Everyone, my name is Justin Kleber. I cover retail, consumer products, and services here at Baird. Pleased to introduce our next session with Driven Brands. For those of you not familiar with the company, Driven is the largest automotive services platform in North America. Just around 4,800 locations today. They provide needs-based essential services such as oil change, maintenance, paint, collision, and glass work. Roughly 80% of those locations are either franchised or independently operated. The company recently divested its U.S. car wash business, which I'm sure we'll talk about. That removed the most capital-intensive, most discretionary piece of the portfolio. The free cash flow in the business is at an inflection point, and that's helping the company deliver. With us from the company today, to my immediate left, is CFO Mike Diamond, who joined in August of last year. We also have Joel Arnao, who leads FP&A, Treasury, and IR. Thank you both for being here today. Thank you. Mike, maybe a question for you, since you are newer to the CFO seat. Just your path to the company, what attracted you to the role, and then what are some of the key deliverables you've been focused on since you took over the role? Yeah, so great to see everybody. Thank you for being here. Prior to my time at Driven, I spent a little over four years at Michaels, public and then private, and then six years at Yum!, working mainly with Pizza Hut. And so a lot of experience with the franchise system and different franchise brands and engaging in the roles of franchisor. What attracted me to Driven was really threefold. I think, one, you look specifically at Take 5 and the trajectory that Take 5 is on. It's in this magical little place in the retail growth curve where it can put a lot of new units in the ground, still see a lot of good comp growth. I want to say this, having been in more established, slower-growing brands, to really be part of something that is making fun capital allocation decisions on how to appropriately accelerate growth was really exciting. I think, second, the end markets that Driven plays in are really quite attractive. As we think about all the economic uncertainty over the last, even just several months, if not several quarters, to be in a non-discretionary space around transportation that is fairly well protected from some of the storms that can buffet the overall economy, it was really an interesting place to be in. Third, it is a company, set aside Take 5 for a second, that is growing. I thought with my experience as a franchisor, both good and bad, seeing positives and negatives, I thought I could bring something to Driven, particularly given what I thought was a path to drive significant equity growth in the business. What have I been focused on? I mean, I think you can probably hear the red thread there. One is growth. How do we make sure we allocate capital in a way that helps facilitate that growth while also deleveraging the balance sheet? How do we continue to act as more of a franchisor of choice, both across our franchise brands as well as our Take 5 business, which is more corporate now, but will continue to grow from a franchise perspective? Third, value creation. You talked about the sale of the car wash business. We continue to deliver. We resegmented our business at the end of the year to help drive what we think is a greater clarity on the key rock star of our business, which is the Take 5 business. Continuing to find a way to drive growth as a franchisor of choice, ultimately to help unlock what I think is the latent valuation power of the business. That's a great overview. We're going to touch a lot on Take 5. Before we get there, let's just also 30 seconds on the CEO transition, just as investors think about continuity in the C-suite. What, if anything, is really changing now that Danny has taken over for Jonathan? I think it's been right around a month since he assumed the CEO role. Yeah, I mean, I would say not a lot in the right ways. Danny is great. Jonathan was great. Danny obviously brings a different operational-focused energy, given his previous role as COO. As I mentioned on the call, and I'll just reiterate it here, I was aware that a transition would happen at some point. They were not able to tell me when, et cetera. I spent a ton of time with Danny during my interview process nine months ago to make sure I knew not only the old guy but the new guy. Danny and I get along very well. I think in reality, a lot of what you are going to see is a continuation on the broader macro strategy. Given Danny's experience in operations, including with our brands, I think he's dialing up the intensity a little bit on, I don't want to say day-to-day operations, but making sure each of the brands we have can operate to the best of their abilities, and then figuring out how that ladders up into the broader strategy. I've really enjoyed working with Danny. I think I've already talked to him two or three times today, which is good. All good. It's a really good working relationship. OK. Let's talk about Take 5. We think that's the growth engine of Driven, really the crown