Driven Brands Holdings Inc. (DRVN) on Q4 2021 Results - Earnings Call Transcript
Operator: Good morning and welcome to Driven Brand's Fourth Quarter 2021 Earnings Conference Call. My name is Tamiya, (ph) and I will be your operator today. As a reminder, this call is being recorded. Joining the call this morning are Jonathan Fitzpatrick, President and Chief Executive Officer; Tiffany Mason, Executive Vice President and Chief Financial Officer; and Rachel Webb, Vice President of Investor Relations. During today's call, management will refer to certain non-GAAP financial measures. You can find the reconciliation to the most directly comparable GAAP financial measures on the company's Investor Relations website and in its filings with the Securities and Exchange Commission. Please be advised that during the course of this call, management may also make forward-looking statements that reflect expectations for the future. These statements are based on current information, and actual results may differ materially from these expectations. Factors that may cause actual results to differ materially from expectations are detailed in the company's SEC filings, including the Form 8-K filed today containing the company's earnings release. Information about any non-GAAP financial measures referenced, including a reconciliation of those measures to GAAP measures can also be found in the company SEC filings and the earnings release available on the Investor Relations website. Today's prepared remarks will be followed by a question-and-answer session. We ask that you limit yourself to one question and one follow-up. I will now turn the call over to Jonathan. Please go ahead, sir.
Jonathan Fitzpatrick: Thank you. And good morning. We had another great quarter across the board. Our fourth has a public company, and are excited to share the results over the course of today's call, but even more importantly, our guidance for 2022 of adjusted EBITDA of $465 million, an increase of almost 30% over 2021. Driven is the largest automotive services company in North America. Our diversified portfolio of needs based services provides many levers to grow revenue through same-store sales, units, and M&A, which drive profit growth. Our total addressable market is massive. It's over $300 billion, and yet we have less than 5% share in this highly fragmented industry. Industry. We will continue to grow and generate cash because of our core competitive advantages: our multiple levers to open new units; we can build, buy, or franchise; our supply chain capabilities that keep us in stock and allow us to take share and price when others cannot; our scale, which is growing, is a significant and sustainable competitive advantage in our highly fragmented industry. Over the long term, Driven has and will consistently deliver organic double-digit revenue growth and double-digit adjusted EBITDA growth. Now that growth, together with our asset-light business model, means we generate a ton of cash. And our needs based services and franchise business model helps insulate our profit from the impacts of inflation. We then invest that cash to further accelerate our growth by building new units and layering on acquisitions, which as we have proven, adds massive incremental upside to our model. On our Q3 call, we announced our Dream Big Plan of at least $850 million of adjusted EBITDA by the end of 2026. Exceeding that plan is our primary focus. And we're making great strides already. Driven is growth and cash. Before I jump into 2022 and beyond, I want to take a moment to highlight our Q4 results. As always, all credit goes to our team and our amazing franchisees. Compared to Q4 of 2020, consolidated same-store sales were positive 16%. Revenue increased 36% to $392 million. Adjusted EBITDA increased 29% to $85 million. And adjusted EPS increased to $0.18 from just $0.01 a year ago, another top to bottom beat, our fourth in a row as a public company. For fiscal 2021, we increased revenue 62% to $1.5 billion, an increased adjusted EBITDA 76% to $362 million. And as I take a step back to reflect on the how and why of 2021, so much of this success is attributable to our benefits of scale in this highly fragmented industry. Despite COVID, suppressed vehicle miles traveled, supply chain disruption, and labor challenges, we grew and took share. We had product when others didn't because of our supply chain capabilities, which then allows us to take price to offset commodity and people costs. We staffed our locations. We could market when others didn't have the people or funds to do so. We grew our real estate and licensed pipeline significantly. And we acquired new stores at accretive prices. This is the power of the growing scale and sophistication of Driven Brands in a world where 80% of our competition remains small chains and independents. Scale is truly a compounding, long-term, sustainable competitive advantage, which most of the industry will never achieve. Tiffany will give more detail regarding 2021, but let's turn to our growth plans for 2022. I want to spend time on the three highest growth priorities at Driven, Quick Lube, car wash, and glass. These businesses share several unique characteristics, simple operating models, highly fragmented competition, significant white space in terms of unit growth, and very strong unit level economics. These highest-growth businesses are supported by the rest of our highly cash-generative and asset light businesses. This is what makes Driven such a powerful engine. Growth and cash. Now let's start with Take five Quickly Lube. The stay in your card 10-minute oil change. We were attracted to the simple and differentiated operating model, a simple menu, a simple building, and of course, the phenomenal unit level economics, high 30% four-wall EBITDA margins, and approximately 65% cash-on-cash returns.returns. When we acquired the Quick Lube brand in 2016, we have since grown that business more than 13 times, less than 50 units to over 700 with 23% franchised, and system-wide sales from 43 million to over 625 million in 2021. We've grown through same-store sales, new company units, new franchise units, and M&A. The pipeline for Take 5 today sits at over 700 commitments, with the majority being