Driven Brands ($DRVN) puked on a February accounting restatement. Kyle Mowery (GrizzlyRock Capital) walks through why Take 5 remains a crown jewel and could be worth the entire EV of the company (making the franchise and autoglass businesses a free option). We also dig into how the April and May 8-Ks took the scary left-tail risks off the table, why Roark Capital (65% owner) might run a sale process later this year, and the bear case (corporate cost bloat, weakness in the non-Take-5 brands).
disclaimer: Andrew is long DRVN
Kyle's late 2024 DRVN podcast: https://www.yetanothervalueblog.com/p/grizzlyrock-capitals-kyle-mowery?utm_source=publication-search
[00:00:00] Intro and disclosures
[00:03:23] What is Driven Brands today
[00:05:14] Why the car wash divestiture sold so cheap
[00:09:19] Why Take 5 is the crown jewel
[00:11:15] EV risk and the US ICE car park
[00:13:21] Franchisee demand and unit growth
[00:15:31] Take 5 vs. Valvoline[00:18:13] The addbacks problem
[00:20:57] Inside the accounting restatement
[00:23:22] The cash adjustment
[00:28:50] The ATI revenue recognition issue
[00:30:12] Reading the April and May 8-Ks
[00:32:40] Debating adjusted EBITDA
[00:34:55] Corporate cost bloat
[00:37:54] Is this fraud? No
[00:39:49] Weakness in the non-Take-5 brands
[00:43:45] Sum-of-the-parts: Take 5 covers the debt
[00:46:30] Why public markets misprice the franchise brands
[00:48:04] Durability of franchise cash flows[00:50:14] Timing the resolution
[00:53:26] Roark Capital's strategic options
[00:57:40] Labor Day or Halloween?
[01:00:00] Capital cycle stories Kyle's watching
[01:03:02] Chinese supply pressure on industrials
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Production and editing by The Podcast Consultant - https://thepodcastconsultant.com/
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