jewel of the portfolio. Maybe bigger picture, the quick-lube space, it's fairly fragmented, but there are some well-known scaled players in the business. Why is Take 5 winning? If you look at the last quarter, for example, your same-store sales were up 8%. Why does that business win? Why does a consumer choose Take 5? Yeah, so I mean, just for context, for those who may be new to our space, Take 5 is one of three large national players in the oil change space. We have a little over 1,300-ish units and growing quite considerably, both from a new unit perspective and a top-line perspective. I think what sets us apart is, and Danny says this better than I, we are the only national stay-in-your-car 10-minute oil change with an NPS score above 70. I think there is a couple of pieces there that are important to highlight. We are national. We have wide distribution. Our roots are in kind of the Sun Belt. As we have continued to grow, we expand further and further north. Stay-in-your-car 10-minute, we are a convenience play. When there is a lot of different demands on your time, we are able to get you in and get you out. There are many different drivers of value, but time is one of them. While we are also, I believe, competitively priced, we are a convenience play. A 70 NPS. As much as I like it, no one gets really excited that they have to go to do an oil change. The fact that we are able to get you in and get you out and do so in a way that leaves customers satisfied, I think, is one of the things that helps build the demand for us. The second thing is we are slightly smaller than our other two competitors. As we are able to plop down these boxes, and it's what I mentioned in that magical part of the retail growth curve, being able to continue to take a business model that is incredibly profitable, incredibly successful, and incredibly resonates with consumers, and then continue to add more and more of them puts us in that right place of the growth curve. You said just around 1,300 units, about 40% of those are franchised today. How should we think about the unit growth trajectory over the next three to five years? How much visibility do you have into that pipeline? Maybe the mix of how that pipeline looks between corporate-owned stores versus franchised? Yeah, so we mentioned this on, I think, most of our calls. Our pipeline is about 1,000 units today. We've got line of sight to, I would say, actual dirt for about a third of those already. Our outlook for this year that we gave last quarter was 175-200 total units, of which Take 5 encompasses a significant majority of that. To your point, 60:40 corporate to franchise in the ground. As we go forward, we are opening over the next couple of years probably more 50:50 corporate to franchise. Over time, the number we open will evolve towards more 2:3, 1:3 franchisee to corporate. As you think about the line of sight we have over the next several years, we expect that portfolio to probably start to look more 50:50 over the coming years as we open more franchise to corporate. We will continue to open corporate stores. I get this question sometimes. The underlying economics are just so strong. It is a sub to three-year payback for these assets. Part of what I spend a lot of my time at night is making sure I'm not choking off growth to Take 5, just because the underlying economics are fantastic, best I've worked with. It is a great business model to be in. I want to grow franchise. I believe in the power of the franchise model. Man, we've got some sites that just make a lot of sense for us to use our own capital to build. Let's maybe double-click on unit economics just a bit here. You would not be seeing demand from your franchise partners to open more units if these unit economics were not as compelling as you just described. Maybe just level set the audience, what the net investment looks like, how these stores open up, ramp, and then from a franchisee perspective, what does the cash-on-cash return profile look like? Yeah, thank you, Justin. From an investment standpoint, the cost of a build, depending on locations, is between $1 million and $1.5 million. Usually a three-year ramp for us that you start to see with margins in the mid-30s, cash-on-cash return about 30% for an investor as well. OK. I alluded to the comp trajectory, about 7% in 2024, 8% in Q1. How do you guys just think about the normalized comp algorithm for this business? How does that break down between transactions versus what are some very visible average ticket growth drivers? The way that we look at it candidly is a little bit of growth is coming from both, for both ticket and customer traffic. The comp growth itself has been pretty steady. As we've kind of given guide for Take 5, expect it to kind of continue as we go through the rest of the year. It will kind of normalize as we get to 2026 and beyond. The only other thing I would add is ticket sometimes can be viewed as a bad word, particularly as we kind of are in this inflationary/post-inflationary, potentially re-inflationary environment. Ticket can mean price, but at least in my old QSR days, it can mean basket