Driven Brands Holdings Inc. (DRVN) Earnings Call Transcript & Summary

Just Good morning, everyone and welcome to Charlotte and welcome to Driven Brands 2023 Investor Day. For many of you, this might be the first time we've had an opportunity to get to meet. I'm Joel Arnao, senior Vice President of Finance and Investor Relations for Driven Brands. We are so glad you decided to join us today and during today's event, we're going to talk about our Dream Big plan for 2026. First, you'll hear from our CEO, Jonathan Fitzpatrick; then our COO, Danny Rivera; and our President of Platform Services, Kyle Marshall, will discuss our business operations. After that, our CFO, Gary Ferrera, will cover our financials, followed by a Q&A session. We'll end the day with lunch and store tours this afternoon. Now comes the fun part. Before we begin, I'd like to remind you that management will refer to certain non-GAAP financial measures in our presentation. You can find reconciliations of most directly comparable GAAP financial measures in the appendix to today's presentation as well as on the company's Investor Relations website and in our filings with the Securities and Exchange Commission. During the presentation, management will also make forward-looking statements in regard to our current plans, beliefs and expectations. These statements are not guarantees of future performance and are subject to a number of risks and uncertainties and other factors that can cause results and events to differ materially from the results and events contemplated by these forward-looking statements. Please see our filings with the Securities and Exchange Commission for more information. Now I'll turn it over to my partner, Jonathan Fitzpatrick.

