Driven Brands Holdings Inc. (NASDAQ:DRVN) Q4 2022 Earnings Call Transcript

Driven Brands Holdings Inc. (NASDAQ:DRVN) Q4 2022 Earnings Call Transcript February 23, 2023

Operator: Good morning, and welcome to Driven Brands Fourth Quarter and Fiscal 2022 Earnings Conference Call. My name is Rob, and I will be your operator today. As a reminder, this call is being recorded. I would now like to turn the conference over to Kristy Moser, Vice President of Investor Relations.

Kristy Moser: Thanks very much, and welcome, everybody, to Driven Brands’ fourth quarter and fiscal 2022 earnings conference call. In addition to the earnings release, there is a leverage ratio reconciliation and infographic available for download at our website at investorrelations.drivenbrands.com, summarizing our fourth quarter results. On the call with me today are Jonathan Fitzpatrick, President and Chief Executive Officer; and Tiffany Mason, Executive Vice President and Chief Financial Officer. In a moment, Jonathan and Tiffany will walk you through our financial and operating performance for the quarter and the year. Before we begin our remarks, I’d like to remind you that on this call, management will refer to certain non-GAAP financial measures.

You can find reconciliations to the most directly comparable GAAP financial measures in 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 in regards 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 could cause actual results and events to differ materially from the results and events contemplated by these forward-looking statements. These risks and uncertainties include those set forth in our earnings release and our filings with the Securities and Exchange Commission.

These forward-looking statements are made only as of the date hereof, and, except as required by law, we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise. Today’s prepared remarks will be followed by a question-and-answer session. We kindly ask that you limit yourself to one question and one follow-up. With that, I’ll now turn the call over to Jonathan.

Jonathan Fitzpatrick: Thank you, and good morning. 2022 as a year of record performance and significant strategic progress for Driven Brands. We deepened our competitive moat by expanding our network benefits and our differentiated offerings resonated with our customers. We are redefining the industry by embracing simplicity and a customer-first mindset, making car care faster, friendlier and more convenient. We continue to gain significant share in this large, growing and highly fragmented $350 billion automotive aftermarket category, leveraging our proven playbook to drive long-term, sustainable growth. Since 2019, we’ve tripled our revenue and quadrupled our adjusted EBITDA, while significantly expanding our footprint. In 2022, we delivered results ahead of our guidance, with 39% revenue growth, supported by 14% same-store sales growth and 9% new store growth, which translated to 42% adjusted EBITDA growth.

We continue to navigate a challenging macro environment, demonstrating our consistent execution and the resilience of our needs-based service offerings. That generated strong cash flow, which we used to reinvest in the business and gain further market share. Now all credit goes to our 11,000 Driven Brands’ team members, our amazing franchisees and our loyal long-term customers. Our business remains resilient. Our team is executing, and we continued to deliver strong growth on both the top and bottom line in the fourth quarter, including the seventh consecutive quarter of double-digit same-store sales growth. We entered the first quarter of 2023 with momentum and excellent visibility into our expense base. Our 2023 guidance released this morning reflects that momentum and our continued confidence in our diversified platform, the resilience of the automotive services category and a strong track record of execution.

We remain highly cash flow generative, creating capacity to reinvest in growth. Our pipeline of future openings continues to expand, giving line of sight into multiyear growth. And we have multiple levers to deliver that unit growth: franchise, build or buy. The power of bringing these businesses together on the Driven platform is tangible. The diversification and the breadth of our offerings provide significant benefits of scale as well as a natural balance and additional resilience to our business. This diversification is complemented by the significant network benefits that our brands collectively create through scale and a carefully curated offering. The network benefits include: driving more value for and sales for our commercial customers; delivering revenue growth and cost savings from procurement; and unlocking the share of wallet benefits from the largest database in the category with 30 million unique customers.

These network benefits continued to compound as we grow our diversified platform, and we look forward to sharing more on that at our upcoming Analyst Day in May. Our continued execution, combined with the strength of our business model, gives us confidence that we are on track to meet or exceed our Dream Big Plan of $850 million of adjusted EBITDA by the end of 2026. As our consolidated business drove strong performance and cash flow, we continue to make significant progress across our key growth categories, Quick Lube, Car Wash and Glass, leveraging our proven playbook for growth. And from a customer perspective, our solutions-oriented approach to simplifying and enhancing the experience is resonating across our growth segments, supporting our market share gains and strong unit level economics.

Now starting with Quick Lube. Take 5 Oil Change, our differentiated 10-minute stay-in-your-car quick lube model, continues to drive customer acquisitions and best-in-category same-store sales, which further accelerated in the fourth quarter to over 25%, driven by both ticket and traffic, continuing to outpace the competition. As our unit count has grown, so has our unaided brand awareness. Take 5 is now the second most recognized quick lube brand in the U.S., just six years after Driven Brands entered the category. As consumers become more aware, there is a faster, friendlier and simpler alternative for their oil change at a more cost-effective price than dealerships, we continue to gain market share. In addition to our strong same-store sales performance, we grew our footprint 20% year-over-year to 850 North American locations, including close to 250 franchise locations.

Our pipeline has continued to expand to 950 units, primarily made up of franchise locations, giving us a long runway for sustainable and predictable growth. And we’re on track to grow our footprint by an additional 20% in 2023. Shifting to car wash. We are the largest provider of car wash services globally with over 1,000 locations comprised of a single branded more established international business, and what has quickly become the largest express car wash provider in the U.S. with a growing footprint of almost 400 locations. The long-term opportunity within the Car Wash business remains compelling with strong profitability and cash-on-cash returns. As we cautioned last quarter, we continued to experience some headwinds in the fourth quarter related to foreign exchange and softer retail volume as a result of the macroeconomic environment that Tiffany will discuss shortly.

Our scale and experience will remain a significant competitive advantage as the current environment is beginning to rationalize the competitive intensity of new entrants. Additionally, as we look to past cycles, the industry remained resilient relative to the broader retail industry. Our greenfield pipeline for openings in the U.S. remains robust at over 250 locations, with roughly 65 expected to open in 2023, enabling us to be more selective with tuck-in M&A, following our proven playbook for growth. As we migrate our footprint under the Take 5 brand, which was approximately 50% complete as of year-end, we are elevating our brand awareness, standardizing our market positioning, operations, system and customer experience. This, in turn, allows us to integrate our Take 5 Unlimited program and enhance our data capture capabilities.

