilities	Accrued expenses and other liabilities	25,595		8,926		Accrued expenses and other liabilities	(61,624)		(6,451)
Income tax receivable	Income tax receivable	(320)		7,551		Income tax receivable	11,476		3,061
Operating lease liabilities	Operating lease liabilities	(47,821)		(28,157)		Operating lease liabilities	(8,666)		(15,758)
Cash provided by operating activities	Cash provided by operating activities	198,195		66,455		Cash provided by operating activities	9,040		32,586
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(93,627)		(35,124)		Capital expenditures	(68,967)		(23,280)
Cash used in business acquisitions, net of cash acquired	Cash used in business acquisitions, net of cash acquired	(442,488)		8,575		Cash used in business acquisitions, net of cash acquired	(224,526)		(26,732)
Proceeds from sale-leaseback transactions	Proceeds from sale-leaseback transactions	66,391		—		Proceeds from sale-leaseback transactions	37,781		41,023
Proceeds from sale of At-Pac business		1,532		—
Proceeds from sale of company-operated stores						Proceeds from sale of company-operated stores	—		4,481
Proceeds from disposition of car wash operations						Proceeds from disposition of car wash operations	1,577		—
Proceeds from disposal of property and equipment	Proceeds from disposal of property and equipment	5,471		—		Proceeds from disposal of property and equipment	803		—
Cash used in investing activities	Cash used in investing activities	(462,721)		(26,549)		Cash used in investing activities	(253,332)		(4,508)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Payment of contingent consideration related to acquisitions		—		(2,783)
Payment of debt extinguishment and issuance costs		(2,153)		(12,639)
Proceeds from the issuance of long-term debt		—		175,000

Repayment of long-term debt	Repayment of long-term debt	(716,542)		(11,619)		Repayment of long-term debt	(4,820)		(707,384)
Proceeds from revolving lines of credit and short-term debt	Proceeds from revolving lines of credit and short-term debt	441,800		152,101		Proceeds from revolving lines of credit and short-term debt	—		114,800
Repayments of revolving lines of credit and short-term debt	Repayments of revolving lines of credit and short-term debt	(212,800)		(191,600)		Repayments of revolving lines of credit and short-term debt	—		(132,800)
Repayment of principal portion of finance lease liability	Repayment of principal portion of finance lease liability	(1,760)		(731)		Repayment of principal portion of finance lease liability	(879)		(409)
Proceeds from failed sale-leaseback transactions		—		3,432

Proceeds from initial public offering, net of underwriting discounts	Proceeds from initial public offering, net of underwriting discounts	661,500		—		Proceeds from initial public offering, net of underwriting discounts	—		661,500
Net proceeds from underwriters' exercise of over-allotment option	Net proceeds from underwriters' exercise of over-allotment option	99,225		—		Net proceeds from underwriters' exercise of over-allotment option	—		99,225
Repurchases of common stock	Repurchases of common stock	(43,040)		—		Repurchases of common stock	—		(42,977)
Payment for termination of interest rate swaps	Payment for termination of interest rate swaps	(21,826)		—		Payment for termination of interest rate swaps	—		(21,826)
Stock option exercises		339		—

Other, net	Other, net	102		—		Other, net	(20)		—
Cash provided by financing activities	Cash provided by financing activities	204,845		111,161		Cash provided by financing activities	(5,719)		(29,871)
Effect of exchange rate changes on cash						Effect of exchange rate changes on cash	(592)		650


Effect of exchange rate changes on cash		(2,285)		468
Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted	Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted	(61,966)		151,535		Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted	(250,603)		(1,143)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	172,611		34,935		Cash and cash equivalents, beginning of period	523,414		172,611
Cash included in advertising fund assets, restricted, beginning of period	Cash included in advertising fund assets, restricted, beginning of period	19,369		23,091		Cash included in advertising fund assets, restricted, beginning of period	38,586		19,369
Restricted cash, beginning of period	Restricted cash, beginning of period	15,827		—		Restricted cash, beginning of period	792		15,827
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period	Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period	207,807		58,026		Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period	562,792		207,807
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	115,365		184,356		Cash and cash equivalents, end of period	270,681		175,371
Cash included in advertising fund assets, restricted, end of period	Cash included in advertising fund assets, restricted, end of period	30,341		25,205		Cash included in advertising fund assets, restricted, end of period	40,716		21,160
Restricted cash, end of period	Restricted cash, end of period	135		—		Restricted cash, end of period	792		10,133
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period	Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period	$	145,841	$	209,561	Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period	$	312,189	$	206,664


Supplemental cash flow disclosures - non-cash items:	Supplemental cash flow disclosures - non-cash items:					Supplemental cash flow disclosures - non-cash items:
Accrued capital expenditures, end of period	Accrued capital expenditures, end of period	$	6,123	$	984	Accrued capital expenditures, end of period	$	2,940	$	3,804
Supplemental cash flow disclosures - cash paid for:	Supplemental cash flow disclosures - cash paid for:					Supplemental cash flow disclosures - cash paid for:
Interest	Interest	$	53,842	$	61,887	Interest	$	24,238	$	16,424
Income taxes	Income taxes	10,593		3,141		Income taxes	$	321	$	1,373

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

DRIVEN BRANDS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1—Description of Business

Description of Business

Driven Brands Holdings Inc., together with its subsidiaries (collectively, the “Company”), is a Delaware corporation and is the parent holding company of Driven Brands, Inc. and Shine Holdco (UK) Limited (collectively, “Driven Brands”). Driven Brands is the largest automotive services company in North America with a growing and highly-franchised base of more than ~~4,300~~4,500 franchised, independently-operated, and company-operated locations across 49 U.S. states and 14 other countries. The Company has a portfolio of highly recognized brands, including Take 5 Oil Change®, Meineke Car Care Centers®, MAACO®, CARSTAR®, and 1-800-Radiator & A/C® that compete in the automotive services industry. Approximately ~~81%~~78% of the Company’s locations are franchised or independently-operated.

Initial Public Offering and Secondary Offering in 2021

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

The Company used the proceeds from the IPO, along with cash on hand, to fully repay the ~~First Lien Term Loan, Second Lien Term Loan,~~term loans and revolving credit facility assumed as part of the acquisition of International Car Wash Group (“ICWG”) in 2020 (collectively, the “Car Wash Senior Credit Facilities”), which totaled $725 million with interest and fees. The Company recognized a ~~$46~~$45 million loss on debt extinguishment for three months ended March 27, 2021 related to this settlement, primarily related to the write-off of the unamortized discount. The Company cancelled the interest rate and cross currency swaps associated with these debt agreements as part of the settlement. The Company also used $43 million in proceeds to purchase approximately 2 million shares of common stock from certain of our existing shareholders.

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

Income Tax Receivable Agreement

The Company expects to be able to utilize certain tax benefits which are related to periods prior to the effective date of the Company’s IPO and are attributed to current and former shareholders. The Company previously entered into an income tax receivable agreement which provides our pre-IPO shareholders with the right to receive payment of 85% of the amount of cash savings, if any, in U.S. and Canadian federal, state, local and provincial income tax that the Company will actually realize. The income tax receivable agreement is effective as of the date of the Company’s ~~IPO, and the~~IPO. The Company has recorded a total liability of $156 million as of ~~September~~March 26, 2022 and December 25, 2021, of which is$24 million and $132 million are recorded under ~~long-term~~current and non-current liabilities, ~~as the income tax receivable liability on the consolidated balance sheet.~~respectively.

Stock Split

On January 14, 2021, the Company’s shareholders approved an amendment to the Company’s certificate of incorporation (the "Amendment") to effect an implied 88,990-for-one stock split of shares of the Company’s outstanding

common stock. In addition, the Amendment increased the number of authorized shares of the Company's stock from 10,000 shares to 1 billion shares (900 million shares of common stock and 100 million shares of preferred stock). All share and per-share data in the consolidated financial statements and footnotes has been retroactively adjusted to reflect the stock split for all periods presented. The Company does not have any shares of preferred stock outstanding.

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 nine~~ months ended ~~September 25,~~March 26, 2022 and March 27, 2021, ~~and September 26, 2020,~~ each consist of 13 ~~and 39 weeks, respectively.~~weeks. The Car Wash segment ~~(primarily ICWG which was acquired in August 2020)~~ is currently consolidated based on a calendar month end. ~~See Note 3 for additional discussion regarding the acquisition of ICWG.~~

Basis of Presentation

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited interim financial data includes all adjustments, ~~(consisting~~consisting only of normal recurring ~~adjustments)~~adjustments, necessary for a fair ~~presentation~~statement of the results of operations, balance sheet, cash flows and shareholders’ 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.

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

Use of Estimates

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

Deferred IPO costs

Costs incurred that are directly related to the IPO, such as legal and accounting fees, registration fees, printing expenses, and other similar fees and expenses, totaling $9 million were capitalized and included within prepaid and other assets as of December 26, 2020. Upon completion of the IPO, the Company reclassified these costs, as well as an additional $6 million of IPO costs incurred during the ~~nine~~three months ended ~~September 25,~~March 27, 2021 to Additional paid-in ~~capital.~~capital within the statement of Shareholders’/members’ equity.

Fair Value of Financial Instruments

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

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

•Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity 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 ~~September~~March 26, 2022 and December 25, 2021 ~~and December 26, 2020~~ are summarized as follows:


Items Measured at Fair Value at September 25, 2021
Items Measured at Fair Value at March 26, 2022								Items Measured at Fair Value at March 26, 2022
(in thousands)	(in thousands)	Level 1		Level 2		Total		(in thousands)	Level 1		Level 2		Total
Mutual fund investments held in rabbi trust	Mutual fund investments held in rabbi trust	$	983	$	—	$	983	Mutual fund investments held in rabbi trust	$	918	$	—	$	918

Foreign currency derivative liabilities not designated as hedging instruments	Foreign currency derivative liabilities not designated as hedging instruments	$	—	$	509	$	509	Foreign currency derivative liabilities not designated as hedging instruments	$	—	$	372	$	372
Foreign currency derivative liabilities designated as hedging instruments								Foreign currency derivative liabilities designated as hedging instruments	$	—	$	1,756	$	1,756

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


Items Measured at Fair Value at December 25, 2021
(in thousands)	Level 1		Level 2		Total
Mutual fund investments held in rabbi trust	$	976	$	—	$	976




Foreign Currency derivative liabilities designated as hedging instruments	$	—	$	536	$	536

The fair value of the Company’s foreign currency derivative instruments are derived from valuation models, which use Level 2 observable inputs such as quoted market prices, interest rates and forward yield curves. Derivative liabilities are included in long-term accrued expenses and other liabilities in the Consolidated Balance Sheet.

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

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


		September 25, 2021				December 26, 2020					March 26, 2022				December 25, 2021
(in thousands)	(in thousands)	Carrying value		Estimated fair value		Carrying value		Estimated fair value		(in thousands)	Carrying value		Estimated fair value		Carrying value		Estimated fair value
Long-term debt	Long-term debt	$	1,695,679	$	1,754,963	$	2,125,207	$	2,169,597	Long-term debt	$	2,381,348	$	2,378,479	$	2,382,364	$	2,411,987

Accumulated Other Comprehensive Income (Loss)

The following tables present changes in each component of accumulated other comprehensive income (loss), net of tax.


		Three months ended September 25, 2021									Three months ended March 26, 2022
(in thousands)	(in thousands)	Foreign currency translation adjustment		Cash flow hedges		Defined benefit pension plan		Accumulated other comprehensive income (loss)		(in thousands)	Foreign currency translation adjustment		Cash flow hedges		Defined benefit pension plan		Accumulated other comprehensive loss
Balance at June 26, 2021		$	19,002	$	(57)	$	(91)	$	18,854
Balance at December 25, 2021										Balance at December 25, 2021	$	(4,183)	$	(758)	$	(87)	$	(5,028)
Net change	Net change	(30,903)		(1)		3		(30,901)		Net change	(5,587)		132		—		(5,455)
Balance at September 25, 2021		$	(11,901)	$	(58)	$	(88)	$	(12,047)
Balance at March 26, 2022										Balance at March 26, 2022	$	(9,770)	$	(626)	$	(87)	$	(10,483)

Three months ended September 26, 2020
(in thousands) Foreign currency translation adjustment Cash flow hedges Defined benefit pension plan Accumulated other comprehensive income (loss)
Balance at June 27, 2020 $ (7,489) $ — $ — $ (7,489)
Net change (2,981) 552 — (2,429)
Balance at September 26, 2020 $ (10,470) $ 552 $ — $ (9,918)

Nine months ended September 25, 2021
(in thousands) Foreign currency translation adjustment Cash flow hedges Defined benefit pension plan Accumulated other comprehensive income (loss)
Balance at December 26, 2020 $ 16,834 $ (87) $ (219) $ 16,528
Net change (28,735) 29 131 (28,575)
Balance at September 25, 2021 $ (11,901) $ (58) $ (88) $ (12,047)


		Nine months ended September 26, 2020									Three months ended March 27, 2021
(in thousands)	(in thousands)	Foreign currency translation adjustment		Cash flow hedges		Defined benefit pension plan		Accumulated other comprehensive income (loss)		(in thousands)	Foreign currency translation adjustment		Cash flow hedges		Defined benefit pension plan		Accumulated other comprehensive income
Balance at December 28, 2019		$	3,626	$	—	$	—	$	3,626
Balance at December 28, 2020										Balance at December 28, 2020	$	16,834	$	(87)	$	(219)	$	16,528
Net change	Net change	(14,096)		552		—		(13,544)		Net change	(9,243)		30		128		(9,085)
Balance at September 26, 2020		$	(10,470)	$	552	$	—	$	(9,918)
Balance at March 27, 2021										Balance at March 27, 2021	$	7,591	$	(57)	$	(91)	$	7,443

Recently ~~Adopted~~Issued Accounting Standards

In ~~December 2019,~~March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial ~~Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12,~~ Reporting~~Income Taxes (Topic 740): Simplifying the Accounting~~. This ASU provides optional expedients and exceptions for ~~Income Taxes, as part of its initiative~~applying generally accepted accounting principles to ~~reduce complexity in accounting standards. The amendments in this ASU simplify the accounting for income taxes~~contracts, hedging relationships, and other transactions affected by ~~removing~~reference rate reform if certain ~~exceptions~~criteria are met. In response to the ~~general principles~~concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of LIBOR, regulators in ~~Topic 740~~several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and ~~improve consistency by clarifying~~less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This guidance is effective immediately and ~~amending existing guidance.~~the amendments may be applied prospectively through December 31, 2022. The Company ~~adopted~~is evaluating the ~~ASU on December 27, 2020,~~impact of adopting this new accounting guidance and ~~the adoption did~~does not believe it will have a material impact on the Company’s consolidated financial statements.

Note 3—Acquisitions and Dispositions

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

~~2021~~2022 Acquisitions

~~During the nine months ended September 25, 2021, the~~The Company completed 254 acquisitions in the Car Wash segment during the three months ended March 26, 2022, representing ~~66 car wash~~6 sites, each individually immaterial, ~~(the “2021 Car Wash Acquisitions”),~~ which were deemed to be business combinations. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was approximately ~~$427~~$43.5 million.

Also, the Company completed 1 acquisition in the Maintenance segment during the three months ended March 26, 2022, representing 1 site, which was deemed to be a business combination. The aggregate cash consideration for this acquisition, net of cash acquired and liabilities assumed, was $1.5 million.

In addition, on December 30, 2021 the Company acquired Auto Glass Now® (“AGN”) which was deemed to be a business combination. AGN had 79 sites at the time of the Company’s acquisition. and is included within the Company’s Paint, Collision & Glass (“PC&G”) segment. AGN has over 20 years of experience in auto glass repair, replacement, and calibration and expands the Company’s auto glass offering into the U.S. The aggregate cash consideration for this acquisition, net of cash acquired and liabilities assumed, was $170.6 million.

The provisional amounts for assets acquired and liabilities assumed for the 2022 acquisitions are as follows:


(in thousands)	Cash Wash Segment		Maintenance Segment		Paint Collision & Glass Segment (AGN)		Total
Assets:
Cash	$	13	$	—	$	7	$	20
Prepaid assets	—		—		327		327
Land and building	28,290		1,025		23		29,338
Equipment	4,350		50		921		5,321
Operating lease right of use asset	—		—		10,693		10,693
Intangibles, net	—		—		49,000		49,000


Deferred tax asset	252		43		—		295
Assets acquired	32,905		1,118		60,971		94,994
Liabilities:
Accrued liabilities	30		—		—		30
Operating lease liabilities	—		—		10,003		10,003
Total liabilities assumed	30		—		10,003		10,033
Net assets acquired	32,875		1,118		50,968		84,961
Total consideration	43,483		1,548		170,636		215,667
Goodwill	$	10,608	$	430	$	119,668	$	130,706

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.