as well. Part of what we're using to drive ticket is an increase in services. It's not just adding $1 or $5 to every oil change. We have a series of services: oil filters, wipers, differential fluid. I'm going to miss one and get made fun of for it. We're able to service customers in addition to the oil change. Part of what you're seeing when we do grow ticket is not just extracting a premium to pay. It's continuing to deliver on that convenience and service aspect that helps us provide additional services for higher ticket. Where does that, Mike, where does that non-oil change revenue penetration sit today? What do the attach rates look like? How variable are those across the chain? Just as we think about the growth in non-oil change revenue, how much is just driving that attach rate up versus maybe layering in additional services over time? Yeah, so the non-oil change revenue is about 20%. As Mike said, it helps with adding some to the ticket. Varies, I think, from store to store in terms of the attach rates. Certainly, there's still a lot of growth there for us. I feel like there's a lot of headroom. We'll kind of help fuel growth in Take 5 as we go forward. OK, OK. I want to talk about premiumization as well, as it relates to average ticket. How much of a structural tail? And we often get the question, are you starting to hit a ceiling in terms of how high you can drive your premium oil mix? I think it sits around 90% today. So maybe dissect that 90% between semi-synthetic versus fully synthetic blends. Yeah, so if you kind of think about it, premiumization is at 90%. And it has continued to be there the last several quarters. The reality is we expect that to continue to kind of stay there and stabilize. The semi-synthetic growth is the bulk of the premiumization. And as cars are getting older and the need to go to a full synthetic oil starts to continue to build the business case, we will start to see a trade up and expect that to kind of continue growth as we go forward. OK. Maybe on the transaction side of the business, do you have a sense for where you're sourcing new customers from? I think many investors view this as a zero-sum game amongst you quick-lube players. In reality, the industry is much larger than just quick-lube. Do you have a sense for when you're taking share, is it from the dealer network? Is it from the full-service maintenance and repair shops? How do you source those new customers? Yeah, I mean, as you mentioned, there's a lot of people who provide oil change. We believe we are the most convenient and therefore provide the best value. I would say at this point, more of the share is coming from the mom and pops out there. There are still a lot of them. And they are giving a lot of share as a donor. From a dealership perspective, the life cycle of a car tends to be you own a car in the first couple of years. You trust your dealer with it. Then as the car ages, you're more willing to go to a quick lube. I would like to tell you that we compete aggressively with dealers. I think in reality, while I'll always take your business if you're currently taking it to a dealer, in reality, you'll probably get to a point where the dealer, either you've bought the package and now the package has expired, or the car gets a little older, and you're not willing to drive the extra 30 minutes to get to your dealer. You're just going to take it to the place down the shop. I think what is important to me is we think we can coexist significantly with our other national peers in the space. There are a ton of oil changes out there. There are a lot of oil changes that aren't currently serviced by us and our two other national competitors. We still think there's a long runway for growth. You mentioned the margin profile of this business. Not only is it high growth, it is also high margin, mid-30s, even down margins. Just what is the room for expansion longer term? Maybe touch on there was a little bit of a margin dip in the first quarter. What was the driver of that? How are you thinking about the margin profile of the business? Yeah, margin growth is a bit of a balance for us coming from company-owned and franchised. We expect for the full year that margins will stay consistent to what we've seen in the past. From a growth standpoint, I think Mike is always demanding more margin for the business. It is a healthy balance between the conversations we're having with the operations teams. I think from that standpoint, there are always going to be some trade-offs. Certainly, there was a little bit of a dip. As we talked in the Q1 earnings call, we had a little bit of headwind with some G&A and some rent that came through. Some of that was just some timing as well. Like I said, we expect it to kind of be consistent throughout the rest of the year. OK. Let's shift gears and talk about the franchise businesses. Obviously, a portfolio of more mature but highly cash-generative businesses. Just what role does this segment play within the overall Driven portfolio? Yeah, I mean, I think you hit the nail on the head. Cash flow generation is, to me, the key aspect of this. You think about