Great quarter for DRVN. We elevated DRVN on our Best Ideas Long list this weekend ahead of the 1Q print expecting a beat. DRVN did not disappoint. EBITDA of $118.5m vs consensus $103.8mm with comps of 16%. Management didn’t adjust guidance upwards, but signaled last quarter that it did not plan to revise annual guidance until mid year. It’s trying to get investors more long-term focused. Sales trends remain strong across the business. Management noted there has not been any noticeable change around demand even with rising gas prices, highlighting that DRVN’s product/services are not discretionary in nature. Afterall, the consumer realizes it makes more sense to invest in maintenance of one’s current vehicle as opposed to paying elevated prices for new or used cars out there in a still tight supply auto market. Management expect miles-driven to be up in 2022, and as the car parc continues to age, we expect demand for DRVN’s services should stay strong for the foreseeable future. Longer-term DRVN has one of the strongest unit growth stories we can find in retail. Is it part rollup? Sure, but it has powerful organic growth alongside the M&A strategy. As good as the $850mm EBITDA target is by FY26 (vs $362mm last year), we think that the REAL EBITDA number will top $1bn by FY26. The company should hit its target about two years early leveraging both organic growth and M&A. For 2022 we’ve got EBITDA at $515mm with consensus at $471mm, in 2023 we’re 30% ahead of consensus, and 2024 nearly 50% ahead. We think this stock is a double over a TAIL duration and a name that should have solid downside support and stability of growth.
Takeaway: Fierce momentum all around, as we expected, in 1Q, and we’re coming in 10% ahead on EBITDA, and 50% higher by year FY24. Best Idea Long.