The following table presents financial information regarding the AGN acquisition included in our consolidated statements of operations from the date of acquisition through March 26, 2022 under the column “AGN actual from acquisition date.” The following table presents supplemental unaudited pro-forma information as if the AGN acquisition had occurred at the beginning of 2021. The pro-forma information does not necessarily reflect the results of operations that would have occurred had the AGN acquisition occurred at the beginning of 2021. Cost savings are also not reflected in the unaudited pro-forma amounts for the three months ended March 27, 2021.


	Three months ended March 26, 2022		Three months ended March 27, 2021
(in thousands)	AGN actual from acquisition date		Driven Brands Holdings Consolidated Proforma
Revenue	$	20,081	$	349,808
Net income attributable to Driven Brands Holdings Inc.	$	2,049	$	(14,575)

Deferred Consideration and Transaction Costs

Included in the total consideration amounts above for the Car Wash and Maintenance acquisitions in 2022 was $1 million of consideration not paid on the closing date. The Company had $14 million of deferred consideration related to 2022 and 2021 acquisitions at March 26, 2022. The Company had $23 million of deferred consideration related to 2021 acquisitions at December 25, 2021. The Company paid $10 million of deferred consideration related to 2022 and 2021 acquisitions during the three months ended March 26, 2022. Deferred consideration is typically paid six months to one-year after the acquisition closing date once all conditions related to representations, warranties and indemnification under the purchase agreement have been satisfied.

The Company incurred approximately $2 million of transaction costs during the three months ended March 26, 2022 related to 2022 acquisitions.

2022 Disposition

On March 16, 2022, the Company disposed of its 75% owned subsidiary, IMO Denmark ApS, for consideration of $2 million. As a result of the sale, a $1 million loss was recognized within selling, general, and administrative expenses during the three months ended March 26, 2022. Also, a noncontrolling interest of less than $1 million was derecognized.

2021 Acquisitions

2021 Car Wash Segment

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

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

The provisional amounts for assets acquired and liabilities assumed for the 2021 Car Wash Acquisitions are as follows:

~~(in thousands)~~

~~Assets:~~

~~Cash~~

~~161~~

~~Right of use assets~~

~~2,487~~

~~Land and improvements~~

~~46,495~~

~~Building~~

~~232,375~~

~~Equipment~~

~~46,063~~

~~Inventory~~

~~311~~

~~Intangibles, net~~

~~550~~

~~Deferred tax assets~~

~~212~~

~~Assets held for sale~~

~~996~~

~~Assets acquired~~

~~329,650~~

~~Liabilities:~~

~~Accrued liability~~

~~356~~

~~Lease liability~~

~~2,587~~

~~Deferred tax liabilities~~

~~812~~

~~Liabilities assumed~~

~~3,755~~

~~Net assets acquired~~

~~325,895~~

~~Total consideration~~

~~427,236~~

~~Goodwill~~

~~101,341~~


(in thousands)	Magic Tunnel Car Wash		Franks Car Wash Express		Racer Classic Car Wash		All Other		Total Car Wash
Assets:
Cash	$	26	$	38	$	18	$	165	$	247
Right of use assets	—		—		2,587		12,277		14,864
Land and improvements	13,020		10,790		6,920		45,455		76,185
Building	48,380		48,570		31,490		270,155		398,595
Equipment	13,800		7,377		5,698		59,578		86,453
Inventory	—		—		311		—		311
Intangibles, net	700		800		550		—		2,050
Deferred tax assets	—		94		—		1,596		1,690
Assets held for sale	—		—		—		996		996
Assets acquired	75,926		67,669		47,574		390,222		581,391
Liabilities:
Accrued liability	—		50		155		304		509
Lease liability	—		—		2,687		12,277		14,964
Deferred tax liabilities	—		—		758		—		758
Liabilities assumed	—		50		3,600		12,581		16,231
Net assets acquired	75,926		67,619		43,974		377,641		565,160
Total consideration	88,026		106,558		64,843		472,721		732,148
Goodwill	$	12,100	$	38,939	$	20,869	$	95,080	$	166,988

~~We also acquired separately identifiable intangible assets certain of~~Goodwill which ~~have not presented above as the valuation has not yet been performed. All goodwill~~ was allocated to the Car Wash segment ~~and~~is substantially all is deductible for income tax purposes.

~~In addition, during~~The following table presents financial information regarding the ~~nine months~~2021 Cash Wash Acquisitions operations included in our consolidated statements of operations from the date of acquisition through December 25, 2021 under the column “Actual from acquisition date in 2021.” The following table presents supplemental unaudited pro-forma information as if the 2021 Car Wash Acquisitions had occurred at the beginning of 2020. The pro-forma information does not necessarily reflect the results of operations that would have occurred had the 2021 Car Wash Acquisitions occurred at the beginning of 2020. Cost savings are also not reflected in the unaudited pro-forma amounts for the year ended ~~September~~December 25, 2021 and December 26, 2020, respectively.


	Actual from acquisition date in 2021		Pro-forma for year ended
(in thousands)	Actual from acquisition date in 2021		December 25, 2021		December 26, 2020
Revenue	$	48,648	$	1,613,479	$	1,026,012
Net income attributable to Driven Brands Holdings Inc.	$	11,693	$	47,272	$	20,558

2021 Maintenance Segment

During the year ended December 25, 2021, the Company also completed 48 acquisitions in the Maintenance segment representing 413 maintenance sites, each individually immaterial (the “2021 Maintenance Acquisitions”), which were deemed to be business combinations. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was $8$37 million.

The provisional amounts for assets acquired and liabilities assumed for the 2021 Maintenance Acquisitions are as follows:

(in thousands)

Assets:

Cash

Land and improvements

~~1,590~~4,425

Building

~~3,390~~13,220

Equipment

~~850~~1,450

Inventory

200

Deferred tax assets

2890

~~Assets acquired~~Asset held for sale

~~5,858~~3,275

22,662

Liabilities:

Prepaid liability

2052

Liabilities assumed

2052

Net assets acquired

~~5,838~~22,610

Total consideration

~~7,601~~37,271

Goodwill

~~1,763~~14,661

~~In addition, during~~2021 Paint Collision & Glass Segment

During the ~~nine months~~year ended ~~September~~December 25, 2021, the Company completed ~~an acquisition of~~ 2 ~~collision sites, each individually immaterial, which are included within the Company’s~~acquisitions in its Paint, Collision & Glass segment (the “2021 PC&G Acquisitions”), representing 12 collision sites, each individually immaterial, which were deemed to be business combinations. The aggregate cash consideration for these acquisitions, net of cash acquired and liabilities assumed, was $2$33 million.

The provisional amounts for assets acquired and liabilities assumed for the 2021 PC&G Acquisitions are as follows:

(in thousands)

Assets:

Right of use asset

~~1,067~~7,672

Equipment

751,512

Inventory

107

Intangibles, net

~~1,804~~6,707

~~Deferred tax assets~~

Assets acquired

~~2,969~~15,998

Liabilities:

Accrued liability

Lease liability

~~1,089~~7,664

Off-market lease component

Liabilities assumed

~~1,094~~7,768

Net assets acquired

~~1,875~~8,230

Total consideration

~~1,969~~32,972

Goodwill

9424,742

Included in the total consideration amounts above for the Car Wash and Maintenance acquisitions in 2021 was $8 million of consideration not paid on the closing date. The Company had $11 million of deferred consideration related to 2021 and 2020 acquisitions at September 25, 2021. The Company had $5 million of deferred consideration related to 2020 acquisitions at December 26, 2020. The Company paid $2 million of deferred consideration related to 2020 and prior acquisitions during the nine months ended September 25, 2021. Deferred consideration is typically paid six months to one-year after the acquisition closing date once all conditions under the purchase agreement have been satisfied.

~~The Company incurred approximately $1 million of transaction costs during the nine months ended September 25, 2021.~~

In addition, during the ~~nine~~twelve months ended ~~September~~December 25, 2021, the Company completed 511 acquisitions composed of 1 site each, each individually immaterial, each of which were deemed to be asset acquisitions as the fair value of assets acquired is substantially all land and buildings. NaN of these acquisitions were included in the Car Wash segment and 39 were included in the Maintenance segment. The aggregate consideration paid for the Car Wash acquisitions and Maintenance assets acquisitions was $9 million and $2$7 million, respectively.

Deferred Consideration and Transaction Costs

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

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

2021 Disposition

On April 27, 2021, the Company disposed of its 70% owned subsidiary, At-Pac Auto Parts Inc., for consideration of $2 million. As a result of the sale, a loss of less than $1 million was recognized within selling, general, and administrative expenses during the ~~nine months~~year ended ~~September~~December 25, 2021. Also, a noncontrolling interest of $1 million was derecognized.

~~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 the final purchase price allocation for the ICWG Acquisition, which was deemed to be a business combination:


~~(in thousands, except shares)~~	~~August 3, 2020~~
~~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~~
~~Definite-lived intangibles~~	~~5,972~~
~~Indefinite-lived intangibles~~	~~165,730~~
~~Other assets~~	~~7,476~~
~~Total assets acquired~~	~~1,403,814~~
~~Liabilities:~~
~~Accounts payable~~	~~13,435~~
~~Long-term debt~~	~~656,684~~
~~Deferred income tax liability~~	~~134,130~~
~~Operating lease liabilities~~	~~476,216~~
~~Derivative liabilities~~	~~12,714~~
~~Other liabilities~~	~~82,307~~
~~Total liabilities assumed~~	~~1,375,486~~
~~Net assets acquired~~	~~28,328~~
~~Non-controlling interest acquired~~	~~400~~
~~Total consideration paid (39,169,857 common shares)(1)~~	~~809,000~~
~~Goodwill~~	$	~~781,072~~

~~(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 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 finalized its purchase accounting estimates during the nine months ended September 25, 2021 related to the deferred tax liability and other liabilities 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 within the Paint, Collision & Glass segment.

~~The following table presents the final purchase price allocation for the Fix Auto acquisition, which was deemed to be a business combination:~~


~~(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~~
~~Property and equipment~~	~~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 liabilities~~	~~7,520~~
~~Income taxes payable~~	~~673~~
~~Deferred income tax liabilities~~	~~3,770~~
~~Liabilities assumed~~	~~16,717~~
~~Net assets acquired~~	~~12,070~~
~~Total consideration~~	~~31,460~~
~~Goodwill~~	$	~~19,390~~

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


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

The Company recorded a liability for the fair value of contingent consideration of $3 million associated with the Fix Auto acquisition, which was subsequently increased to $4 million at December 26, 2020. The Company recorded a $4 million benefit to Acquisition costs in the Consolidated Statement of Operations during the three and nine months ended September 25, 2021 related to the reversal of the liability as the payment of contingent consideration was deemed to be remote.

~~Other Acquisitions~~

During the fourth quarter of 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 $109 million.

~~The following table presents the final purchase price allocation for the 2020 Car Wash Acquisitions, which were deemed to be business combinations:~~


~~(in thousands)~~
~~Assets:~~
~~Cash~~	$	41
~~Land and improvements~~	~~18,635~~
~~Building~~	~~42,570~~
~~Equipment~~	~~12,125~~
~~Deferred tax assets~~	~~5,117~~
~~Assets acquired~~	~~78,488~~
~~Liabilities:~~
~~Deferred revenue~~	~~368~~
~~Liabilities assumed~~	~~368~~
~~Net assets acquired~~	~~78,120~~
~~Total consideration~~	~~108,771~~
~~Goodwill~~	$	~~30,651~~

The valuation for the acquisitions requires significant estimates 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 acquisition or the 2020 Car Wash Acquisitions during the nine months ended September 25, 2021.

Note 4— Revenue from Contracts with Customers

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

Capitalized costs to obtain a contract were $11 million as of ~~September~~both March 26, 2022 and December 25, 2021, ~~and December 26, 2020 were $10 million and $9 million, respectively,~~ and are presented within deferred commissions on the consolidated balance sheets. The Company recognized an immaterial amount of costs during the three ~~and nine~~ months ended ~~September 25,~~March 26, 2022 and March 27, 2021 ~~and September 26, 2020, respectively,~~ that were recorded as a contract asset at the beginning of the ~~period.~~periods.

~~Contract~~

The Company had Deferred Revenue of $40 million and $38 million as of March 26, 2022 and December 25, 2021, respectively, which includes contract liabilities ~~consist~~consisting primarily of deferred franchise fees and deferred development ~~fees. The Company had contract liabilities~~fees, of ~~$25~~$38 million and ~~$21~~$27 million as of ~~September~~March 26, 2022 and December 25, 2021, ~~and December 26, 2020, respectively, which are presented within deferred revenue on the consolidated balance sheets.~~respectively. The Company recorded less than $1 million of revenue during both the three months ended ~~September 25,~~March 26, 2022 and March 27, 2021, and September 26, 2020, that was recorded as a contract liability as of the beginning of the period. The Company recorded $2 million and less than $1 million of revenue during the nine months ended September 25, 2021 and September 26, 2020, respectively, that was recorded as a contract liability as of the beginning of the period.

Note 5—Segment Information

The Company’s worldwide operations are comprised of the following reportable segments: Maintenance; Car Wash; Paint, Collision & Glass; and Platform Services. ~~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 nine~~ months ended ~~September 25,~~March 26, 2022 and March 27, 2021 ~~and September 26, 2020~~ are as follows:


		Three months ended September 25, 2021													Three months ended March 26, 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 royalties and fees	Franchise royalties and fees	$	9,635	$	—	$	20,280	$	9,038	$	—	$	38,953	Franchise royalties and fees	$	9,635	$	—	$	21,365	$	6,888	$	—	$	37,888
Company-operated store sales	Company-operated store sales	125,561		74,105		12,723		1,465		(99)		213,755		Company-operated store sales	156,828		94,495		39,998		1,152		(82)		292,391
Independently-operated store sales	Independently-operated store sales	—		47,941		—		—		—		47,941		Independently-operated store sales	—		63,089		—		—		—		63,089
Advertising fund contributions	Advertising fund contributions	—		—		—		—		19,762		19,762		Advertising fund contributions	—		—		—		—		19,698		19,698
Supply and other revenue	Supply and other revenue	9,261		1,516		17,572		31,558		(9,170)		50,737		Supply and other revenue	12,279		1,691		18,080		35,126		(11,919)		55,257
Total revenue	Total revenue	$	144,457	$	123,562	$	50,575	$	42,061	$	10,493	$	371,148	Total revenue	$	178,742	$	159,275	$	79,443	$	43,166	$	7,697	$	468,323
Segment Adjusted EBITDA	Segment Adjusted EBITDA	$	47,894	$	37,999	$	22,039	$	16,254	$	(25,558)	$	98,628	Segment Adjusted EBITDA	$	52,485	$	55,720	$	29,012	$	14,165	$	(32,362)	$	119,020


		Three months ended September 26, 2020													Three months ended March 27, 2021
(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 royalties and fees	Franchise royalties and fees	$	6,971	$	—	$	19,235	$	10,599	$	(285)	$	36,520	Franchise royalties and fees	$	7,927	$	—	$	17,309	$	5,178	$	—	$	30,414
Company-operated store sales	Company-operated store sales	101,023		28,586		9,556		1,686		(63)		140,788		Company-operated store sales	114,067		57,048		11,930		983		(173)		183,855
Independently-operated store sales	Independently-operated store sales	—		30,595		—		—		—		30,595		Independently-operated store sales	—		56,163		—		—		—		56,163
Advertising fund contributions	Advertising fund contributions	—		$	—	—		—		14,927		14,927		Advertising fund contributions	—		—		—		—		17,255		17,255
Supply and other revenue	Supply and other revenue	6,642		$	4	18,281		27,370		(7,365)		44,932		Supply and other revenue	6,157		1,453		14,652		28,435		(8,964)		41,733
Total revenue	Total revenue	$	114,636	$	59,185	$	47,072	$	39,655	$	7,214	$	267,762	Total revenue	$	128,151	$	114,664	$	43,891	$	34,596	$	8,118	$	329,420
Segment Adjusted EBITDA	Segment Adjusted EBITDA	$	34,774	$	17,739	$	23,231	$	13,306	$	(19,966)	$	69,084	Segment Adjusted EBITDA	$	40,440	$	34,155	$	17,639	$	11,008	$	(25,019)	$	78,223