the amount of EBITDA we generate out of that business with fairly modest capital needs. It is a significant cash flow engine for us. As we think about wanting to continue to invest in growth for Take 5, as well as to continue to deliver our balance sheet, the franchise brands are really critical. I think the second probably under-heralded aspect is we build a lot of our relationships with fleet and insurance companies based on our franchise brands. It is those types of relationships that then help us if we want to talk about glass from an insurance perspective or growth in our fleet business in Take 5, which is still an opportunity. It is that relationship we have. Insurers have certain requirements. It is not just showing up at the door of one of the property casualty guys and saying, hey, let me just send you to the shop. Quite frankly, in some of our franchise brands, it is our relationship with the insurers that caused some of the independents or mom and pops to want to join our company because they know that with our banners, they get better access to that. I view it as stability. It is probably the bond-like aspect of investing in Driven. If Take 5 is the growth and AGN is our call option on future growth, the franchise brands give us that stability and our cash flow that we are going to use to help fund future growth as well as help us deliver the balance sheet. You mentioned AGN, we'll talk a little bit about that. Maybe I'll lump the question into two kind of longer-term growth drivers, one being glass, but also maybe just touch on Driven Advantage, which is kind of the marketplace procurement engine of the business. Again, earlier stage growth vehicles. Yeah, so let's start with glass. We continue to believe that glass is a really exciting end market for us, for us to be in, and where we have a right to play. We've mentioned some of the insurance relationships that we already have. They know what Driven can deliver across the other brands that we offer. When we are knocking on the door, participating in their processes, we are able to have credibility. It's not just a, hey, I'm Mike Diamond. Can I fix your windshield? We're able to talk about all of the various franchise brands and the relationships we've built. It's got a strong incumbent who does a fantastic job. We don't believe that we can displace them. We just believe that there exists a right to have a second national competitor. We have national distribution there. I do not want to say it is a choppy business, but RFPs for insurance companies come up every couple of years. We need to work through that. We need to get our operations and continue to improve it. I feel really good about that. I think we have a good way to go and a way to be successful. What I would tell you for this audience as well is we do not have to be successful in AGN immediately to unlock value given the rest of the strength of our portfolio. Driven Advantage is, I would say, two things. At its core, the origin of Driven Advantage is a way to leverage the purchasing power of Driven for both our corporate and franchise-owned stores. Immediately, it's a sexy branding of an internal procurement function that enables both our stores as well as our franchise stores to leverage us. As you think about it, we believe it has growth opportunity going forward to let others who aren't currently part of the Driven platform take advantage of our scale. That does require a different set of skills that we're continuing to work on. Again, I would say it's nothing but an upside. As it stands today, we continue to benefit from the economies of scale. We will continue to add new products and providers to the platform. It gives us the ability to continue to talk to people who aren't necessarily in the Driven platform and leverage our buying power and the ability to sell those products further. OK. Let's move to maybe some of the financial discussion here. We'll talk about tariffs, everyone's favorite topic. Maybe just remind the audience your exposure to tariffs, what the mitigation playbook looks like at Driven. I haven't checked the news this morning, so I'm not sure if I'm out of date. I would say in general, our exposure to tariffs is modest for a couple of different reasons. First, let's start from the demand side. As we've talked about in the past, non-discretionary category, people need their cars. In fact, even in times of economic uncertainty, their car oftentimes becomes that much more important, whether it's a downshift in vacations to more driving vacations or just you're worried about making money, you need your car to get to your job. We feel good from where we're located from a demand perspective about the ability of Driven to continue to service very effective non-discretionary categories. From a supply side, it's obviously more nuanced. There are a couple of things I would call out. Oil, driven by market dynamics, largely tariff exempt. The price of oil goes up or goes down. That is largely independent of tariffs. To the extent there is macroeconomic uncertainty, oil prices tend to reflect that as well. Much of our product is either domestic or