franchised. Like in 2021, in 2022, we will open more franchise locations this year than company-owned. We expect this brand to continue growing aggressively, both in terms of same-store sales and new units. Take 5 Quick Lube is the blueprint we are applying to our newer growth assets, Car Wash and Glass. Now we're just getting started with the Car Wash and like our Quick Lube business, this is a phenomenal, simple operating model with terrific unit level economics, high 30% four-wall EBITDA margins, and cash-on-cash returns of approximately 40%. We love the operating model, subscription revenue component, white space, and the opportunity for massive growth. You can clearly see why we're so excited about this business. As we mentioned last quarter, John Teddy rejoined Driven to run the U.S. business. And over the past 100 days, he has enhanced his leadership team, visited every market, implemented some early action plans, and has developed a long-term strategy and vision for the business. Despite all of these changes, the Car Wash segment delivered 6% same-store sales growth in Q4. And while I'm pleased with this performance, I know there is upside. And I'm eager to see John deliver on those plans over the course of 2022 and beyond. Our development team has done a tremendous job of building a Greenfield pipeline of over a 150 sites for car wash from just zero 15 months ago. In 2021, we added a 114 car wash locations in the United States, bringing our current total store count to 330, an increase of more than 50% over 2020. And we remain disciplined in a rising price environment. And we've been paying single-digit purchase multiples. In 2022, we will remain acquisitive with Carwash and will supplement that with at least 45 Greenfield locations. The future is very promising for our carwash business in terms of same-store sales units, M&A, and profit growth. And now we will apply the same proven playbook to our most recent growth acquisition. We completed the acquisition of Auto Glass Now, or AGN in late December. AGN is a great starting platform for our entry into the U.S. glass market because just like our Quick Lube and Car Wash businesses, it has a simple and differentiated operating model, a simple menu, simple building, and strong unit level economics. AUDs of approximately a million dollars, mid 20% four-wall EBITDA margins and cash on cash returns we are excited about because of the low initial investment. AGN is a business where we can leverage our growth blueprint, and significantly accelerate our presence in this segment. And our thesis on the Glass opportunity is simple. This is a $5 billion-plus growing market in North America. It's highly fragmented like all parts of the automotive aftermarket. There are tailwinds with the increasing need for calibration. Glass repair and replacement is required for all vehicle types. We can leverage our existing same-store sales levers, including our 20 million-plus unique retail customers, our deep insurance relationships, and our fleet customers all to grow this business. We learned a lot about the Glass operating model since we entered the Canadian market in 2019. And Michael Macaluso and his team are hitting the ground running and unlocking the opportunity we underwrote with this business. The new unit team is already building a robust pipeline like we have with Car Wash and Quick Lube. And as you can imagine, we will be highly acquisitive in this space. We're repeating our proven growth playbook and getting better each time we do it. M&A is a core strength at Driven, and all transactions to date have been accretive to earnings. We make the businesses we acquire better, and they make us better. Glass will be no different. We're excited to continue to reinvest into the business in 2022, we have world-class people processing systems for unit growth and that is why we're so bullish for the future. $275 million in capex in fiscal 2022 with about 90% of that earmarked for growth. Growth capital will be spent on new company units for Quick Lube, for Carwash, and now Glass. Remember we have plenty of available capital and look forward to growing all three businesses. And we get lots of additional store growth. . Between company and franchise stores to over 1200 locations. We have also budgeted capital to invest into the existing U.S. Car Wash store base. We'll be investing in store remodels and upgrades. And we will continue to invest in having one national Car Wash brand, Take 5 Car Wash. As always, we will continue to be acquisitive. And you can expect additional growth capital to be deployed into Car Wash and Glass. Now, pulling everything together into 2022 guidance on our longer-term outlook, we're bullish on 2022 and confident in achieving our guidance for adjusted EBITDA of $465 million because the team and strategy are in place. It's about execution. Our businesses are all performing well, growing, taking share, and generating cash. Our pipeline for unit growth, company, franchise and M&A is the Digital and Data . Nothing is modeled, but it will absolutely provide upside. Our scale gives us a competitive advantage, which continues to expand and compound. The industry is still dealing with some noise around COVID, vehicle miles traveled, inflation, and supply chain like in 2021. However, that doesn't change our overarching confidence in our business model and our growth and cash. Our dream big plan of at least $850 million of adjusted EBITDA by the end of 2026 is very much on track. The team and I are relentlessly focused on beating it. And the addition of the U.S. Glass business simply adds to our conviction. We're believers in this long-term plan because we are accounting compound grower. Our growth is low risk because of our current market share. We are asset light and generate a lot of cash, which we reinvest back into growth. Scale is driving even bigger competitive advantages. Our business model works well in all economic cycles. And finally, we execute and do what we say we're going to do. You can see this very clearly in our 2021 results and our confidence around 2022. Momentum continues to build. Driven is growth and cash. I will now turn it over to Tiffany for a deeper dive into the Q4 financials and 2022 guidance. Tiffany.