Nine months ended September 25, 2021
(in thousands) Maintenance Car Wash Paint,
Collision &
Glass Platform Services Corporate
and Other Total
Franchise royalties and fees $ 26,651 $ — $ 57,578 $ 23,011 $ — $ 107,240
Company-operated store sales 365,735 196,858 37,672 3,911 (368) 603,808
Independently-operated store sales — 160,483 — — — 160,483
Advertising fund contributions — — — — 56,665 56,665
Supply and other revenue 25,231 4,800 49,791 94,576 (27,199) 147,199
Total revenue $ 417,617 $ 362,141 $ 145,041 $ 121,498 $ 29,098 $ 1,075,395
Segment Adjusted EBITDA $ 132,895 $ 115,223 $ 61,534 $ 44,864 $ (76,422) $ 278,094

Nine months ended September 26, 2020
(in thousands) Maintenance Car Wash Paint,
Collision &
Glass Platform
Services Corporate
and Other Total
Franchise royalties and fees $ 21,028 $ — $ 52,220 $ 21,377 $ (411) $ 94,214
Company-operated store sales 268,267 28,586 21,613 5,020 (147) 323,339
Independently-operated store sales — 30,595 — — — 30,595
Advertising fund contributions — — — — 42,429 42,429
Supply and other revenue 16,552 4 47,287 80,184 (18,912) 125,115
Total revenue $ 305,847 $ 59,185 $ 121,120 $ 106,581 $ 22,959 $ 615,692
Segment Adjusted EBITDA $ 82,579 $ 17,739 $ 50,119 $ 36,740 $ (45,722) $ 141,455

1917

The reconciliations of Income before taxes to Segment Adjusted EBITDA ~~to income before taxes~~ for the three ~~and nine~~ months ended ~~September 25,~~March 26, 2022 and March 27, 2021 ~~and September 26, 2020~~ are as follows:


		Three months ended				Nine months ended					Three months ended
(in thousands)	(in thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020		(in thousands)		March 26, 2022		March 27, 2021
Income before taxes		$	44,966	$	9,999	$	72,766	$	9,364
Income (loss) before taxes										Income (loss) before taxes		$	47,396	$	(24,378)
Depreciation and amortization	Depreciation and amortization	28,447		16,221		78,722		32,656		Depreciation and amortization		33,023		23,852
Interest expense, net	Interest expense, net	17,688		29,594		52,390		64,973		Interest expense, net		25,353		18,091
Acquisition related costs(a)	Acquisition related costs(a)	636		12,076		2,674		13,287		Acquisition related costs(a)		4,318		1,646
Non-core items and project costs, net(b)	Non-core items and project costs, net(b)	1,357		(2,690)		3,910		(926)		Non-core items and project costs, net(b)		866		32
Store opening costs	Store opening costs	666		119		1,360		1,921		Store opening costs		506		289
Sponsor management fees(c)		—		4,278		—		5,357

Straight-line rent adjustment~~(d)~~(c)	Straight-line rent adjustment~~(d)~~(c)	2,548		485		8,391		3,124		Straight-line rent adjustment~~(d)~~(c)		4,093		2,485
Equity-based compensation expense~~(e)~~(d)	Equity-based compensation expense~~(e)~~(d)	933		(182)		2,944		508		Equity-based compensation expense~~(e)~~(d)		2,618		983
Foreign currency transaction (gain) / loss, net~~(f)~~(e)	Foreign currency transaction (gain) / loss, net~~(f)~~(e)	1,074		(2,230)		6,356		55		Foreign currency transaction (gain) / loss, net~~(f)~~(e)		971		10,511
Bad debt expense		—		—		—		2,842
Asset impairment and closed store expenses(g)		313		741		3,005		7,621

Asset sale leaseback (gain) loss, impairment and closed store expenses(f)										Asset sale leaseback (gain) loss, impairment and closed store expenses(f)		(124)		(786)
Loss on debt extinguishment~~(h)~~(g)	Loss on debt extinguishment~~(h)~~(g)	—		673		45,576		673		Loss on debt extinguishment~~(h)~~(g)		—		45,498
Segment Adjusted EBITDA	Segment Adjusted EBITDA	$	98,628	$	69,084	$	278,094	$	141,455	Segment Adjusted EBITDA		$	119,020	$	78,223

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

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

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

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

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

~~(g)~~(f) ~~Represents non-cash charges incurred related~~Relates to ~~the~~(gain) loss on sale leasebacks, impairment of certain fixed assets and operating lease right-of-use assets related to closed locations. Also, represents lease exit costs and other costs associated with stores that were closed prior to ~~their~~the respective lease ~~terminations~~termination dates.

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

2018

Note 6—Long-Term Debt

Our long-term debt obligations consist of the following:


(in thousands)	(in thousands)	September 25, 2021		December 26, 2020		(in thousands)	March 26, 2022		December 25, 2021
Series 2018-1 Securitization Senior Notes, Class A-2	Series 2018-1 Securitization Senior Notes, Class A-2	$	265,375	$	267,438	Series 2018-1 Securitization Senior Notes, Class A-2	$	264,000	$	264,688
Series 2019-1 Securitization Senior Notes, Class A-2	Series 2019-1 Securitization Senior Notes, Class A-2	291,750		294,000		Series 2019-1 Securitization Senior Notes, Class A-2	290,250		291,000
Series 2019-2 Securitization Senior Notes, Class A-2	Series 2019-2 Securitization Senior Notes, Class A-2	269,500		271,563		Series 2019-2 Securitization Senior Notes, Class A-2	268,125		268,813
Series 2019-3 Variable Funding Securitization Senior Notes, Class A-1						Series 2019-3 Variable Funding Securitization Senior Notes, Class A-1	—		—
Series 2020-1 Securitization Senior Notes, Class A-2	Series 2020-1 Securitization Senior Notes, Class A-2	172,812		174,125		Series 2020-1 Securitization Senior Notes, Class A-2	171,938		172,375
Series 2020-2 Securitization Senior Notes, Class A-2	Series 2020-2 Securitization Senior Notes, Class A-2	446,625		450,000		Series 2020-2 Securitization Senior Notes, Class A-2	444,375		445,500
Car Wash First Lien Term Loan (a)		—		528,858
Car Wash Second Lien Term Loan (a)		—		175,000
Car Wash Revolving Credit Facility (a)		—		18,000
Driven Holdings Revolving Credit Facility		247,000		—
Series 2021-1 Securitization Senior Notes, Class A-2						Series 2021-1 Securitization Senior Notes, Class A-2	447,750		448,875
Term Loan Facility						Term Loan Facility	500,000		500,000
Revolving Credit Facility						Revolving Credit Facility	—		—
Other debt ~~(b)~~(a)	Other debt ~~(b)~~(a)	34,923		26,763		Other debt ~~(b)~~(a)	40,873		39,082
Total debt	Total debt	1,727,985		2,205,747		Total debt	2,427,311		2,430,333
Less: unamortized discount		—		(46,030)

Less: unamortized debt issuance costs	Less: unamortized debt issuance costs	(32,306)		(34,510)		Less: unamortized debt issuance costs	(45,963)		(47,969)
Less: current portion of long-term debt	Less: current portion of long-term debt	(18,342)		(22,988)		Less: current portion of long-term debt	(22,969)		(26,044)
Total long-term debt, net	Total long-term debt, net	$	1,677,337	$	2,102,219	Total long-term debt, net	$	2,358,379	$	2,356,320

(a)~~Car Wash Senior Credit Facilities~~

~~(b)~~ Consists primarily of finance lease obligations. See Note 7.

~~As discussed in~~ ~~Note 1~~, the Company used the proceeds from the IPO, along with cash on hand, to fully repay the Car Wash Senior Credit Facilities during the nine months ended September 25, 2021, which totaled $725 million including interest and fees. As a result, the Company incurred a $46 million loss on debt extinguishment related to the write-off of unamortized discount during the nine months ended September 25, 2021.

Series 2019-3 Variable Funding Securitization Senior Notes

In December 2019, the Company issued Series 2019-3 Variable Funding Senior Notes, Class A-1 (the “2019 VFN”) in the revolving amount of $115 million. The 2019 VFN have a final legal maturity date of January 20, 2050. The commitment under the 2019 VFN expires on July 20, 2022, and is subject to 3 one-year extensions at the election of the Company. The 2019 VFN is secured by substantially all assets of the Issuer and are guaranteed by the Securitization Entities. The Issuer may elect interest at the Base Rate plus an applicable margin or LIBOR plus an applicable margin (the LIBOR rate as the applicable interest rate). No amounts were outstanding under the 2019 VFN as of ~~September 25, 2021.~~March 26, 2022 and no borrowings or repayments were made during the quarter ended March 26, 2022. As of ~~September 25, 2021,~~March 26, 2022, there were ~~$15~~$18 million of outstanding letters of credit which reduced the borrowing availability under the 2019 ~~VFN to $100 million.~~VFN.

Driven Holdings Revolving Credit Facility

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

~~As of September 25, 2021, there was $247 million~~No amounts were outstanding on the Driven Holdings Revolving Credit Facility ~~with immaterial accrued interest at quarter-end.~~as of March 26, 2022 and no borrowings or repayments were made during the quarter ended March 26, 2022.

The Company’s debt agreements are subject to certain quantitative and qualitative covenants. As of ~~September 25, 2021,~~March 26, 2022, the Company and its subsidiaries were in compliance with all covenants.

2119

Note 7—Leases

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


(in thousands)	(in thousands)	September 25, 2021		December 26, 2020		(in thousands)	March 26, 2022		December 25, 2021
Right-of-use assets	Right-of-use assets					Right-of-use assets
Finance leases (a)	Finance leases (a)	$	28,422	$	14,211	Finance leases (a)	$	33,032	$	29,766
Operating leases	Operating leases	905,527		884,927		Operating leases	1,026,537		995,625
Total right-of-use assets	Total right-of-use assets	$	933,949	$	899,138	Total right-of-use assets	$	1,059,569	$	1,025,391

Current lease liabilities	Current lease liabilities					Current lease liabilities
Finance leases (b)	Finance leases (b)	$	2,897	$	2,149	Finance leases (b)	$	3,226	$	3,101
Operating leases (c)	Operating leases (c)	61,506		60,095		Operating leases (c)	66,686		57,588
Total current lease liabilities	Total current lease liabilities	$	64,403	$	62,244	Total current lease liabilities	$	69,912	$	60,689

Long-term lease liabilities	Long-term lease liabilities					Long-term lease liabilities
Finance leases (d)	Finance leases (d)	$	24,413	$	16,726	Finance leases (d)	$	31,322	$	27,957
Operating leases	Operating leases	843,925		818,001		Operating leases	961,182		931,604
Total long-term lease liabilities	Total long-term lease liabilities	$	868,338	$	834,727	Total long-term lease liabilities	$	992,504	$	959,561

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

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

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

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

The lease cost for operating and finance leases recognized in the consolidated statement of operations for the three ~~and nine~~ months ended ~~September 25,~~March 26, 2022 and March 27, 2021 ~~and September 26, 2020~~ were as follows:


		Three months ended				Nine months ended					Three months ended
(in thousands)	(in thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020		(in thousands)	March 26, 2022		March 27, 2021
Finance lease expense:	Finance lease expense:									Finance lease expense:
Amortization of right-of-use assets	Amortization of right-of-use assets	$	715	$	280	$	1,970	$	565	Amortization of right-of-use assets	$	734	$	614
Interest on lease liabilities	Interest on lease liabilities	299		163		796		375		Interest on lease liabilities	377		237
Operating lease expense	Operating lease expense	29,028		20,874		85,564		46,180		Operating lease expense	30,992		27,748
Short-term lease expense	Short-term lease expense	523		685		1,619		818		Short-term lease expense	490		1,314
Variable lease expense	Variable lease expense	206		203		692		492		Variable lease expense	353		246
Total lease expense	Total lease expense	$	30,771	$	22,205	$	90,641	$	48,430	Total lease expense	$	32,946	$	30,159

The Company also subleases certain facilities to franchisees as a component of supply and other revenue on the consolidated statements of operations. The Company recognized $2 million in sublease revenue in both the three months ended ~~September 25, 2021~~March 26, 2022 and ~~September 26, 2020 and $5 million in both the nine months ended September 25, 2021 and September 26, 2020.~~March 27, 2021.

During the ~~nine~~three months ended ~~September 25, 2021,~~March 26, 2022, the Company sold 197 car wash and 32 maintenance properties in various locations throughout the United States for a total of ~~$66~~$38 million, resulting in a net gain of $1$2 million. Concurrent with the closing of these sales, the Company entered into various operating lease agreements pursuant to which the Company leased back the properties. These lease agreements have terms ranging from 15 to 20 years and provide the Company with the option to extend the lease for up to an additional 20 to 25 years. The Company does not include option periods in its determination of the lease term unless renewals are deemed reasonably certain to be exercised. The Company recorded an operating lease right-of-use asset and operating lease liability of ~~$62~~$33 million and ~~$59~~$33 million, respectively, related to these lease arrangements.

2220

The weighted average remaining lease term as of September 25, 2021 was 11.5 years for finance leases and 14.8 years for operating leases. The weighted average discount rate as of September 25, 2021 was 5.33% for finance leases and 4.82% for operating leases.

Supplemental cash flow information related to the Company’s lease arrangements for the ~~nine~~three months ended ~~September 25,~~March 26, 2022 and March 27, 2021, ~~and September 26, 2020,~~ respectively, was as follows:


		Nine months ended					Three months ended
(in thousands)	(in thousands)	September 25, 2021		September 26, 2020		(in thousands)	March 26, 2022		March 27, 2021
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	$	79,310	$	40,898	Operating cash flows used in operating leases	$	28,073	$	25,794
Operating cash flows used in finance leases	Operating cash flows used in finance leases	736		360		Operating cash flows used in finance leases	370		216
Financing cash flows used in finance leases	Financing cash flows used in finance leases	921		197		Financing cash flows used in finance leases	414		317
Right-of-use assets obtained in exchange for lease obligations:	Right-of-use assets obtained in exchange for lease obligations:					Right-of-use assets obtained in exchange for lease obligations:
Operating leases	Operating leases	$	75,268	$	855,308	Operating leases	$	46,763	$	6,849
Finance leases	Finance leases	7,249		12,808		Finance leases	1,741		630

Note ~~8—Share-based~~8 — 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 September 25, 2021, 6,986,207 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.

The Company calculated the fair value of these performance-based restricted stock awards on the modification date and determined the fair value of these awards increased to $66 million as a result of modification. In addition, the grant date fair value of the performance-based IPO Options was $26 million. The fair value of the performance-based restricted stock awards and performance-based IPO Options was determined by using a Monte Carlo simulation, using the following assumptions: (i) an expected term of 4.96 years, (ii) an expected volatility of 40.6%, (iii) a risk-free interest rate of 0.48%, and (iv) no expected dividends.

There was approximately $6 million of unrecognized compensation expense related to the time-based restricted stock awards and time-based IPO Options at September 25, 2021, which is expected to be recognized over a weighted-average vesting period of 3.07 years.

There was approximately $91 million of unrecognized compensation expense related to the performance-based restricted stock awards and performance-based IPO Options at September 25, 2021. For the three and nine months ended September 25, 2021 and September 26, 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~~granted new awards ~~in connection with~~during the ~~IPO,~~three months ended March 26, 2022, including 239,804 restricted stock units (“RSUs”) and 446,348 performance stock units (“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 RSUs vest ratably in 3 installments ~~of 33%~~ on each of the first three anniversaries of the grant date. The PSUs ~~may~~ vest after a three-year ~~period and are~~performance period. The number of PSUs that vest is contingent on achieving certain performance goals, one being a market condition and the other being a performance condition. The number of PSU shares that vest may range from zero to 200% of the original grant, based upon the level of performance. The awards are considered probable of meeting vesting requirements, ~~or vest upon achieving a market condition,~~ and therefore, ~~have~~the Company has started recognizing expense.