In fact, we grew our total Wash Club members to 675,000 subscriptions. By the end of the quarter, in aggregate, locations where rebranding was complete, delivered positive same-store sales and mid-single-digit higher adjusted EBITDA margin than the locations yet to be rebranded. If you combine our 850 Quick Lube locations with our nearly 400 Car Wash locations that will soon operate entirely under the Take 5 brand, and include growth plan for 2023, we will have over 1,400 Take 5 branded locations. We remain bullish around the long-term synergies of leveraging one brand across two great businesses. Now wrapping up with Glass. In the fourth quarter, we continued to enhance our position as the second largest player in the highly fragmented $5 billion U.S. auto glass servicing category, ending the year with over 188 locations and over 800 mobile units in the United States.

And we’re following the same growth playbook that we used in Quick Lube and Car Wash. We are now shifting towards smaller tuck-in acquisitions and greenfield mobile and store openings, which have the best cash-on-cash returns in our portfolio given the compelling unit level economics. In addition to strong unit growth, store volumes continue to increase as we begin to see the early benefits from our implementation of calibration services and expanding our commercial relationships. And as we migrate our footprint under Auto Glass Now, that not only strengthens our brand recognition with consumers, it also upgrades our systems and standardizes our operating procedures that enables us to further capture commercial volume. We expect to continue to grow commercial volume at our locations through the year, with the addition of fleet and regional insurers in the short term and large national insurers in late 2023 and 2024.

The benefits of scale from further growth and the increase in commercial business as we mature our footprint over the next year will provide a tailwind to the already compelling economics. And with the current footprint that covers approximately 20% of U.S. consumers today, there remains significant white space for continued expansion over the next several years. We couldn’t be more excited about the long-term potential of the Glass business. Now looking across Driven Brands, our robust development pipeline has continued to grow to over 1,600 locations which are approximately 35% site secured or better, giving us strong visibility into sustainable, predictable unit growth over the next few years. Within this large and highly fragmented category, there remains significant white space, creating a long runway for unit growth, same-store sales growth and market expansion in the future.

And we believe there is no one better positioned to capitalize on that opportunity than Driven Brands. Beyond the breadth and strength of our brands, our scale and our shared service capabilities create significant network benefits that deepen our competitive moat and differentiate our business, further enabling unit growth, incremental store profits, same-store sales growth and cost savings. We continue to leverage data, technology and scale. Over time, these network benefits will include simplifying car care and rewarding our customers so they can focus on the road ahead. So, let’s talk about some of these network benefits. Beginning with commercial business. Our B2B sales continue to represent approximately half of our system-wide sales, including the top 20 insurance carriers, regional and local insurance carriers and a large and growing fleet business.

creating an additional layer of resilience to our business. Within our collision business, our B2B volume for the top 10 carriers was up 38% in Q4 and our estimates are up high-single digits from the start of the year. Our expanding relationship with our insurance partners continue to give us confidence in Glass. Continuing to expand our offering with B2B partners, including fleet and insurance, will remain a major focus for Driven Brands in 2023 across all of our segments, a tailwind to same-store sales. Now, shifting to procurement. We continue to generate network benefits from our centralized procurement function. This helps to optimize input costs and keeps our stores in stock, which will continue to be a differentiator for Driven Brands even as the market begins to stabilize.

In 2022, procurements contributed approximately $45 million of adjusted EBITDA, up 43% year-over-year. And we recently launched the pilot of our new marketplace, branded Driven Advantage, which will begin to roll out over the course of 2023. It’s still early days, but the 65-location test is performing in line with our expectations. In addition to being a great growth driver for Driven Brands, we continue to believe it will provide significant value to our franchisees. Giving franchisees buying through Driven Brands, the opportunity to save tens of thousands of dollars annually per location, by expanding our offering from 10,000 SKUs to over 160,000 SKUs, value to our vendor partners by driving volume through a one-stop shop and value to Driven Brands providing cost savings and revenue generation without a material impact to working capital.

We will continue to learn and validate our assumptions as we complete our test over the first quarter. We continue to be excited by the potential for it to generate meaningful revenue and EBITDA growth for Driven over time. And now turning to share of wallet. Another component of leveraging our network benefits is to unlock the power of our data ecosystem that is generated from all our brands to grow wallet share. This is a strategic priority for our business. Underpinned by one of the most robust databases in the category with more than 30 million unique customers, which has grown by 25% year-over-year, we are driving tangible results today through direct-to-consumer marketing, which contributed over $80 million in revenue, which equates to 4% of total revenue or 8% of consumer revenue in 2022.

We’re integrating our differentiated Quick Lube and Car Wash services under the Take 5 brand, bringing brand awareness to our Car Wash business and serving as a low-cost customer acquisition point for quick lube. We’re only beginning to scratch the surface of the long-term potential to drive customer acquisition, retention and share of wallet across our platform, which will be a focus for us in 2023. Now bringing all that together, the power of our growing scale and network benefits will enable continued future growth and market share gains in this highly fragmented needs-based industry. And we are still in the early innings of these capabilities with a long runway of incremental value, volume and profitability benefits to the business, giving us further confidence in our ability to deliver on our short, medium- and long-term goals.

On the back of a strong 2022, momentum has continued in the first quarter. We are growing, taking share and generating cash, which we are reinvesting into the flywheel of growth. Our scale gives us a competitive and compounding advantage. We have a proven playbook and multiyear visibility into unit growth that gives us confidence in the significant opportunities ahead of us. Our Dream Big Plan of at least $850 million of adjusted EBITDA by the end of 2026 remains very much on track, and we’re confident in our ability to beat it. Now with that, let me turn it over to Tiffany for a deeper dive into the Q4 full year 2022 financials and 2023 guidance. Tiffany?

Tiffany Mason: Thanks, Jonathan, and good morning, everyone. Driven Brands has delivered another strong print in 2022. In fact, we ended the year 10% ahead of our original adjusted EBITDA guidance. Our team executed well, delivering best-in-class needs-based services to both consumer and commercial customers. We continue to build on our strong track record of organic and inorganic growth. As Jonathan mentioned earlier, since 2019, we have tripled revenue, growing at a 50% CAGR, and quadrupled adjusted EBITDA, growing at a 63% CAGR. Our business continues to be incredibly resilient, and the fourth quarter unfolded much like we anticipated. We have entered 2023 with strength, delivering same-store sales and unit growth in this resilient category as we execute on behalf of our customers.