Thanks, Joel. Good morning and welcome, everyone. Thank you to my team for all their time and efforts in making this happen. Thank you to those of you who took the time to be here in person. We know your time is valuable and we appreciate you investing your time with us. We take our responsibility very seriously and we want to continue to earn your trust and confidence everyday. So today, you'll hear from me; Danny Rivera, our Chief Operating Officer; Kyle Marshall, our President of Platform Services; and finally, Gary, our CFO. And I'll speak about the following topics. I'll give a quick industry overview. I'll talk about the power of the Driven platform. I'll give you a view into our long-term growth. We'll talk about capital strategy and I'll wrap up with a view on our Dream Big 2026 plan. So let's start with my interim 2023 self-assessed report card, which I've shared with our company and our Board. And while there are definitely some positives in 2023 worth mentioning, particularly the performance of our Take 5 Oil Change business and having Gary on board and Danny in his new Chief Operating role, I really want to spend some time talking about our opportunities. First, I'll tell you that as CEO, I own all the challenges over the last 100 days. Specifically, the communications on CFO transition, the rescheduling of our Investor Day and, of course, the reduction in 2023 guidance. These missteps are 100% on me. And I take it incredibly personally and I'm even more determined than ever to unlock shareholder value. Now several steps to improve Driven's performance have already been taken. We have created and implemented our Chief Operating Officer position and you'll hear from Danny later today. We have also made leadership changes within our U.S. Glass and U.S. Car Wash business. This is what motivates myself and the team. We've invested significant dollars to create an asset base that drives cash flow for decades to come. And our investor focus and mindset leads us to be proactive and long term. Now while 2023 is a misstep, it doesn't change our conviction in our industry, our platform or our earnings power. We have a platform that generates high steady state returns with a long runway for reinvestment at exceptional returns. And we are incredibly motivated to see our valuation mirror our results over time. So we've been super busy the last few months and following our several actions and decisions that we have made and as you'll see throughout the morning, we're super bullish on Take 5 Oil Change and U.S. Glass. And we'll continue to lean into both those categories. Let's start with U.S. Car Wash. Simply, our current performance is not acceptable. We have to fix it or think differently about the long term. And similar to Take 5 Oil Change in 2017 when we stopped growing for 4 quarters to allow the business to get all the people, process and systems in place, which then allowed us to accelerate growth, we can have a better full Take 5 brand with the time to optimize Take 5 Car Wash. Consequently, Gary, Danny and myself have made the decision based on the current performance of U.S. Car Wash to significantly reduce growth capital in that business. We will take the next 12 months to optimize the business, the current footprint, our pipeline, our stores under construction. And then and only then, depending on the results, will we decide whether to deploy additional growth capital into U.S. Car Wash. Importantly, under no circumstances is this a capitulation on our belief in car wash. This is simply being smart about not deploying capital to a business that needs to be improved. And we've done this before with other businesses and come out much stronger on the other side. Now at a minimum, this will translate into a reduction in capital spending in 2024 and any excess cash flow will likely be used to pay down debt. Let's talk about U.S. Glass. Now we went fast intentionally to create a platform and create a moat around others following suit. We acquired 12 founder-owned businesses. And we've been running our integration playbook over the last 18 months. We took on a lot of integration involving 1,000 employees, multiple businesses and multiple operating models. This was a lot. And in hindsight, I own the decision, perhaps we should have gone slower. However, this is a short-term issue and has not changed anything about our conviction about this opportunity in U.S. Glass. We heard you. Pause, optimize and focus on debt reduction. I joined Driven as CEO more than 11 years ago. And I was attracted by a massive needs-based and growing industry that is highly fragmented and dominated by mom-and-pops, an industry where scale can matter, which has limited e-commerce risk for disruption and how the category was generally unsophisticated. When I got to the industry 11 years ago, yellow pages were the marketing playbook. Digital marketing and customization were unknown. And you couldn't trust you weren't getting sold something you didn't need. Quite frankly, none of that has really changed for the industry. And I had a dream when I joined. To become the largest provider of automotive services in North America, redefining a fragmented category with scale and sophistication, centered around the needs of our customers and using profitable growth to create an enduring business that delivers significant value for our investors and employees. And that vision and ambition has not changed. It guided me 11 years ago and continues to guide and drive me today. I'm very proud of the scaled enduring business that we've built over the last decade. Since 2012, we've gone from 2 brands to 4 segments. Store count has increased from 1,400 to 2023 guidance of almost 5,100. Revenue has increased from less than $100 million to 2023 guidance of $2.3 billion. And we've increased adjusted EBITDA from less than $40 million to 2023 guidance of $535 million. And we've achieved this success because of our business model and a talented team with a track record of execution. Most importantly, massive opportunities still exist today and has only made more powerful given the scale and competitive differentiation that we've built. I'm as excited about the future as I was 11 years ago. Now after a decade of growth, this is what Driven looks like today. We have 4 scaled segments, all of which are generating cash. And these segments are supported by a shared service layer whose job is to help the segments grow and be profitable. But despite our size and scale, there remains significant runway for growth. And it's worth noting that over the last 3 years, we have expanded our addressable -- total addressable market with the addition of car wash and glass. Today, we generate $6 billion of system sales from almost 5,000 locations, with a high percentage of those being franchised. And yet, we still have a very low market share. And we have an impressive track record of same-store sales growth over the last 14 years. And our 2-year same-store sales stack is 26%. Now none of this would be possible without a talented and highly skilled team with the right mix of experience, alignment around our shared values and mission and highly incented by share price and shareholder returns. This team, including myself, is all in on Driven. Now the addition of the Chief Operating Officer role is a very important one. Danny is responsible for all the operating segments. Danny owns the P&Ls, all day-to-day decision making, finding and executing on growth opportunities and ultimately, delivering segment-level revenue and profits. And with Danny focused in these areas, Gary and I can focus on our strategic plan, maximizing the return on our investments through disciplined capital deployment and portfolio management. So our mission is to simplify car care, so our customers can focus on the road ahead. And our core values power us and they haven't changed in a decade. They define who we are, what we do and how we do it. Our culture is anchored in meritocracy. And this flows through all levels of the organization and to all businesses, from our entry-level technicians in the shops to me. We recognize and reward results. We are a high-performance organization where senior leaders have a very significant portion of their compensation and net worth at risk, driven by stock price and equity value creation. Let's talk about our customers. Our customers are a great balance of both retail and commercial customers. Over the past 12 months, we served over 4 million commercial vehicles such as national rental car companies, local fleets and insurance companies, from the top 20 insurers to local providers. We and our franchisees love our commercial business partners because it's predictable, sticky and profitable. And our retail customers represent about 50% of system sales. On average, they have a household income of about $70,000. They drive cars that are 9-plus years old. They depend on their vehicles to live their lives and they are typically not owners of newer, high-end luxury automobiles who frequent dealerships. This is a very large total addressable market for our business. Let's talk about the industry for a few minutes. The fundamentals of this industry are really powerful and not likely to change anytime soon, the same fundamentals that attracted me 11 years ago. It needs-based services with limited e-commerce risk. It's a large and growing TAM. We have tailwinds from miles-driven growth, an aging car park and more complexity to repair and maintain vehicles. And 80% of this industry is still fragmented, which means there's significant white space for growth. Now in addition to the great fundamentals, there are multiple tailwinds, which all help Driven. This industry is massive and has been growing at 3% to 4% annually for the last few decades. And industry experts expect that growth to continue. VMT, or vehicle miles traveled, has grown at a 2% CAGR over the last 50 years. And the aging of vehicles. We've seen a decades-long trend of vehicles lasting longer as they are made better and that accelerated in the last recession. The average age of vehicles on the road is now over 12 years, 10% longer than a decade ago. And older vehicles mean more repairs, more maintenance and higher average checks. And the complexity of newer vehicles, which take more time and money to service. For example, a decade ago, when you got into a small fender bender, you could simply just repair your bumper and paint it. Today with ADAS, you likely need to fully replace it, given all the technology impacted. So when you put that all together, we have a massive and aging car park and newer cars are more complicated, all long-term sustainable and predictable tailwinds for Driven. Now in addition to the industry tailwinds, 80% of this category remains with independent shops. This is core to why we have conviction about the long-term growth of Driven. So why are we taking market share? Large brands in this space are particularly valuable because they convey quality and affordability to the consumer. These are massive and sustainable competitive advantages in a low trust category. There has been more vehicle innovation in this category in the last decade than the last 50 years, which favors the larger, more sophisticated players who remain nimble and adapt to a changing landscape, such as staying current with technology like ADAS and calibration, which requires significant investment in people, process and systems. And customer expectations have also changed. They expect apps, online appointments, online estimates, multiple payment options and being updated on the progress of their repair. We believe, over time, consolidation is likely to accelerate and Driven is very well positioned. This industry has significant reinvestment opportunities, both organically and via M&A. And at Driven, we have a first-mover advantage with leading positions across many sectors with our long-duration assets. Our scale, our brands, our platform will reinforce our leadership over time. So now let's shift to the power of the Driven platform. Our platform creates many benefits. Three important ones are our competitive advantages, diversification and, of course, strong cash flow. Let's talk about competitive advantages. We have diverse service offerings and a great balance of commercial and retail customers. Driven Advantage, our purchasing platform, which drives revenue to Driven and profits to our stores. We have national scale, strong brands, expanded and growing TAM. We have an ability to invest in marketing, over $90 million annually. And the ability to invest in technology and people. We have iconic brands which have served millions of customers for decades. And we have great unit economics and a pipeline of franchise and company stores. We will continue to leverage our competitive advantages to grow revenue, enhance margins and deliver value for all of our stakeholders: our company stores, our franchisees and investors. Let's talk about diversification. We very strategically repositioned Driven over the last 3 years to think about the changing car park over the next 20 years. Now we service most automotive needs, oil change, maintenance, collision, car wash and glass, to name a few. We have a great balance of commercial and retail customers. We have very limited geographic or franchisee concentration risk. We have multiple ways to grow, through same-store sales, new units and M&A. And we have a growing addressable market. We now own the world's third largest but fastest-growing oil change business. The world's largest car wash business and the second largest glass business in the U.S., all of these position Driven for the long term. Let's talk about cash flow. This is arguably the most important element of the Driven platform, which supports multiple ways to grow and deleveraging. Now our brands collectively allow us to meet most of customers' automotive needs but they also play an important role in our growth strategy. All of our brands grow over time and all of them generate cash. But we segment the fast-growing ones with the growth label and the less fast-growing with the mature label. We have a number of mature brands that are largely franchised and deliver predictable performance and generate significant cash flow at very attractive EBITDA margins. These mature brands will generate $180 million of cash flow annually for many years to come with very low maintenance -- CapEx requirements. And we have used that cash flow to invest into our growth brands. Driven has been intentionally built as a diversified platform, which provides us balance and resilience. And our businesses have delivered better performance together than they could as stand-alone businesses. Driven provides public equity investors with this differentiated exposure. We are creating a high return on capital business that has a long runway for reinvestment at higher returns on incremental invested capital. The power of the Driven platform speaks for itself, more than tripling revenue and quadrupling adjusted EBITDA since 2019. So let's move to our growth strategy. For the next 3 years, we're going to be focused on 2 key levers, same-store sales and unit growth. And while we have a strong history of completing accretive M&A but that won't be a focus for the next few years. And I'd like to bring our growth playbook to life with a look at our Take 5 Oil Change business. We created our growth playbook with Take 5 Oil Change, which we acquired back in 2016. Now back then, it had 60 company-operated stores, serviced less than 1 million cars annually, generated $45 million of revenue and less than $10 million of adjusted EBITDA. By the end of 2023, we will have grown this business to almost 1,000 locations, of which 35% are franchised. We'll service 12 million cars annually. We'll generate close to $900 million in revenue and deliver $285 million in brand-level adjusted EBITDA. This is truly a great and underappreciated business. And it has taken 7 years to get there. We had bumps along the way, particularly in 2017, when we paused to optimize the business and then we hit the gas again. And it takes time to build brand awareness, scale and operational excellence but the returns are worth it. So let's jump in. Why do we win? We have a national brand with scale, which drives customer acquisition, retention and margins. We have a differentiated operating model. You stay in your car, it's 10 minutes or less and a maniacal focus on customer satisfaction, all of which drive market share gains. And of course, we've got great unit-level economics and returns for both our company-owned and franchise stores. Now it can take anywhere from 12 to 18 months to open a new location. And as you can see, that invested capital is relatively low and incredibly attractive, if you sale and lease back the real estate. We and our franchisees are believers and we are in growth mode. That is why we have a total Take 5 Oil Change pipeline of greater than 900 locations. No one else in this category has a pipeline close to this. Let's talk about our unit-level economics. That pipeline only happens with great unit-level economics. And these are as good as any multiunit business in any industry. Trust me, I spent 15 years in quick serve, 4-wall EBITDA margins in the high 30s and cash-on-cash returns north of 40% for company stores. Franchisee returns have to be adjusted for a 7% royalty rate. So let's talk about where we are opening our locations. We have core company markets like Texas, Florida and the Gulf Coast, which we selected back in 2016. And we selected them because of net population growth, higher employment rates, greater density of trucks and SUVs and affordable and available real estate. And we like to go deep and create density in our company markets and our goal is to finish filling out the capacity in those markets. And today, we believe there is significant white space in our existing company markets. And the rest of the country is for our franchisees. Today, we've got 280 franchise locations open and have signed and paid development agreements for an additional 800 locations. Now because we report Take 5 Oil Change in our consolidated maintenance segment, I believe this has led to a lack of understanding and appreciation for how great this business is. It has best-in-industry same-store sales. A 21% CAGR of new stores since 2017. Revenue has grown at a 31% CAGR. And finally, adjusted EBITDA at a 48% CAGR. This is a great business, no matter what metric you look at. Let's talk about why our franchisees are investing. And I'll explain what we've done and are planning to do with Take 5 franchising. We started franchising this business in late 2017, only 6 years ago. But we knew the business model, the unit-level economics and returns would make this a great franchise business. Now after we selected several core company-operated markets like Texas and Florida, we then set about the journey of building a world-class franchise business. It's the white space and our operating model. This is why franchisees are signing development agreements, opening new stores and generating great returns. Let's dive a little deeper. Our franchisees are signing 15-year license agreements. The license fee is $35,000 per location, paid at signing. The royalty rate is 7%. The ad fund rate is 5% and there is a requirement to purchase all products through Driven, which means they get better pricing than they could by themselves. We've also built a highly sophisticated franchise base. Many have come from other multiunit businesses because of the simplicity of the model and of course, the returns. These are experienced operators and developers with back-office support already in place and they are signing development agreements typically for 9 locations. We're proud of what we've achieved so far. From a standing start back in late 2017, we now have 280 franchise units open. We have more than 60 active franchisees. 50% of those franchisees have already signed a second or third development agreement. And we have a total franchisee pipeline of more than 760 locations, with over 30% of those sites secured or better. Now we're pleased with what we've achieved so far with our entire Take 5 Oil Change business but the future also looks very promising. As we look at the next 3 years, we expect to add more than 500 locations. More than 60% of those will be franchised locations and we expect to add close to $200 million of incremental adjusted EBITDA. As we think about the drivers of our 2026 plan, Take 5 Oil Change represents almost 2/3 of that growth. Going back to the lack of appreciation and understanding of how great this business is, since going public, Take 5 Oil Change same-store sales and unit growth has outperformed the competition. And therefore, we believe this business is massively undervalued. So let's jump back into our 2 Driven growth levers, same-store sales and units and start with same-store sales. As I mentioned before, this industry has tailwinds, aging car park, increased vehicle complexity, both of which drive average check and a flight to trusted brands. And then you combine that with our unique capabilities, such as a greater than $90 million annual marketing spend, which helps drive brand awareness, better marketing, cross-branding opportunities, repeat customers, subscriptions, then we have that healthy balance of retail and sticky, predictable commercial business. And don't forget the new store ramp contribution. What's great about our stores that are less than 3 years old is the capital for those company stores is already in the ground and working and earnings from those stores are predictably increasing. By the end of 2023, we will have approximately 600 stores that are less than 3 years old that will be contributing to future same-store sales growth. So when you put all those factors together, we're very comfortable with a consolidated Driven same-store sales forecast of 5% plus for the next 3 years. That's a 5%-plus same-store sales forecast for the next 3 years, which I'll also note is less than our historical performance. Now let's turn to new units. And just to remind everyone that we're currently focused on organic unit growth in oil change and glass, we're taking a pause with car wash, all of which is reflected in our 2026 target. So we're proud of this 6% unit growth CAGR. Remember, that is with a significant base of stores and yet we still have a very small share in this industry. For me, that translates into a long runway for additional new unit growth. We want to deploy capital to generate the best returns. That means we look for simple business models that can deliver a service as well or better than anyone else in the industry with the following characteristics: best-in-class unit-level economics and returns; large and growing total addressable markets where scale matters; and fragmented markets that provide a long runway for growth. Now this has been our growth focus the last number of years. But remember, we've been working on Oil Change for 7 years, Car Wash for 3 years and Glass for 2 years. And we added Car Wash and Glass over the last 3 years to increase our total addressable market and position Driven for the next 20 years. Let's talk about our new unit pipeline. This is what gives us conviction about the unit growth assumptions for the next 3 years. Our total pipeline is more than 1,700 locations, 70% of which are franchised, which means no capital. And 36% of that total pipeline is site secured or better. This is a very important slide as you think about your models over the next 3 years. Firstly, new unit growth is predominantly coming from the great Take 5 Oil Change business. And as you can see, the majority of new units being franchised and capital light. We have new units coming from AGN, starting again in 2025 because we believe it is prudent not to model any new store openings in 2024 to allow Danny and the team time to get through all the integration. New unit growth will resume but we expect to -- in 2025, but we expect to beat these prudent assumptions. Finally, about 20 new U.S. car washes that will open in 2024, which are simply a carryover from those under construction in 2023. This is what we're planning for new units. Now secondly and equally important is the impact we'll see from units that are less than 3 years old. Again, the majority of these stores less than 3 years old are Take 5 Oil Change, which has a proven track record. We call this embedded EBITDA. And the great thing is, this capital for company stores has already been invested. Gary will talk more about that later. So let's talk about our capital strategy. 2023. As you can see here, we have broken out the various capital spending buckets for 2023. And a few things to note here. Our store maintenance CapEx is for our company stores. The rebranding CapEx is mostly complete in 2023. The M&A was for glass and will not be a focus going forward as we pivot our strategy to greenfield growth. And we are showing likely sale and leaseback proceeds for the full year. Now I want to pause to discuss sale and leasebacks for a few minutes. Year-to-date, we have completed approximately $160 million of sale and leasebacks. But because we're in the middle of evaluating our U.S. Car Wash business, understanding the markets and store performance, we are delaying the sale of additional car wash real estate as we finalize that analysis. Now this will impact 2023 cash proceeds, which Gary will cover more later. However, we believe this is the right business decision. Having the time to finish the Car Wash portfolio review is more important than signing long-term leases on locations that we may or may not want to keep. And we'll keep you updated on this process. As I showed you a few minutes ago, by the end of 2023, we will have more than 600 locations that are less than 3 years old. This capital has already been deployed on the company stores and they are in the various stages of their respective maturity curves. We believe this cohort will contribute approximately $100 million of incremental adjusted EBITDA over the next 3 years, based on the stores reaching their typical 3-year ramp. Let's talk about 2024 capital. These are our preliminary plans for 2024 capital spending. Let me talk through some highlights. $150 million of growth CapEx, primarily on approximately 60 company Take 5 Oil Change locations. As I mentioned earlier, we'll be opening 20 U.S. Car Wash locations and these stores are already under construction and will open in the first half of 2024. We have company store maintenance CapEx of approximately $45 million spread across Quick Lube, Car Wash and Glass. We have corporate capital spend of approximately $60 million, the majority on IT-related projects, which we expect to decrease over time. And we're planning to sell and leaseback some Take 5 Oil Change locations, generating approximately $40 million of proceeds. As I mentioned earlier, we're going to delay the decision to sell and lease back additional U.S. Car Wash sites, pending the completion of that review. The total estimated net capital for 2024 is approximately $215 million. And we're going to be super disciplined on all capital spending and excess cash will generally be used to pay down debt. So let's finish with a summary view on our 2026 Dream Big plan, which Gary will cover in a lot more detail. So before I get into the specifics, I've received feedback from lots of investors that we should not talk about a 2026 target. And not surprisingly, I've received a similar amount of feedback that you must continue to talk about it. I want everyone to understand that our short-term focus is on delivering 2023 and 2024 and we know how important this is. And it's also important to remember that during my 11 years at Driven, we've always had a medium or long-term plan in place, as this is important to how we run the business, dreaming big and working hard. So now let's get back to the assumptions. The focus will be on organic growth from 2024 to 2026. Same-store sales growth of 5-plus percent, new units in Oil Change, both company and franchise and U.S. Glass units. For U.S. Car Wash, the projections assume that we will not grow units beyond the remainder of the pipeline that will open in early 2024. And we have modeled low-single-digit same-store sales over the next 3 years. And I'll say it again. We are modeling limited growth from our U.S Car Wash business because that's the prudent thing to do now. And we don't need that growth to deliver our 2026 plan. That being said, we certainly expect to be able to over deliver on these prudent U.S. Car Wash assumptions but want to share clearly that our model works even if we didn't. And finally, we're not including any M&A in our 3-year plans. These building blocks will hopefully explain how we're going to achieve our plan. Same-store sales of 5% plus across Driven. Ramping stores contributing $100 million of growth and the capital has already been invested for those company stores. Over 600 new units over the next 3 years, with 50% being franchised. And that's supported by a pipeline and 36% of those stores site secured or better. And Driven Advantage, our purchasing platform, delivering $35 million in incremental adjusted EBITDA contribution. Said even simpler, these are the big levers. 60% or $195 million coming from Quick Lube; 25% or about $80 million coming from U.S. Glass; 10% or about $35 million coming from Driven Advantage. And we remain very confident in our ability to hit our 2026 targets. Why, you ask? Because this plan has very limited growth model for U.S. Car Wash, which, of course, we expect to do better. All the growth is organic and we have modeled no M&A. Finally, let me show you what myself Gary, Danny and the rest of the management team will be using as our guiding principles for the next 3 years. Disciplined capital allocation for the best returns. Disciplined growth, making sure that we are growing the right businesses. A focus on creating excess cash flow and generally using that to pay down debt so that we can get below 3x levered by the end of 2026. And finally, there are no sacred cows in our business and we will constantly evaluate our platform to ensure that we have the right assets in place. We plan to be active portfolio managers as another tool to drive value creation. Thank you. We'll now take a quick 15-minute break and then you'll hear from my partner of more than 10 years, our COO, Danny Rivera. [Break]