Tiffany Mason: Thanks, Jonathan, and good morning, everyone. Our fiscal 2021 results are a testament to the power of Driven Brands, a scale net integrated platform, and a growing business with a diverse needs based service offering that delivered very attractive margin. For the year, we posted $1.5 billion in revenue and drove adjusted EBITDA of $362 million, a 76% increase over the prior year. Adjusted EBITDA margins reached 25%, approximately 200 basis points of expansion from fiscal 2020, and who delivered adjusted EPS of $0.88. This was the result of $4.5 billion in system-wide sales, same-store sales growth, and 6% net store growth. Adjusting for driving -- period, we added 247 net new stores in fiscal 2021. We are proud of the entire team who continue to adapt to an ever-changing landscape, exceeding our expectation and delivering industry-leading results. We delivered on our commitments this year, both organically and inorganically. And we exceeded the first year of our IPO model by nearly 30%. By all account, Driven Brands had a great year. Now, turning into our fourth-quarter results specifically. System-wide sales for $1.2 billion, from which we generated $392 million of revenue adjusted EBITDA with $85 million, and adjusted EPS with $0.18, another top to bottom beat. We delivered this strong outcome despite continued supply chain disruption and inflationary pressure, as well as yet another COVID variant. Now, let me break things down a bit more. System-wide sales growth in the quarter was driven by same-store sales growth as well as the addition of new stores. We have tremendous white space to continue growing our store count in this $300 plus billion highly fragmented industry. As Jonathan discussed, our franchise, company Greenfield, and M&A pipelines are all robust, and we are aggressively growing our footprint. In the fourth quarter, we added 102 net new stores as we continued to lead into opportunities in the Quick Lube and carwash businesses. We are in the process of selling the drive in South business, which is a mobile reconditioning service for both the interior and exterior of vehicles in fiscal 2021, driving thousands of revenue that posted a loss. This business is not core to our strategy and we are actively marketing it. As a result, it is considered held for sale and has been excluded from our ending store count. Same-store sales growth was 16% for the quarter, which relatively consistent performance across the three months. We once again outpaced the industry across all business segments, continuing to gain market share. And our same-store sales were comprised of positive car count and average ticket. Car count was driven by our best-in-class marketing and customer experience and average ticket continued to benefit from the increasing complexity of vehicles, as well as our ability to pass through the cost of inflation. Now remember, we are approximately 80% franchised, so not all segments contribute to revenue proportionally. For example, PC&G was over half of system-wide sales this quarter, but only about 15% of revenue because it's effectively all franchised with lower average royalty rates. Maintenance and Car Wash, our mix of franchise and company operated, contributing approximately 40% and 30% of revenue respectively. As always, this is provided on our info graphic, which is posted on our Investor Relations website. When you put unit growth and same-store sales growth in the blender in account for our franchise mix. Our reported revenue in the quarter was $392 million, an increase of 36% versus the prior year. From an expense perspective, we continue to carefully manage slight level expenses across the portfolio. In fact, prudent expense management together with strong sales volume, drive forward gross margins of 38% at company operated stores. And above shop, SG&A as a percentage of revenue, was 20% in the quarter over 400 basis points of improvement versus last year. This resulted in adjusted EBITDA of $85 million for the quarter, an increase of 29% versus the prior year. Adjusted EBITDA margin was 22%, 100 basis points lower than last year as a result of the mix of our business. The maintenance and Car Wash segment contributed more of the EBITDA dollars this year versus last. Depreciation and amortization expense was $34 million, primarily attributable to the growth in company operated stores $4 million in the quarter. This decrease versus the prior year was primarily attributable to lower average interest costs on outstanding debt. For the fourth quarter, we delivered adjusted net income of $31 million and adjusted EPS of $0.18. You can find a reconciliation of adjusted net income, adjusted EPS, and adjusted EBITDA in today's release. Now, a bit more color on our fourth-quarter results by segment. The maintenance segment posted positive same-store sales of 26%. Maintenance continues to benefit from more targeted digital marketing, which led to an increase in car count from both new and repeat customers in the quarter. We were able to pass along a price increase while maintaining our premium oil mix, which drove average ticket. From a profitability perspective, segment adjusted EBITDA margin year-over-year was flat. However, margin contracted from the third quarter to the fourth quarter due to a combination of product cost increases in excess of retail price increases, and alternative supply costs incurred to mitigate oil supply constraints. The overall impact was approximately 200 basis points. By Q4, we had largely overcome the effects of the national labor shortage, which has provided a margin benefit in Q2 and Q3 as we ran leaner on labor than intended. The Car Wash segment posted positive same-store sales of 6%. Wash club subscription have increased to 50% of sales, and the number of wash club members grew by an additional $31,000 in the fourth quarter. This is up nearly 800 basis points or 200 thousand members since the acquisition in August of 2020. This is a great recurring revenue stream that provides a level of predictability to this business. Non-wash club revenue per wash continues to increase as well, the results of a simplified menu board and the focus that our teams have placed on improved selling techniques. As Jonathan discussed, we are testing and rebranding of some of ous car wash location to the trusted Take 5 brand name. This test will help determine the go-forward brand strategy for our U.S. car wash business. Rolling