Let me begin with the highlights of the full year. System-wide sales were $5.6 billion, up 24% versus prior year. The growth was driven by both the addition of 393 net new stores and 14% same-store sales growth. We continue to benefit from market share gains, the increasing complexity of vehicles, and retail pricing actions to offset the cost of inflation. When you account for our franchise mix, our reported revenue for the year was $2 billion, an increase of 39%. From an expense perspective, we continue to carefully manage site mobile expenses across the portfolio. In fact, prudent expense management, together with the strong sales volumes drove four-wall margin of 39% at company-operated stores. And above shop, SG&A as a percentage of revenue was 20% for the year, improving 129 basis points, largely driven by leverage on our growth.

This resulted in adjusted EBITDA of $514 million for the year, an increase of 42%. Adjusted EBITDA margin was 25%, 62 basis points ahead of the prior year. Pulling that together, we delivered adjusted net income of $208 million and adjusted EPS of $1.22, which were up 41% and 39% year-over-year, respectively. The 53rd week in fiscal 2022 contributed $25 million of revenue, $6 million of adjusted EBITDA and $0.02 of adjusted EPS to those results. You can find a reconciliation of adjusted net income, adjusted EPS and adjusted EBITDA in today’s release. Our strong performance during the year resulted in significant cash generation that allowed us to continue to invest in the business. In 2022, we delivered $197 million of cash flow from operations.

While cash flow generation remains strong on an absolute basis, it decreased approximately $87 million from the prior year, primarily due to the one-time $56 million success fee related to the AGN acquisition paid in the first quarter and higher interest expense year-over-year. That cash generation, together with our revolving credit facilities and our real estate portfolio, provide us more than enough capital to fuel our strategic growth plans in 2023. Our number one priority continues to be investing in the business, given the strong return profile in this highly fragmented $350 billion category. In fact, we ended the year with $618 million of liquidity, comprised of $227 million in cash and cash equivalents and $391 million of undrawn capacity on our revolving credit facility.

This does not include the additional $135 million of variable funding notes issued in the fourth quarter, which can be exercised at the company’s discretion, assuming certain conditions continue to be met. At the end of the year, our net leverage ratio was 4.5x. You can find a reconciliation of our net leverage ratio posted on our Investor Relations website. Now double clicking on our fourth quarter results. System-wide sales were $1.5 billion, up 24% versus prior year, from which we generated $540 million of revenue, up 38% versus prior year. System-wide sales growth in the quarter was driven by the addition of 98 net new stores and 11% same-store sales growth. From an expense perspective, we drove four-wall margin of 37% at company-operated stores.

And above shop, SG&A as a percentage of revenue was 21% for the quarter, increasing 172 basis points from the prior year driven by two items: first, a $15 million true-up related to the tax receivable agreement that we entered into at the IPO as a result of filing our 2021 tax returns; second, $7 million of incremental equity-based compensation expense based on outperformance on the earlier grants and layering in another annual grant. These items, both of which are adjustments to EBITDA, were partially offset by leverage on our growth. Adjusted EBITDA was $130 million for the quarter, an increase of 54% from the prior year. Adjusted EBITDA margin was 24%, up 250 basis points from the fourth quarter of 2021. Depreciation and amortization expense was $40 million.

This $5 million increase versus the prior year was attributable to the growth in company-operated stores. Interest expense was $35 million. This $12 million increase versus the prior year was primarily attributable to increased debt levels as we lean into opportunities across our Quick Lube, Car Wash and Glass businesses, and the adjustment in mid-December of our floating rate term loan debt from an initial 12-month LIBOR of 50 basis points, plus a 300-basis point spread to a three-month LIBOR of 474 basis points plus a 300-basis point spread. Our 38% effective tax rate in the quarter was elevated as a result of a change in our tax strategy. The change allows us to optimize the NOLs that we can recognize in the U.S., providing cash tax savings going forward despite the one-time rate impact in the quarter.

For the fourth quarter, we delivered adjusted net income of $42 million and adjusted EPS of $0.25, which were up 35% and 39% year-over-year, respectively. Now a bit more color on our fourth quarter results by segments. The Maintenance segment posted positive same-store sales of 16%. Take 5 Quick Lube continues to benefit from enhancements to targeted digital marketing, driving increased car count. And we’ve successfully passed along retail price increases while maintaining our premium oil mix year-over-year, driving an increase in average ticket. The attachment rate of ancillary products such as engine air filters, wiper blades, cabin air filters and coolant exchange, remained strong at nearly 40%, also contributing to a higher average ticket.

Despite retail price increases over the past 24 months, our Net Promoter Score remained stable, while repeat rates have increased 5% year-over-year. The expansion in segment adjusted EBITDA margin year-over-year is primarily the result of lapping higher alternative supply costs incurred in 2021 to mitigate oil supply shortages. The Car Wash segment posted negative same-store sales of 10%. Foreign exchange rate movement continued to have an outsized negative impact versus the prior year of roughly 400 basis points. In the U.S., we are evolving to a single brand and operating standard. We had approximately 50% of our car wash business, operating under the Take 5 banner as of the end of the year, which are outperforming the footprint yet to be rebranded, as Jonathan mentioned earlier.

We are on track to rebrand the rest of the estate by the end of fiscal 2023. While retail volume was soft again this quarter, we continued to drive mix shifts to higher dollar washes and grow our subscription program. We now have over 675,000 Take 5 Unlimited subscriptions in total and the retention rate has remained steady. This is not only a great recurring revenue stream that provides a level of predictability to this business, but it is also proving to be a sticky customer and an important focus for Driven Brands. The compounding effect of a 5x higher LTV from Take 5 Unlimited members versus retail customers is compelling. Softer retail traffic was the primary driver of the segment adjusted EBITDA margin decline year-over-year. The Paint, Collision and Glass segment posted positive same-store sales of 14%.

We are excited about the significant expansion of our glass offering in the U.S. after entering the market just 14 months ago. Glass repair complexity is increasing due to the need for calibration of the windshield camera associated with the Advanced Driver Assistance Systems that govern a vehicle’s safety features. As these features grow as a proportion of the car parts and as our mix of commercial customers increase, we expect to see a tailwind to both ticket and margins. Also, the recovery in the Collision business continues. In fact, estimate counts for the industry continue to grow, and our shops have consistently outpaced the industry. We added 229 direct repair programs with insurance carriers in the fourth quarter. Our expanding commercial partnerships are a testament to our strength and scale and the ease of working with one large national provider is a clear differentiator for Driven Brands.