The fair value of the RSUs, performance based PSUs ~~was~~and market based PSUs granted were $7 million each. The Company based the fair value of the RSUs and performance based PSUs on the Company’s stock price on the grant date. The Company determined the fair value of the market based PSUs by using a Monte Carlo simulation, using the following assumptions: (i) an expected term of ~~2.96~~3 years, (ii) an expected volatility of ~~41.16%~~40.90%, (iii) a ~~risk-free interest rate~~correlation of ~~0.23%~~the S&P Mid-cap Index peer group of 50.70%, and (iv) no expected dividend.

At September 25, 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 2.49 years, and there was approximately $2 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 September 25, 2021, there were no 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.

The Company recorded $1$3 million and $3$1 million of share-based compensation expense during the three ~~and nine~~ months ended ~~September 25,~~March 26, 2022 and March 27, 2021, respectively, within selling, general and administrative expenses on the consolidated statements of operations. ~~Share-based compensation expense for the three and nine months ended September 26, 2020 was less than $1 million in each period.~~

Note 9—Earnings per share

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


	Three months ended
(in thousands, except per share amounts)	March 26, 2022		March 27, 2021
Basic earnings per share:
Net income (loss) attributable to Driven Brands Holdings Inc.	$	34,443	(19,939)
Less: Net income attributable to participating securities, basic	735		—
Net income after participating securities, basic	33,708		(19,939)
Weighted-average common shares outstanding	162,762		154,827
Basic earnings (loss) per share	$	0.21	$	(0.13)

Three months ended Nine months ended
(in thousands, except per share amounts) September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020
Basic earnings per share:
Net income attributable to Driven Brands Holdings Inc. $ 33,124 4,079 48,389 3,289
Less: Net income attributable to participating securities, basic 709 — 1,057 —
Net income after participating securities, basic 32,415 4,079 47,332 3,289
Weighted-average common shares outstanding (a)
162,635 111,950 160,030 96,643
Basic earnings per share $ 0.20 $ 0.04 $ 0.30 $ 0.03
Diluted earnings per share:
Net income attributable to Driven Brands Holdings Inc. 33,124 4,079 48,389 3,289
Less: Net income attributable to participating securities, diluted 632 — 942 —
Net income after participating securities, diluted 32,492 4,079 47,447 3,289
Weighted-average common shares outstanding (a)
162,635 111,950 160,030 96,643
Dilutive effect of share-based awards 3,995 — 3,938 —
Weighted-average common shares outstanding, as adjusted (a)
166,630 111,950 163,968 96,643
Diluted earnings per share $ 0.19 $ 0.04 $ 0.29 $ 0.03

~~(a)~~ ~~Weighted average common shares 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.~~


	Three months ended
(in thousands, except per share amounts)	March 26, 2022		March 27, 2021







Diluted earnings per share:
Net income (loss) attributable to Driven Brands Holdings Inc.	$	34,443	$	(19,939)
Less: Net income attributable to participating securities, diluted	657		—
Net income after participating securities, diluted	$	33,786	$	(19,939)
Weighted-average common shares outstanding	162,762		154,827
Dilutive effect of share-based awards	3,986		—
Weighted-average common shares outstanding, as adjusted	166,748		154,827
Diluted earnings (loss) per share	$	0.20	$	(0.13)

Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to Driven Brands Holdings Inc. by the weighted-average number of common shares outstanding for the period. ~~In addition,~~Also, the Company’s participating securities are related to certain restricted stock awards issued to Section 16 officers which include non-forfeitable dividend rights.

The Company has ~~4,618,722~~4,703,626 shares of performance awards that are contingent on performance conditions which have not yet been met, and therefore have been excluded from the computation of weighted average shares for the three ~~and nine~~ months ended ~~September 25, 2021.~~March 26, 2022.

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


Number of securities (in thousands)	Three Months Ended ~~September 25, 2021~~March 26, 2022	~~Nine~~Three months ended ~~September 25,~~March 27, 2021
Restricted stock awards	—	609
Restricted stock units	—	267
~~Stock~~Performance stock units	—	135
Stock/IPO options	—	361,514
Employee stock purchase plan	—	123
Other options	—	48
Total	—	382,496

Note 10—~~Related-Party Transactions~~Income Taxes

The ~~Company had management advisory services agreements with Roark Capital Management, LLC (“Roark”),~~Company’s tax provision is comprised of the most recent estimated annual effective tax rate applied to year-to-date ordinary income before taxes. The tax impacts of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are recorded discretely in the interim period in which they occur.

Income tax expense (benefit) was $13 million and $(4) million for the three months ended March 26, 2022 and March 27, 2021, respectively. The effective income tax rate for the three months ended March 26, 2022 was 27.4% compared to 18.2% for the three months ended March 27, 2021. The increase in income tax expense and tax rate was primarily driven by an ~~affiliated entity, which provided that~~increase in income before taxes relative to the ~~Company pay an annual advisory services fee~~tax effects of our permanent differences for the three months ended March 26, 2022, and favorable discrete tax adjustments related to ~~Roark. The Company and Roark terminated all advisory services agreements in January 2021 in connection with~~a non-deductible loss on debt extinguishment as well as tax deductible costs incurred related to the ~~Company’s~~ initial public ~~offering. The Company paid $4 million and $5 million under these service agreements during~~offering for the three ~~and nine~~ months ended ~~September 26, 2020, respectively.~~March 27, 2021.

2522

Note 11—Commitments and Contingencies

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

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

Note 12—Subsequent Events

On ~~September~~April 29, 2021, Driven Brands Funding, LLC and Driven Brands Canada Funding Corporation (together, the “Co-Issuers”), each wholly owned indirect subsidiaries of the Company issued $450 million of 2021-1 Securitization Senior Notes, Class A-2, bearing a fixed interest rate of 2.791% per annum, a final legal maturity date of October 20, 2051 and an anticipated repayment date of October 20, 2028 (the “2021 Senior Notes”). The proceeds from the issuance of the 2021 Senior Notes have been used to pay off the outstanding $247 million balance on the Driven Holdings Revolving Credit Facility with the remainder to be used for general corporate purposes including future acquisitions. On November 9, 2021, the Company made a draw of $10 million on the Driven Holdings Revolving Credit Facility.

~~On September 30, 2021,~~2022 the Company acquired ~~10 CARSTAR franchise~~All Star Glass (“ASG”), which has 31 locations, for ~~$31~~approximately $36 million. The ~~initial accounting for this~~ acquisition ~~is incomplete as~~of ASG continues the ~~valuation~~expansion of the ~~assets acquired and liabilities assumed and residual goodwill has not yet been performed.~~

Company’s auto glass offering in the U.S. From ~~September~~March 26, ~~2021~~2022 through ~~November 9, 2021~~May 6, 2022 the Company acquired 207 car wash sites for ~~$123~~approximately $80 million. The initial accounting for these acquisitions is incomplete as the valuation of the assets acquired and liabilities assumed and residual goodwill has not yet been performed.

On May 3, 2022, the Company drew $75 million on the Driven Holdings Revolving Credit Facility, which will primarily be used to fund acquisitions.

2623

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion and analysis for Driven Brands Holdings Inc. and Subsidiaries (“Driven Brands”, “the Company”, “we”, “us” or “our”) should be read in conjunction with our consolidated financial statements and the related notes to our consolidated financial statements included elsewhere in this quarterly report. We operate on a 52/53-week fiscal year, which ends on the last Saturday in December. The three months ended ~~September 25,~~March 26, 2022 and March 27, 2021 ~~and September 26, 2020~~ were both 13 week periods. ~~The nine months ended September 25, 2021 and September 26, 2020 were both 39 week periods.~~.

Overview of Operations

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

of more than ~~4,300~~4,500 locations across 49 U.S. states and 14 other countries. Our scaled, diversified platform fulfills an extensive range of core consumer and commercial automotive needs, including paint, collision, glass, repair, car wash, oil change and maintenance. Driven Brands provides a breadth of ~~high-quality~~high quality and high-frequency services to a wide range of customers, who rely on their cars in all economic environments to get to work and in many other aspects of their daily lives. Our asset-light business model has generated consistent recurring revenue and strong operating margins with limited maintenance capital expenditures, which has resulted in significant cash flow generation and capital-efficient growth.

We have a diversified portfolio of highly-recognized brands, including Take 5 Oil Change®, Meineke Car Care Centers®, MAACO®, CARSTAR®, and 1-800-Radiator & A/C® that compete in the large, growing, recession-resistant and highly-fragmented automotive care industry. Our U.S. industry is underpinned by a large, growing population of more than 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 and nine months ended September 25, 2021, our network generated $371 million and $1.1 billion in revenue from $1.2 billion and $3.4 billion in system-wide sales, respectively.~~ We serve a diverse mix of customers, with sales coming from retail customers and commercial customers such as fleet operators and insurance carriers. Our success is driven in large part by our mutually beneficial relationships with more than 2,800 individual franchisees and independent operators.

Our organic growth is complemented by a consistent and repeatable M&A strategy, having completed more than 70100 acquisitions since 2015. Notably, in August 2020 we acquired ICWG, the world’s largest conveyor car wash company by location count with more than 900 locations across 14 countries, demonstrating our continued ability to pursue and execute upon scalable and highly strategic acquisitions. We further complemented our expansion into the car wash segment by acquiring 112 locations in 2021 and six additional car wash locations during the first quarter of 2022. We grew our glass service offerings through the acquisition of Auto Glass Now (“AGN”) in late December 2021 which has 79 locations.

Significant Factors Impacting Financial Results

~~During the second half of fiscal year 2020 and the first nine months of fiscal year 2021,~~As noted above, we completed the acquisition of ~~ICWG and a number of tuck-in acquisitions of other~~112 independently-owned car wash sites ~~which launched our entry into the~~during fiscal year 2021 and six additional car wash ~~market and created a new operating and reportable segment. During~~locations during the ~~second~~first quarter of ~~fiscal year 2020, we completed the~~2022, which are included in our Car Wash segment. The acquisition of ~~Fix Auto,~~AGN during the first quarter of 2022, which is included in our Paint, Collision & Glass ~~segment. During fiscal year 2020 and~~segment, expands our glass operations into the ~~first nine months of fiscal year 2021, we also completed tuck-in acquisitions of several independently-owned oil change shops, which are included in our Maintenance segment.~~U.S. market. These acquisitions were a core driver of growth in our key performance indicators and our financial results for the three ~~and nine~~ months ended ~~September 25, 2021,~~March 26, 2022, as compared to the three ~~and nine~~ months ended ~~September 26, 2020.~~March 27, 2021. For additional information on our acquisitions, see Note 3 to the consolidated financial statements.

~~For the~~ ~~three months ended September 25, 2021, we~~We recognized net income of ~~$33~~$34 million, or ~~$0.19 per diluted share, compared to net income of $4 million, or $0.04~~$0.20 per diluted share for the three months ended ~~September~~March 26, ~~2020.~~2022, compared to net loss of $(20) million, or $(0.13) per diluted share, for the three months ended March 27, 2021. This increase was ~~primarily~~ due to an increase in revenue, primarily related to the AGN acquisition ~~of ICWG~~ and a number of ~~tuck-in~~car wash acquisitions in 2021 and the first quarter of 2022, as well as organic growth from store growth and same store sales growth, ~~and lower interest expense,~~ partially offset by ~~an increase in~~higher operating, ~~expenses~~interest and income tax ~~expense~~expenses associated with this growth. The increase was also ~~partially offset by~~due to $45 million in debt extinguishment cost in three months ended March 27, 2021 related to the repayment of the ICWG debt and a $3$10 million ~~increase~~decrease in net loss on foreign currency transactions.

Adjusted Net Income was ~~$43~~$48 million for the three months ended ~~September 25, 2021,~~March 26, 2022, an increase of ~~$21~~$17 million, compared to ~~$22~~$30 million for the three months ended ~~September 26, 2020.~~March 27, 2021. The increase in Adjusted Net Income was primarily due to an increase in revenue, primarily related to the acquisition of ~~ICWG~~AGN and a number of ~~tuck-in~~car wash acquisitions, as well as organic growth from store growth and same store sales growth, ~~and lower interest expense,~~ partially offset by an increase in an increase in operating, ~~expenses~~interest and income tax ~~expense~~expenses associated with this growth. See Note 3 to our consolidated financial statements for additional information regarding acquisitions. ~~Adjusted EBITDA was $98 million for the three months ended September 25, 2021, an increase of $29 million, compared to $69 million for the three months ended September 26, 2020.~~

~~For the nine months ended September 25, 2021, we recognized net income of $48 million, or $0.29 per diluted share, compared to a net loss of $3 million, or $0.03 per diluted~~ share, for the nine months ended September 26, 2020. The increase was primarily due to an increase in revenue, primarily related to the acquisition of ICWG and a number of tuck-in acquisitions, as well as organic growth from store growth and same store sales growth and lower interest expense, partially offset by an increase in operating expenses and income tax expense related associated with this growth. This was also partially offset by 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 and a $6 million increase in net loss on foreign currency transactions. Adjusted Net Income was $116 million for the nine months ended September 25, 2021, an increase of $74 million, compared to $42 million for the nine months ended September 26, 2020~~. The increase in Adjusted Net Income was primarily due to~~ an increase in revenue, primarily related to the acquisition of ICWG and a number of tuck-in acquisitions, as well as organic growth from store growth and same store sales growth and lower interest expense, partially offset by an increase in operating expenses and income tax expense associated with this growth. A~~djusted EBITDA was $277 million~~ ~~for the nine months ended September 25, 2021, an increase of $137 million, compared to $140 million for the nine months ended September 26, 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 income (loss) to Adjusted Net Income and Adjusted EBITDA, see “Reconciliation of Non-GAAP Financial Information”.

Strong operational execution, improving consumer and driving trends and acquisitions led to total system-wide sales of ~~$1.2~~$1.3 billion during the three months ended ~~September 25, 2021,~~March 26, 2022, an increase of ~~28%~~26% from the three months ended September 26, 2020. Total system-wide sales were $3.4 billion during the nine months ended September 25, 2021, an increase of 39% from the nine months ended September 26, 2020. The outbreak of COVID-19 led to adverse impacts on global economies, including the U.S., Canada and Europe during fiscal year 2020 which continued into fiscal yearMarch 27, 2021. While COVID-19 did not have a material adverse effect on our business operations for the three and nine months ended September 25, 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 ~~10%~~8% and ~~14%~~9% of our total revenue for the three months ended ~~September 25, 2021~~March 26, 2022 and ~~September 26, 2020, respectively, and 10% and 15% for the nine months ended September 25, 2021 and September 26, 2020, respectively.~~March 27, 2021. For the three months ended ~~September 25,~~March 26, 2022 and March 27, 2021, ~~and September 26, 2020,~~ approximately 98% and ~~95%~~97%, respectively, of franchise royalties and fees revenue is attributable to royalties, with the remaining balance attributable to license and development fees. For the nine months ended September 25, 2021 and September 26, 2020, approximately 98% and 91% 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 ~~58%~~62% and ~~53%~~56% of total revenue for the three months ended March 26, 2022 and March 27, 2021, respectively. Revenue from independently-operated stores represented 13% and 17% of our total revenue for the three months ended ~~September 25,~~March 26, 2022 and March 27, 2021, ~~and September 26, 2020, respectively, and 56% and 53% for the nine months ended September 25, 2021 and September 26, 2020,~~ respectively. ~~Revenue~~

~~from independently-operated stores represented 13% and 15% of our total revenue for the three and nine months ended September 25, 2021, respectively.~~

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

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

Segment Adjusted EBITDA. We define Segment Adjusted EBITDA as earnings before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for acquisition-related costs, straight-line rent, equity compensation, loss on debt extinguishment, foreign currency transaction related gains or losses, store opening costs, and certain non-recurring and non-core, infrequent or unusual charges. Segment Adjusted EBITDA is a supplemental measure of operating performance of our segments and may not be comparable to similar measures reported by other companies. Segment Adjusted EBITDA is a performance metric utilized by our Chief Operating Decision Maker to allocate resources to and assess performance of our segments. Refer to Note 5 in our consolidated financial statements for a reconciliation of income before taxes to Segment Adjusted EBITDA for the three ~~and nine~~ months ended ~~September 25, 2021~~March 26, 2022 and ~~September 26, 2020.~~March 27, 2021.