the Take 5 brand nationally to a large proportion of the state means that there could be a non-cash impairment charge in a future period of up to $130 million associated with the write-off of intangible assets for any retired brands, will be sure to keep you updated on our progress. The Paint Collision and Glass segment posted positive same-store sales of 11%. The additive was 650 direct repair programs with insurance carriers this year. The recovery in the collision business continues. Estimate counts for the industry continue to grow, and our shops have consistently outpaced the industry. We are optimistic about what that means for Fiscal 2022. We're also excited to expand our Glass offering into the U.S. with the acquisition of Auto Glass Now. Glass repairs are growing as a percentage of auto repairs and repair complexity is increasing due to necessary calibration. This provides yet another exciting avenue for growth, leveraging our proven playbook. And finally, the Platform Services segment posted positive same-store sales of 35%.Platform services is the segment most exposed to supply chain pressures. And as you well know, every aspect of the supply chain is challenged right now, from manufacturing, to the port, to trucking. We ended the fourth quarter with $523 million in cash and cash equivalents. We have leveraged our scale and leadership in the industry to turn this into a strength and differentiator for Driven. We contract with multiple suppliers, while most of our competitors, 80% of the industry that is independent operators, rely on just one primary supplier. We leverage the strength of our balance sheet to place orders earlier. And we have the team dedicated to relationship management, and ensuring we keep closed watch on every step of the supply chain. This is translated into more inventory in stock at 1-800-Radiator than many of our competitors. And customers have been willing to pay a premium, driving continued record sales levels within the quarter. We were pleased with our strong operating performance in the quarter, which resulted in significant cash generation that allowed us to further invest in the business. That cash generation, together with our revolving credit facilities and access to the debt capital markets, is important for our strategic growth plans. And as we've consistently stated, investing in our business and growing our footprint is our number one priority. In December, we closed on a $500 million term loan. The proceeds from the issuance will be used for general corporate purposes, including acquisition. We had $397 million of undrawn capacity on our revolving credit facilities, resulting in total liquidity of $920 million. Our net leverage ratio at the end of the fourth quarter was 4.4 times. Pro forma for the AGN acquisition, our net leverage ratio was 4.7 times. You can find a reconciliation of our net leverage ratio posted on our Investor Relations website. We intend to continue using our balance sheet to capitalize on the substantial life space in the $300 plus billion consolidating industry. Now looking ahead at fiscal 2022, disposable personal income is forecasted to be flat, but still well ahead of 2019, and VMT is expected to continue its recovery despite a near-term blip from the latest COVID variance. As a result, demand for our needs based services are expected to be strong in fiscal 2022. In fact, so far, in the first quarter, we are pleased with our performance. As we laid out in this morning's earnings release, we expect mid-single-digit same-store sales growth on a consolidated basis with fiscal 2022, driven by continued industry tailwinds, as well as the strength of our scale and sophistication when it comes to our key differentiators, our commercial partnerships, and our marketing capabilities, which include cross-marketing opportunities. And we expect to open approximately 225 net new stores across the portfolio, which is all organic growth. Our Take 5 franchise is strong, while Greenfield development continues. We've spent the past year building out our Car Wash Greenfield pipeline, and we're excited about Glass expansion in the U.S. We expect to deliver revenue of approximately $1.9 billion and adjusted EBITDA of approximately $465 million, which should result in adjusted EPS of approximately $1.04, based on $167 million weighted average shares outstanding. We are guiding adjusted EBITDA margin rates flat to fiscal 2021 While we were successfully able to navigate the inflationary environment last year and expand margins, we think it's prudent to approach fiscal 2022 cautiously. Given the widespread inflationary pressure that were and that is expected to continue most of the year, we want to ensure that we continue to drive growth in car count while managing our margin. Now there are just a few other items to mention as you model fiscal 2022. First, we anticipate depreciation and amortization of approximately $135 million. Second, interest expense is expected to be approximately $100 million. And lastly, our effective tax rate is expected to be approximately 30%. Also, keep in mind that fiscal 2022 is a 53-week year. The impact of the extra week is expected to yield approximately $15 million in revenue, $4 million in adjusted EBITDA, and $0.02 in adjusted EPS. And finally, because we were a new public company last year and they were significant volatility associated with year-over-year public comparison, we updated our guidance every quarter, rolling in each fee, and updating our outlook for the year. Our expectation for this year is a bit different. We shared our annual guidance today and we don't expect to updated again until the end of Q2. At that time, we rolling all M&A activity for the first six months of the year, plus organic performance to-date, and we'll share related forecast for the second half of the year. We believe this is a transparent and very reasonable approach for fiscal 2022. In closing, we expect the strength of this portfolio to continue to deliver best in-class results. We are focused on our proven formula, with a platform that is scaled and diversified. Our formula is simple. We add new stores, we grow same store sales, and we deliver stable margins. This results in significant cash flow generation that we reinvest in the business. We look forward to speaking with you again in late April when we released our first quarter results. And Operator, we'd now like to open up the call for questions.
