VVV - Earnings call 4 2023

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Operator

Hello, everyone, and welcome to the Valvoline 4Q 2023 Earnings Conference Call and Webcast. My name is Emily, and I'll be coordinating your call today. [Operator Instructions] I would now turn the call over to our host, Elizabeth Russell. Please go ahead, Elizabeth.

Elizabeth Russell

Thanks. to Quarter welcome Call XXXX and Webcast. and morning, Valvoline's Fiscal Fourth Conference Good approximately X:XX at morning This a.m. Valvoline fiscal quarter XXXX. year Time, and Eastern released fourth ended results September for the XX, release, in our on Relations website with viewed is Investor be investors.valvoline.com. should of which presentation that This earnings a at copy available conjunction CFO. preliminary Mary these our morning's our call Lori we Flees, Form Meixelsperger, Exchange XX-K note that until and this Please with and Commission. On and CEO; President our results are file the Securities is

on any historical that are statements X, shown of are and subject A not assumptions used under used is measures is by and of forward-looking from any assumes companies. obligation similar our non-GAAP unless Non-GAAP our forward-looking this reported included the not are nature. of adjusted results and today which As be and GAAP uncertainties that our for remarks items, and and comparable The restructuring results date key are current or to Slide statements management's ongoing other nonoperational adjusted amounts may forward-looking measures of unusual, believe to noted. in basis, These our business. of provided of this on will statements a our management facts approach non-GAAP an key in We appendix. are business otherwise cause certain the law. In discussion understanding results are use presentation enhances as materially risks of to adjusted non-GAAP reconciliation statements. to of information our the based be no such by presentation in may actual this update discussing required on differ results by unless we presentation remarks, Valvoline to statements.

of We'll by the a Global formula purposes best-in-class segment reminder, discussing today's operations call. retail you'll services agenda Products classified former growth. and company's proven business operations, begin platform for the as the reports. On see the the GAAP Slide for and discontinued As is represents continuing X, Services Retail our for

at our a look We guidance. review will results and financial of then

to like Lori. over to I'd Now call turn the

Lori Flees

you as Thanks, Elizabeth, and year play Valvoline was great Fiscal a retail first XXXX as be transformational for was pure it to our business. a year all today. with

record delivering for completed sale in to quick, proceeds is with is for of and results With the substantial Services track to billion automotive to this strategy, leader platform Retail sale the positioned a our made Services both addition the Products $X.X maintenance on In and easy, well trusted expected and we preventive our repurchases a the the in year, provider. Global progress year. share return is growth. Valvoline strong Retail promise best-in-class also results clear long-term a shareholders,

track positive with proven XXth sales billion. XXXX to sales record $X.X growth. marked growing of year same-store a have our Fiscal We of consecutive year system-wide

network X,XXX the stores top is Our our XX% named of times. And in both franchised. by over franchisor entrepreneur been Valvoline franchise and has category

and record to We of the year. profit XX.X% also returns IRR for margin a proven mid-teens with growing track have and EBITDA strong

to an through investors leader in annually changes is proposition on and Valvoline serve performance. that store accretive sales store we've oil and is do-it-for-me brand a performed As we With based of locations, $XXX EBITDA revenue United XXX-year-old significant large X,XXX the proven States. platform value and growth years estimated M&A. and market in recent has with The offers scaled additions, growth million same-store nondiscretionary a brand Valvoline out created growth, previously, over best-in-class a laid and a

build X% compound we've rate an still market upon estimated significant While system-wide has since Valvoline sales our share. delivered annual the in to growth XX% IPO, opportunity our

while to grow franchise accelerated growth. through to ability lowering our in our requirements confidence have X,XXX-plus We stores capital

System-wide history and our winning in for adjusted impressive significant perspective, consistent franchise performance, shows to resulting in company continue million stores, including XX% growth in store about IPO Our $X.X recent count $XXX value with demonstrating in fiscal grew growth This since XX.X% will attractive XX% for our also returns the from XXXX. billion incredible allow investors. Slide network to XXXX. over total rate XXX a fiscal the XXXX. service System-wide and across years X,XXX. of a compound market and proposition same-store XX financial trusted years, cash both of quick, And to from flows franchise EBITDA us strong year in easy, in sales performance creates compound generate model in to systems growth and sales come. annual is an growth key share rate our profit stores XXXX, metric XX% added XXXX, now grew including our annual X XXXX, strong saw XXXX. With an