Welcome back, good morning. My name is Danny Rivera. And like Jonathan, I've also been a part of the Driven leadership team for over a decade. It's been an amazing ride, no pun intended. And throughout that time, I've had the privilege of leading several amazing teams that have helped grow this business from a relatively small company to a dynamic -- to the dynamic and growing industry leader it is today. Now there's been 2 halves to my career. The first half was in technology. I grew up in the IT ranks and I'm an engineer by trade. I worked for some very iconic businesses like GE, Burger King and AutoNation. I joined Driven in 2012 as our Chief Information Officer. And I joined for 1 reason. I also had a dream. My dream was to extend my career and grow outside of IT. I wanted to be involved in operations. And ultimately, I wanted to run a business. At Driven, I found the culture that allowed me to realize those dreams. I've had the privilege of running several businesses during my time at Driven. Throughout the last decade, I've been President of Meineke, President of Take 5 Oil Change and Group President of our Maintenance division. Most recently, in February of this year, I was promoted to Chief Operating Officer for Driven. I have vast experience in retail with both company-operated businesses and franchise businesses. Thanks to my roles with Meineke and Take 5, I've managed all aspects of the mechanical side of this industry. Behind the time lines and titles is over 20 years of experience, leading teams and delivering results. And speaking of results, here you see just some of the accomplishments my teams have delivered through the years. We grew AUVs at Meineke from 540,000 to 890,000, a respectable 5% CAGR for a very mature company. And at Take 5, we grew AUVs from 840,000 to about 1.3 million, an amazing 15% CAGR. Now while there are many things to be proud of, ultimately, I'm most proud of the difference we've made in the lives of our employees, the thousands of careers, individuals and families we've managed to help through the years. People that came to Driven looking for a meritocratic culture and found that if you dream big, work hard and deliver results, anything is possible. Now Jonathan introduced this slide a few moments ago. Effective this year, we've separated the management of the business into 2 core groups, the CEO and CFO; and the COO and segment leaders. So this begs the question, why did we create the separation? Well, over the past decade, Driven has grown from 2 businesses to 4 operating segments. Our portfolio has changed from exclusively franchise to a combination of company-owned and franchise businesses. Lastly, Driven has gone from privately held to publicly traded. With this growth and added complexity came a need to create separation and ownership of the primary parts of effectively running a business. Jonathan and Gary are responsible for strategy and capital allocation. It's my job to ensure that the capital that Jonathan and Gary have allocated, whether through M&A, new units or strategic projects, realize the returns that we underwrote. My priorities are extremely straightforward, deliver the P&L, train the next layer of leadership at Driven and set the tone and culture for the business. Driven has 2 playbooks and 2 chapters, our growth playbook and our operating playbook. Now Jonathan spent some time this morning explaining Driven's growth playbook. My goal today is to walk through our operating playbook, which enables Driven, over time, to take acquired businesses and turn them into high-growth engines that deliver predictable and scalable results. And I'm going to tell that story through the lens of Take 5 Oil Change. Having acquired Take 5 Oil Change in 2016, it is our most mature acquisition and serves as a great case study to understand Driven's operating playbook and how we methodically make businesses better over time. Driven's operating playbook has been developed over the past 10 years. We've implemented it across all our businesses, both company and franchise. The playbook has several chapters, all of which are important and build upon one another: culture, people, brand positioning, process and continual improvement. I'll explore all of these this morning. Our culture can best be defined by a few key phrases. We think and act like owners. We do what we say we're going to do. We recognize success and ultimately and most importantly, we are a meritocracy. We have very specific beliefs about people. Beliefs like the right people make all the difference. You should routinely identify your best people. Your best people should get the biggest jobs, the toughest roles. And yes, they should make the most money. And while we occasionally hire from the outside, we believe in consistently growing our talent from within. At Take 5, we don't focus on finding a lube tech with 15 years of experience. We look for people that are hungry, have a strong work ethic, love to win and have a get-it-done mentality. We take these amazing people and we immerse them in a meritocratic culture. We provide very clear career paths with guidance and training along the way so that our people can realize their dreams. At Take 5 Oil Change, that career path is called pit tech to President. You can see it on the screen. This image is in every office, in every Take 5 across the country. And our people know that it's more than just some poster on a wall. Because every single one of them knows a former peer that is now a shop manager or a former boss that is now a regional director. When I say we believe in growing from within, I mean it. More than 85% of our shop managers, more than 55% of our district managers and 100% of our regional directors have been promoted from within Take 5 Oil Change. And we believe in variable compensation, starting with our entry-level technicians, all the way up to the CEO. Again, Take 5 is a meritocracy, through and through. Our best people get bigger jobs, get paid more and ultimately deliver more value. We show them how to win and we celebrate when they do. At Take 5, we have a variety of ways we recognize our best employees. We have our Take 5 High 5s, our way of regularly recognizing employees for great work. Employees are publicly given a certificate, have their picture taken with their team and receive a gift card thanking them for an amazing job. We give out over 2,000 Take 5 High 5s per year. We have our Supertech program, where we rack and stack all of our technicians and reward and recognize the best on a monthly basis. Lastly, we have our President's Club, where we take our top 25 managers and district managers on an amazing vacation. The most amazing part, however, is not where we go but who gets to go. We don't just invite our employees. We also invite their spouses and their families. Nothing shows we care about our employees more than giving their spouses and their kids an absolutely amazing life experience. And our approach to culture and people provides us with a distinct competitive advantage, the results of which you can see here, world-class Net Promoter Scores, amazing repeat rates, 10-plus years of positive comp sales, averaging 18% over the last 3 years. We hire amazing people. We immerse them in a meritocratic culture. We show them how to win and celebrate when they do. This is Driven's playbook to deliver amazing results. Now when it comes to brand positioning, we design our businesses to delight our customers. Our results and NPS scores are no accident. They are the result of carefully listening to what our customers want and need. And then designing the business to deliver those wants and needs, in a way that delights the customer. When it came to our Take 5 Oil Change business, customers told us they wanted a fast oil change experience with no appointments necessary. They wanted convenient hours with no heavy selling and they wanted a trustworthy, high-quality experience. Internally, we summarized what the customer told us into a very simple brand positioning. Take 5 is fast, friendly and simple. In turn, everything we do within the business, every decision we make, every customer interaction and every brand moment is run through the rubric of can we make it fast, friendly and simple? But it's not enough to merely listen to your customer and have an internal brand position. You have to bring that position to life. You have to manifest fast, friendly and simple in a way that customers can see and feel it. And so we've designed the business as a stay-in-your-car model to ensure that we're fast. We start every transaction with a free bottle of water to show you that we're friendly and we have a menu of only 6 services to keep things simple. Now it's not enough to just have the right people and culture. It's not enough to listen to your customer and design the right brand experience. You have to consistently deliver on that brand experience in a way that is scalable and repeatable. That's where process comes in. That's where you need an operating model. Now like everything else at Driven, we like to keep things simple. When you look at our Take 5 Oil Change business, every aspect of the business is highly simplified to ensure that we can deliver our fast, friendly and simple promise consistently. We offer only 6 services, oil, air filters, cabin air filters, wipers, coolant and fuel additives. We do not require any ASE-certified mechanics. We train all of our people internally. Each location requires about 5 employees to run. And our prototype box is very simple, 1,400 square feet with a shallow pit design, no underground basements, no waiting rooms, above ground storage for oil and we only need 2 to 3 bays. By designing the business to be highly simplified, we generate powerful competitive advantages. We're faster and more convenient, with a stay-in-your-car model that is an industry-leading 10-minute experience. We deliver a better customer experience, resulting in better customer satisfaction. Since we don't require ASE-certified technicians, it's easy to find and recruit qualified applicants. Our simple design, menu and staffing model allows us to generate higher margins and ultimately, a best-in-class ROI. But it's not enough to simply put processes in place. You have to continually refine and improve those processes. Otherwise, the business will deteriorate over time. Driven's take on continual improvement is encapsulated by our DRIVE framework. DRIVE is an acronym. It stands for defined success, review data, implement solutions, verify results and evolve. Our framework begins with defining success. For each business, we first establish the clear and simple KPIs that determine what success looks like. We then review data to identify any problem areas that need attention and determine root cause. Once root cause has been established, the appropriate best practice solutions are implemented over the course of a quarter. We verify whether the implemented solutions are having the desired results. And lastly, we evolve. Our DRIVE framework creates an endless loop of continual improvement, where on a quarterly basis, we are systematically improving the business. We then reinforce our DRIVE framework with a series of checkpoints, our way of establishing a trust but verify culture. Those checkpoints include quarterly action plans, quarterly audits, weekly coaching visits and daily exception reporting. When you put it all in the blender, the results of our Driven operational playbook can be extraordinary. When it comes to our Take 5 business, we've grown the business from about 300 locations to about 1,000 in just 6 years. During that time, comps have been sustained in the mid-teens. Revenue has grown at a 31% CAGR and EBITDA has grown at an amazing 48% CAGR. With Take 5 Oil Change, we've successfully created a simple, predictable and scalable business that produces best-in-class financial results. As Jonathan laid out a moment ago, we have an established playbook for growing our businesses post-acquisition. Hopefully, I was able to bring that playbook to life through the lens of Take 5 Oil Change, our most mature company-owned business. We are repeating the very same playbook with both Take 5 Car Wash and Auto Glass Now. There are 2 key points I want to drive home. First, while it may look from the outside as if things are always up and to the right, that's simply not the case. Life, unfortunately, seldom plays out that way. Our Take 5 Oil Change business is an amazing business. But there were moments, especially early on where things were rocky and not perfectly up and to the right. Growing businesses, particularly at the pace that we grow them, can be messy. This is especially true when you're integrating over a dozen different brands and businesses. Now the second point I want to drive home is that, while this is very difficult work and it isn't always up and to the right, it's also not our first rodeo. The fact of the matter is that our growth and operating playbooks are a core competency for Driven. Over the past 10 years, Driven has acquired over 1,500 units. We have dedicated people, systems, processes and a strong track record of results. So with the context of Driven's growth playbook, Driven's operating playbook and Driven's track record of success, specifically told through the lens of Take 5 Oil Change, I now want to dive into our U.S Car Wash business. First, let's take a look at why we got into this business in the first place. Importantly, you'll see many of the very same factors we found compelling when we entered into the old team space. A large TAM, a simple operating model, benefits of scale and some factors that are unique to the Car Wash business, a recurring revenue model in the form of memberships and the ability to cross-sell to our Oil Change business. So what have we been up to in the last 3 years? Well, we've been busy turning an amalgamation of businesses, brands and operating models into 1 business with 1 brand and 1 operating model. This integration is a necessary first step. This first step unlocks our ability to predictably grow and scale the Car Wash business like we did our Oil Change business. We've had many accomplishments over the last 3 years. We entered into the new vertical of car wash. We acquired over 1,000 stores, about 200 of which were in the U.S. Since then, we acquired an additional 164 stores and opened 60 greenfields. And we consolidated the business from over 40 brands to about 85% of them being rebranded to Take 5 today. Now it's important to note that when we say we rebranded a store to Take 5, we mean a lot more than just new signage and paint. Yes, it does, in fact, mean new signage and paint but it also means our new point-of-sale system, our new tunnel management system, a new operating model and addressing significant deferred maintenance. We've learned a lot in the last 3 years. And while I'm not going to go through everything that we've learned, I would like to cover a few key points. First, people matter and leaders matter. Consequently, we've recently made changes as it relates to the President of our Car Wash business and we've made a series of changes to our ops leadership. Second, we have to get better at pricing and promotional strategy. We also have to develop our digital and cross-branding muscles. More to come on that in a moment. From an ops perspective, we have to be the best at the basics. That means a focus on the right people in the right positions. It means ensuring that we're open and operating during the hours of operation and it also means that we work really hard to delight our customers. We're on year 3 of our journey in car wash. It's been a little bit rocky and we've learned a lot. While we're not satisfied with where we are, I remain confident. We've done this before. We know how to create success. And we're going to continue to execute our Driven playbook to ensure this business realizes all of its underlying potential. Let's now move over to glass, an industry that we just entered into last year. And let's level set on why we love the glass industry. It also has a large TAM. It's highly fragmented. It has a simple operating model and enjoys benefits of scale. Again, these are many of the very same factors we found compelling when we entered into the oil change space. There's also some unique tailwinds as it relates to glass. The growth of calibrations, opportunities to sell not just across retail but commercial and insurance and very low investment costs. Just like car wash, we haven't been idle the last 2 years. We've acquired nearly 200 locations, 500 mobile units and opened about 60 greenfields. We moved quick to prevent the competition from rolling up the industry and we succeeded. We caught them by surprise and we went from no presence in the U.S. Glass industry to the second largest glass company in the country almost overnight. Let's talk about the U.S. Glass integration. As the slide mentioned, we've acquired and are currently integrating 12 different businesses. Now I want to bring that to life just a little bit. We're talking about 12 completely different businesses, brands, operating models and technology stacks. We're talking about getting over 1,000 people that all worked a certain way for a long time to work a different way with a different culture and a different brand on their shirt. We've touched every meaningful part of the business, new payroll systems, new comp plans, centralized purchasing, a call center. We've even switched out the point-of-sale system, the central nervous system of any retail business. We are now undergoing the difficult but necessary work to consolidate the business to 1 operating playbook. We're only in our second year of operating this business. Some aspects of the integration have been more complicated than we suspected but we have the right leadership team in place, the right go-forward plan and we have the benefit of experience, having done this many times before. Now regarding Car Wash and Glass, I am personally disappointed with their performance to date. These businesses are similar to Take 5 Oil Change and should be performing similarly. I know how to do this and I have done this. I am now the Chief Operating Officer because our Take 5 business is the blueprint for success across both Car Wash and Auto Glass Now. I helped develop and implement the blueprint for Take 5, which ultimately resulted in an amazing business. I know how to get this done across both Car Wash and Glass and I plan to do so. I'd now like to change subjects and focus on why, when it comes to Driven, 1 plus 1 should equal 3 and not 2. For every customer that enters Driven's ecosystem, whether their journey starts with our Oil Change business, our Car Wash business or any of our other businesses, we should be able to not only retain that customer but we should be able to cross-sell that customer into another Driven business. Why? Well, there are several reasons why. First, the average consumer requires about 14 services per year, about 10 car washes, 2 oil changes and 2 other repair and/or maintenance items. That doesn't include any nonrecurring glass or collision work. Driven is uniquely positioned to service all 14 of these occasions. Second, we are the biggest and most scaled company in the automotive aftermarket. If we focus on just our 2 Take 5 brands, Take 5 Oil Change and Take 5 Car Wash, we have 262 car washes within 10 miles of an oil change. We have 360 oil changes within 10 miles of a car wash. These 622 locations serviced 26 million vehicles in the last 12 months. And lastly, we've only just started trying to realize the opportunity of cross-selling within Driven. Sitting here today, we have less than 1% cross-penetration between our Car Wash and Oil Change businesses. Now we have an enormous opportunity ahead of us to drive oil change customers to car wash and vice versa. And while we're in the very early innings, there are reasons to believe that our customers want Take 5 to take care of both their oil change and car wash needs. First, Driven is not new to digital marketing. We've been in the digital marketing game for many years and we've been quite successful. Let's look at just 1 channel within 1 business, namely e-mail at Take 5 Oil Change. You'll note growth along every step of the marketing funnel. Most importantly, about 40% year-over-year growth in transactions and about 60% growth in revenue. We've also recently beta tested our first cross-branding marketing initiative. Our goal was to successfully get Take 5 Oil Change customers to try our Take 5 car washes. We started with about 250 pilot locations within 10 miles of a Take 5 car wash. We sent those customers a series of offers both via e-mail and direct mail throughout the month of March and July of 2023. We delivered over 10 million impressions to about 3 million customers. The results were exciting. We drove over 170,000 redemptions at about a 6% conversion rate. So let's take a step back and talk about Driven and our aspirations. It's simple. Ultimately, we want more. More transactions, more loyalty and more cross-selling. In 2024, Driven will begin to revolutionize the automotive aftermarket with the first-ever cross-brand loyalty program that will incentivize and reward customers for taking better care of their cars. I'd like to welcome you to Take 5 Rewards. [Presentation]