Operator: At this time. I would like to remind everyone , we'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Simeon Gutman with Morgan Stanley. Your line is open.
Jackie Sussman: Hi. This is actually Jackie Sussman on for Simeon. Thanks so much. Congrats on a good quarter. The first question we wanted to ask was, so you guided for revenue above consensus by about 18%. EBITDA on the high single digits versus consensus and EPS also up a bit versus consensus. And it seems like the revenue dollar upside isn't fully flowing through to the bottom line. Any color on why that is and anything to keep in mind from a flow-through or modeling standpoint? Is there any conservatives on you're baking in on EBITDA?
Tiffany Mason: Hi, Debbie, thanks for the question. And I appreciate your thoughts on the year that we just ended. Appreciate the congratulations there. Listen, on guidance, I would say we are excited about 2022. We think we've got a lot of nice tailwinds heading into the year. Certainly industry tailwinds continue. Our businesses are performing strong. We did some significant M&A in 2021. That's going to provide some benefit in 2022 as well. So by all accounts, the consumer is in great shape. As I said in my scripted remarks, disposal personal income is flat, but well ahead of 2019. CMT going to continue to recover. Infact, the forecast is for the CMT to be up 6%. So by all accounts, nice, healthy environment for us to operate in. As we think about the profile, or about the P&L and the flow-through, what I would tell you is obviously when you think about adjusted for 465, that's 28% growth versus 2021 it's a nice, healthy growth year-over-year. We do have increased DNA in 2021 as a result of our continued growth of company operated stores across maintenance, car wash, and now the glass business. So that's a $135 million. Interest is up. Interest will be $100 million where we've issued two rounds of debt in 2021, we're getting nice favorable rate. The good news about favorable rates and building our war chest is that we can deploy that capital to continue to grow our business. So we'll deploy that capital this year. And we've got great pipeline of M&A built to be able to deploy that capital. So there should be M&A coming to offset that interest costs that's not modeled in our outlook. And then our effective tax rate is 30%. So those are the components that you need to think about that flow through, but we feel great about our guidance for 2022.
Jackie Sussman: Great. Thank you so much. And a quick follow-up. It looks like the Car Wash sensor sales of plus 6% were below what the Street was thinking, which was up mid-teens. And we recognize we don't have a lot of visibility into the compare, and how the segment that a year ago, and the U.S. versus the international mix. Could you provide any more color on the plus 6%? How that looks between the U.S. and international businesses? And on an underlying tier basis, how did the same-store sales evolved from the third to fourth quarter? Thanks.
Jonathan Fitzpatrick: Thanks, Jackie. It's Jonathan. I'll take a shot at that. We're not going to bifurcate the international and the U.S. market. But what I'll tell you, as I said in my remarks, we're a little over a year into the car wash business. We had bought phenomenal leader on in late Q3, early Q4. We're working on a bunch of stuff. We're building scale in terms of unit counts, building scale in terms of the pipeline for Greenfield growth. And I think 6% was a reasonable performance in Q4, as I said, I'm pleased with it, but I believe there is a ton of incremental upside. So we're early in the journey, and we expect that John and the team will continue to deliver even better results as we march forward. We won't bifurcate the -- either the two-year stack or the split between the international and domestic.
Jackie Sussman: Thanks so much.
Operator: Your next question comes from the line of Christopher Horvers with JPMorgan. Your line is open.
Christian Carlino: Hi, good morning. It's Christian Carlino on for Chris. Thanks for taking our question. Just to piggyback on the carwash business. Comps came in a bit short of expectations, but EBITDA came in a bit better. Actually, I think post of last quarter, there were some concerns around labor pressures at the company operated stores, so I guess could you just help us qualitatively think about flow-through within the Car Wash segment and how to think about that labor model going forward?
Jonathan Fitzpatrick: Yes. Great, great comment. And look, like I said, and I'll reiterate, we're not displeased with 6% for the quarter, right? We were doing a bunch of things in that business and making that business stronger for the future terms of the labor for that business. One of the reasons the Express tunnel carwash is so attractive to us is because of the efficient labor model. So really machines do the work in that business. When you've got a business that requires 3,4 or 5 people, much easier to staff that fully versus the business that may have 10, 15, 20 people. So we feel really good about the performance of the business in Q4. Q1, we're pleased with so far. And again, this is a very efficient labor operating model, and we think we're managing really well despite some of the sort of overall labor challenges in the market.