The decline in segment adjusted margin year-over-year is the result of the build-out of our new U.S. Glass business. This business has scaled rapidly and we’re investing to support future growth. While that pressures margins today, we expect to expand Glass margins as we increase the mix of commercial customers and the penetration of calibration services. And finally, the Platform Services segment posted positive same-store sales of 4%. We have leveraged our scale and leadership in the industry to ensure our franchisees are consistently in stock despite supply chain disruption, creating long-term customer loyalty for the 1-800-Radiator brand. While we continue to benefit from the customers we acquired as a result of the supply chain disruption, average selling prices year-over-year have begun to normalize.

Looking ahead at fiscal 2023, we remain well positioned. Our team is executing well, and the category is proving its resilience versus other categories in retail. Vehicle miles traveled were up approximately 1% in 2022, and the forecast for 2023 is for VMT to grow 3% to 4%. We serve both consumer and commercial customers and our services are diverse and needs based. This allows us to better withstand any volatility that comes with changes in the economic environment. Our scale and sophistication provide us a competitive advantage as we continue to navigate the environment. And finally, our proven playbook for growth is delivering across our key growth areas. As a result of our continued strong performance in 2022 and the momentum with which we have entered 2023, in our earnings release this morning, we proudly issued our fiscal 2023 guidance.

In 2023, we expect to deliver revenue of approximately $2.35 billion, driven by 5% to 7% same-store sales growth and net store growth of approximately 365 units. This is organic growth. We have not included future M&A in our guidance. We expect adjusted EBITDA of approximately $590 million. Adjusted EBITDA margin is expected to remain stable at approximately 25%. And we expect adjusted EPS of approximately $1.21 based on 167 million weighted average shares outstanding. As you update your models, it will be helpful to have a few other data points. First, equity-based compensation expense is expected to be approximately $26 million as we layer on the third annual grant post IPO. Second, we anticipate depreciation and amortization expense of approximately $180 million as a result of new store growth.

Third, interest expense is expected to be approximately $150 million as a result of our recent capital raise and the rate adjustment of our floating rate term loan debt. The term loan is our only floating rate debt instrument outside of our revolving credit facilities. And finally, our effective tax rate is expected to be approximately 30%. We expect to deliver approximately $300 million of cash flow from operations, a 64% CAGR since 2019. Gross capital expenditures are expected to be approximately $470 million as we follow our playbook for growth in Glass and Car Wash, shifting our focus to more organic growth complemented by selective and opportunistic tuck-in M&A. That CapEx is expected to be partially offset by approximately $250 million of sale leasebacks of our owned real estate, primarily in Car Wash as new locations open.

This results in net CapEx of $220 million. As a result, we do not expect to add any incremental debt in fiscal 2023. And with the projected growth in adjusted EBITDA, we expect to naturally deleverage. With regards to how we expect the year to unfold, we anticipate a fairly tight range of same-store sales performance across the quarters, with only about a 2-point range between the high and the low. We expect adjusted EBITDA margin rate to be lowest in the first quarter, likely 300 basis points lower than the rate for the full year, as a result of the timing of our Car Wash rebranding activity as well as the integration of recent acquisitions in our U.S. Glass business. In closing, delivering $590 million of adjusted EBITDA from fiscal 2023 will be an increase of 15% over fiscal 2022, a great milestone on the path to at least $850 million by the end of 2026.

We expect this differentiated portfolio to continue to deliver strong results, outperforming the market. 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. Operator, we’d now like to open the call up for questions.

Q&A Session

Operator: Your first question comes from the line of Simeon Gutman from Morgan Stanley. Your line is open.

Simeon Gutman: Good morning, everyone. My first question is on Car Wash. Can you talk about the comp or the forecast for ’23? And if you share anything on U.S. versus abroad? And just thinking about it, why should it get any better than the current run rate other than the compares? And then if you could talk about any of the Take 5 branded? It looks like you have critical mass. Curious why it doesn’t look like — they probably are driving improvement, but why haven’t they been enough to reshape the comp?

Tiffany Mason: Hey, Simeon, thanks for the question, and good morning. Let me start, and then I’ll have Jonathan add on some color around the rebrand. So, obviously, we don’t guide the specific segments. So, there’s no specific segment guidance in the outlook this morning for 2023. With regard to Car Wash though, I’ll give you some qualitative commentary. First, I’d say, we continue to view the unit level economics of this business as compelling, and we remain confident about the long-term trajectory. And you’ve heard Jonathan mentioned that this morning in his scripted remarks. Again, I would say qualitatively, we expect retail softness to continue through at least the first half. But in the second half, we started to lap some pretty significant FX headwinds, and we also will have completed our Car Wash rebranding exercise, which was the second part of your question.

And we continue to see those rebranded stores outpace those that have not been rebranded. Jonathan, anything additional you want to add there?

Jonathan Fitzpatrick: Yes. Good morning, Simeon. Look, over the long run, this is a fantastic business and the return profile continues to be incredibly compelling. We are positioning this business with a value proposition of fast, friendly and convenient, which has resonated very, very well with our Take 5 Quick Lube business. We’re growing our target customers in subscription, which has a 5x higher LTV. And while there’s some short-term pressures in the macro environment, that doesn’t change any of our long-term expectations for returns. So, look, the other thing I’d add, Simeon is, one of the great things about Driven Brands is our diversified portfolio across a needs-based industry, and that enables us to possibly not have all businesses firing at all cylinders, but still deliver phenomenal consolidated results at the Driven level.

Simeon Gutman: Okay. And then, a follow-up…

Tiffany Mason: Simeon, maybe just one last point there. You asked about the rebrand. The other thing I’d share there is while we have 50% of our fleet rebranded at the end of the year, there was a significant portion of that activity that happened in late Q3 and into Q4. So, we’re at 50% when we snap the line at the end of the year, but we’ll start to see the yield from that over 2023.