growth Slide across to FY well. 'XX aligned Valvoline full provided 'XX across did algorithm Not FY our metrics. our with metrics long-term can long-term guidance we against we Turning results along X, performance as see strong last year. our you our all all year fiscal guidance, deliver was our 'XX only with guidance delivered and

to line sales growth store capturing the year. improving addition across outpaced strong sales growth, the to top leverage for In and and growth, EBITDA XX.X% margins the our business

was share growth Products, repurchases the and share reductions XX% sale the including EPS 'XX, for income items adjusted count in FY to impacted to proceeds. results from anticipate in due to year-by which in For will but long-term detail the do algorithm significantly we related moment, interest discuss Global FY guidance we guidance fall of saw more within XXXX well. investment of year a the our 'XX as fiscal $X.XX, to the Mary net

to Turning XX. Slide

I an to cash expanding higher and three, strong formula evolving and full return revenue, the We of two, year, our attractive park. on one, includes: customer have to capital. invested shared which will flow growth; network formula long-term value delivering first potential our proven margins, driving X-pillar effective race car needs services but shareholders. existing This meet drive free and our the highly last business; strategy for simple of a accelerating

each potential more with in a starting the those detail, take the look of in business. core Let's at

As XX, operational years. significant you we Slide on can have improvements see recent seen in

industry. be standout the in to services automotive marketing sophistication a continues Our

continue to cost the We customers. acquire to brand awareness new and optimize build

trusted a customer Our service quick, retention. consistently and delivers experience drives strong easy, customer

average execution ticket service increase, of demonstrating nano-change well pricing to as our continues and power revenue as strong premiumization. penetration Our

to we pricing service As not in our see labor, we we take for, costs see as increase, notably FY already which in confidence trade we this product actions, downs with We pricing deferrals time. this but done do and in have at continue or look power 'XX.

we store ticket current improvement. of profitability and an X-wall customers can in performance, be $XX million as anticipate stores additional mature. in and growth This seen nonmature EBITDA drive our Our mature

Next, let's new look at units. on an update

bringing the the were As I XX total the in units our in we delivery mentioned finished year expected some a of able to new earlier, with units store the XXX. of most for additions into QX. franchise to challenging that QX, partners QX. After store deliver a additions, QX. to strong our QX QX We delayed delivered we year units push in of mentioned or delayed QX our in partners franchise But

nearly opportunities. with both builds. and that for advantage number our of XX a to take respectively, new company being franchisees XX% demonstrates see had with of and franchise year for value of the XX both new ground-up builds the in record This M&A also the and systems units, units new continuing We

construction continue, finding the company improve teams franchise QX expect new challenges partnering in we the we to processes ways While permitting our and across and cycle. saw of are development

across franchise corporate For partners estate includes which example, the fiscal system. a our Valvoline in and real formed XXXX, developing development council,

reinvestments Our development council and execution is the plans focused and engaged on pipeline highly into reduction capital business. strategies,

to we our progress our for remains and footprint. fragmented have with network a significant to expand expansion. we XX, store white towards Auto As our Slide opportunity Care proud of partners team growing, space I'm franchise turn significant recognize our a growth. highly accelerating market Both

system we 'XX, units. out see over X,XXX set we to retail As in grow our to potential FY

goal Currently, We and company ticket at XX% continue including to which a pursue coming We to fuel see towards owners franchise advantage important growth, driven The accounts. a units of -- to taking we ticket franchise of is fleet the M&A. faster change new coming highlight to existing to continues in XX% sales with the franchise. new XX% is with store maintain adding performance. X,XXX to system-wide within unit Slide our and accounts largely This assets. I'd we our about the We continue that business our fiscal existing new like partners. On multiple to existing taking grow to XXX added XX additions consumer from business the increased 'XX, for as our than expansion. business customer less we the business and per new with by and a over fleet partnering In services consumer on units opportunistic to additional business. than turn fleet levers our service fleet rate year our revenue from XX average step the total business the and than strategy, order pillar their business third largely penetration. averages with offer change XXX we saw XXX growth in non-oil partners, projected from XXX XXXX Today, fleet non-oil higher franchisees, total units, based XX, of by anticipate progress fiscal 'XX, target service

owners is keep business not easy, only is vehicles their potential safe the proposition the the our We're and offers. customers, fleet and growth convenient, trusted but road. fleet For the excited quick, helps of progress compelling. about it on it service The

non-oil The this contributor revenue change to largest growth penetration. within we're years. increase the our let's certainly a improvement is our in with at Now fleet that change the look The in seeing But has system. change X of business our service increase across system-wide non-oil a revenue grown an take $X.XX consistently base. dollar consumer service year, improvements revenue in non-oil also

to of driven quick, an delivery. in which For company new and increase was enabled easy, presentation of penetration, trusted this services a well half about our increase deployed by consistency as by stores, these ensuring training tools of service as the was

to turn results. Now discuss I'll it financial to over Mary our

Mary Meixelsperger

Thanks, Lori.