Christian Carlino: Got it. That's a really helpful color. And then just on the mid-single-digit guide next year, how are you thinking about the different segments? I think it's fair to expect that collision outperformed, just given the recovery in collision miles. But are there any other notable call-outs you'd help us think about segment level comp next year?
Tiffany Mason: Sure. Mid single-digit to your point is what we guided. What I would say about the second level of same-store sales generally, and this is statement about a year in total is we expect the segments to perform in generally a pretty tight range. So no real outperformance by any one segment. We think they will all perform somewhere around 200 basis points of each other. So all segments are performing well today. Collision, which had a bit of a later start in terms of recovery is performing well. As I said in my prepared remarks today, estimate counts are up. They're up in the U.S., they're up in Canada. We think that bodes well for that particular segment in 2022. So everything should perform well, everything around 200 basis points each other in mid single-digit comp for the company in total.
Christian Carlino: Got it. Thanks very much. Everyone, congrats on a great year.
Tiffany Mason: Thank you.
Operator: Your next question comes from the line of you, Chan Diwan with Bank of America. Your line is open.
Liz Suzuki: Hi. I'm Liz Suzuki. I'd like to ask about whether you see a wide disparity in regional trends in annual basis segment this quarter, and which region out-preformed the company's average and which ones under-performed?
Jonathan Fitzpatrick: You Chan, good question. We don't actually break down regional stuff at all, but I will give you this color. You can -- we track vehicle miles traveled, we track congestion miles literally on our state-by-state basis. You can imagine the places that have been open for business longer over the course of 2021, places like Florida, places like Texas, generally the Southeast are typically trending maybe a little bit higher, a little bit better than some of the places in the Northeast and the Midwest. Markets like Canada have been a little more lock downed than other markets. I don't think there's anything radically different than what you'd be reading about for other businesses in terms of where people are out and about moving, driving, more normal life than some of the areas that are still a little bit shutdown in in Q4. You also have the COVID variant developed in Q4, so that sort of exacerbated some of those issues, but I would say, generally, the southern states, probably a little bit outperforming some of the northern states.
Liz Suzuki: Got it. That's helpful. And then does Paint, Collision, and Glass do have a fair amount of recovered before it gets back to where you would have expected to operate pre-COVID? And could collision rate stay below historical given that a large portion of the working population do not as frequently as they were pre-COVID?
Jonathan Fitzpatrick: Yes. We're seeing vehicle miles traveled and congestion mile specifically, are the biggest drivers there in that business, but we're seeing sequential growth in that business, literally quarter-on-quarter, continuing to see that as we exit 2021. So I think that -- And we have an ability to look at work in progress, if you like, which is the amount of vehicles on our loss, and that seems to be pretty good right now. So I think it's as vehicle miles travels continued to return to normal, that business will continue to strengthen, but it's in pretty good shape, I would say, right now. But definitely upside as VMT returns to more normal rates throughout 2022.
Liz Suzuki: Okay. Thank you very much.
Operator: Your next question comes from the line of Sharon Zackfia with William Blair. Your line is open.
Sharon Zackfia: Hi. Good morning. The question on the environment we're in with the supply chain and inflation you've obviously executed really well. I'm curious how much of the comps recently have benefited from I would call it the price component of higher ticket that's independent of the operational dynamics of up-selling or what have you. So if you could give us some clarity on the inflation benefit to comps I think that would be helpful. And then as it relates to supply chain and your ability to execute so much better there than a lot of the competition, are you seeing any signs of that advantage narrowing at this point, or is that gap still pretty pronounced?
Tiffany Mason: Okay. Sharon, I'll take that first part your question then Jonathan can handle the second half. Let's talk about inflation for just a minute. And really we're somewhat insulated from the inflationary impact as we think about our franchise brands. So predominantly your question relates to our company-owned Quick Lube business and then the company-owned Car Wash business. I haven't seen a whole lot of inflation outside of wages in the Car Wash business. In the maintenance business, we are seeing some inflation and supply costs, predominantly in oil. In my prepared remarks, I talked about some -- in particular in the fourth-quarter, some cost increases that we had to take that resulted in some retail price increases. So generally what I would say is we've experienced mid-single-digit inflation year-to-date between oil and wages in our business. In the fourth quarter, it was a bit more pronounced. It was about double-digit in the fourth-quarter. So if you think about ticket and the impact of inflation on ticket, I would say it was more mix in the first three quarters of the year, driving ticket. It there's a bit more priced in the fourth quarter just based on the way that the year played out. So that's what -- that's how I answer the first part of your question, then I'll refer the second part of your question to Jonathan.