Simeon Gutman: Thanks for that. And then, one follow-up on the Maintenance comp. I think Jonathan mentioned the 25% in Take 5. If you look at the other side of the business, I know you don’t break it out, but there’s probably a benefit from the used car, I don’t know what you would call it, the wave that occurred over the last couple of years. Any insight into that cycle? Is it abating? Is it at the top? Is it in — what inning could that be in? And how much could that drive the Maintenance business over the next 12 to 18 months?

Jonathan Fitzpatrick: Yes. Look, we think sort of the new and used car environment is a natural tailwind for Driven. Cars have — now average age is north of 12 years. Simeon, you’ve seen that grow for the last 10 years. Used car prices and new car prices and availability are incredibly challenging. I think there’s a stat recently that sort of Middle America is literally priced out of a new vehicle, given the cost. So, we see customers holding on to their vehicles and those older vehicles longer which naturally sort of drives them into incremental repair and maintenance and more premium products such as high mileage oil. So, we see this as a net tailwind for the foreseeable future.

Simeon Gutman: Thanks. Good luck. Take care.

Operator: Your next question comes from the line of Seth Sigman from Barclays. Your line is open.

Seth Sigman: Hey, everybody. Nice to talk to you guys, and congrats on the quarter. So, I just wanted to touch on the comp outlook first. So, you’re guiding 5% to 7% comps, which is still above the long-term targets that you’ve had. Can you just discuss some of the assumptions across business lines? And then maybe comment specifically on the cadence, that last comment around the range being tight. It seems to imply every quarter around 5% to 7%. But I think there’s also a comment that momentum into Q1 was very strong. You just did an 11% comp. So just trying to reconcile that a little bit, too. Thank you.

Tiffany Mason: Hey, Seth, thanks for the question, and I appreciate your sentiment this morning. So, let me first just start with the macro backdrop with which we’ve planned 2023. Couple of qualitative points there. We certainly will continue to see inflation, but we think inflation will be more modest, it will moderate over the course of 2023. We’ll see continued macro-related pressure on the consumer, particularly in the first half of the year, but there is a forecast for VMT to grow 3% to 4%. So, we’ve guided to a solid 5% to 7% same-store sales rate, plus healthy net store growth and 15% adjusted EBITDA growth. So obviously, we believe we’re going to continue to execute well in what is a needs-based industry. To the point about cadence, so the comments in my script this morning, fairly tight range around same-store sales performance across the quarters.

And you’re right, only about a 2% range between the high and the low. So, it’s tight over the course of the year for all the reasons I just mentioned in the macro backdrop. I think we’ve touched on Car Wash already. I think, we continue to benefit throughout the rest of our segment from natural industry tailwinds as well as the premium oil mix that is a part of OE recommendations for consumers over the long run.

Seth Sigman: Okay. Thank you for that. And just one follow-up question around the EBITDA margins guidance over what’s embedded in the guidance around 25%, which is pretty consistent with where you’ve been historically. But on that stronger 5% to 7% comp, I’m just curious, is there anything specific that pulled the flow-through back? Is that just a business mix dynamic? Are there cost pressures? Like, how should we be thinking about that?

Tiffany Mason: Yes, that’s great. So, let me first put it into perspective, right? Our margin is already very strong at 25%, and our 2023 guidance reflects, again, about a 15% increase in EBITDA dollars at that same stable margin of 25%. Now, we’ve expanded margin each year since we went public, even with significant macro challenges like supply chain disruption and inflation. I’d also suggest you remember that we lapped the anniversary of our AGN acquisition and our Glass portfolio overall is on average less than six months old. So, we’re still integrating that business. If you exclude U.S. Glass, margins are expanding once again in 2023, just like they have over the last number of years. And U.S. Glass specifically, we’re going to be increasing the mix of commercial customers and the penetration of calibration services over the long run, which we expect to be a tailwind to margins.

So, it is a bit about the mix of the business, but this is a great healthy business that continues to perform really, really well.

Seth Sigman: Okay, great. Thank you for all that.

Operator: Your next question comes from the line of Christopher Horvers from J.P. Morgan. Your line is open.

Christopher Horvers: Thanks, and good morning. So, my first question is, can you help us think about how much EBITDA was acquired in the fourth quarter? And then, in 2023 in totality, how much of the EBITDA is simply carry over from M&A during 2022?

Tiffany Mason: Sure, Chris. Good morning. So, I’m going to speak to 2022 in total. So, we recognized about $34 million of acquired EBITDA from the acquisitions that we did over the course of the year. That’s inclusive of both the AGN transaction as well as the rest of the Glass tuck-in, and it’s net of SLB. If you — so one, I think, really important point to highlight on this call is, if you remove that M&A from our adjusted EBITDA print of $514 million, our organic EBITDA was $480 million versus the original guide of $465 million. So again, business is just performing tremendously. And then, of course, some of that EBITDA, to your point, will lap into 2023, and we’ve, of course, taken that into account in our guidance.

Christopher Horvers: Understood. And then, you are stepping up the unit growth pretty much across every segment, including the Car Wash business. Jonathan, you mentioned things calming down on the Car Wash side. But I guess, more broadly, can you talk about what opportunities you’re seeing out there? Are these all-new store opens? And to what extent is it sort of brownfield type locations? And then, longer term, how does this affect your longer view of how many stores and units that you could add over — across all segments?

Jonathan Fitzpatrick: Yes, good morning, Chris, thanks. Look, on the greenfield pipeline, there’s a really core set of skills and competencies required to develop the pipeline that we have today across both our company and franchise businesses. Our pipeline is over 1,600 units, and we mentioned over 250 for Car Wash with a site secured at a better rate of about 35%. So, we see this greenfield, both company and franchise continuing to grow and deliver amazing new stores for the next decade. So, we’ve got really high degree of optimism around those stores coming online. And these are truly greenfield stores where our teams are finding real estate, and then we’re building the stores and opening up those new units. So that just continues to expand.

And the reason that expands is because the underlying unit level economics are so attractive. So that’s number one. Number two, in terms of overall white space, we’ve talked about the ability for Driven over time to get to 12,000 units, Chris, over time, and we feel as bullish as ever around the ability to execute against that plan over time. So that’s what I’d say about unit growth.

Christopher Horvers: And then, just as a quick follow-up, is this — sort of this — I think it’s 7% rate this year. Is this a sort of new standard? Or is this year more of an opportunistic on the organic side?