for look Let's growth. sales start significant growth at 'XX. both QX revenue and our We with saw fiscal a

billion. $XXX growth. XX% For the to for quarter and XX.X% to grew for approximately grew and sales almost saw by transaction X/X with the XX% million, from same-store driven the sales System-wide quarter, we X/X growth $X.X ticket of year,

XX% change system-wide XX.X% approximately we was the penetration by from and same-store non-oil with but largely growth the and For the sales in contributions saw by ticket. Ticket also service quarter meaningful pricing, year, revenue year driven driven grew premiumization.

On along convenient trusted margin margin at look side, retention. On performance. in service to customers contributor. and we Slide efficiencies, quarter, EBITDA was lubricant strong benefits that were customers oil labor XXX the basis margin Sequentially, headwinds. for seasonally have continues to cost Year-over-year the largely is the growth improved with are to driven a our decreased customer points by XX%, labor transaction which within waste drive providing line. XXX primarily by we rate driven largely The higher largest the offset declines XX, increased the points, basis expense by

XX%, fiscal of growth. by well, driven As SG&A basis top margin growth leverage. we Lori XX.X%, XX outpacing to EBITDA mentioned, the the increasing XX% largely year, as for saw improved line points EBITDA

the Turning to for for to and year. quarter results to Slide XX% the improved $XXX XX, and XX.X% EBITDA year. million you'll the $XXX Adjusted see financial for additional million the quarter

stronger interest growth an for activity. the by the prior of increase strong and year, with an quarter, improvement $X.XX $X.XX We both higher over share in year operating repurchase XX%, also and for adjusted driven income saw the results, EPS XX%

the cash Turning position. sheet have to we at updated balance XX, look an Slide and

'XX, continue product proceeds billion global to the returned to make progress we the on shareholders. shareholders. sale commitment our $X.X to amount We substantial of a fiscal of to In return

on month October authorization the we billion October, XX. additional $XXX million X.X $X.X repurchased leaving as an the million current During of shares, of

of still completion We have current coming in the the months. authorization position strong continue and a to cash anticipate the

activity leverage translates adjusted basis, X.X rating from the to target remains million a adjusted agency Our EBITDA basis. Cash ratio operating $XXX prior increased year to million. from agency on $XXX flows non-rating a over to X.X which X.Xx X.Xx to

this net growth benefit payables year, working the of the in supply changes capital earlier due with Global the includes mentioned favorable agreement new onetime to result a the in we As Products. of as in

saw for for $XX quarter to $XX Products, 'XX. favorable the again have This total the of the proceeds million Slide year Global bringing once quarter, from the year. On the XX, for of from investments income guidance net sale we our the million earning interest and we fiscal

sales 'XX As XXX to to mentioned, profit to store to $XXX to to growth grow expect Lori $XXX driven year XX and franchisees. additions we Top fiscal are expected billion to XXX million of X% from we to a expected line same-store be X% on-algorithm an with expect by From to to million. of EBITDA revenues $X.X year. XX billion, $X.X grow stores perspective,

patterns the million maintenance our $XXX the As half. Capital balance back to new are half of to increased for of a the we amounts which customer-driving XX% year timing and over meetings, includes $XXX to and expenditures million, reminder, seasonality just with costs. first around annual come coming expect in of the EBITDA company in with growth, be store technology expected company the additional

We EPS to expect to be $X.XX adjusted $X.XX.

Now back up. wrap I'll to over turn it to Lori

Lori Flees

talented Thanks, our fiscal that over strong for of team delivered Mary. and these XXXX. I franchise results the in our hard XX,XXX want to thank year partners work

core algorithm our of innovating high-growth business, evolving focused of network the We the car needs continue retail creating on best-in-class franchise growth value potential long-term a with with shareholder accelerating full performance an peers. to We're of our focus driving park. meet and to on to deliver relative

back Now to it I'll the Q&A over begin turn Elizabeth to session.