Our new Take 5 Rewards program is a tier-based rewards program. It's specifically designed to incentivize more transactions, more loyalty and more cross-shopping between our Oil Change and Car Wash businesses. From a consumer perspective, this is accomplished through a modern omnichannel digital experience that's in line with the best retailers in the world. To complement Take 5 Rewards, we will also be introducing 2 new subscription programs. Now our Car Wash business has been offering subscriptions in the form of unlimited monthly memberships for some time. We will now offer a Take 5 Oil Change subscription and a combo subscription across both Take 5 Oil Change and Car Wash. Customers, for the first time, will be able to take care of their cars' maintenance needs all through the ease of 1 simple subscription. I'd like to spend a moment and explain some of our design principles and what we're trying to accomplish through Take 5 Rewards. First, we made it very simple to join. Customers only need to download the Take 5 app and create an account. That's it. The goal is to get as many people to download the app as possible and to fill our data lake with as many addressable records as possible so we can put that data to work. Second, progressing through the tiers will be driven by frequency. By simply taking care of their cars and visiting Take 5 Car Wash or Oil Change, customers will progress to higher tiers, unlocking more rewards. Third -- and this is important, tiers are intentionally designed to be more discount-centric at the entry tier levels to drive trial. Once customers develop a habit of frequenting Take 5, we focus more on rewarding experiences and less on discounting. Lastly, the highest tier that unlocks the most rewards is reserved for subscribers. Customers will benefit from a variety of rewards, everything from discounts and welcome rewards to level up rewards and special reward member experiences. We'll be testing Take 5 Rewards in Q4 of this year, with an initial focus on Take 5 Oil Change and Car Wash. Now that being said, every aspect of our rewards platform has been designed to scale beyond Take 5. Whether we're talking about program design or technology stack, the platform can be extended to other Driven assets, leaving plenty of runway for us to delight every Driven customer within the U.S. Like Jonathan, I'd like to go through some of the principles that my team and I will be leveraging in the years ahead. First, we have a proven operating playbook that we will continue to execute. It works over time to create predictable and scalable businesses that grow. We can't and won't overreact to short-term setbacks. We have to remind ourselves that Take 5 Oil Change wasn't built in a day. Nothing worth talking about ever is. Second, it's wise to go slow to than go fast. Now I'm an engineer. I've been trained to measure twice and cut once. That doesn't mean you always move slow. Quite the opposite. Early in our integrations, we need to methodically design how the business is going to work from all aspects, ops, marketing, real estate, et cetera. Once we have the blueprint, like we did with Take 5, we can grow quickly and predictably. Third, we need to focus on being the best at the basics. Our businesses, by design, have very simple operating models. At Take 5, we win because no one is better at the basics. Deliver the stay-in-your-car 10-minute oil change consistently and with a smile and you win. Lastly, we need to delight our customers. We enjoy 60-plus percent repeat rates at Take 5 because no one is friendlier. Whether it's a free bottle of water or a team of people that are hustling for your business, our customers know we care and that we want to delight them. We need to deliver that experience in every Driven business. In my new role as COO, I look forward to growing our new Take 5 Rewards program. I also look forward to taking the success of our Take 5 Oil Change business and methodically spreading those best practices and those results throughout Driven. I'd like to now introduce my partner, Kyle Marshall, who will lead us through our exciting new platform, Driven Advantage. Thank you.