Jonathan Fitzpatrick: No. Look, again, we can’t deliver this without an incredible team who builds this pipeline. So, as the pipeline continues to build, we would expect that sort of this rate of unit growth would minimally be sort of the new standard and hopefully expand over time.

Christopher Horvers: Excellent. Thanks so much.

Operator: Your next question comes from the line of Karen Short from Credit Suisse. Your line is open.

Karen Short: Hi. Thanks very much. I’m wondering a couple of things. Can you just clarify exactly what you think the interests — or sorry, the inflation rate will be for ’23? And then what exactly it was in 4Q?

Tiffany Mason: Hi, Karen, good morning. So, in terms of what we’ve seen in the inflationary environment over the last a year to 24 months, we’ve certainly seen low double-digit inflation rate. And as I said in my macro commentary, we expect that to start to moderate. So, we still expect inflation, obviously, in 2023, but something in the single-digit range.

Karen Short: Okay. And then maybe just a little color in terms of your appetite for M&A. Obviously, you don’t guide to anything, including M&A. But maybe talk about your outlook and prospects on the M&A front, but also just triangulating that in the context of leverage because, obviously, this scenario has changed a little bit in terms of appetite for higher levered companies. So, wondering if you could just maybe talk a little bit about that.

Jonathan Fitzpatrick: Sure. Hi, Karen. Jonathan here. Look, the M&A environment is one of our levers to grow our businesses. And as we’ve outlined with our Quick Lube, our Car Wash and our Glass business, we use M&A at the start to build platforms and then ultimately migrate to sort of more greenfield growth. We’ve done that with Quick Lube. We’re now doing it with Car Wash, and we expect to continue to do that with Glass. That being said, M&A has been an important part of Driven story for the last decade, and we have a phenomenal M&A team, and we’ll continue to look at all the M&A opportunities that cross our desks here at Driven. In terms of specifically what’s happening in the markets, we’re definitely seeing some moderation in the Car Wash space.

That was the most frothy and busy M&A area in auto after services for the last couple of years. And I think we’ve definitely seen some moderation both in price and sort of velocity there. I don’t see that changing in 2023, given some of the macro conditions around debt levels. Glass, we did a phenomenal job in 2022, building out that platform from zero to becoming the second largest player in the United States. And then, as mentioned in my scripted remarks, we’ll continue to do some small tuck-in acquisitions in Glass, but again, moving towards our proven growth playbook of greenfield growth, and Quick Lube really has been both a greenfield company and franchise growth story for the last number of years. So that’s how we think about M&A.

Karen Short: And just appetite on leverage — update?

Tiffany Mason: Yes. Karen, happy to take that one. So, Jonathan laid out the plan, sort of vertical by vertical as you think about our playbook for growth and shifting from M&A, predominantly M&A into greenfield. So obviously, we remain committed to our long-term growth strategy. And the capital that we’re deploying, we’re deploying into assets that are generating in excess of 40% returns. And of course, as you know, our business generates really healthy cash flow, and we’ve guided just $300 million of operating cash flow in fiscal ’23 with a net CapEx expectation of $220 million. So, we have more than enough capital to fund our growth plans in 2023. We don’t expect to go back to the debt capital markets for incremental financing. We ended the year at 4.5x levered and with our growth in EBITDA that we’re projecting for 2023, we expect to naturally deleverage below that point.

Karen Short: Great. Thanks very much.

Operator: Your next question comes from the line of Liz Suzuki from Bank of America. Your line is open.

Liz Suzuki : Great. Thank you. Just you talked about the network benefits and unlocking share of wallet. So, do you have any stats just about the percentage of your customers that visit more than one of your brands in a given year, as in like do car wash customers also go to Meineke for service? And then, what did those early learnings of the Take 5 cobranding tell you about the opportunity to convert car wash customers into multichannel customers?

Jonathan Fitzpatrick: Hey, Liz, Jonathan here. Thanks for the question. And look, we’re super excited about this opportunity. We’ve talked about it a few times on the call. We’ll do sort of a big download and reveal at our Analyst Day coming up in May. But Liz, ultimately what our aspirations are is the following. Any customer that comes through any of Driven Brands’ services or brands will be connected to the, if you like, the mothership to understand all the various services that we operate or offer to our customers. So, that’s number one. It’s really making sure that anyone who does business with us understands there’s a suite of auto motive aftermarket services that are provided under the Driven Brands umbrella. The second is to lean into loyalty and rewards at a Driven level, and we’re excited about what that could look like in 2023 and beyond.

So, we think there is a massive incremental opportunity for any customer to come through any of our brands to sort of understand and take advantage of the rest of our services in the network. So that is something we’re super excited about, and we’ll talk about in a lot more detail at our Analyst Day in May.

Liz Suzuki: Great. Yes. I look forward to hearing that. Just a quick follow-up, kind of thinking about the evolution of Driven Brands over time and what you’ve expanded into year-after-year. Just how do you think about increasing the frequency with which customers interact with Driven Brands? I mean clearly, car wash is a more frequent service than oil change or collision. But do you see an opportunity for other high-frequency services like EV charging or more medium-term services like tire replacement, like other areas that you could potentially expand into to increase your touch points?

Jonathan Fitzpatrick: Liz, great question, big question. And what I would say is that we’re always thinking about how we can add more value to our customers, whether that’s incremental services with our existing businesses or potentially new service categories. So, if you look at the last sort of 2.5 years of Driven Brands, we entered the car wash space, which is a phenomenal business. Last year, we entered the glass space. So, we will continue to look at is there obvious large addressable markets within automotive aftermarket that we’re not in, and think about whether that’s the right fit for Driven going forward. But I think the last 2.5 years have proven that we think about that strategically, both in terms of customers and sort of the changing landscape within the automotive aftermarket service.

Liz Suzuki: Great. Thank you.

Operator: Your next question comes from the line of Chris O’Cull from Stifel. Your line is open.

Unidentified Analyst: Great. Good morning. Thanks, guys. This is Patrick on for Chris. Jonathan, I know you originally indicated in your $850 million EBITDA target that at least $250 million would come from M&A. But just as a follow-up to that earlier question, can you frame up where you are today relative to that target maybe on a full year run rate basis based on what you’ve acquired so far, where you believe you are? And then is that $250 million still the right number? Or has the mix changed given the strength in the underlying organic growth and that — based on where the opportunities that you see today as you look forward?