Elizabeth Russell

Thanks, Lori.

that, the want please limit start remind line. to on can everyone line. we get Q&A, to With the the open operator, everyone your I to we to so and follow-up Before a that X question

Operator

today Our Instructions] Daniel the Stephens with Imbro [Operator question of Inc. comes from line first

Daniel Imbro

openings on 'XX? pipeline maybe talked the are you franchisees bit. do obviously, cadence discussion starting you refranchising about in last unit the conversations for and new franchise Maybe growth guys side, about And up going caught a feel potential with quarter? the the How how

Lori Flees

X a QX. surprise disappointment a took really quick we permitting support chain question, very felt partners. about stores really them we Great saw. But on franchisees the franchise put was our opportunity and franchise and Obviously, we in helping landed pleased Yes. QX meet actions to were pushouts our in supply We and given an actually to as good based them up given ago and some had the partners. We did get running, that with progress we QX challenges, weeks with our Daniel. where

is estate annual in an share, we market leader together space, come excitement we in have about on the Valvoline which where all beyond. still there's franchise the the is the new the talk And have and council fragmented. workshop leadership FY side. would the and And while partners 'XX that, market, this M&A and say And only significant construction space with and real very a build about a our them. We opportunities development on as there incredible of I means side had leaders this both developing had we mean market brand that the to I market footprint. X% in white develop our is

in goal partners, franchise new we units those our by XXXX XXX partners. getting so the franchise coming a from have as working developed we've XXX to and year with of And stated, of per

about XXX, our from the partners. will within Now X/X come existing

sides about had X to was that on both get work together to So that. we meeting that reinforcing how weeks really ago we'll

our good feel the we franchisees. pipeline, so And about

for asking of some franchisees expansion We have their territories.

the FY units agreement and XXX that feel XX out And from to to underway build laid XXX year-over-year our 'XX expect with piece so active of to about we to target. we component development for really big We from XXX continue have strong XX a guide existing total we the as that franchise. players new have of updates franchise coming

Mary Meixelsperger

of would comments the are those in potential was and new a meaningful and growth. And really about unit making of I we've as we in really that handful franchisees. We progress discussions speaking good comparison felt you XX franchise in side. good in saw Lori, we new the seen where one franchise progress say driving only addition that with where refranchising new smaller in couple want that are as QX, franchisees with the capable earlier some just also seen QX with progress other new of a made I with really on franchisees We've making your would came really comment only against franchisees talking units. so well

Nothing progress has call, made good report to we're on progress. on making this all specific but So fronts. been

Daniel Imbro

guidance. you to low like a takes of high puts the about get then and this from year? what momentum guide? clarify any kind guide release? on the maybe would or very carrying clarifier one feels just to does here and in comp historical you Mary, algo Great. activity see ranges. what a the talk And the you're follow-up. with exclude line on into that year? didn't I end comp EPS, this Can It in Maybe for And type of any buyback

Mary Meixelsperger

$X.X share EPS doesn't we your the the the but additional do Sure. the EPS, authorization, beyond of on the Well, authorizations might on part include of billion includes $X.X second that and guide over completion question repurchase billion. any

I SG&A continues margin high growth good of growth to part really our first growth terms positioned your going And between sales We're of the confident and that new single in quarter. the for just side. continue we're especially that mid-teens, the to fact first to be see business. I'm the coming in side on of while we're On leverage seeing about digits, the seeing well to mid- sales growth guide year. and the coming excited into the from slower nice in SG&A performance the the feel about operating the question, delta the we're both

know don't So to good there's like to add confidence in anything if guidance. Lori, I you'd that.

Lori Flees

same. the add would I No.

drive 'XX around and going grow I operating momentum. FY strong our we're we existing and into ticket opportunities teams and our think And feel both partners. cars are the really in company energized the with both to really like franchise stores side

Mary Meixelsperger

basis quarter, benefit while from fourth costs quarter the would lubricant the saw from costs, it in net of lubricant modest was some we waste is add, which lower very oil product also from a sales. sequential overall, XX about a the points costs I perspective, leverage

I the the And to in increases as cost that forward adjustments. begin labor so well and we're pricing new 'XX, year pretty our our of watch We going costs. those make fiscal that already and the product we some feel watch year we'll within adjustments largest our taken and -- cost carefully we price the might cost is pricing areas good power necessary carefully, positioned. think some cost on, year, into our sold increase, on about both And take but we've to require to additional continue moves any if ability we goods see