Thank you, Danny. Thank you, everyone, for being here again. My name is Kyle Marshall. I currently serve as President of Platform Services for Driven Brands. And I actually started my career in the automotive industry back in 2002 when I joined a small family-owned parts distribution business called 1-800-Radiator & A/C. And over the years, I played a key role in growing that business from a corporate model doing $30 million of system-wide sales annually to a fully franchised business with over $200 million in revenue. I joined Driven Brands in 2015 through the acquisition of 1-800-Radiator and shortly thereafter became President of that brand. In early 2020, I earned the opportunity to lead the entire Platform Services segment and with that, fleet and procurement. And when I stepped into that role, I was immediately excited about what I saw, just a huge opportunity for Driven Brands and its partners. Standing here today, Driven Brands is the largest provider of services -- automotive services in North America, which also means we are one of the largest purchasers of automotive supplies with over $2.3 billion in purchasing power. And just to give you a few examples, in 2022 alone, we bought over 12 million gallons of oil, nearly 1 million gallons of paint, 13 million automotive filters, more than 20 million sheets of sandpaper and enough painter's tape to go from New York City to Los Angeles and back almost 4 times. And that purchasing power continues to grow every year as we grow both our store count and same-store sales. Conservatively, our purchasing power will surpass $3 billion by 2026. And the procurement team at Driven Brands boast over 150 years of collective experience and has category experts supporting each of our brands. And at Driven, it's 1 team. So our procurement team's goals, their incentive plans are fully aligned with our business needs. And that alignment has paid dividends over the last several years in a very challenging environment. Our team leveraged our huge buying power to deliver lower costs on major categories like paint and oil by using best-in-class strategic sourcing methods, bringing in new suppliers and optimizing product mix. They created competitive programs on new categories like chemicals and equipment for our Car Wash segment. And our strategic relationships ensured that our fill rates and inventory position remained strong throughout 2020 to 2022. And that, coupled with lower costs, meant larger revenue for Driven Brands. In 2020, our total network spend was approximately $1.7 billion annually and our procurement efforts were primarily focused on a handful of large direct categories. At the time, we only influenced or controlled around 35% of total spending taking place across all of our businesses. Our results for paint and oil and related products were strong. But as our business evolved, we entered new categories and recognized a massive opportunity to expand our offering and drive more value. And not just for our company-operated locations but for our franchisee partners as well. We began further leveraging our size and scale to negotiate thoughtful new programs across multiple categories for both direct and indirect products and services. So fast forward to 2022, our total spend as a network was up to $2.3 billion and we now influenced or controlled greater than 50%. Over the last several years, we've expanded and improved our core category coverage. We've introduced new programs to our franchisees. We've conducted aggressive multi-round competitive RFPs and reverse auctions on larger spend categories, creating better programs, leading to increased franchisee adoption and share of spend. And in 2022, those efforts translated into tangible results when the procurement team delivered $51 million in adjusted EBITDA. That's an impressive 4-year growth CAGR of 32%. Now despite the strong performance, we recognized our existing procurement solution, our e-store was built to sell paint and oil. It was limited in capabilities and it was far from best-in-class. So to fuel continued growth, we needed a new solution and we knew simply saving franchisees money alone would not be enough. Without a new solution, adoption rates would be inconsistent at best. Our customers needed a one-stop shop solution that was efficient, saving them time so they could focus on driving revenue and growing profits for their business. We needed a best-in-class user experience built around the unique needs of small business owners. We had to make it easy to use by including features like expanded payment methods and employee controls so they could confidently purchase items needed for their business. And we needed to provide them with better visibility through reporting so managing their overall business would be easier than ever. For Driven Brands, a new solution would allow us to expand our controlled spend across our entire corporate footprint. We also needed a solution that would add -- easily add dozens of new vendors, large or small and thousands of new products without costly time-consuming integrations, creating an ecosystem where multiple vendors compete in real time for our spending. And lastly, the new solution would open up an entirely new revenue stream for Driven Brands by giving our vendors opportunities to advertise to our franchisees in a very targeted way. This opportunity will continue to grow as our vendors see more and more customers turn to Driven Brands for their sourcing needs. And over the last 18 months, we've developed that solution called Driven Advantage. It's built on SAP technology and it is truly a one-of-a-kind platform in the automotive space. And it's built scalable, allowing us to extend beyond the Driven Brands network. For example, Driven Advantage is already available to our over 1,600 affiliate partners at ATI as well. Driven Advantage is a reimagined user experience in the automotive services category. And so far in 2023, we have already onboarded the majority of our company-operated locations, as well as over 1,000 franchisee and affiliate locations. We've already processed over 60,000 orders on the new site. We have over 65,000 handpicked SKUs across a multitude of categories. We've added over 40 vendors and we are onboarding new partners every month. I can't tell you how excited I am as how Driven Advantage has performed so far. And this excitement is shared by our vendors, by our franchisees and by our partners. We are just getting started. The platform truly is a win-win, most importantly for our franchisees. The average franchisee doing $1 million annually in revenue can now save over $50,000 per year when taking advantage of our programs. Huge savings are available on direct products like paint, oil and hard parts. But just as importantly, they could now save significantly on all aspects of their business and all in 1 place. Our over 1,000 company-owned stores benefit as well. Brand leaders can now manage costs using controlled catalogs and have full visibility into spend by location. As our offerings grow, so too does our controllable spend, ensuring shops are buying the right supplies at the right price. And training and onboarding is simple and easy, ensuring all of our employees buy effectively. For our vendors, the new site is a welcome solution. It will drive higher sales to a captive audience. It opens a new marketing channel for them on which to sell their products and services. It allows them to fully integrate their catalog with a best-in-class e-commerce solution. And lastly, it will give them access to data and buying behaviors that should enable them to customize their offers appropriately to all of their potential customers. Finally, for Driven Brands. I just discussed how the new platform will ensure company-owned stores will benefit. In addition to that, we capture rebates or commissions on all franchisee spend, resulting in 8% to 10% of every dollar coming back to Driven Brands. And that's in addition to the huge savings our franchisee's partner gets. And just as exciting, on most products and services for franchisees, we do not take on any inventory and almost no credit risk as these products are shipped directly to our partners, keeping our balance sheet clean and our risk low. So powered by a winning strategy, a best-in-class user experience and a differentiated platform, we expect these advantages to compound as we grow. So where are we in our journey? Well, in 2023, we've completed the initial build. We've done extensive testing both on the tech side and through a month's long pilot. We are on the front end of our rollout, really initially focused on company-operated stores as well as franchisees who are already purchasing on the old platform. We are already live in around 1,800 locations, with line of sight on the remaining 3,000-plus. Our rollout will continue through 2023, all while enhancing our platform and customer service model. And we will continue to thoughtfully invest in the platform's capabilities by adding features like suggestive selling, promotional opportunities and partner advertising, to name a few, ensuring Driven Advantage becomes the most convenient place to purchase products for all of our customers' needs. Over the long run, the opportunity is immense. And as Jonathan mentioned, one that should deliver adjusted EBITDA of $35 million -- incremental adjusted EBITDA of $35 million by the end of 2026. My team and I fully expect to over deliver on that number. So as we look forward, our focus remains on onboarding the remaining Driven -- onboarding our remaining franchisees and partners, expanding our vendor landscape and product offerings, really fine-tuning our data-driven selling capabilities and lastly, continuing to unlock partner advertising revenue. Thank you. And please make sure to check out drivenadvantage.com with my partner, Phil Hoblet. He's out in the hallway and he'd love to show you what that platform can do. Up next is a quick 15-minute break. And when we return, my partner and our CFO, Gary, will be on stage for you. [Break]