Jonathan Fitzpatrick: Hey, Sharon. Good morning. The supply chain advantages and when there -- whether they're going to diminish. On the contrary, Sharon, I think they're going to expand and compound over time, right? So remember 80% of this industry is small chains and independent. So their supply chain capabilities are completely dependent on third parties, right? We control our own destiny. Our ability to work with our vendors because of the size of our purchasing, because of our willingness to use our balance sheet or willingness to order well ahead of others, our ability to understand price elasticity and pass that onto the customer are vastly either franchise store models, which are insulated to driven from an inflationary perspective, or company-operated models, which are highly labor-efficient. All of that generates the ability to have highly efficient unit level economics and then supported by this massive supply chain capability. So actually, I think it continues to grow in scale and importance as we look forward.
Sharon Zackfia: Thank you.
Operator: Your next question comes from the line of Chris O'Cull with Stifel. Your line is open.
Chris O'Cull: Thanks. Good morning, guys. The car wash unit guidance and I think cultrate 45 Greenfields, which is a strong number for a single years growth, more than doubled, I think, a lot of your peers, so how is the company supporting its Greenfield development? And will new builds be primarily infills in existing markets?
Jonathan Fitzpatrick: Hey, Chris, Jonathan. Look, we have a track record of building lots of Greenfield locations. I don't know what our competitors are doing, whether it's half or a third of what we're saying, but it starts with building out a real estate pipeline. We bought the business back in August of 2020. There was no Greenfield pipeline. I think we've got about a 150 locations in our pipeline today, so that takes people process and systems, which we've had at Driven. We don't need to build up that capability. We're able to just expand that capability. So we feel really good about that number, and hopefully that number growing in '23 and '24 and beyond. So you have to have the people process and systems in order to build the pipeline. And then obviously execute on the openings and the construction, the project management, etc. In terms of infill or not. Chris, there is a lot of white space in this Car Wash industry. Obviously, we've got some core markets and we're focused on both white space within those core markets. And then we think there's some opportunities for new markets as well. So it like literally there is some amount of white space, so I think you'll see a combination of infill and some new market locations as well.
Chris O'Cull: Great. And then just a follow-up. I'm curious outside of the obvious lever of increasing Car Wash club subscriptions What are the other primary opportunities you see in the Car Wash business to increase sales at existing locations? Are there certain markets we're upgrading equipment to provide more premium wash performance could be used to attract more people?
Jonathan Fitzpatrick: I think it's a great question, Chris. Look, the subscription revenue component is an amazing part of that business. And as you think broadly in life, we start to getting much more comfortable with subscription revenue models across our lives. But I'll tell you a couple of things that you think about top-line revenue growth. One is product mix, so as people move up the product mix spectrum from lower-priced washes to more premium price washes, because maybe there's a ceramic option or a higher-end option, so that's one PMIX management if you like. The second is, addition of new customers. So we've got these 20 million unique customer database, which is growing. We have a lot of customers that go to our Take 5, Quick Lube brands, which obviously we're inviting them to come to our Car Wash brands. So that's an ability to drive for incremental trial within our business. So we think that's super important as we continue to capture data from our customers that come to our car wash, the ability for them to refer to other friends and family members. That's really important. So we think there's unbelievable opportunity to grow both top-line through new customer acquisition and then, obviously, menu mix management as people move up the menu. And as I noted in my remarks, we are continuing to invest into the existing asset base as well, specifically to upgrade equipment to add maybe incremental components to that equipment package, which then helps drive incremental new customers. It's combination of those three things.
Chris O'Cull: Thank you.
Operator: Your next question comes from the line of Karen Short with Barclays. Your line is open.
Karen Short: Hi. Thanks very much. I wanted to just ask a couple of questions on cadence and puts and takes throughout the year with respect to your guidance. So maybe a little color on how you think -- you've obviously commented on comps by segments within a pretty narrow range, but any color you could give on comps by quarter just because there are, I think, will be some pretty meaningful volatility? And then I'd ask the same question just about EBITDA margin by segment if there's anything to call out from a put and take perspective?
Tiffany Mason: Hey, Karen, yeah. Thanks for the question. So listen, in terms of quarterly expectations, I'll give you two statements and probably less segments specific and more just big picture. But here's how I think about quarterly expectations across the year. From a same-store sales perspective, I would say first half is expected to be stronger than second half and that's simply due to the fact that first-quarter last year was the weakest quarter because really the recovery was just starting to take hold. Vaccines have really gotten going. People weren't really very mobile yet. And so our first-quarter compare is a bit easier. So just surely because of that, we expect the first half to be stronger than the second half. If you think about adjusted EBITDA margins, what I would tell you is, the profile from Q1 to Q4 in 2021 will look very similar in 2022. So if you think about the way EBITDA margins played out in 2021, that profile looks similar as we think about building to that 25% for 2022. So while it's not segment-specific, I think that general guidance should send you in the right direction as you think about how to model our business.