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The following table sets forth our key performance indicators for the three ~~and nine~~ months ended ~~September 25, 2021~~March 26, 2022 and ~~September 26, 2020:~~March 27, 2021:


		Three months ended						Nine months ended							Three months ended
(in thousands, except store count or as otherwise noted)	(in thousands, except store count or as otherwise noted)	September 25, 2021			September 26, 2020			September 25, 2021			September 26, 2020			(in thousands, except store count or as otherwise noted)	March 26, 2022			March 27, 2021
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	$	333,779		$	267,325		$	932,890		$	714,943		Maintenance	$	357,112		$	277,884
Car Wash	Car Wash	122,046			59,181			357,341			59,181			Car Wash	157,584			113,211
Paint, Collision & Glass	Paint, Collision & Glass	620,302			506,368			1,760,313			1,399,200			Paint, Collision & Glass	658,967			542,433
Platform Services	Platform Services	120,290			103,857			307,120			246,302			Platform Services	90,794			69,356
Total	Total	$	1,196,417		$	936,731		$	3,357,664		$	2,419,626		Total	$	1,264,457		$	1,002,884
System-Wide Sales by Business Model:	System-Wide Sales by Business Model:													System-Wide Sales by Business Model:
Franchised Stores	Franchised Stores	$	934,721		$	765,348		$	2,593,373		$	2,065,692		Franchised Stores	$	908,895		$	762,693
Company-Operated Stores	Company-Operated Stores	213,755			140,788			603,808			323,339			Company-Operated Stores	292,473			184,028
Independently-Operated Stores	Independently-Operated Stores	47,941			30,595			160,483			30,595			Independently-Operated Stores	63,089			56,163
Total	Total	$	1,196,417		$	936,731		$	3,357,664		$	2,419,626		Total	$	1,264,457		$	1,002,884
Store Count	Store Count													Store Count
Store Count by Segment:	Store Count by Segment:													Store Count by Segment:
Maintenance	Maintenance	1,506			1,371			1,506			1,371			Maintenance	1,531			1,470
Car Wash	Car Wash	1,018			939			1,018			939			Car Wash	1,063			954
Paint, Collision & Glass	Paint, Collision & Glass	1,647			1,676			1,647			1,676			Paint, Collision & Glass	1,730			1,627
Platform Services	Platform Services	201			199			201			199			Platform Services	202			198
Total	Total	4,372			4,185			4,372			4,185			Total	4,526			4,249
Store Count by Business Model:	Store Count by Business Model:													Store Count by Business Model:
Franchised Stores	Franchised Stores	2,809			2,739			2,809			2,739			Franchised Stores	2,794			2,766
Company-Operated Stores	Company-Operated Stores	831			706			831			706			Company-Operated Stores	1,010			749
Independently-Operated Stores	Independently-Operated Stores	732			740			732			740			Independently-Operated Stores	722			734
Total	Total	4,372			4,185			4,372			4,185			Total	4,526			4,249
Same Store Sales %	Same Store Sales %													Same Store Sales %
Maintenance	Maintenance	17.0		%	5.6		%	24.4		%	(3.7		%)	Maintenance	19.2		%	16.5		%
Car Wash	Car Wash	6.2		%	N/A			6.2		%	N/A			Car Wash	6.6		%	N/A
Paint, Collision & Glass	Paint, Collision & Glass	10.8		%	(7.3		%)	12.2		%	(9.2		%)	Paint, Collision & Glass	13.7		%	(9.4		%)
Platform Services	Platform Services	15.8		%	12.0		%	24.7		%	3.9		%	Platform Services	30.9		%	22.0		%
Total	Total	12.8		%	(0.6		%)	16.9		%	(5.9		%)	Total	15.6		%	0.5		%
Segment Adjusted EBITDA	Segment Adjusted EBITDA													Segment Adjusted EBITDA
Maintenance	Maintenance	$	47,894		$	34,774		$	132,895		$	82,579		Maintenance	$	52,485		$	40,440
Car Wash	Car Wash	37,999			17,739			115,223			17,739			Car Wash	55,720			34,155
Paint, Collision & Glass	Paint, Collision & Glass	22,039			23,231			61,534			50,119			Paint, Collision & Glass	29,012			17,639
Platform Services	Platform Services	16,254			13,306			44,864			36,740			Platform Services	14,165			11,008

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.

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

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

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

Adjusted Net Income/Adjusted Earnings per Share


		Three months ended				Nine months ended					Three months ended
(in thousands, except per share data)	(in thousands, except per share data)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020		(in thousands, except per share data)	March 26, 2022		March 27, 2021
Net income		$	33,086	$	4,111	$	48,321	$	3,255
Net income (loss)										Net income (loss)	$	34,428	$	(19,932)
Acquisition related costs(a)	Acquisition related costs(a)	636		12,076		2,674		13,287		Acquisition related costs(a)	4,318		1,646
Non-core items and project costs, net(b)	Non-core items and project costs, net(b)	1,357		(2,690)		3,910		(926)		Non-core items and project costs, net(b)	866		32
Sponsor management fees(c)		—		4,278		—		5,357

Straight-line rent adjustment~~(d)~~(c)	Straight-line rent adjustment~~(d)~~(c)	2,548		485		8,391		3,124		Straight-line rent adjustment~~(d)~~(c)	4,093		2,485
Equity-based compensation expense~~(e)~~(d)	Equity-based compensation expense~~(e)~~(d)	933		(182)		2,944		508		Equity-based compensation expense~~(e)~~(d)	2,618		983
Foreign currency transaction (gain) loss, net~~(f)~~(e)	Foreign currency transaction (gain) loss, net~~(f)~~(e)	1,074		(2,230)		6,356		55		Foreign currency transaction (gain) loss, net~~(f)~~(e)	971		10,511
Bad debt expense(g)		—		—		—		2,842
Asset impairment and closed store expenses(h)		313		741		3,005		7,621

Asset sale leaseback (gain) loss, impairment and closed store expenses(f)										Asset sale leaseback (gain) loss, impairment and closed store expenses(f)	(124)		(786)
Loss on debt extinguishment~~(i)~~(g)	Loss on debt extinguishment~~(i)~~(g)	—		673		45,576		673		Loss on debt extinguishment~~(i)~~(g)	—		45,498
Amortization related to acquired intangible assets~~(j)~~(h)	Amortization related to acquired intangible assets~~(j)~~(h)	4,665		4,043		13,875		11,693		Amortization related to acquired intangible assets~~(j)~~(h)	5,142		3,652
Provision for uncertain tax positions~~(k)~~(i)	Provision for uncertain tax positions~~(k)~~(i)	(251)		2,810		(251)		2,810		Provision for uncertain tax positions~~(k)~~(i)	76		—
Adjusted net income before tax impact of adjustments	Adjusted net income before tax impact of adjustments	44,361		24,115		134,801		50,299		Adjusted net income before tax impact of adjustments	52,388		44,089
Tax impact of adjustments~~(l)~~(j)	Tax impact of adjustments~~(l)~~(j)	(886)		(1,839)		(18,968)		(8,461)		Tax impact of adjustments~~(l)~~(j)	(4,612)		(13,641)
Adjusted net income	Adjusted net income	43,475		22,276		115,833		41,838		Adjusted net income	47,776		30,448
Net income (loss) attributable to non-controlling interest	Net income (loss) attributable to non-controlling interest	(38)		32		(68)		(34)		Net income (loss) attributable to non-controlling interest	(15)		7
Adjusted net income attributable to Driven Brands Holdings Inc.	Adjusted net income attributable to Driven Brands Holdings Inc.	$	43,513	$	22,244	$	115,901	$	41,872	Adjusted net income attributable to Driven Brands Holdings Inc.	$	47,791	$	30,441

Adjusted earnings per share~~(m)~~	Adjusted earnings per share~~(m)~~									Adjusted earnings per share~~(m)~~
Basic	Basic	$	0.26	$	0.20	$	0.71	$	0.43	Basic	$	0.29	$	0.19
Diluted	Diluted	$	0.26	$	0.20	$	0.69	$	0.43	Diluted	$	0.28	$	0.19

Weighted average shares outstanding~~(m)~~	Weighted average shares outstanding~~(m)~~									Weighted average shares outstanding~~(m)~~
Basic	Basic	162,635		111,950		160,030		96,643		Basic	162,762		154,827
Diluted	Diluted	166,630		111,950		163,968		96,643		Diluted	166,748		158,761

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

The following table provides a reconciliation of Net income to Adjusted EBITDA:


Adjusted EBITDA	Adjusted EBITDA									Adjusted EBITDA

		Three months ended				Nine months ended					Three months ended
		September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020			March 26, 2022		March 27, 2021
Net income		$	33,086	$	4,111	$	48,321	$	3,255
Net income (loss)										Net income (loss)	$	34,428	$	(19,932)
Income tax expense	Income tax expense	11,880		5,888		24,445		6,109		Income tax expense	12,968		(4,446)
Interest expense, net	Interest expense, net	17,688		29,594		52,390		64,973		Interest expense, net	25,353		18,091
Depreciation and amortization	Depreciation and amortization	28,447		16,221		78,722		32,656		Depreciation and amortization	33,023		23,852
EBITDA	EBITDA	91,101		55,814		203,878		106,993		EBITDA	105,772		17,565
Acquisition related costs(a)	Acquisition related costs(a)	636		12,076		2,674		13,287		Acquisition related costs(a)	4,318		1,646
Non-core items and project costs, net(b)	Non-core items and project costs, net(b)	1,357		(2,690)		3,910		(926)		Non-core items and project costs, net(b)	866		32
Sponsor management fees(c)		—		4,278		—		5,357

Straight-line rent adjustment~~(d)~~(c)	Straight-line rent adjustment~~(d)~~(c)	2,548		485		8,391		3,124		Straight-line rent adjustment~~(d)~~(c)	4,093		2,485
Equity-based compensation expense~~(e)~~(d)	Equity-based compensation expense~~(e)~~(d)	933		(182)		2,944		508		Equity-based compensation expense~~(e)~~(d)	2,618		983
Foreign currency transaction (gain) / loss, net(f)		1,074		(2,230)		6,356		55
Bad debt expense(g)		—		—		—		2,842
Foreign currency transaction (gain) loss, net(e)										Foreign currency transaction (gain) loss, net(e)	971		10,511

Asset impairment and closed store expenses~~(h)~~(f)	Asset impairment and closed store expenses~~(h)~~(f)	313		741		3,005		7,621		Asset impairment and closed store expenses~~(h)~~(f)	(124)		(786)
Loss on debt extinguishment~~(i)~~(g)	Loss on debt extinguishment~~(i)~~(g)	—		673		45,576		673		Loss on debt extinguishment~~(i)~~(g)	—		45,498
Adjusted EBITDA	Adjusted EBITDA	$	97,962	$	68,965	$	276,734	$	139,534	Adjusted EBITDA	$	118,514	$	77,934

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

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

c.~~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 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 ~~gains and losses~~that primarily related to the remeasurement of our intercompany loans. These losses are offset by unrealized gains/losses on remeasurement of cross currency swaps and forward contracts.

g.~~Represents bad debt expense related to uncollectible receivables outside of normal operations.~~

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

i.g.Represents the write-off of unamortized discount associated with early termination of debt.

j.h.Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statements of operations.

k.i.Represents uncertain tax positions recorded for ~~Canadian~~ tax positions inclusive of interest and penalties.

l.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. 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.

m.~~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 consolidated financial statements for additional information.~~

3228

Results of Operations for the three months ended ~~September 25, 2021~~March 26, 2022 compared to the three months ended ~~September 26, 2020~~March 27, 2021

To facilitate review of our results of operations, the following tables set forth our financial results for the periods indicated. All information is derived from the Consolidated Statements of Operations.

Revenue


		Three months ended									Three months ended
(in thousands)	(in thousands)	September 25, 2021		September 26, 2020		Change				(in thousands)	March 26, 2022		March 27, 2021		Change
Franchise royalties and fees	Franchise royalties and fees	$	38,953	$	36,520	$	2,433	7	%	Franchise royalties and fees	$	37,888	$	30,414	$	7,474	25	%
Company-operated store sales	Company-operated store sales	213,755		140,788		72,967		52	%	Company-operated store sales	292,391		183,855		108,536		59	%
Independently-operated store sales	Independently-operated store sales	47,941		30,595		17,346		57	%	Independently-operated store sales	63,089		56,163		6,926		12	%
Advertising fund contributions	Advertising fund contributions	19,762		14,927		4,835		32	%	Advertising fund contributions	19,698		17,255		2,443		14��	%
Supply and other revenue	Supply and other revenue	50,737		44,932		5,805		13	%	Supply and other revenue	55,257		41,733		13,524		32	%
Total revenue	Total revenue	$	371,148	$	267,762	$	103,386	39	%	Total revenue	$	468,323	$	329,420	$	138,903	42	%

Franchise Royalties and Fees

Franchise royalties and fees increased $2$7 million primarily due to same store sales growth ~~as well as~~and benefited from a net increase of 7028 franchise ~~stores primarily within the Maintenance segment.~~stores. Franchise system-wide sales increased by ~~$169 million.~~$146 million or 19%.

Company-operated Store Sales

Company-operated store sales increased ~~$73~~$109 million of which $43 million, $37 million, $28 million related to the Maintenance, Car Wash and Paint, Collision and Glass segments, respectively. The sales increase in Maintenance segment was primarily due to ~~ICWG~~same store sales growth and ~~other tuck-in acquisitions,~~54 net new stores. The sales increase in Paint, Collision and Glass segment was primarily due to same store sales growth as well as net store growth from acquisitions. The acquisition of AGN, which had 79 stores at the time of the acquisition in late December 2021, generated $20 million of sales for three months ended March 26, 2022 and the acquisition of 10 Carstar franchise sites in the fourth quarter of 2021 generated $6 million of sales for three months ended March 26, 2022. The sales increase in Car Wash segment was primarily due to the addition of ~~125 company-operated~~109 net new stores ~~year-over-year~~primarily from a number of acquisitions in the second half of 2021 and first quarter of 2022, new greenfield store openings and same store sales growth. ~~The Car Wash segment~~In total, the Company added 261 company-operated store sales increased by $46 million due to the ICWG and other tuck-in acquisitions and same store sales growth. Only 2 months of revenue related to ICWG sales was included for the three months ended September 26, 2020 as ICWG was acquired in early August 2020 while a full quarter of activity is included for the current year quarter.stores year-over-year.

~~Independently-Operated~~Independently-operated Store Sales

Independently-operated store sales (comprised entirely of the international car wash locations) increased ~~$17~~$7 million as only 2 months of revenue related to ICWG sales were included for three months ended September 26, 2020 as ICWG was acquired in early August 2020 while a full quarter of activity was included for the current year quarter. Independently-operated store sales also increasedprimarily due to same store sales ~~growth.~~growth as a result of increased volume.

Advertising Fund Contributions

Advertising fund contributions increased by $5$2 million primarily due to an increase in franchise system-wide sales of approximately ~~$169~~$146 million 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 $6$14 million primarily from growth in product and service revenue within the Platform Services, Paint, Collision and Glass and Maintenance segments due to an increase in system wide sales. ~~The Car Wash segment Supply and other revenue increased by $2 million primarily due to the ICWG and other tuck-in acquisitions.~~

3329

Operating Expenses


		Three months ended									Three months ended
(in thousands)	(in thousands)	September 25, 2021		September 26, 2020		Change				(in thousands)	March 26, 2022		March 27, 2021		Change
Company-operated store expenses	Company-operated store expenses	$	130,520	$	85,668	$	44,852	52	%	Company-operated store expenses	$	177,867	$	112,756	$	65,111	58	%
Independently-operated store expenses	Independently-operated store expenses	27,764		17,995		9,769		54	%	Independently-operated store expenses	33,299		31,108		2,191		7	%
Advertising fund expenses	Advertising fund expenses	19,762		14,927		4,835		32	%	Advertising fund expenses	19,698		17,255		2,443		14	%
Supply and other expenses	Supply and other expenses	28,330		25,813		2,517		10	%	Supply and other expenses	32,774		22,489		10,285		46	%
Selling, general, and administrative expenses	Selling, general, and administrative expenses	71,565		56,586		14,979		26	%	Selling, general, and administrative expenses	92,220		69,050		23,170		34	%
Acquisition costs	Acquisition costs	636		12,076		(11,440)		(95)	%	Acquisition costs	4,318		1,646		2,672		162	%
Store opening costs	Store opening costs	666		119		547		460	%	Store opening costs	506		289		217		75	%
Depreciation and amortization	Depreciation and amortization	28,447		16,221		12,226		75	%	Depreciation and amortization	33,023		23,852		9,171		38	%
Asset impairment charges and lease terminations	Asset impairment charges and lease terminations	(270)		321		(591)		(184)	%	Asset impairment charges and lease terminations	898		1,253		(355)		(28)	%
Total operating expenses	Total operating expenses	$	307,420	$	229,726	$	77,694	34	%	Total operating expenses	$	394,603	$	279,698	$	114,905	41	%

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

Company-operated store expenses increased ~~$45~~$65 million. The increase in expenses is commensurate with the increase in Company-operated store ~~sales from acquisitions and same store sales growth.~~sales.