Welcome back, everyone. My main objective today is to make sure everyone clearly understands how we get from our current 2023 guidance to our Dream Big plan 2026 financial targets. I'll start by briefly reviewing the impressive growth that Jonathan and the team have delivered over the last few years that provides us with a strong foundation from which we will deliver future growth and then wrap up with our capital structure and some key takeaways. However, before all of that, I was asked to provide a little background on myself and what I've been up to since joining Driven Brands. As a guy who spent his earlier adult years in the shadows, I much prefer talking about our company and the team. So please bear with me for a moment. In a prior life, before going to college and joining the commercial world, I spent many years working in special operations and intelligence. Oddly enough, I believe that those years prepared me more for the commercial world than anything I learned while in college or graduate school. Prior to becoming a CFO, I did a stint as an international tax consultant and I spent almost a decade as an investment banker in both London and New York. As a CFO, I've taken 2 companies public and close to 90% of my time as a CFO over the last 18 years has been at public companies. My biggest priority since joining have been first and foremost, the team and talent. We had some important positions that needed to be filled when I arrived. Policies, procedures, infrastructure or what I refer to as plumbing has been and will continue to be a high priority. This company has made a lot of acquisitions over the years and we are on multiple systems. We will be moving to Oracle in the cloud for our ERP system. While that decision was made before I arrived, it is very similar to the situation I was in at Cardtronics about 5 years ago. The company had made many acquisitions and was on multiple ERP systems and we began the move to Oracle in the cloud just as I arrived. That was a very successful implementation. Finally and just as importantly, when I started at Driven, we began a deeper forecasting process, followed by a long-range planning update, including both short- and longer-term capital planning. Going forward, we will continue with these priorities and a few others, with the objective of delivering this plan and significant shareholder value. While we take a slight pause this year from double-digit adjusted EBITDA growth to digest acquisitions recently made in our Glass business and work through some issues in the Car Wash segment, it is important to note that based on this year's guidance over the last -- over the past 5 years through a mix of both organic growth and acquisitions, revenue has quadrupled and adjusted EBITDA has more than quintupled with a revenue growth CAGR of 36% and adjusted EBITDA CAGR of 42%. Not only has Driven Brands shown strong growth over the last few years, it has also significantly outperformed consensus estimates published around the time of the January 2021 initial public offering. Revenue growth ended up at approximately twice that of original consensus and adjusted EBITDA growth was more than twice IPO consensus estimates. These are phenomenal results and a big reason why I decided to join the team. Before we talk in detail about the Dream Big plan, I wanted to take just a moment to discuss 2023, which is the base from which we will be growing. As you can see on this slide, we continue to post significant revenue and adjusted EBITDA growth in the first half of the year. On a full year basis, we expect this growth to moderate as we work through known issues, which Jonathan and I have previously discussed in detail, concerning the U.S. Car Wash and U.S. Glass businesses as well as adjusted EBITDA headwinds due to additional rent expense from sale and leaseback activity. Now that I've spent some time talking about the past and the near-term financial results, I'm very excited to talk -- start talking about the future. As Jonathan mentioned earlier, the management team will be using the principles on this slide to guide us over the next 3-plus years. These principles will assist us in being laser-focused on growing the right portions of our business through disciplined growth and strategically allocating capital. This will also allow us to prioritize generating cash flow in order to drive down leverage. Finally, as Jonathan has made very clear in the past, there are no sacred cows in our business. We believe following these principles will assist us in creating significant shareholder value over the next few years. I will now begin a deeper dive into the specifics of our Dream Big plan. As you can see on the slide, these growth rates are actually lower than what the team has historically delivered. We project revenue to grow at a 14% CAGR from approximately $2.3 billion in 2023 to approximately $3.4 billion at year-end 2026. We currently anticipate that growth to ramp from approximately the high single digits to as much as 10% in the first full year, then ramping up to the high-teens percentage in the final year as a significant number of recent new builds ramp along the maturity curve and new stores are added, all backed by mid-single-digit same-store sales growth at our mature stores. We project adjusted EBITDA to grow at a CAGR of 17% from approximately $535 million in 2023 to approximately $850 million at year-end 2026. While we're not currently providing specific adjusted EBITDA guidance for 2024, based on the Dream Big plan, the adjusted EBITDA growth will be much less linear than the revenue growth rate. More specifically, based on our current modeling, growth in the first year of the Dream Big plan should be more than double that of 2023 adjusted EBITDA growth. It would then double again in the second year of the plan with approximately the same growth rate in year 3 as in year 2. This is primarily due to a continuation of the headwinds that we have previously discussed, such as delays regarding integration of the multiple U.S. Glass business acquisitions, turning around the U.S. Car Wash business now under new management and headwinds related to rent associated with sale and leaseback transactions. I would also anticipate that these headwinds will dissipate as we move through 2024. In the outer years, I would expect adjusted EBITDA growth to outpace revenue growth as we generate more operating leverage in the business over time and Driven Advantage continues to gain strength. Additionally, we would expect later projection period efficiencies will be realized as we optimize our internal practices and procedures and continue to improve our systems infrastructure. We expect that these efforts to drive adjusted EBITDA growth will provide us with natural deleveraging but that will be assisted by focusing on delivering increasing operating cash flow over the period, which will help to drive leverage below 3x by the end of 2026. When we look at revenue growth in the Dream Big plan on a reporting segment basis, you will notice that most of the growth, approximately 50%, will be generated by our Maintenance segment, which is primarily driven by our Take 5 Oil Change business, followed by our Paint, Collision and Glass segment at approximately 30%. It is key to note that this plan anticipates minimal growth from our Car Wash segment and even that minimal growth is primarily focused in the outer years. While we are currently focused on improving operations in the Car Wash segment, we felt this view was prudent, based on recent results. Shifting to adjusted EBITDA growth by segment, you will see an even greater impact to the performance of our Take 5 Oil Change business within the Maintenance segment, as our strongest performing segment continues to benefit from all 3 levers of growth. Same-store sales, recently opened stores continuing to ramp, along with new store growth. These factors will drive the Maintenance segment to approximately 60% of our increase in EBITDA over the period of the Dream Big plan. This will again be followed by Paint, Collision and Glass at 30% of the increase. Driven Advantage represents approximately $35 million of adjusted EBITDA over the period within the Corporate segment but that will be offset by growth in SG&A over the period. You will notice that we do not anticipate Car Wash will contribute very much, if at all, to the growth in EBITDA over the period. Another way of looking at accomplishing the plan of approximately $315 million in EBITDA growth is to focus on adjusted EBITDA by growth lever. While these are close to evenly spread among the 3 key drivers, you will notice that the largest driver of growth over the period at 35% is through embedded adjusted EBITDA from our 600 ramping stores. These are stores that opened by year-end 2023 but are at different stages of maturity over an approximately 3-year ramp. Same-store sales on our mature stores accounts for approximately 30%, with new store growth accounting for 25% of the growth over the period. The Other category consists of everything else, such as Platform Services segment, Driven Advantage, et cetera, offset by corporate SG&A costs. These last few slides should provide comfort that the increase in adjusted EBITDA is coming from a few key sources and is not heavily reliant on any 1 lever, which speaks to the power of the Driven platform. Well, now I'm going to go into slightly more detail on the largest of the key levers that I just discussed. Approximately 12% of our current stores are in the category that I referred to as ramping stores. As these stores ramp from different starting points over the '20 to '21 to 2023 period, we expect them to generate just over $100 million or approximately 35% of our increase in adjusted EBITDA over the period. The majority of that will come from our Take 5 Oil Change business within the Maintenance segment. The ramping store cohort that I just discussed consists of just over 600 stores, which are heavily weighted towards the Oil Change business within the Maintenance segment, both in number of stores and anticipated embedded adjusted EBITDA growth. On the previous slide, I mentioned that our stores that are in their 3-year ramp phase approximated 600 stores. Just under 50% of those stores are franchised. Over the next 3 years, we currently anticipate a similar amount of new stores at approximately 650 stores with a similar weighting of about 50-50 company-owned versus franchised. The vast majority of those new franchise stores will be in the Maintenance segment. The major difference in the plan as it relates to new stores is a shift away from new U.S. car washes until we are more comfortable with that business. The Dream Big plan assumes approximately 5-plus percent same-store sales growth through year-end 2026. While the 3-year historical average for the entire company is greater than this amount, the historical average includes the later years of ramping units. And in our plans, we keep that separate. We also need to consider the more recent trends in the U.S. Car Wash business. Taking all that into consideration and all the positives that Jonathan mentioned earlier, we believe 5-plus percent is a reasonable amount going forward. While we continue to plan on deploying growth capital, our Dream Big 2026 plan is much less dependent on new company-operated store growth than in prior years, with only about 25% of our adjusted EBITDA growth coming from building new stores, with no or de minimis amounts coming from M&A. This, along with an intensified focus across the organization on cash flow, will assist us in decreasing gross capital spend as we move through the projection period. You will notice that in 2023, we expect net capital spend to be approximately $200 million less than gross capital spending. We had expected to execute approximately $330 million of sale leasebacks in 2023, but we have changed course and now expect executing closer to $200 million in the year. This will result in less proceeds than originally anticipated, which will result in a slight near-term increase in our net leverage ratio. This was a strategic decision on our part. We anticipate getting gross capital spend, including growth capital, down to approximately $230 million in the 2025 and 2026 period. As we increase operating cash flow over the next few years and decrease capital spending, this will allow us to drive down leverage further than we would just through natural deleveraging from EBITDA growth. As of Q2 2023, our net leverage ratio per the credit agreement was 4.6x. And as I mentioned earlier, based on the Dream Big plan, we anticipate driving our net leverage ratio to below 3x by year-end 2026. As you are all likely aware, about a month ago, we announced a share repurchase authorization. This authorization was for $50 million. We have used just over half of this amount through last Friday, September 15. We believe the company is significantly undervalued at our current trading levels. And while I would love to buy even more shares at these prices, we felt that $50 million was appropriately sized since the impact of this repurchase authorization is less than 0.1 of a multiple of leverage. We have a relatively low-cost, covenant-like capital structure. It is diversified between multiple attractively priced fixed-rate whole business securitization notes, along with a term loan and revolving credit facility. The current blended cost of our total debt is approximately 5%. Approximately 80% of our debt is fixed rate at approximately 4.3%, with a weighted average maturity of more than 4 years and a very manageable maturity schedule beginning in 2025 and currently ending in 2028. Before we turn it over to Q&A, there are some important messages that I would like you to take away from my presentation. To start, we have a strong foundation from which to deliver our Dream Big plan. As I just showed you, our balance sheet is in excellent shape with no large near-term maturities and plenty of liquidity. Even in a year or 2 that we see as transition years, while we consolidate for another extended period of strong growth, we will continue to see revenue and adjusted EBITDA growth. While we can never rule out M&A, this plan is built on future organic growth. Going forward, we will not only be focused on delivering growth but on closely monitoring and responsibly allocating capital while increasing free cash flow and delevering over the plan period. In closing, I'm extremely excited to partner with this talented executive team and all our almost 12,000 employees and thousands of incredible franchisees to work towards our Dream Big plan of delivering $850 million in adjusted EBITDA while driving our net leverage to less than 3x. We appreciate your time today. We're going to take a quick production break and we'll be back in about 5 minutes for Q&A. Thank you. [Break]

Peter Benedict at Baird. Two questions. First, just 1 on management incentives with the adjusted kind of focus of the business, how are they changing, if at all? And then secondly, you talked a lot about applying the Take 5 Oil Change playbook over to Glass and Car Wash, I am specifically interested in Car Wash. Maybe anything more specific as to what you plan to do this year or next year to kind of turn that business around? And if conditions remain tougher for longer in that segment, what are some of the long-term options that you think about there?

