DRVN Q2 Deep Dive: Take 5 Drives Growth, Margins Face Pressure Amid Industry Softness

Automotive services company Driven Brands (NASDAQ:DRVN) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 6.2% year on year to $551 million. The company expects the full year’s revenue to be around $2.1 billion, close to analysts’ estimates. Its non-GAAP profit of $0.36 per share was 7.2% above analysts’ consensus estimates.

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StockStory’s Take

Driven Brands delivered a quarter that met and slightly exceeded Wall Street’s expectations, as reflected by a positive market reaction. Management credited the ongoing expansion of Take 5 Oil Change locations and strong customer loyalty as key growth drivers. CEO Danny Rivera emphasized the importance of consistent service and high Net Promoter Scores for Take 5, noting, “Our unique operating model paired with the passion and consistency of our team members and franchisees continues to deliver Net Promoter Scores in the high 70s.” Meanwhile, softness in the collision repair and Maaco segments weighed on overall results, with Rivera acknowledging continued discretionary spending pullback among lower-income consumers.

Looking forward, Driven Brands’ guidance is anchored by expectations for steady growth in its Take 5 segment and cautious outlooks for collision and paint businesses. Management sees opportunity to increase non-oil change revenue through new services and continued unit expansion, but flagged moderating growth as Take 5 matures and macroeconomic headwinds persist. CFO Michael Diamond highlighted the need for caution in the second half, stating, “We believe we are appropriately cautious for the remainder of the year,” while also reiterating a focus on deleveraging and capital discipline.

Key Insights from Management’s Remarks

Management attributed Q2’s performance to Take 5’s ongoing expansion, growing non-oil revenue, and stable customer demand, but flagged persistent challenges in collision repair and discretionary services.

• Take 5 unit and service expansion: The Take 5 Oil Change business added 41 new stores in the quarter and continues to roll out new non-oil services, now fully launching differential fluid service across company-owned locations. Management noted these new offerings are designed to fit the stay-in-your-car model and are producing high customer satisfaction and repeat visits.
• Growing non-oil change revenue: Non-oil services now represent over 20% of Take 5’s sales, with attachment rates (percentage of visits in which additional services are purchased) in the mid-to-high 40% range and some stores reaching the 60% range. Rivera sees no near-term ceiling for further growth in this area, citing ongoing product innovation.
• Franchise and international car wash stability: Franchise brands like Meineke and CARSTAR maintain strong free cash flow, while the international car wash segment posted a 19% same-store sales increase. However, management expects moderation in car wash growth due to tough comparisons and weather disruptions.
• Collision and Maaco segment headwinds: Both businesses continue to see softness due to claim avoidance and higher total loss rates in the collision industry, as well as reduced discretionary spending among lower-income consumers. Management does, however, highlight ongoing market share gains in collision.
• Debt reduction and capital discipline: The company monetized the seller note from the U.S. Car Wash sale, using proceeds to pay down debt. This contributed to a reduction in net leverage from 5x to 3.9x since the end of last year, with a goal to reach 3x by the end of 2026.

Drivers of Future Performance

Driven Brands’ outlook centers on continued Take 5 growth, expansion of non-oil services, and caution around discretionary business recovery and margin pressures.

• Take 5 growth moderation: Management expects Take 5’s growth to slow as it expands over a larger base, but remains optimistic about its long-term runway due to strong franchise and corporate pipelines and high customer retention. Expansion of new services is seen as a key lever for sustaining growth.
• Margin and cost headwinds: Operating margin compression is anticipated as store and SG&A expenses rise with new unit growth and technology investments. Management also mentioned that unfavorable weather, particularly for the car wash segment, and potential tariff impacts remain ongoing risks.
• Franchise and collision market recovery: The company expects continued pressure in Maaco and collision businesses, with recovery tied to normalization in consumer discretionary spending and claim activity. Management is watching for signs of stabilization, but remains cautious in its guidance and capital allocation.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be watching (1) continued expansion and customer adoption of new Take 5 services, (2) signs of stabilization or turnaround in the collision and Maaco segments, and (3) moderation in international car wash growth following recent weather and tough comparisons. Progress toward deleveraging and the ability to maintain margin discipline amid rising costs will also be important metrics to monitor.

Driven Brands currently trades at $16.80, down from $17 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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