~~Independently-Operated~~Independently-operated Store Expenses

Independently-operated store expenses, which are entirely related to the Car Wash segment, increased ~~$10~~$2 million ~~which is commensurate with the~~due to an increase in Independently-operated store ~~sales from acquisitions and same store sales growth.~~sales.

~~Advertising Fund Expenses~~

The $5 million increase in advertising fund expenses represents a commensurate increase to advertising fund contributions during the period. Advertising fund expenses generally trend consistent with advertising fund contributions.

~~Supply and Other Expenses~~

~~Supply and other expenses increased $3 million which is commensurate with the growth in Supply and other revenue.~~

~~Selling, General and Administrative Expenses~~

Selling, general and administrative expenses increased $15 million primarily due to $9 million of increased employee compensation and other employee-related expenses driven primarily by acquisitions and a $4 million increase in professional service fees.

~~Acquisition Costs~~

Acquisition costs decreased $11 million. The three months ended September 25, 2021 had costs associated with several tuck-in acquisitions, which were offset by a $4 million favorable contingent consideration adjustment related to the Fix Auto acquisition while the three months ended September 26, 2020 had costs associated the acquisition of ICWG.

~~Store Opening Costs~~

Store opening costs increased by $1 million due to an increase in company-operated new store openings and conversions of acquired stores to the Take 5 brand. There were eight new company-operated store openings and three Take 5 store conversions in the three months ended September 25, 2021, compared to six company-operated store openings and zero Take 5 store conversions during the three months ended September 26, 2020.

~~Depreciation and Amortization~~

Depreciation and amortization expense increased $12 million due to additional fixed assets and finite-lived intangible assets recognized in conjunction with recent acquisitions and higher current period capital expenditures.

~~Asset Impairment Charges and Lease Terminations~~

~~Asset impairment charges decreased by $1 million primarily due to a $1 million favorable lease termination in the current year quarter.~~

~~Interest Expense, Net~~

Three months ended
(in thousands) September 25, 2021 September 26, 2020 Change
Interest expense, net $ 17,688 $ 29,594 $ (11,906) (40) %

Interest expense, net decreased $12 million as a result of lower average debt outstanding and lower average interest rate in the current period. The repayment of the higher interest rate Car Wash Senior Credit Facilities more than offset borrowings under the Driven Holdings Revolving Credit Facility.

~~Loss (Gain) on Foreign Currency Transactions, Net~~
Three months ended
(in thousands) September 25, 2021 September 26, 2020 Change
Loss (gain) on foreign currency transactions, net $ 1,074 $ (2,230) $ 3,304 (148) %

~~The loss on foreign currency transactions for the~~ ~~three months ended September 25, 2021~~ is comprised of a $3 million net remeasurement loss on our foreign third party long-term debt and intercompany notes, partially offset by $2 million of unrealized gains incurred on foreign currency hedges that are not designated as hedging instruments. ~~The gain on foreign currency transactions for the~~ ~~three months ended September 26, 2020~~ is ~~comprised of a $1 million net remeasurement gain on our foreign third party long-term debt and foreign intercompany notes and $1 million translation gain on other foreign currency transactions.~~

~~Loss on Debt Extinguishment~~
Three months ended
(in thousands) September 25, 2021 September 26, 2020 Change
Loss on debt extinguishment $ — $ 673 $ (673) 100 %

The loss on debt extinguishment for the three months ended September 26, 2020 was due to the write-off of remaining unamortized debt issuance costs associated with the repayment of a bridge loan used to finance certain 2020 acquisitions.

~~Income Tax Expense~~
Three months ended
(in thousands) September 25, 2021 September 26, 2020 Change
Income tax expense $ 11,880 $ 5,888 $ 5,992 102 %

Income tax expense increased by $6 million. The effective income tax rate for the three months ended September 25, 2021 was 26.4% compared to 58.9% for the three months ended September 26, 2020. The decrease in rate was primarily driven by an increase in income before taxes relative to the tax effects of our permanent differences for the three months ended September 25, 2021, and a tax benefit for the three months ended September 25, 2021 compared to an income tax expense for the three months ended September 26, 2020 related to uncertain tax positions.

~~Results of Operations for the nine months ended September 25, 2021 compared to the nine months ended September 26, 2020~~

To facilitate review of our results of operations, the following tables set forth our financial results for the periods indicated. All information is derived from the consolidated statements of operations. Independently-operated store sales and expenses are derived from our acquisition of ICWG and are only reflected in the results of operations from the August 3, 2020 acquisition date through the end of our current period.

~~Revenue~~

Nine months ended
(in thousands) September 25, 2021 September 26, 2020 Change
Franchise royalties and fees $ 107,240 $ 94,214 $ 13,026 14 %
Company-operated store sales 603,808 323,339 280,469 87 %
Independently-operated store sales 160,483 30,595 129,888 425 %
Advertising fund contributions 56,665 42,429 14,236 34 %
Supply and other revenue 147,199 125,115 22,084 18 %
Total revenue $ 1,075,395 $ 615,692 $ 459,703 75 %

~~Franchise Royalties and Fees~~

Franchise royalties and fees increased $13 million primarily due to same store sales growth as well as additional franchised stores augmented by the acquisition of Fix Auto in April 2020. Franchised system-wide sales increased $528 million, of which approximately $156 million related to the acquisition of Fix Auto.

~~Company-operated Store Sales~~

Company-operated store sales increased $280 million primarily due to the addition of 125 company-operated stores year-over-year, the acquisition of ICWG and other car wash tuck-in acquisitions and same store sales growth. Only 2 months of revenue related to ICWG sales were included for nine months ended September 26, 2020 as ICWG was acquired in early August 2020 while a full period of activity was included for the current period. The acquisition of ICWG and other car wash sites generated approximately $168 million of incremental Company-operated store sales for the nine months ended September 25, 2021.

~~Independently-Operated Store Sales~~

Independently-operated store sales (comprised entirely of the international car wash locations) increased $130 million as only 2 months of revenue related to ICWG sales were included for the nine months ended September 26, 2020 as ICWG was acquired in early August 2020, while nine months of activity was included for the current year period. Independently-operated store sales also increased due to same store sales growth.

~~Advertising Fund Contributions~~

Advertising fund contributions increased by $14 million primarily due to a $528 million increase in franchised system-wide sales from same store sales growth and additional net new franchise stores. Our franchise agreements typically require the franchisee to pay continuing advertising fund fees based on a percentage of franchisee gross sales.

~~Supply and Other Revenue~~

Supply and other revenue increased $22 million primarily due to growth in product and service revenue within the Platform Services and Maintenance segments due to an increase in system wide sales. The acquisition of ICWG and other car wash sites also generated approximately $5 million of incremental Supply and other revenue for the nine months ended September 25, 2021.

~~Operating Expenses~~

Nine months ended
(in thousands) September 25, 2021 September 26, 2020 Change
Company-operated store expenses $ 367,095 $ 202,333 $ 164,762 81 %
Independently-operated store expenses 89,664 17,995 71,669 398 %
Advertising fund expenses 56,665 42,429 14,236 34 %
Supply and other expenses 80,417 70,167 10,250 15 %
Selling, general, and administrative expenses 218,549 153,107 65,442 43 %
Acquisition costs 2,674 13,287 (10,613) (80) %
Store opening costs 1,360 1,921 (561) (29) %
Depreciation and amortization 78,722 32,656 46,066 141 %
Asset impairment charges 3,161 6,732 (3,571) (53) %
Total operating expenses $ 898,307 $ 540,627 $ 357,680 66 %

~~Company-Operated Store Expenses~~

Company-operated store expenses increased $165 million which is commensurate with the increase in Company-operated store sales from the addition of new stores, acquisitions and same store sales growth. Company-operated store expenses continue to increase at a slower rate than company-operated store sales due to effective cost management and operational leverage.

~~Independently-Operated Store Expenses~~

Independently-operated store expenses increased $72 million which is commensurate with the increase in Independently-operated store sales from the acquisition of ICWG and same store sales growth. Independently-operated store expenses continue to increase at a slower rate than Independently-operated store sales due to effective cost management and operational leverage.

Advertising Fund Expenses

The ~~$14~~$2 million increase in advertising fund expenses represents a commensurate increase to advertising fund contributions during the period. Advertising fund expenses generally trend consistent with advertising fund contributions.

Supply and Other Expenses

Supply and other expenses increased $10 million ~~commensurate with~~due the ~~growth~~increase in Supply and other ~~revenue.~~revenue as well as higher oil and freight costs incurred in the Platform Services segment.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased ~~$65~~$23 million primarily due to ~~$43 million of~~ increased employee compensation, ~~and~~ other employee-related expenses and insurance expenses driven primarily ~~resulting from~~by acquisitions ~~as well as $9 million~~and an increase in ~~marketing expenses, and a $12 million increase in professional service fees including $5 million in IPO-related~~advertising costs.

Acquisition Costs

Acquisition costs ~~decreased $11~~increased by $3 million. The ~~nine~~three months ended ~~September 25,~~March 26, 2022 had costs associated with the acquisition of AGN and several tuck-in car wash locations while the three months ended March 27, 2021 had costs associated with ~~a number of~~several car wash tuck-in acquisitions which were offset by a $4 million favorable contingent consideration adjustment related to the Fix Auto acquisition while the nine months ended September 26, 2020 had costs associated with the acquisitions of ICWG and Fix Auto.locations.

Store Opening Costs

Store opening costs ~~decreased $1 million~~increased slightly due to ~~a decrease~~an increase in company-operated new store openings and conversions of acquired stores to the Take 5 brand. There were 18seven new company-operated store openings and 4one Take 5 store ~~conversions~~conversion in the ~~nine~~three months ended ~~September 25, 2021,~~March 26, 2022, compared to 23four company-operated store openings ~~and 12 Take 5 store conversions~~ during the ~~nine~~three months ended ~~September 26, 2020.~~

March 27, 2021.

Depreciation and Amortization

Depreciation and amortization expense increased ~~$46~~$9 million due to additional ~~property~~fixed assets and ~~equipment and definite-lived~~finite-lived intangible assets recognized in conjunction with recent acquisitions and higher current period capital expenditures.

Asset Impairment Charges and Lease Terminations

Asset impairment charges ~~decreased $4~~were approximately $1 million ~~due~~for both the three months ended March 26, 2022 and three months ended March 27, 2021, which consisted of impairment related to ~~fewer impairments related to~~certain property and equipment and operating lease right-of-use assets at closed ~~locations and a $1 million favorable lease termination in the current year period.~~locations.

Interest Expense, Net


		Nine months ended									Three months ended
(in thousands)	(in thousands)	September 25, 2021		September 26, 2020		Change				(in thousands)	March 26, 2022		March 27, 2021		Change
Interest expense, net	Interest expense, net	$	52,390	$	64,973	$	(12,583)	(19)	%	Interest expense, net	$	25,353	$	18,091	$	7,262	40	%

Interest expense, net ~~decreased $13~~increased $7 million as a result of ~~lower~~higher average debt outstanding ~~and~~which was partially offset by a lower average interest ~~rates~~rate in the current period. The Company issued debt in the fourth quarter of 2021 to fund the AGN and other acquisitions and for the nine months ended September 25, 2021. The higher interest rate 2015-1 and Series 2016-1 Senior Securitization Notes were repaid in December 2020, substantially replaced by the issuance of lower interest rate Series 2020-2 Securitization Senior Notes. Also, the higher interest rate Car Wash Senior Credit Facilities acquired as part of the ICWG acquisition in August 2020 were repaid in January 2021 from proceeds from the IPO, partially offset by borrowings under the Driven Holdings Revolving Credit Facility during the nine months ended September 25, 2021.

general corporate purposes.

Loss (Gain) on Foreign Currency Transactions, Net


		Nine months ended									Three months ended
(in thousands)	(in thousands)	September 25, 2021		September 26, 2020		Change				(in thousands)	March 26, 2022		March 27, 2021		Change
Loss on foreign currency transactions, net		$	6,356	$	55	$	6,301	11456	%
Loss (gain) on foreign currency transactions, net										Loss (gain) on foreign currency transactions, net	$	971	$	10,511	$	(9,540)	(91)	%

The loss on foreign currency transactions for the ~~nine~~three months ended ~~September 25, 2021 is~~March 26, 2022 was comprised of a $9$3 million net remeasurement loss on our foreign third party long-term debt and intercompany notes, partially offset by $3$2 million of unrealized ~~gains~~gain incurred on foreign currency hedges that are not designated as hedging instruments. The loss on foreign currency transactions for the ~~nine~~three months ended ~~September 26, 2020 is~~March 27, 2021 was comprised of a $13 million net remeasurement loss on our foreign third party long-term debt and foreign intercompany notes ~~of less than $1 million,~~ partially offset by $2 million of unrealized translation gains ~~incurred~~ on other foreign currency ~~hedges that are not designated as hedging instruments of less than $1 million.~~hedges.

Loss on Debt Extinguishment


		Nine months ended									Three months ended
(in thousands)	(in thousands)	September 25, 2021		September 26, 2020		Change				(in thousands)	March 26, 2022		March 27, 2021		Change
Loss on debt extinguishment	Loss on debt extinguishment	$	45,576	$	673	$	44,903	6672	%	Loss on debt extinguishment	$	—	$	45,498	$	(45,498)	100	%

The loss on debt extinguishment for the ~~nine~~three months ended ~~September 25,~~March 27, 2021 iswas due to the write-off of ~~remaining~~ unamortized discount associated with the settlement of the Car Wash Senior Credit ~~Facilities. The loss on debt extinguishment for~~Facilities, which were repaid during the three months ended ~~September 26, 2020 was due to~~March 27, 2021 with proceeds from the ~~write-off of remaining unamortized debt issuance costs associated with the repayment of a bridge loan used to finance certain 2020 acquisitions.~~IPO and cash on hand.

Income Tax Expense


		Nine months ended									Three months ended
(in thousands)	(in thousands)	September 25, 2021		September 26, 2020		Change				(in thousands)	March 26, 2022		March 27, 2021		Change
Income tax expense	Income tax expense	$	24,445	$	6,109	$	18,336	300	%	Income tax expense	$	12,968	$	(4,446)	$	17,414	(392)	%

Income tax expense increased by ~~$18~~$17 million. The effective income tax rate for the ~~nine~~three months ended ~~September 25, 2021~~March 26, 2022 was ~~33.6%~~27.4% compared to ~~65.2%~~18.2% for the ~~nine~~three months ended ~~September 26, 2020.~~March 27, 2021. The ~~decrease~~increase in ~~the~~ rate was primarily driven by ~~profitable pre-tax operations,~~an increase in income before taxes relative to the tax effects of our permanent differences for the three months ended March 26, 2022, and favorable discrete tax adjustments related to a ~~non-deductible~~non-taxable loss on debt extinguishment as well as tax deductible

costs incurred related to the initial public offering ~~and income tax benefits associated with our uncertain tax positions, all of which were partially offset by a change in~~for the ~~statutory tax rates in the United Kingdom, enacted during the nine~~three months ended ~~September 25,~~March 27, 2021.