All right. Thanks, Peter. I'll start with incentives. So if you look at, anyone sitting up here, there's sort of 3 forms to our incentives. We've got our base salary, our annual variable compensation, which is linked to KPIs in the business. And then our equity plan is 2/3 performance-based and 1/3 time-based. So no plans to change that. Obviously, bonuses for this year probably don't look great compared to where we were but I think no real change to our sort of overall equity compensation structure. There's -- I'll let Danny jump in, in a minute but on the U.S. Car Wash, I think there's a couple of questions there. One is, what are some of the things that we're going to be doing to try and turn around that business? Like we discussed on the Q2 earnings call or I discussed on the Q2 earnings call, there was 3 sort of factors that we talked about back then. One was unfavorable weather conditions, which I promised I'd never talk about. And over time, we'll get benefits there as well. The second was consumer slowdown in spending and the third was competitive intrusion. So I would say those are, to some extent, macro forces. Really, what we're focused on right now and what Danny is going to be leading the charge on is how do we improve our internal operations. And not just the store operations but where are we building stores, are we in the right markets? Are the 4-wall physical operations better? Are we open on time, closing on time? Are we executing flow-through in the stores? Do we have the right pricing and promotion strategies? So that's really the focus now. I don't want to -- obviously want to focus on the things that we can control. And I'll come back, Peter, to your last question about what happens long term. I don't know if you wanted to add.

So the only thing I'd add is, look, I took over the business last month. I'd start by saying and I mentioned it when I spoke, leadership matters, right? So immediately you made a leadership change, not just at the president level but at the operations level, as well with several leaders there as well making some -- bringing some talent, let's just say, into that organization. We have a 5-part plan. I'm not going to go into the specific details of the plan for competitive reasons but we're acting now to improve that business.

And Pete, I suppose long term, look, we have conviction in -- my partner here is going to help sort of make that business better. So we think the performance is going to get better. But like I said, we're not going to deploy incremental capital into that business until it is better. And if for some reason, we can't make it better, we'll have other decisions to make at that point in time. Simeon?

Simeon Gutman from Morgan Stanley. I wanted to ask about growth versus return on capital. Jonathan, you just talked about improving the internal operations of the business, yet you kept the $850 million by 2026. And I know you said half of the folks wanted, half didn't. So how do you sort of grapple between those 2? Why did you keep it? And we still call it today Dream Big. So the organization is still being pushed. And if it's because you had that much clearance to get there anyway, that's fair. But how do you toggle between the 2? And then I have 1 follow-up.

Yes. I mean if this half of the room wants it and this half of the room doesn't want it, so we made the decision. This is something that we talked about in 2021. It's something that we think about internally, it's the time frame that we look at. So again -- but I'd go back to Simeon, is that our really #1 priorities right now is not 2026. I think if we execute '23 and '24, we'll increase the credibility factor of actually executing on the '26 numbers. So our focus is on fixing U.S. Car Wash, getting through the Glass integration, continuing the momentum with the Take 5 Oil Change business, which is phenomenal, delivering '23 and then creating that momentum into 2024. So that's kind of how we're thinking about things.

And then the 1/3 that's the embedded EBITDA. How have those assumptions in each of the businesses, has that changed at all? Or are those just the normal economics, the unit economics, the way we know it or now they're mark-to-market for what we know today?

Yes. I would say in the -- well, I don't want to interrupt you but I would say in the model, we have taken -- we have taken, Simeon, more a mark-to-market approach in terms of those ramp curves. So obviously, if you break it down, the Take 5 Quick Lube business is ramping at a phenomenal rate. We've taken prudent ramp assumptions within the Car Wash business based on current conditions. And glass is, I would say somewhere in the middle. So they are not pollyannish views in terms of the ramp assumptions. Guys, I don't know if you wanted to...

No, no, I agree.

Chris Horvers, JPMorgan. So my first question is on the Car Wash business. Obviously, there's a lot of marketing opportunity between the brands and Car Wash is your most frequent maintenance item. You talked about no sacred cows. Can you sort of reflect on that, because there's a little bit of a contradiction there? And then related to that, how far are you along in evaluating the real estate footprint of that business? You talked about stranded stores in the second quarter. How much are you relying on, let's say, the Take 5 Oil Change business to create densities in some of these markets that do have stranded locations?

So let me start with sort of the micro portfolio review at Car Wash and then get back to the sacred cow comment. I would say that we are -- we're in the middle of that review, Chris, on the Car Wash side. And obviously, that's informed our decision not to do incremental sale and leasebacks to saddle stores with 15-, 20-year lease commitments. So I would expect that we'll have that review complete in the next 45 to 60 days sort of time frame. And it's no [indiscernible] here but it's going through every single store and every single key metric associated with that store and looking at the competitive landscape and lots of other factors. So I think it's really important that we take the time to do that appropriately. Will that likely mean exiting underperforming stores in markets that we don't want to be in? Most likely. Most likely. But we don't have the analysis finished there. My comment on myself and Gary being active portfolio managers, you can tie in with that sacred cow comment, is really to sort of continuously evaluate like we're doing with Car Wash on a specific business. How are the sum of the parts working together? And is there assets that maybe don't belong at Driven Brands as we look forward? So this is something that Gary and I and Danny, quite frankly, are thinking through.

Got it. So my follow-up question is that, you are 10 weeks into the third quarter. Can you talk about what you're seeing on the consumer in different parts of your business? There's a lot of conflicting data points out there around the consumer, from Macy's to Dollar General to Walmart. So can you shed some light on what you're seeing now?

Want to take it?

Look, I can do the [indiscernible]. You can do the consumer part.

Yes. Chris, it's really difficult to get a specific read on the consumer right now, at least from our perspective. So we've got lots of brands, lots of businesses, a lot of needs-based services. We've got some that are more discretionary than others. So I would say that we haven't seen a material change from -- over the last couple of months. I think we still have a consumer that -- it's a little bit hard to predict. So I wouldn't say that we have 1 definitive view on, is the consumer super strong in spending or are they starting to sort of tail downwards? So I think depending on our businesses, we've got different views on that.

Peter Keith, Piper Sandler. Thanks for all the detail. I guess -- would you maintaining the $850 million EBITDA target, you've got -- I think it's about 60% of the growth is coming from oil change. So it's a big number. Maybe you could just bridge us within that bridge. That's a lot of growth. It's -- you seem like compounding up EBITDA over 20% in oil change alone. You're moving to more franchise growth, so that's less EBITDA dollars. So to believe the guidance, kind of have to believe the oil change projections. So you could dig into that.

Yes. I think it's in there. And I suppose if you go back and look through the materials, you see it, it's really coming from 3 elements within the Quick Lube business. First of all, if you look at the history of that business, these are arguably lower growth rates than the last number of years, albeit on a higher base. When it comes to new units, the pipeline is there. So we've got about 1,000 stores in the Take 5 pipeline, north of 30% today are site secured, and there's a high probability that a site secured turns into an open location. Our franchisees are the majority of that pipeline and what we've seen over the last 2 to 3 years in terms of their unit growth is all we're extrapolating on a go-forward basis. In our existing company markets, as I mentioned, we feel that we've got pretty big capacity to continue to fill out those markets over the next 3 years. And then on a same-store sales assumption, overall driven brands is 5% plus. I think our 2-year stack of Take 5 Oil Change is about 26%, I think, was the number I quoted. We're actually modeling in more conservative same-store sales growth within that Quick Lube business. So I think -- I don't think, I know that the growth in Quick Lube is fully supported by sort of the FactSet or the foundation that's in place today.

Especially the ramping stores.

And the ramping store as well. Yes.

And then I was hoping today that we hear a little more around the data ecosystem and cross marketing. So you guys sort of teased out a little bit on some of the e-mail campaign where the oil change. We've got the loyalty. Maybe just even -- just big picture, how are you bringing this all together to really leverage this customer database? Is it -- are you going to cross-market the loyalty program now? I'm not quite clear exactly how this -- all this data is coming together for you.

Yes. I mean I think the rewards program is the big first foray into this, right? So we showed the e-mail numbers. We showed that we did a test, trying to get some carwash customers to go to -- some Quick Lube customers to go to Car Wash. What rewards does for us is it gives us a very specific offer, so to speak to the consumer that says, here, here's a formal way to try both brands, and you're awarded by going to both brands, right? So that's our first real formal foray into this. We're going to go live. So testing is going to happen in Q4, we'll be live early next year. And we'll report out on how this goes, but we're super excited about formally introducing the customer to both brands. And like I mentioned, the platform itself is built so we can scale outside of just Take 5, right? So it's going to start with car washing quickly because that makes a lot of sense. They're synergistic businesses. They're high-frequency businesses, but we intentionally designed it so that we can scale this thing outside of this Take 5.

Liz Suzuki, Bank of America. Just as you shift your focus away from M&A and store growth in Car Wash, is there any concern that some of your competitors may get more aggressive in trying to take over some locations given that there's one less big buyer out there?

You're talking about on greenfield growth, I suppose, Liz? Yes. Someone said to me recently, fix the base business with U.S. Car Wash and in time with fixing it, you can grow it again. And when that time comes, we're going to grow it again through incremental greenfield, which we have a track record of doing or possibly and don't underwrite this, but there will be M&A opportunities down the road. So I'm not worried about what others are doing in terms of building sites or taking real estate. Our job right now is to make sure that this U.S. Car Wash business gets back to a performance level that we're satisfied with.

Great. And just a quick one for Danny. On the Take 5, the loyalty program and adding in oil change to that and getting some of your Car Wash customers into oil change. I mean just given that, that's a much more infrequent service, is there a good like precedent to look at or where you've seen this successful in the past where you've been able to get customers from a high frequency business into a lower frequency business and retain those?

It's a good question. I mean there's certainly loyalty programs out there that we're not first market or anything like that with that concept. I think about like Marriott Bonvoy is somewhat similar to what we're trying to accomplish here in some respects. I get your question about high frequency to low frequency. An example doesn't come immediately to mind. But what I would say is if you look at the oil change in Car Wash business, they are naturally synergistic and it's not novel to see those locations even co-develop together. We certainly do it. Other folks have done it before. So we believe, and we've shown with some of our early kind of piloting ride or test that I shared some of the numbers. We believe and we've seen that they're synergistic enough that the customer needs both services, trust the Take 5 brand, which we've got great brand awareness with and they're willing to try both services. So we're super excited, but good question.

It's Chris O'Cull with Stifel. I just had a couple of follow-up questions. And Jonathan, I was hoping you could elaborate on the framework the company is using to determine whether or not to divest a brand or a segment even.

No. So Chris, I'm trying not to be flip here. Look, when it comes to the U.S. Car Wash portfolio, we're going to look at all the factors that you might imagine. The age of the site, the access egress of that site, what has happened from a competitive landscape over the last number of years, how is the store trending, what is the size of the membership count. Those are things that we'll be looking at. Is it in a core market for us that we believe has densification properties. So those are the things that we think about on a specific car wash review. I won't get into discussions in terms of how we think about the sort of sacred cow conversation, but there's lots of things that obviously we will put into the blender as we think about that.

Just to follow up on the Car Wash. I mean you're talking about launching a new loyalty program, which seems to imply that the company intends to have a significant Car Wash presence, obviously, to be able to leverage that. Any idea -- I mean, what percentage of the Car Wash base do you think you need to have to roll out -- or successfully roll out a loyalty program?