Jonathan Fitzpatrick: Yes. Thanks, Patrick. Good morning. What I would tell you is our model that we shared in November of 2021 shows that over five years, you should model $250 million of acquired EBITDA on any individual year that we acquire EBITDA, it will then sort of roll into the sort of the legacy or the organic growing business and then convert at sort of a 10% growth rate after year one of acquisition. So that $250 million cumulative number is still a good number to use in your models. As of end of 2022, we’re about a little over $100 million of M&A, which has already included in the Driven story. And I think that it’s safe to assume that there could be another $100-plus million of acquired EBITDA in the plan over the next sort of three, four years as we build towards the $850 million.

Very importantly, Patrick, like we’ve always said, we are extremely confident in our ability to beat, minimally to meet, but typically to beat that $850 million target by the end of 2026.

Unidentified Analyst: Great. That’s helpful. And then, I know you guys have mentioned in the past you’re testing several co-located sites between Take 5 Quick Lube and Take 5 Car Wash. And just with a little bit of aging on those tests, I mean, I’m presuming that the thesis is that higher car counts and more frequent car counts in the car wash side would help the ramp up of new Quick Lube units that were located next to them. But just curious if you could provide an update there. And if you’ve seen that pan out and if it’s what you’re seeing as you actually ramp up some of these locations?

Jonathan Fitzpatrick: Yes. Good question, Patrick. And I think we’ve opened about 10 to 15 of these stores primarily in 2023. So, we’re very happy with sort of the, meeting the underwriting thesis both in terms of efficient use of real estate synergies with construction and then obviously, ultimately, getting those customers to trade between those two assets on that one location. That is part of a broader strategy, Patrick, which you’ll see with the Take 5 branding, which is to have, as I mentioned, at the end of this year, about 1,400 locations in North America, which will operate under the Take 5 brand name. And that, along with the co-developed locations will enable us to cross brand, cross-promote and capitalize on those two great businesses and make sure that we’re moving and shifting customers from one of those businesses to the other.

So, I would say we’re very pleased with the sort of 10 to 15 stores that have opened, but it really is part of this bigger Take 5 branding strategy.

Unidentified Analyst: Great. Thanks guys.

Operator: Your next question comes from the line of Sharon Zackfia from William Blair. Your line is open.

Sharon Zackfia: Hi, good morning. My phone just cut out, so I apologize if someone asked this, but I was really curious about the commercial opportunity in Glass. How material do you think that could be over time? And then, secondarily, just any color on — within this segment, Tiffany, how you expect — I know you said 2 points of bandwidth for overall comps. But are there any segment thought processes that we should think about for comps, particularly as inflation might roll off some of those segments? Thanks.

Jonathan Fitzpatrick: Good morning, Sharon, I’ll take the first part, which is sort of the commercial opportunity in Glass. And I think it’s important to understand this. There’s multiple levers in the Glass business, which we see as really nice opportunities. The first is the calibration services that Tiffany talked about today. That need for calibration in glass replacement and repair is going to grow, and we’re seeing that growth within our portfolio today. When we add calibration to a ticket, we will typically see margin expansion within that ticket. So that feels really good on the calibration side. In terms of the customer opportunity, really, there’s sort of three layers of customers here, Sharon. One is what I would call regular B2C customers, our retail customers, which is an anchor point for us.

The second is our commercial. So, if you think about fleet customers or local insurance customers, we’re starting to lean into that as well right now. And then, as we’ve sort of said, by the end of 2023, rolling into 2024, we believe we’ll be in a position to capture some of those large national insurance relationships that we’ve had. Such great partnerships within our collision space. So, really, it’s sort of a — calibration will flow through all customers. We’ve heavily focused on B2C right now, local insurance and fleet, and then long term into that sort of national insurance space. So, incredibly excited about what’s going to happen with Glass over the next couple of years.

Tiffany Mason: And Sharon, this is Tiffany. With regard to your same-store sales question, both cadence as well as segment expectations, so just to reiterate my scripted remarks, again, we, fairly tight range is what we expect around same-store sales performance across the quarters with only about a 2-point range between the high and the low. So, if we’ve guided to 5% to 7%, you can expect every quarter to be in that range. I also suggested in an earlier question that we — while we don’t guide to specific segments, from a Car Wash perspective, qualitatively, we’re thinking about retail softness that continues in the first half and then as we get into the second half, we start to lap significant FX pressure in that business as well as getting further into our rebranding and be fully rebranded by the end of the year.

So, we think Car Wash picks up steam as we go through the year. And then, your last point, I think, in that question was around inflation. Again, we were dealing with double-digit inflation, low double-digit inflation in the last 18 to 24 months. We think that starts to moderate. Obviously, as it starts to moderate, it’s less of a tailwind to ticket, particularly in the maintenance segment as we think about navigating that moderate inflation rate instead of high inflation. And so that’s the other qualitative factor I give you, as you think about the quarters.

Sharon Zackfia: Thank you.

Operator: Your next question comes from the line of Peter Keith from Piper Sandler. Your line is open.

Peter Keith: Hey, thanks, good morning. Congrats on wrapping up a nice year. Pivoting to 2023 and maybe this is a bit of a preview on the Analyst Day for Jonathan. It’s really around the Driven ecosystem and the rebranding of Car Wash to Take 5. The Maintenance segment has seen nice comp acceleration as you’ve kind of turned on that marketing engine. Should we think of 2023 as the year when the marketing engine gets turned on with Car Wash and potentially seeing some of the same same-store sales benefit?

Jonathan Fitzpatrick: Yes, Peter, look, the answer is it’s a continuous focus for us, but I think we will be coming to market with sort of commercialization in that space in 2023. And like I talked about, that’s a sort of a multi-layered approach. One is to make sure that all customers that do business with any of our brands understand the overall service offering within the Driven Brands portfolio. So that’s number one. And then, it makes sure that we are cross-promoting, cross-branding those services to those customers and then layer on top of that, what a long-term sustainable rewards and loyalty program looks like at the Driven level. So, I think we’re pretty excited about those things. So, look, it will be a multiyear journey, Peter, but I think 2023 will mark the year where we’re talking about commercialization of these activities.

Peter Keith: Okay. Great. Maybe I’ll stick on Car Wash. One piece of feedback or pushback we get is on the European Car Wash segment, I think we can do checks on much of the U.S. business, but really don’t have good visibility on Europe. That’s still two-thirds of the overall segment. Could you give us some color on how Europe has been performing overall? Is it above or below that non-FX comp?