Segment Results of Operations for the three months ended ~~September 25, 2021~~March 26, 2022 compared to the three months ended ~~September 26, 2020~~March 27, 2021

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

Maintenance


		Three months ended											Three months ended
(in thousands, unless otherwise noted)	(in thousands, unless otherwise noted)	September 25, 2021			September 26, 2020			Change				(in thousands, unless otherwise noted)	March 26, 2022			March 27, 2021			Change
Franchise royalties and fees	Franchise royalties and fees	$	9,635		$	6,971		$	2,664	38	%	Franchise royalties and fees	$	9,635		$	7,927		$	1,708	22	%
Company-operated store sales	Company-operated store sales	125,561			101,023			24,538		24	%	Company-operated store sales	156,828			114,067			42,761		37	%
Supply and other revenue	Supply and other revenue	9,261			6,642			2,619		39	%	Supply and other revenue	12,279			6,157			6,122		99	%
Total revenue	Total revenue	$	144,457		$	114,636		$	29,821	26	%	Total revenue	$	178,742		$	128,151		$	50,591	39	%
Segment Adjusted EBITDA	Segment Adjusted EBITDA	$	47,894		$	34,774		$	13,120	38	%	Segment Adjusted EBITDA	$	52,485		$	40,440		$	12,045	30	%

System-Wide Sales	System-Wide Sales											System-Wide Sales
Franchised stores	Franchised stores	$	208,218		$	166,302		$	41,916	25	%	Franchised stores	$	200,284		$	163,817		$	36,467	22	%
Company-operated stores	Company-operated stores	125,561			101,023			$	24,538	24	%	Company-operated stores	156,828			114,067			42,761		37	%
Total System-Wide Sales	Total System-Wide Sales	$	333,779		$	267,325		$	66,454	25	%	Total System-Wide Sales	$	357,112		$	277,884		$	79,228	29	%
Store Count (in whole numbers)	Store Count (in whole numbers)											Store Count (in whole numbers)
Franchised stores	Franchised stores	992			896			96		11	%	Franchised stores	982			975			7		1	%
Company-operated stores	Company-operated stores	514			475			39		8	%	Company-operated stores	549			495			54		11	%
Total Store Count	Total Store Count	1,506			1,371			135		10	%	Total Store Count	1,531			1,470			61		4	%
Same Store Sales %	Same Store Sales %	17.0		%	5.6		%	N/A		N/A		Same Store Sales %	19.2		%	16.5		%	N/A		N/A

Maintenance revenue increased ~~$30~~$51 million for the three months ended ~~September 25, 2021~~,March 26, 2022, as compared to the three months ended ~~September 26, 2020.~~ C~~ompany-operated store sales increased by $25 million primarily due to same store sales growth and 39 net new company operated stores.~~March 27, 2021. Franchise royalties and fees increased by $3$2 million primarily due a ~~$42~~$36 million increase in franchised system-wide sales from same store sales growth and ~~96 additional~~7 net new franchise stores. Company-operated store sales increased by $43 million primarily due to same store sales growth and 54 net new company operated stores. Supply and other revenue increased by $3$6 million due to higher income resulting from higher system-wide sales.

Maintenance Segment Adjusted EBITDA increased ~~$13~~$12 million primarily due to revenue growth, cost management and operational leverage. We continue to utilize a more efficient labor model at company-operated locations.

~~Car Wash~~

Three months ended
(in thousands, unless otherwise noted) September 25, 2021 September 26, 2020 Change
Company-operated store sales $ 74,105 $ 28,586 $ 45,519 159 %
Independently-operated store sales 47,941 30,595 17,346 57 %
Supply and other revenue 1,516 4 1,512 37,800 %
     Total revenue $ 123,562 $ 59,185 64,377 109 %
Segment Adjusted EBITDA $ 37,999 $ 17,739 20,260 114 %
System-Wide Sales
Company-operated stores 74,105 28,586 45,519 159 %
Independently-operated stores 47,941 30,595 17,346 57 %
     Total System-Wide Sales $ 122,046 $ 59,181 62,865 106 %
Store Count (in whole numbers)
—
Company-operated stores 286 199 87 44 %
Independently-operated stores 732 740 (8) (1) %
     Total Store Count 1,018 939 79 8 %
Same Store Sales % 6.2 % N/A N/A N/A

4032

Car Wash


	Three months ended
(in thousands, unless otherwise noted)	March 26, 2022			March 27, 2021		Change
Company-operated store sales	$	94,495		$	57,048	$	37,447	66	%
Independently-operated store sales	63,089			56,163		6,926		12	%
Supply and other revenue	1,691			1,453		238		16	%
Total revenue	$	159,275		$	114,664	44,611		39	%
Segment Adjusted EBITDA	$	55,720		$	34,155	21,565		63	%

System-Wide Sales
Company-operated stores	94,495			57,048		37,447		66	%
Independently-operated stores	63,089			56,163		6,926		12	%
Total System-Wide Sales	$	157,584		$	113,211	44,373		39	%
Store Count (in whole numbers)						—
Company-operated stores	341			220		121		55	%
Independently-operated stores	722			734		(12)		(2)	%
Total Store Count	1,063			954		109		11	%
Same Store Sales %	6.6		%	N/A		N/A		N/A

The Car Wash segment is comprised of our car wash sites throughout the United States, Europe and Australia. ~~We established this operating segment in August 2020 from our acquisition of ICWG, which served as our entry point into the car wash market. See~~ ~~Note 3~~ ~~to the consolidated financial statements for additional information on the ICWG and other tuck-in car wash acquisitions.~~

Car Wash Segment revenue increased by ~~$64~~$45 million driven by ~~a full quarter of ICWG acquisition revenue for the three months ended September 25, 2021 compared to the two post-acquisition months for the three months ended September 26, 2020,~~ the addition of 79109 net new stores primarily from a number of ~~tuck~~acquisitions in ~~acquisitions~~the second half of 2021 and ~~6.2%~~first quarter of 2022 and 6.6% same store sales growth.

Car Wash Segment Adjusted EBITDA increased by ~~$20~~$22 million, primarily driven by higher sales as well as cost management and operational leverage.

Paint, Collision & Glass


		Three months ended											Three months ended
(in thousands, unless otherwise noted)	(in thousands, unless otherwise noted)	September 25, 2021			September 26, 2020			Change				(in thousands, unless otherwise noted)	March 26, 2022			March 27, 2021			Change
Franchise royalties and fees	Franchise royalties and fees	$	20,280		$	19,235		$	1,045	5	%	Franchise royalties and fees	$	21,365		$	17,309		$	4,056	23	%
Company-operated store sales	Company-operated store sales	12,723			9,556			3,167		33	%	Company-operated store sales	39,998			11,930			28,068		235	%
Supply and other revenue	Supply and other revenue	17,572			18,281			(709)		(4)	%	Supply and other revenue	18,080			14,652			3,428		23	%
Total revenue	Total revenue	$	50,575		$	47,072		$	3,503	7	%	Total revenue	$	79,443		$	43,891		$	35,552	81	%
Segment Adjusted EBITDA	Segment Adjusted EBITDA	$	22,039		$	23,231		$	(1,192)	(5)	%	Segment Adjusted EBITDA	$	29,012		$	17,639		$	11,373	64	%

System-Wide Sales	System-Wide Sales											System-Wide Sales
Franchised stores	Franchised stores	$	607,579		$	496,812		$	110,767	22	%	Franchised stores	$	618,969		$	530,503		$	88,466	17	%
Company-operated stores	Company-operated stores	12,723			9,556			$	3,167	33	%	Company-operated stores	39,998			11,930			28,068		235	%
Total System-Wide Sales	Total System-Wide Sales	$	620,302		$	506,368		$	113,934	23	%	Total System-Wide Sales	$	658,967		$	542,433		$	116,534	21	%
Store Count (in whole numbers)	Store Count (in whole numbers)											Store Count (in whole numbers)
Franchised stores	Franchised stores	1,617			1,645			(28)		(2)	%	Franchised stores	1,611			1,594			17		1	%
Company-operated stores	Company-operated stores	30			31			(1)		(3)	%	Company-operated stores	119			33			86		261	%
Total Store Count	Total Store Count	1,647			1,676			(29)		(2)	%	Total Store Count	1,730			1,627			103		6	%
Same Store Sales %	Same Store Sales %	10.8		%	(7.3)		%	N/A		N/A		Same Store Sales %	13.7		%	(9.4)		%	N/A		N/A

Paint, Collision & Glass revenue increased $4$36 million for the three months ended ~~September 25, 2021,~~March 26, 2022, as compared to the three months ended ~~September 26, 2020.~~March 27, 2021. The Company-operated store sales increased $3$28 million driven primarily by $20 million from the acquisition of AGN, which had 79 stores, and $6 million from the acquisition of 10 Carstar franchise sites. The Company-operated store sales increase was augmented by same store sales growth at Company-operated stores. Franchise royalties and fees ~~which were impacted by differences in the revenue mix by brand,~~ increased by $1$4 million primarily due to a ~~$111~~$88 million increase in franchise system-wide sales ~~from~~generated by same store sales ~~growth. Same store sales~~ growth ~~was driven by market share gains~~ and ~~the lifting of certain restrictions due to COVID-19~~an increase in ~~2021~~.franchise stores. Supply and other revenue ~~decreased~~increased by $1$3 million primarily due to ~~lower~~higher vendor ~~rebates.~~rebates resulting from an increase in system wide sales.

Paint, Collision & Glass Segment Adjusted EBITDA ~~decreased $1~~increased $11 million primarily due to ~~lower income~~higher revenue from ~~vendor rebates~~acquisitions and ~~higher non-recurring costs which more than offset the increase from higher franchise and company-operated~~same store ~~revenues.~~sales growth.

Platform Services


		Three months ended											Three months ended
(in thousands, unless otherwise noted)	(in thousands, unless otherwise noted)	September 25, 2021			September 26, 2020			Change				(in thousands, unless otherwise noted)	March 26, 2022			March 27, 2021			Change
Franchise royalties and fees	Franchise royalties and fees	$	9,038		$	10,599		$	(1,561)	(15)	%	Franchise royalties and fees	$	6,888		$	5,178		$	1,710	33	%
Company-operated store sales	Company-operated store sales	1,465			1,686			(221)		(13)	%	Company-operated store sales	1,152			983			169		17	%
Supply and other revenue	Supply and other revenue	31,558			27,370			4,188		15	%	Supply and other revenue	35,126			28,435			6,691		24	%
Total revenue	Total revenue	$	42,061		$	39,655		$	2,406	6	%	Total revenue	$	43,166		$	34,596		$	8,570	25	%
Segment Adjusted EBITDA	Segment Adjusted EBITDA	$	16,254		$	13,306		$	2,948	22	%	Segment Adjusted EBITDA	$	14,165		$	11,008		$	3,157	29	%

System-Wide Sales	System-Wide Sales											System-Wide Sales
Franchised stores	Franchised stores	$	118,825		$	102,171		$	16,654	16	%	Franchised stores	$	89,642		$	68,373		$	21,269	31	%
Company-operated stores	Company-operated stores	1,465			1,686			$	(221)	(13)	%	Company-operated stores	1,152			983			169		17	%
Total System-Wide Sales	Total System-Wide Sales	$	120,290		$	103,857		$	16,433	16	%	Total System-Wide Sales	$	90,794		$	69,356		$	21,438	31	%
Store Count (in whole numbers)	Store Count (in whole numbers)											Store Count (in whole numbers)
Franchised stores	Franchised stores	200			198			2		1	%	Franchised stores	201			197			4		2	%
Company-operated stores	Company-operated stores	1			1			—		—	%	Company-operated stores	1			1			—		—	%
Total Store Count	Total Store Count	201			199			2		1	%	Total Store Count	202			198			4		2	%
Same Store Sales %	Same Store Sales %	15.8		%	12.0		%	N/A		N/A		Same Store Sales %	30.9		%	22.0		%	N/A		N/A

Platform Services revenue increased $2$9 million primarily due to higher revenue resulting from an increase in distribution sales to the Maintenance segment and higher franchise income resulting primarily from franchisee same store sales ~~growth.~~growth and an increase in franchise store count.

Platform Services Segment Adjusted EBITDA increased $3 million primarily driven by revenue growth, cost management and operational leverage.

~~Segment Results of Operations for the nine months ended September 25, 2021 compared to the nine months ended September 26, 2020~~

~~Maintenance~~

Nine months ended
(in thousands, unless otherwise noted) September 25, 2021 September 26, 2020 Change
Franchise royalties and fees $ 26,651 $ 21,028 $ 5,623 27 %
Company-operated store sales 365,735 268,267 97,468 36 %
Supply and other revenue 25,231 16,552 8,679 52 %
     Total revenue $ 417,617 $ 305,847 $ 111,770 37 %
Segment Adjusted EBITDA $ 132,895 $ 82,579 $ 50,316 61 %
System-Wide Sales
Franchised stores $ 567,155 $ 446,676 $ 120,479 27 %
Company-operated stores 365,735 268,267 97,468 36 %
     Total System-Wide Sales $ 932,890 $ 714,943 $ 217,947 30 %
Store Count (in whole numbers)
Franchised stores 992 896 96 11 %
Company-operated stores 514 475 39 8 %
     Total Store Count 1,506 1,371 135 10 %
Same Store Sales % 24.4 % (3.7 %) N/A N/A

~~Maintenance revenue increased $112 million~~ driven primarily by a $97 million increase in company-operated store sales from same store sales growth and 39 net new Company-operated stores. Franchise royalties and fees increased by $6 million primarily due to the $120 million increase in franchised system-wide sales from same store sales growth and 96 net new franchise stores. Supply and other revenue increased by $9 million due to higher income from higher system-wide sales.

Maintenance Segment Adjusted EBITDA increased $50 million primarily due to revenue growth, cost management and operational leverage. We continue to utilize a more efficient labor model at company-operated locations.

~~Car Wash~~

Nine months ended
(in thousands, unless otherwise noted) September 25, 2021 September 26, 2020 Change
Company-operated store sales 196,858 28,586 $ 168,272 589 %
Independently-operated store sales 160,483 30,595 129,888 425 %
Supply and other revenue 4,800 4 4,796 119,900 %
     Total revenue $ 362,141 $ 59,185 $ 302,956 512 %
Segment Adjusted EBITDA $ 115,223 $ 17,739 $ 97,484 550 %
System-Wide Sales
Company-operated stores $ 196,858 28,586 $ 168,272 589 %
Independently-operated stores 160,483 30,595 129,888 425 %
     Total System-Wide Sales $ 357,341 $ 59,181 $ 298,160 504 %
Store Count (in whole numbers)
Company-operated stores 286 199 87 44 %
Independently-operated stores 732 740 (8) (1) %
     Total Store Count 1,018 939 $ 79 8 %
Same Store Sales % 6.2 % N/A N/A N/A

Car Wash segment is comprised of our car wash sites throughout the United States, Europe and Australia. We established this operating segment in August 2020 as a result of our acquisition of ICWG, which served as our entry point into the car wash market. See ~~Note 3~~ ~~to the consolidated financial statements for additional information on the Car Wash acquisitions.~~

Car Wash segment revenue increased $303 million driven by nine months of ICWG acquisition revenue for the nine months ended September 25, 2021 compared to two post-acquisition months for the nine months ended September 26, 2020, the addition of 79 net new stores primarily due to a number of tuck in acquisitions, and 6.2% same store sales growth.

~~Car Wash Segment Adjusted EBITDA increased by $97 million primarily driven by revenue growth as well as cost management and operational leverage.~~

~~Paint, Collision & Glass~~

Nine months ended
(in thousands, unless otherwise noted) September 25, 2021 September 26, 2020 Change
Franchise royalties and fees $ 57,578 $ 52,220 $ 5,358 10 %
Company-operated store sales 37,672 21,613 16,059 74 %
Supply and other revenue 49,791 47,287 2,504 5 %
     Total revenue $ 145,041 $ 121,120 $ 23,921 20 %
Segment Adjusted EBITDA $ 61,534 $ 50,119 $ 11,415 23 %
System-Wide Sales
Franchised stores $ 1,722,641 $ 1,377,587 $ 345,054 25 %
Company-operated stores 37,672 21,613 $ 16,059 74 %
     Total System-Wide Sales $ 1,760,313 $ 1,399,200 $ 361,113 26 %
Store Count (in whole numbers)
Franchised stores 1,617 1,645 (28) (2) %
Company-operated stores 30 31 (1) (3) %
     Total Store Count 1,647 1,676 (29) (2) %
Same Store Sales % 12.2 % (9.2) % N/A N/A

Paint, Collision & Glass revenue increased $24 million for the nine months ended September 25, 2021, as compared to the nine months ended September 26, 2020. Company-owned store revenue increased $16 million primarily due to same store sales growth. Franchise royalties and fees revenue, which were impacted by differences in the revenue mix by brand, increased $5 million due to a $345 million increase in franchised system-wide sales augmented by the acquisition of Fix Auto in April 2020 and same store sales growth. Supply and other revenue increased $3 million due to same store sales growth and higher franchise income from an increase in system wide sales. Same store sales growth was driven by market share gains and the lifting of certain restrictions due to COVID-19 in 2021.