sourced from Mexico and Canada. Domestic, you do not have to worry about as much. Mexico and Canada is a party to USMCA and therefore is largely tariff exempt. For some of the products, we are modestly exposed to tariffs. We are actively working on mitigation strategies. We are not really single-sourced on any specific product. To the extent there are some products where we are exposed, we have alternative sources of supply that we are either actively or already have moved supply out of, I guess, now potentially higher tariffed impact. I do not think they are technically applied now for most of this. In general, the takeaway, though, is modest exposure, strong demand markets just given the protection of non-discretionary and an ability to leverage some of the existing tariff-exempt infrastructure around USMCA to maintain those protections. Yeah, it's nice to have pricing power, too. Absolutely. Question from the audience just around, you still have an international car wash business. Why has that been more stable than the domestic business? And just what's the role that that business plays in the overall portfolio? Yeah, no, I was actually in London last week meeting the team. It is a really well-run business. They do a really good job. I think that the biggest differential is they are the market leaders. Unlike the domestic business in which there were somewhere between half a dozen to a dozen competitors each trying to get in, we have clear market leadership in the U.K., in which there really is not a second player, and Germany, in which there are players, but they are not nearly at our size. We are also the market leader in some of our other countries we are in, although our scale there is smaller as well. It is not worth talking about as much. I think one is we have clear market leadership. There therefore has not been this race to try to supplant us because the gap between us and everybody else is big enough that it is a pretty big thing to bite off. The second is the model is a little different. We run an independent operator model. It is franchise-like. We still are responsible for the upkeep of the asset. The independent operator is a non-employee who runs the site, is there day in and day out, and managing the customer relationship. It looks a little bit more franchised. I think that is a benefit for two reasons. One is it places responsibility for the experience and the operations in the hand of a local entrepreneurial focus. The second is the economic profile just looks a little bit better for us. It feels a little bit more franchise-like in the margins than running a 300 corporate-owned domestic car wash business. OK. I mentioned earlier that the CapEx, capital intensity of the business is declining fairly dramatically. You're guiding this year 6.5-7% of sales, which is maybe $150-$175 million. What's kind of the right go-forward run rate for CapEx? How do you break that down between growth versus maintenance versus maybe corporate IT type of initiatives? Yeah, well, three things. I think it's 6.5-7.5. So keep me honest. I don't want you to shortchange me on that extra 50 basis points. Second, at a kind of we don't provide direction beyond this year. But we own the U.S. car wash business for a quarter in 2025, and we won't. It will probably is realistic to expect it to come down a little bit more as we won't have that business next year. The way I think about the total quantum of spend is I break it down into three buckets. Half of that CapEx is supporting Take 5 growth, building new locations, getting them in the ground, continuing to support what we think is a really strong growth engine. That's, I think, an important lever for us. As I've said, making sure I maintain my dual commitments of delivering and continuing to invest in growth, allocating enough capital so that we can take advantage of our growth position. I do not want to lose the momentum we have right now to continue to grow that. The second is what I would call the normal corporate CapEx to both maintain an ERP system. We need laptops for people. We need to make sure we have appropriate information security, as well as some of the growth investments needed for our franchise brand. It is not zero CapEx. If you wanted to go today and get a paint job with Maaco, you would go to our website and have an OET, an online estimator tool that requires some investment from a technology perspective. We need to get vans for AGN. We need to have an online estimator tool for AGN so that our glass business, if you went to Safelite and you went to us, we could continue to deliver that experience. That is about a quarter of our CapEx spend. I would say the normal corporate running of a corporate business, as well as modest franchisee other brand growth to make sure we continue to be relevant and fulfill our commitments as a franchisor to our franchisees. The remaining quarter, maintenance CapEx. We still have over 1,000 company-owned stores. I have been at brands where they take the spigot off of maintenance CapEx and they start to show the wear for it. CapEx deferred is still CapEx you have to pay. Given where we are