Well, I think Danny showed it earlier on his slides that between the 300 and 200, that was 26 million vehicles that we serviced last year. So I think that Take 5 rewards can live and breathe with that pie. Obviously, in time, we hope to add other parts of the driven portfolio to that loyalty platform. But it's important that as we take the time to evaluate and improve the U.S. Car Wash business, that we don't stop, right? We need to continue to do these things with loyalty as if we're going to own this business forever because I have absolute faith that we're going to make it better. Okay? But over time, we'll sort of address those decisions and outcomes based on the outcomes.

And just a last question. Gary, you talked about not including Car Wash growth in the EBITDA bridge. What about the drag from Car Wash given the recent trends? Is there something we should be -- I mean, should we anticipate some sort of drag for a period of time?

Yes. I think that's fair. We haven't given obviously, guidance for the rest of the year by quarter, but Danny just took this over a month ago. So I'm assuming near-term drag. And I said in my prepared remarks, as we go through '24, you'll probably start seeing that ramp as we get through the year, same with U.S. Glass. So I kind of think of like this month and last month is, I don't know, new beginning. Danny is in charge of this in the weeds in it now. We just put a new person in charge of the finance of Car Wash in the U.S. So I think sort of we hit the nail, get things operationally straight and start growing out of that.

And Chris, in the model, I think I mentioned it, but for the 3 years, '24 to '26, we've modeled low single-digit same-store sales growth for that Car Wash business. So I think we're being appropriately prudent on that.

And it's back ended, as I mentioned.

John Lawrence from Benchmark. Talk a bit a little bit about the Glass business. You mentioned [ 12 ] companies, 1,000 employees. What's really the challenge as far as -- I mean you knew that complexity going in as far as that integration time line, what's happened? And is it really 12 to 18 months before that plan really gets implemented?

Yes. Look, I hold myself accountable, John, for pushing the team to try and integrate everything essentially at the same time. And I think Danny did a nice job of explaining the level of complexity there. So I was pushing the team and that parts on me. I said on the Q2 earnings call that we're several quarters behind where we wanted to be. If you actually dissect what several quarters means for me, it's more than 1, less than 4. Our internal planning is that these integration challenges are behind us broadly Q1, late Q1 of 2024. So that's kind of how we're thinking about that, John. And again, we're being prudent in terms of saying for 2024, limited new store growth to give ourselves breathing room, but we expect those integration challenges to be behind us sort of, I'd say, late Q1 of next year.

Thanks for the detail. This question dovetails nicely with the previous one. Can you provide a little more detail on the $80 million ramp in EBITDA in the U.S. Glass business? In the context of the new stores and then the ramping stores, so maybe some economics at the store level or how that growth you see achieving over the next couple of years?

Okay. Thanks, David. I think we've modeled about 150 new stores, David, over that 3-year time frame. We've modeled those new stores to ramp to -- in a 3-year time frame, broadly about $1 million, at an EBIT 4-wall EBITDA margin in that sort of 30% range. We've also modeled margin expansion because we're buying more Glass. So we think that margin expansion will happen. And then in terms of revenue, we're not changing our belief that right now, the business is heavily retail and commercial customers, commercial being noninsurance. We do a lot of local insurance. And again, we're live here, but we still believe that there's a really interesting long-term opportunity to get some of those bigger insurance partners that we do business with today to use our AGM business. So it's really top line through incremental revenue sources, improve margins and then the ramps on the new stores.

And just to go back, I mean, similar, it's -- we're not putting a bunch of stores on the ground next year, obviously, in getting operations fixed before we start coming out again.

Is there a starting point that you want to share on the revenue and EBITDA for the Glass business looking into next year?

Not right now, but maybe we'll think about that, but not right now.

Can you go back to the EBITDA glide path that you laid out, Gary, the language is a little confusing. I think you said it, the growth rate doubles in '24 from '23 and then doubles again. Did I get that part right?

Yes. There was a lot of doubles in there. So the thought process is in the first year of the plan should be about double what we would hit this year or just above double what we had this year. And then the next year would double and then the growth rate stays the same. The EBITDA doesn't stay the same, but the growth rate stays the same. You should be able to very easily model that out. When you get to your computer and play with it, those numbers will seem very easy.

Then with the next year's growth rate, though, what's the hold back? Because Oil Change alone would get you above a doubling of this year's growth rate. So what are the drags to next year that holds back the Oil Change?

I think we've talked about all of them. And as I just mentioned, I think it started as of last month, sort of -- obviously, the first half of the year was pretty strong. We knew there were issues in the Glass business and with the Car Wash business. There's -- Danny's taken over Car Wash and just starting to work through them. So even this year, I would see -- last year, I think Q3 and Q4 on an adjusted EBITDA basis, we're about even, round about a couple of hundred thousand. I think this year, it will probably be more heavily weighted to Q4 and a little bit lighter in Q3, and I think you'll see that continue as we get into 2024. As Jonathan mentioned, we're still going to be working through some issues in Q1 and Q2. And as you get through the back half of the year, those should dissipate and we'll start charging them. So that it works just as the plan says, it looks just like this. It's not on an annual basis. It's really starting from middle of next year.

Okay. That's helpful. Then the '26 guide, can you give us sort of the components of free cash flow, but can you give us the rest of the components of cash flow, so $850 million of EBITDA, $230 million of CapEx?

Yes. We haven't provided a specific cash flow number. I mean, you can back into it, but we're just not at the point in time right now we're not going to give specific number.

Okay. And then lastly on the leverage side of it, you -- $850 million of EBITDA almost gets you to your below your leverage target alone. So there's 700-ish plus of cash generated between now and then. Is that going to pay down? Is that to re-up the authorization on the share repurchases, just whatever your plans are for that?

I'll let Jonathan talk about capital allocation in a minute, but as you work through the period, obviously, certain pieces of debt are prepayable right now. So we'd focus on those first. Number one, bringing down the revolver. Number two, Term Loan B, then you have the maturities coming up on the whole business securitization. I don't know if you want to talk about the other part.

Yes. Brian, we've laid out our capital plan right now for the next 3 years. So you can see where we're going to be spending the growth capital. When we have this luxurious position of having whatever your calculation is, $700 million plus of incremental free cash flow, I'm sure we'll find a good use for that.

Brian McNamara here, Canaccord Genuity. Probably a dumb question, but why are your end markets fragmented? And presumably, you -- to be successful, you want to be a consolidator in the space. So is there anything structural that prevents that from happening over time?

Why are they fragmented? I think it's the history of automobiles. I mean this was never a consolidated big brand business, but there's lots of brands or lots of categories like that. I think one that some of the older people in the room like myself would remember like pharmacies. So like pharmacies 50 years ago, it was the local mom-and-pop pharmacy or drugstore in the corner. Obviously, that industry now has become heavily consolidated. So I think as I've even been in this industry over the last 11 years, I think we've seen a capital flow into this industry from private and public investors. So the unit economics are good. The sophistication level with these independent operators is -- there's an opportunity there. So I do think over time, we're going to continue to see that fragmented portion of the industry shrink over time. I think there's no doubt in my mind that will happen. And I did mention that as certainly -- and we've been beneficiary. So if you look at the Take 5, Quick Lube business, part of our growth early on, we acquired, Brian, probably 150 to 200 units as we were building scale exactly from those individual owner operators. So I do see this continuing to accelerate over time.

And your view on leverage has clearly changed over the last several months. What's the primary driver of that? Is it the recent struggles in your capital-intensive businesses? Is it Gary's addition or something else?

No, I think the reason our view on leverage has changed is probably threefold. Number one is we are -- we have more company-operated stores than 3 years ago. And I think people's view on leverage guardrail used to be 5x when we're more franchised, I think people viewed that as too high for a more company-focused business. So that's number one. Number two is the interest rate environment. So like that's more expensive now and who knows when that's going to change. And then thirdly, I think we heard from a lot of our investors, we'd like you to see -- we'd like to see that number come down and really show the cash earnings power of this business and slow down a little bit of that capital and show us that we can actually generate cash and bring that leverage number down. So it's something that we've been aware of for a while. Obviously, Gary is, I would say, cementing that view.

Mark Jordan from Goldman Sachs. I guess going back to the 2026 EBITDA target, can you provide some color maybe on what the growth drivers looked like before some of the issues discovered at the U.S. Car Wash business? And I guess what I'm really trying to get at is with the lower contribution from Car Wash, what's making up the difference in the bridge?

Yes, I won't sort of talk about how the model has evolved, right? The model has evolved. And obviously, a year ago, we would have felt differently about the U.S. Car Wash contribution. But I think at the same time, we've accelerated the pace of growth within our Quick Lube business. So I think if you look at the model today, 60% or so is coming from Quick Lube, which we think is imminently achievable. We've got about $80 million coming from the U.S. Glass business and our conviction in that space is as high as ever. And then Kyle talked about our procurement platform. I don't think people realize that $51 million in 2022, and we think there's massive runway to get that high margin rebate dollars or procurement dollars in. So I think where we've moved off Car Wash, we've seen the accelerated momentum in Quick Lube. We obviously have Glass, which is new over the last 18 to 24 months. And then we're pretty bullish about the procurement opportunity to driven advantage.

Carolina Jolly from Gabelli. Just talking -- going back to you as portfolio managers, today, you talked a lot about your businesses that maybe are a little less complex to your SKUs than some of the other businesses such as Meineke maybe or Abra. Can you talk about why those -- the latter 2 kind of should be in the portfolio and the synergies, I guess, with the whole business?

The -- yes, I mean, you mentioned 2 businesses, but I'll give you examples. Number one is we benefit from fleet or commercial businesses that we apply across our portfolio. We benefit from marketing dollars that come in from those brands that we can use to generate brand awareness, not just for those brands, but then which could lead to cross branding. The procurement benefits that we get from all of our brands, obviously flows into the work that Kyle Marshall is doing in driven advantage. So I think there's benefits across all of our brands and reasons for them to be together. But I go back to my comment earlier, we will continue to evaluate what are the right brands for this business now and for the next number of years.

And can you correct me if I'm wrong, the $180 million in free cash flow, I think you mentioned from your mature names, does that change through 2026? Or is that kind of study?

We think if you looked at the historical numbers, I think it was sort of in the high $170 million, and that's the number, I think, for this year. So we expect without any change to the portfolio, that number would be a steady-state number for the next 3 years.

I think we'll wrap it up [indiscernible] Jonathan.

Yes. Just thank you all for being here. I know it's been a wild ride with driven brands, certainly this year. But thank you for being here, and look forward to continued conversations. Thank you all.

Thank you.