Jonathan Fitzpatrick: So, our European business is run by a fabulous executive, Tracy Gehlan, who lives over in Europe and has done a magnificent job since we’ve owned that business for about 2.5 years. If you take out the FX, Peter, I think we’re very pleased with the trajectory of that business. We’ve deployed some capital in there. So, we’ve done extensive remodels and rebrandings in the European business. Tracy and her team have expanded the digital — the digital footprint over there. And we have one brand across sort of 13 countries in Europe. So, I think the other thing that you have to sort of factor in is that the European macro environment over the last year has been challenging, both from a sort of inflationary perspective, not to mention the horrible war that’s going on there. So, we remain incredibly pleased with how our business has performed and pretty excited about the long-term prospects for that business under Tracy and her team.

Peter Keith: Okay. Thank you very much. Good luck.

Operator: Your next question comes from the line of John Lawrence from Benchmark. Your line is open.

John Lawrence: Good morning. Thanks for the questions. Could you speak to a little bit — you talked about the procurement business. I was interested in moving the SKU base from 10,000 to 160,000 is quite a jump. Could you talk a little bit about that expansion? And how often do you have to say no today, not having that product and talk about the categories of this expansion, please?

Jonathan Fitzpatrick: Yes, John, thanks for the question. Procurement is an unsung hero within the Driven Brands platform. Ultimately, we’re trying to achieve a couple of things, John. One is, make our franchisees more profitable and make it easy for them to buy the products and services that they need to run their businesses effectively. The second lever there is, to make sure that as Driven is providing this one-stop shopping platform known as Driven Advantage, that Driven is getting paid for its efforts to provide that to our broader system. And then, thirdly is to make sure that we have continued great vendor relationships and that we’re working with all of our vendors on a weekly basis to make sure they’re giving us the best terms and conditions and service levels to both our company and franchise stores.

So, this marketplace that we’ve invested in over the last sort of 1.5 years is now in test. It is a world-class marketplace where we have full connectivity with all of our vendors and obviously, our franchisees and tests have access to that. So, the movement from an older platform that had 10,000 SKUs to the new 160,000 SKUs is partly enabled by the new technology investments that we’ve made. So again, we feel really good about creating incremental profitability for our franchise stores, for Driven, for our vendors and ultimately capturing the opportunity with procurement as we look ahead to the next sort of three to five years.

John Lawrence: Yes. And just quickly on that, what type of products would be at the end of that tail on that when you get north of 120,000, what kind of products are we talking about that you haven’t had before?

Jonathan Fitzpatrick: Yes. I think, look, we’ve got, obviously, the sort of core items if you think about our business, whether that’s oil or filters, or paints or ancillary products within any of our business. You then move into sort of, I’ll call it, the — if you like, some of the office supplies and sundries that our franchisees use. And then, over time, I think we’ll have the ability to add potential service — services that our franchisees use as well. But I’d say with the 160,000 SKU count we have today, we’re probably capturing 85% to 90% of what the franchisees and company stores need to run their businesses effectively.

John Lawrence: Great. Thanks. Good luck.

Operator: And your last question comes from the line of Justin Kleber from Baird. Your line is open.

Justin Kleber: Hey, good morning, everyone. Thanks for taking the question. Wanted to ask about what’s driving the uplift in the rebranded car wash locations? Is it more about an increase in car counts as you leverage the Take 5 brand equity? Or is it more a function of ticket, as I assume you’re optimizing the menu board and it sounds like you’re having success trading customers up to higher dollar washes?

Jonathan Fitzpatrick: Yes, Justin, I think it’s important to understand that this is not just a rebranding of the stores and putting new signage on it, but we also included any deferred maintenance CapEx that the stores had. We’ve got equipment upgrades. We’ve got better merchandising. We’ve got new team uniforms. We’ve got incremental technology that we’ve included, whether it’s point-of-sale systems or camera technology in all those stores. So, when a customer goes to one of these rebranded stores, it really feels like a big remodel to that store. So that’s number one. Number two is, the team is doing a terrific job at converting what we call retail customers into Wash Club subscription members as evidenced by the growth now to over 675,000 Take 5 Unlimited car wash members.

I think the other thing that we’re continuing to work on is pricing and menu board construct at those stores. So, making sure that we’ve got the right sort of good, better, best offering to our customers at the right price point. So, I think it’s a combination of both traffic and check and really a whole new experience for our customers who may have not — who may have gone to the store pre and post in terms of the rebranding.

Justin Kleber: Got it. That’s helpful color. And then just a follow-up, Jonathan, you mentioned in your remarks that current environment within Car Wash beginning to rationalize new entrants into the space. I mean, was that just a comment related to the M&A environment? I guess I’d also be curious if you’re seeing any pullback in the pace of greenfield development from some of your larger peers.

Jonathan Fitzpatrick: Yes. Justin, I think it’s both. One is, sort of the very lofty multiples that were being — that were in effect in 2021 and 2022 have definitely moderated and we’re seeing some processes that are just not getting completed. So that’s sort of on the M&A front. And then, when you think about this market over the last two to three years, you had a lot of people building and then flipping stores and because there’s no buyers for those stores, I think we’re seeing moderation in the pace of greenfield activity. So, I think we’re seeing a double hit. One is, multiples are rationalizing. And secondly, we’re seeing some moderation in the amount of new stores being built. Again, when you think about some of the multiples that were paid for these businesses, and the leverage levels on some of these new entrants that is sort of handicapping their ability to put incremental capital into new store growth. So again, multiple and greenfield pace moderation.

Justin Kleber: All right. Thank you. Best of luck.

Operator: And this ends our question-and-answer session. Mr. Jonathan Fitzpatrick, I turn the call back over to you for some final closing remarks.

Jonathan Fitzpatrick: Thank you, and thank you all for joining us and for your time today. Driven Brands continues to deliver strong growth and profitability with momentum entering the year in a resilient category, powered by a diversified platform and tangible competitive advantages. Our team is executing. We’re delivering record performance and share gains in a dynamic environment, leveraging our proven playbooks for growth. We remain confident in our ability to deliver long-term profitable growth and enhance shareholder value. And as always, Investor Relations with Kristy will be available after the call if anyone has any further questions. Thank you.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.