in the growth curve, we are very focused on making sure these assets are our best foot forward, continue to drive NPS for our customers, lean into the convenience aspect. We have got to make sure we keep up the upkeep. Another question from the audience just as we think about adjusted EBITDA guidance this year, $520 million-$550 million, how do you think about the free cash flow conversion? What's the outlook for free cash flow for this year? Yeah, and I get this question a lot. We haven't explicitly provided free cash flow outlook. I'll try to give you some of the building blocks. Adjusted EBITDA $520 million-$550 million, there's always some cash expenses that get added back. You've got to deduct that a little bit just from some of the add backs within the, and you can see it in the adjusted EBITDA table and get a pretty good sense of which ones are cash. We mentioned CapEx, 6.5%-7.5%. Cash interest, please look at whatever I said in the Q1 earnings. I'll get this directionally right, but exactly wrong. Call it $140 million-ish of cash interest. Our interest expense will be lower because now that we've sold the car wash business and have the seller note, there will be PIK interest that offsets that. There is about $140 million there. We have some cash taxes, not a lot, but some. The interest yield helps. Some NOLs help as well. We will pay a little bit of that. If you think about it, you have the $500+ million of EBITDA, a little bit of deduct for the adjustments, CapEx, interest. There is still a healthy amount of free cash flow flowing through this business. We are really plowing that into just a couple of different things. One is, again, continuing to grow Take 5. Two is continuing to maintain our commitments on the deleveraging point, three times net leverage by the end of 2026, and just making sure we land that plane. Just on that, the path of deleveraging, probably a year ago you were close to five times. I think we have you pro forma for the car wash sale around four times. You're making good progress. I mean, is there anything, I guess, out of model that would accelerate the deleveraging path? Is it really just using any more assets held for sale on the balance sheet that you still are planning to monetize? Is it really just taking the free cash flow and using that for debt pay down? I'll answer it two different ways. We don't need anything else to get to the three times by the end of the year. You're not going to see us immediately try to fire sale stuff just to get down there. I think there are a couple of things. We still have some assets held for sale. I think in our last quarterly earnings, we said we're roughly 80% of the way through selling our assets held for sale. There are still double digit, but not triple digit, like a, sorry, nine digit versus whatever. Somewhere in the $20 million-$50 million range of assets held for sale that we may have is kind of within that 20% remaining of what we've sold. There is the seller note we've got from the car wash deal that will go on our balance sheet as a note receivable at the present value. We think it's not a bad, it's good money. It's good interest. Potentially we could monetize that if we wanted to. The most important thing is underlying cash flow is strong. We continue to see EBITDA growth. We see a path to the three times leverage with just kind of operating our business and hitting our marks. All right, within the last minute, Mike or Joel, just what do you think is the most misunderstood or underappreciated part of the Driven story as we sit here today? Take 5, Take 5, Take 5. I mean, we've talked a lot about it as the growth engine. We have changed how we report publicly to make the comparable and really kind of see the growth of that. When you look at just the overall portfolio for us, I mean, Take 5 has really been the growth engine. I don't think that we've quite gotten the perspective from investors yet that just how strong and how unique and how really awesome that business is that we've built over the last 15 years. I do not disagree. I agree. I want to just reiterate kind of what I said earlier around how I think about Driven. I think it does reinforce the power of Take 5 as well. I view our story as equity bond option. Take 5 is the equity value of the company. I actually think it probably at this point explains all of where we currently are. That is fine. We owe it to you guys to continue to operate and demonstrate that we can hit our marks. I think we have got the franchise business, which not only gives us access to the relationships and the red thread of some of this B2B that is helpful across the rest of the portfolio, but it is a really good stable cash flow generation to support the balance sheet and future growth. You have the call option on our AGN business, which I think is not reflected in current value, does not have to be, but is the potential for future upside. I think we can continue to drive significant growth just from the Take 5 business alone. We have other levers here to help us continue to grow. That's a great place to end it. Please join me in thanking Mike and Joel Arnao. Thanks.