Driven Brands Holdings Inc. (NASDAQ:DRVN) experienced a roughly 20% decline in its share price on Wednesday after informing investors that it will postpone the release of its fiscal 2025 annual results and must restate previously issued financial statements for fiscal years 2023 and 2024 due to material errors.
According to the company, the audit committee concluded on February 23 that the financial statements for fiscal years 2023 and 2024, together with quarterly statements covering multiple periods, should not be relied upon and require restatement. The company said the independent auditor's reports on those statements also should not be relied upon.
The company detailed a series of identified accounting errors. These include lease-related adjustments that affect right-of-use assets and liabilities, as well as cash account reconciliation differences largely tied to fiscal 2023 and earlier periods that resulted in overstated cash and revenue. Driven Brands also flagged misclassification of operating expenses between company-operated store expenses and supply expenses.
Additional issues called out by the company encompass income tax provisions, supply revenue, fixed assets and cloud computing arrangements. Driven Brands also noted inappropriately recognized revenue in its ATI business, with that recognition affecting primarily fiscal 2025.
In connection with the accounting findings, the company identified material weaknesses in its internal control over financial reporting. Driven Brands stated that it concluded controls and disclosure procedures were not effective as of December 27, 2025, and that it is taking steps to remediate those weaknesses.
Because of the need to restate prior financials and to complete its review, Driven Brands said it expects to file a Form 12b-25 with the U.S. Securities and Exchange Commission to extend the deadline for its fiscal 2025 annual report by 15 calendar days. The company added that its review of the financial statements and internal controls is ongoing and that the process could uncover additional material errors.
Driven Brands had been scheduled to release fourth-quarter and full-year fiscal 2025 results before the market opened on February 25, followed by a conference call. Both events have been postponed pending completion of the company's review and restatement work.
Context and next steps
The company is undertaking remedial measures to address the internal control weaknesses it identified. Investors and market participants will be watching any updates to the restated financials, the outcome of the internal review and the timing of the refiled annual report. Driven Brands warned that its ongoing review may identify further material errors.