Karen Short: Okay, thanks. That's helpful. And then you gave a potential write-down net dollar amount, that $130 million. Maybe just a little color on how you got that number and how you're thinking about from a timing perspective?
Tiffany Mason: Yes. Karen so a little bit of additional color for you. So -- listen, we bought the international car wash group in August of 2020. And when we bought International Car Wash group, there were a variety of brands in the portfolio that came with that acquisition. And there were values attributed to those trademarks that are sitting on the balance sheet. As we think about what the brand strategy should be go-forward for the U.S. carwash business, we're leaning into this idea that Take Five carwash could be the primary brand going forward. And we're doing some work right now to test that. We're testing it in a couple of markets as we consolidate and convert some of those old legacy brands to take by Car Wash. And we're testing it with some of our new greenfield builds. If it proves to be successful the way that we think that it will, and the precise measurement looks up to par, up to our expectation. Then we'll likely make the decision to make that a national brand, and we'll roll it in a pretty significant way. When we do that, the value of some of those old trademarks that were on the balance sheet at pretty significant values and marked as indefinite life, will have to be written down and or written off. And when that decision is made, and it will likely be some time towards the middle of this year, we'll have to take some amount of impairment. So the number that I gave today was up to $130 million. I stress that it's up to. it could be slightly less than that. But we wanted to make sure that everybody was tracking that and understood what that number could be so there was no surprise later this year.
Karen Short: Okay. Great. Thanks very much. That was helpful.
Tiffany Mason: You're welcome.
Operator: Our last question comes from the line of Peter Keith with Piper Sandler. Your line is open.
Peter Keith: Thanks. Good morning, everyone. Jonathan, I was hoping you could talk a little bit more about your digital marketing efforts. Where are you finding across the segments the biggest areas of opportunity? And then now that you've had the new position of the Chief Digital and Data Officer, has there been any big realizations or unlocks that you're finding as you leverage that Big Data Lake.
Jonathan Fitzpatrick: Hey, Peter, good morning. Yes. Look, I think over the course of this year, we'll get into more details around metrics coming out of that data and digital unlock. I think we're working through a bunch of stuff there, but the opportunity is really big. I think it comes from a couple of places, Peter, though, if you think about making sure that we are promoting our brands appropriately with different customers that live in the same trade area. So if you're a Quick Lube customer, let's make sure you're invited to our Car Wash and vice a versa or to our other brands. So really that cross promoting activity is something that we continue to work against and execute on. And over the course of this year, we will give you more specifics in terms of the success, the cost of doing that, and the returns. I think the second piece is around the, if you like, the digital landscape Peter, which is really about making sure that we make it as easy and seamless as possible for our customers to do business with one or more of our brands, right? So you could be thinking about how do we connect our different brand offerings in a market to our customer? Make sure that that digital experience as flawless, an easy for them to connect with multiple of our brands. I think the last thing is, again, as we think about, but the carwash rebranding that we're testing, as we think about the Glass business that we're now in, we have this unbelievable platform where we're capturing about 900,000 new customer -- information about new customers on a quarterly basis. We've got over 20 million unique customers. I don't think anyone else in our industry has that, so we have that process built. So really it's now taking that really strong platform and leveraging against both the digital and the cross promotion. So intentionally, we didn't talk about it too much this time. We're saving that for another call later on the year, but we'll give you a lot more detail in terms of what's being done and the return profile associated with that.
Peter Keith: Okay, great. We'll look forward to that. Maybe lastly, so congrats on the Auto Glass acquisition. Maybe you could just break down some of the synergy opportunities. I would think, just given your large insurance relationships, can you apply that to AGN and really unlock more revenue opportunities versus the $85 or so million they did last year?
Jonathan Fitzpatrick: Yeah. 100%. I said it -- I said it in my remarks, Peter, I think there's like -- there's three obvious things where we're leaning into already. One is that retail customer base that we have today, 2020 million plus unique customers. A lot of our customers from our other brands are in the same markets as our new AGN locations, so that's an obvious on lock. The second is we have incredibly deepened important partnerships, whether insurance carriers and we've obviously had lots of conversations with them. And we think that they are very eager to see if they can do more business in the Glass space just like they do in the collision space. And then the third component is what we call fleet business. So you think about our large fleet customers. They have large fleet of vehicles and they have Glass needs and we're a tried and trusted partner for them. So we think those three levers alone provide really interesting opportunity for that Glass business.
Peter Keith: Okay, sounds great. Thanks so much and congrats on a good year.
Jonathan Fitzpatrick: Thanks, Peter.
Operator: I will now turn the call back over to Mr. Fitzpatrick.
Jonathan Fitzpatrick: Thanks, Tamiya. And I appreciate everyone dialing in this morning. Just to reiterate, we're delighted with with Q4 with fiscal 2021 overall. More importantly, we are pumped about what 2022 is shaping up to be. And again, our , you all look forward to talking to you in Q2.
Operator: This concludes today's conference call. You may now disconnect.