~~Paint, Collision & Glass Segment Adjusted EBITDA increased $11 million primarily due to revenue growth as well as cost management and operational leverage.~~

~~Platform Services~~

Nine months ended
(in thousands, unless otherwise noted) September 25, 2021 September 26, 2020 Change
Franchise royalties and fees $ 23,011 $ 21,377 $ 1,634 8 %
Company-operated store sales 3,911 5,020 (1,109) (22) %
Supply and other revenue 94,576 80,184 14,392 18 %
     Total revenue $ 121,498 $ 106,581 $ 14,917 14 %
Segment Adjusted EBITDA $ 44,864 $ 36,740 $ 8,124 22 %
System-Wide Sales
Franchised stores $ 303,209 $ 241,282 $ 61,927 26 %
Company-operated stores 3,911 5,020 $ (1,109) (22) %
     Total System-Wide Sales $ 307,120 $ 246,302 $ 60,818 25 %
Store Count (in whole numbers)
Franchised stores 200 198 2 1 %
Company-operated stores 1 1 — — %
     Total Store Count 201 199 2 1 %
Same Store Sales % 24.7 % 3.9 % N/A N/A

Platform Services revenue increased $15 million primarily due to higher Supply and other revenue resulting from an increase in distribution sales to the Maintenance segment and higher franchise income from higher system-wide sales. Also, Franchise royalties and fees increased due to higher Franchised stores system-wide sales primarily from same store sales growth.

~~Platform Services Segment Adjusted EBITDA increased $8 million primarily driven by a combination of revenue growth and margin expansion through effective cost management and operational leverage.~~

Financial Condition, Liquidity and Capital Resources

Sources of Liquidity and Capital Resources

Cash flow from operations, supplemented with long-term borrowings and revolving credit facilities, have been sufficient to fund our operations while allowing us to make strategic investments to grow our business. We believe that our sources of liquidity and capital resources will be adequate to fund our operations, acquisitions, company-operated store development, other general corporate needs and the additional expenses we expect to incur for at least the next twelve months. We expect to continue to have access to the capital markets at acceptable terms. However, this could be adversely affected by many factors including a downgrade of our credit rating or a deterioration of certain financial ratios.

On January 14, 2021, we completed our IPO through which we issued and sold approximately 32 million shares of common stock at a price per share of $22. On February 10, 2021, we sold an additional 5 million shares pursuant to the underwriters’ exercise of their option to purchase additional shares. We received total proceeds of approximately $761 million from these transactions, net of the underwriting discounts and commissions. Upon closing of the IPO, we fully repaid $725 million related to the First Lien Term Loan, Second Lien Term Loan and the Revolving Debt Facility assumed in the ICWG Acquisition, including the related interest and fees. In addition, we recorded a $46 million loss on debt extinguishment primarily driven by the write off of unamortized discount. We also used $43 million in proceeds to purchase approximately 2 million shares of common stock from certain of our existing shareholders.

Driven Brands Funding, LLC (the “Master Issuer”), a wholly owned subsidiary of the Company, and Driven Brands Canada Funding Corporation (along with the Master Issuer, the “Co-Issuers”) are subject to certain quantitative covenants related to debt service coverage and leverage ratios in connection with the Securitization Senior Notes. Driven Holdings

Revolving Credit Facility also has certain qualitative covenants. As of ~~September 25, 2021,~~March 26, 2022, the Co-Issuers and Driven Holdings were in compliance with all covenants under its agreements.

At ~~September 25, 2021,~~March 26, 2022, the Company had total liquidity of ~~$268~~$668 million, which included ~~$116~~$271 million in cash, cash equivalents and restricted cash, ~~$100~~$97 million and ~~$53~~$300 million of undrawn capacity on its 2019 variable funding securitization senior notes and Driven Holdings Revolving Credit Facility, respectively.

On September 29, 2021, Driven Brands Funding, LLC and Driven Brands Canada Funding Corporation, each wholly owned indirect subsidiaries of the Company issued $450 million of 2021 Senior Notes bearing a fixed interest rate of 2.791% and a final legal maturity date of October 20, 2051 and an anticipated repayment date of October 20, 2028 (the “2021 Senior Notes”). The proceeds from the issuance of the 2021 Senior Notes were used to pay off the outstanding $247 million balance on the Driven Holdings Revolving Credit Facility with the remainder to be used for general corporate purposes including future acquisitions.

The following table illustrates the main components of our cash flows for the ~~nine~~three months ended ~~September 25,~~March 26, 2022 and March 27, 2021 ~~and September 26, 2020~~ :


		Nine months ended					Three months ended
(in thousands)	(in thousands)	September 25, 2021		September 26, 2020		(in thousands)	March 26, 2022		March 27, 2021
Net cash provided by operating activities	Net cash provided by operating activities	$	198,195	$	66,455	Net cash provided by operating activities	$	9,040	$	32,586
Net cash used in investing activities	Net cash used in investing activities	(462,721)		(26,549)		Net cash used in investing activities	(253,332)		(4,508)
Net cash provided by financing activities		204,845		111,161
Net cash used in financing activities						Net cash used in financing activities	(5,719)		(29,871)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(2,285)		468		Effect of exchange rate changes on cash	(592)		650
Net change in cash, cash equivalents, restricted cash, and restricted cash included in advertising fund assets	Net change in cash, cash equivalents, restricted cash, and restricted cash included in advertising fund assets	$	(61,966)	$	151,535	Net change in cash, cash equivalents, restricted cash, and restricted cash included in advertising fund assets	$	(250,603)	$	(1,143)

Operating Activities

Net cash provided by operating activities was ~~$198~~$9 million for the ~~nine~~three months ended ~~September 25, 2021~~March 26, 2022 compared to ~~$66~~$33 million for the ~~nine~~three months ended ~~September~~March 27, 2021. The decrease was due to $56 million payment of transaction costs associated with the AGN acquisition during the three months ended March 26, ~~2020, primarily resulting from a $188~~2022, which was partially offset by $15 million increase in operating results ~~which was partially offset by~~and a ~~$56~~$17 million ~~increase~~decrease in net working capital.

Investing Activities

Net cash used in investing activities was ~~$463~~$253 million for the ~~nine~~three months ended ~~September 25, 2021~~March 26, 2022 compared to ~~$27~~$5 million for the ~~nine~~three months ended ~~September 26, 2020.~~March 27, 2021. During the ~~nine~~three months ended ~~September 25, 2021,~~March 26, 2022, there was a ~~$451~~$198 million increase in net cash paid for acquisitions, ~~and $59~~$46 million increase in capital ~~expenditures. These higher investing cash outflows were offset by~~expenditures and a $3 million decrease in proceeds ~~received of $66 million~~ from sale-leaseback ~~transactions, $5 million from sale of property and equipment and $2 million from the sale of our At-Pac business during the nine months ended September 25, 2021 .~~transactions.

For the ~~nine~~three months ended ~~September 25, 2021,~~March 26, 2022, we invested ~~$94~~$69 million in capital expenditures, compared to ~~$35~~$23 million for the ~~nine~~three months ended ~~September 26, 2020.~~March 27, 2021. This increase is mostly due to new company-operated store openings within our Car Wash and Maintenance segments, as well as expenditures related to the maintenance of our existing store base and technology initiatives.

Financing Activities

Net cash ~~provided by~~used in financing activities was ~~$205~~$6 million for the ~~nine~~three months ended ~~September 25, 2021 compared~~March 26, 2022 due primarily related to ~~$111~~the repayment of senior securitization notes. Net cash used in financing activities was $30 million for the ~~nine~~three months ended ~~September 26, 2020. We received~~March 27, 2021 primarily resulting from our $722 million repayment of the Car Wash Senior Credit Facilities, $43 million in repurchases of our common stock, and $22 million payment related to the termination of our interest rate swaps. These were offset by the $761 million in proceeds from our IPO and the underwriters’ exercise of their over-allotment option, net of underwriting discounts and $247 million net proceeds from borrowings under the Driven Holdings Revolving Credit Facility during the nine months ended September 25, 2021. These were offset by the $722 million repayment of the Car Wash Senior Credit Facilities, $11 million repayment of senior securitization notes, $43 million repurchase of common stock and $22 million cash paid on the termination of interest rate swaps during the nine months ended September 25, 2021. We received $175 million from the issuance of senior securitization notes, which was offset by $39 million net repayment of revolving lines of credit and short-term debt, $12 million payments on long-term debt and $13 million in debt extinguishment costs during the nine months ended September 26, 2020.discounts. See~~Note 1~~ ~~to our consolidated financial statements for additional information regarding our IPO, and~~ Note 6 to our consolidated financial statements for additional information regarding the Company’s debt.

Income Tax Receivable Agreement

We expect to be able to utilize certain tax benefits which are related to periods prior to the effective date of the Company’s initial public offering, which we therefore attribute to our existing shareholders. We expect that these tax benefits (i.e., the Pre-IPO and IPO-Related Tax Benefits) will reduce the amount of tax that we and our subsidiaries would otherwise be required to pay in the future. We have entered into an income tax receivable agreement which provides our Pre-IPO shareholders with the right to receive payment by us of 85% of the amount of cash savings, if any, in U.S. and Canadian federal, state, local and provincial income tax that we and our subsidiaries actually realize as a result of the utilization of the Pre-IPO and IPO-Related Tax Benefits.

For purposes of the income tax receivable agreement, cash savings in income tax will be computed by reference to the reduction in the liability for income taxes resulting from the utilization of the Pre-IPO and IPO-Related Tax Benefits. The term of the income tax receivable agreement commenced upon the effective date of the Company’s initial public offering and will continue until the Pre-IPO and IPO-Related Tax Benefits have been utilized, accelerated or expired.

Because we are a holding company with no operations of our own, our ability to make payments under the income tax receivable agreement is dependent on the ability of our subsidiaries to make distributions to us. The securitized debt facility may restrict the ability of our subsidiaries to make distributions to us, which could affect our ability to make payments under the income tax receivable agreement. To the extent that we are unable to make payments under the income tax receivable agreement because of restrictions under our outstanding indebtedness, such payments will be deferred and will generally accrue interest at a rate of LIBOR plus 1.00% per annum until paid. To the extent that we are unable to make payments under the income tax receivable agreement for any other reason, such payments will generally accrue interest at a rate of LIBOR plus 5.00% per annum until paid.

Critical Accounting Policies and Estimates

Our significant accounting policies are more fully described in Note 2 of the consolidated financial statements. Refer to our annual report for the year ended December ~~26, 2020~~25, 2021 for a full discussion of our critical accounting policies. There have been no material changes to our critical accounting policies from those disclosed in our Form 10-K for the year ended December ~~26, 2020.~~25, 2021.

Application of New Accounting Standards

See Note 2 of the consolidated financial statements for a discussion of recently issued accounting standards.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Refer to the Company’s annual report for the year ended December ~~26, 2020~~25, 2021 for a complete discussion of the Company’s market risk. There have been no material changes in the Company’s market risk from those disclosed in the Company’s Form 10-K for the year ended December ~~26, 2020,~~25, 2021, other than the Company’s repayment of the Car Wash Senior Credit Facilities in January 2021, the Company’s execution of the income tax receivable agreement in connection with the IPO, the Company’s entry into the Driven Holdings Revolving Credit Facility, and the Company’s issuance of the 2021 Senior Notes. The repayment of debt and income tax receivable agreement impacted both the Company’s interest rate risk and foreign exchange risk. See Note 1 and Note 6 to the consolidated financial statements for additional details.

Item 4. Controls and Procedures

a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our CEO and CFO, has evaluated the design effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of ~~September 25, 2021.~~March 26, 2022. The term “disclosure controls and procedures,” means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on evaluation of the design of our disclosure controls and procedures as of ~~September 25, 2021,~~March 26, 2022, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures were designed effectively and will provide a reasonable level of assurance.

b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the ~~nine~~three months ended ~~September 25, 2021~~March 26, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4836

Part II. Other Information

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors

For a discussion of risk factors that could adversely affect our results of operations, financial condition, business reputation or business prospects, we refer you to Part I, Item 1A "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended December ~~26, 2020, as supplemented by Part II, Item 1A “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 26, 2021 and the following risk factor.~~25, 2021.

~~Mandatory COVID-19 vaccination of employees could impact our workforce and suppliers and have a material adverse effect on our business and results of operations.~~

Effective November 5, 2021, the U.S. Department of Labor’s Occupational Safety and Health Administration (“OSHA”) issued an emergency temporary standard (“OSHA Regulation”) requiring all employers with at least 100 employees (“Covered Employers”) to implement a COVID-19 vaccination policy that requires their employees to be vaccinated or to undergo weekly COVID-19 testing and wear a face covering at work. Covered Employers, such as the Company, will be required to provide paid time off for workers to get vaccinated and allow for paid leave for employees to recover from any side effects. The OSHA Regulation also requires Covered Employers to (i) determine the vaccination status of each employee, (ii) obtain acceptable proof of vaccination status from vaccinated employees and maintain records of such vaccinations, and (iii) require employees to provide prompt notice to the employer when they test positive for COVID-19 or receive a COVID-19 diagnosis. Covered Employers must comply with most of the requirements of the OSHA Regulation by December 5, 2021, and must comply with the testing requirement by January 4, 2022. Failure to comply with the OSHA Regulation may result in fines. Litigation

challenging aspects of the OSHA Regulation has commenced, and we anticipate that further litigation and other actions challenging aspects of the OSHA Regulation may materialize, which could further complicate implementation of the OSHA Regulation.

The OSHA Regulation or similar mandatory vaccination or testing requirements that may become applicable to our employees may result in employee attrition, including attrition of critically skilled labor, difficulty in obtaining services, parts, and components from impacted suppliers, and increased costs, which could have a material adverse effect on our business, financial condition and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 5. Other Information.

None.

4937

Item 6. Exhibits.


Exhibit Number						Exhibit Description
3.1						Amended and Restated Certificate of Incorporation of Driven Brands Holdings Inc. ~~(incorporated by reference from Exhibit 3.1 to Driven Brands Holdings Inc.’s Form 10-K, filed March 24, 2021).~~
3.2						Amended and Restated ~~Restated~~ Bylaws of Driven Brands Holdings Inc. ~~(incorporated by reference from Exhibit 3.2 to Driven Brands Holdings Inc.’s Form 10-K, filed March 24, 2021).~~
31.1						Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2						Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
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						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						XBRL Instance Document
101.SCH						XBRL Schema Document
101.CAL						XBRL Calculation Linkbase Document
101.DEF						XBRL Definition Linkbase Document
101.LAB						XBRL Label Linkbase Document
101.PRE						XBRL Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

5038

SIGNATURES

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

Date: ~~November 9, 2021~~May 6, 2022

DRIVEN BRANDS HOLDINGS INC.

By:

/s/ Jonathan Fitzpatrick

Name:

Jonathan Fitzpatrick

Title:

President and Chief Executive Officer

By:

/s/ Michael Beland

Name:

Michael Beland

Title:

Senior Vice President and Chief Accounting Officer

5139


			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			3
Consolidated Statements of Operations			3
Consolidated Statements of Comprehensive Income (Loss)			4
Consolidated Balance Sheets			5
Consolidated Statements of Shareholders’/Members' Equity			6
Consolidated Statements of Cash Flows			7
Notes to the Consolidated Financial Statements			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2724
Item 3. Quantitative and Qualitative Disclosures About Market Risk.			4736
Item 4. Controls and Procedures.			4836

PART II. OTHER INFORMATION
Item 1. Legal Proceedings			4937
Item 1A. Risk Factors			4937
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4937
Item 5. Other Information			4937
Item 6. Exhibits			5038

Signatures			5139


	Nine months ended September 25, 2021
(in thousands)	Foreign currency translation adjustment		Cash flow hedges		Defined benefit pension plan		Accumulated other comprehensive income (loss)
Balance at December 26, 2020	$	16,834	$	(87)	$	(219)	$	16,528
Net change	(28,735)		29		131		(28,575)
Balance at September 25, 2021	$	(11,901)	$	(58)	$	(88)	$	(12,047)