Operator

question Zaccone comes Steven next with from Citi. Our

Steven Zaccone

prior follow cadence think around on year. sales. that, about same-store the the curious a in to ticket full up the pricing thinking I of of how you're the industry? mixture we you should at on you're think wanted to question guidance that you was How then the I year transaction? within gave? And stabilizing the point of versus relative about Do

Lori Flees

Steven. question, Great

as very sales think FY at I as move 'XX, looked at we finished we XX% strong felt QX, we and -- we into we same-store growth.

expected, of pricing than I As slightly we because think overall, rest year-over-year. we expect. the delivered we as the September increase the But lower would we was quarter a that quarter lapped did

is getting good to the -- about start feel across the new having for October, a October, strong increase, as we moved And the was compare we year-over-year board the of business very momentum at the saw percent October little across the really year. sales move to that we same-store we as X-year and year start soft, into our through to Now the a but X- where and relative a guide was year-over-year.

have comes non-oil guidance presentation. good. that and the to high that the There's hit we can, think very I always we're to as in we on -- around is change focus So initiatives continuing guidance from revenue as working

And then things feel so new teams accounts. come, and around business sales the to the But good initiatives We existing start penetration at the a be rate. we we're have after bunch acquisition get optimization the have the drive stronger. lower into same-store coming far. to how some really about obviously, growth then have as will a we customer And of to gone fleet where those year higher marketing CAC of

Steven Zaccone

clearly. more Okay. should -- then the ask it clarify, on to I just And just

as of Just is you above half cadence, in [indiscernible] could transaction? that second also you terms range? a first be just significant it half would think, first the the Or half, on bit the

Mary Meixelsperger

Yes.

sales, terms of amount half in actually of a versus fair half. we in see the same-store So first the second overall consistency

expect will amount stronger ticket transactions do see saw that what certainly so we but bit 'XX. versus in little we'll more it from comp this fiscal balanced And I of still a the be than year, coming

Steven Zaccone

just Okay. on Great. second then the And just question allocation. have is I capital

to cash How about completed flow? So authorization, overall for when buy priority a to as think willingness the this your that you've do stuff? back you what's continue

Mary Meixelsperger

Well, we've to excess turn a Yes. shareholders. to capital -- excess made commitment return capital

flow. don't our will we to should to ratio, continue over strong we I grows continued do as capital generate So to cash expect us will target capital business sheet shareholders time. expect I that of X.X to The we allow see And adjusted again, manage think that as and with see leverage through free get rating time. continued growing over our of ratio And lazy. returns EBITDA, to leverage agencies returns EBITDA of that the X.Xx balance I

to reauthorization. I will that, reevaluate the after current think market we complete conditions we subject

so call And hear you more our with what next our plans about on earnings think to QX. expect should are I

Operator

Stanley. question with Simeon Morgan from next comes Gutman Our

Simeon Gutman

to your was gross the going of answers surprised I one preempted and question this base ask, margin Mary, oils outlook. on

product at move of guidance. the come already kind through suggested that expectations in. you into quarter? if have actually the I'm all how And embedded curious as you then that's changed fourth So costs those

Mary Meixelsperger

Yes. reflect take know that today in Well, what guidance. we typically, Simeon, we and the

the XX% same that I'm it a side base incremental not was from reductions. oil. better in saw some me, lubricant in If sorry, would we understand if base really we extent base oil that would on do in $X.XX oil opportunity in. increase, increase increases cost company increases a our to there help try base to under so today, that math $X And for are goes reductions we about excuse see dollar is ultimately that's did factoring you oil supply agreement, factored increase for We're through a not in the -- in. to flow oils, factored impact where the to the base price -- take either. We increase So of

So able unfavorably that Said base prices. in be it points, increase $X.XX about in a XX and a differently, cost XX% about cost points to oil margins would would take to impact gross by about made in increase would increase. XX about cover up little be price basis $X basis increase with a that

company that's side on Now just of the the business.

side franchise a the business, costs, lubricant the contracts the on of On we passed with through base under costs basis franchisees. our oil quarterly

Simeon Gutman

Okay. the and a with costs you you got to sticking, call And is both? then second but the you promotional waste separate ask they the marketplace, underlying got that can oil, higher better the you're I'm both in or are better it. promotions? that product going they're funded -- prices about follow-up the it overall? getting talk and then the you in being, then that And is or that base happening that about question question waste mentioned mentioned is oil completely Can it, the promotional talk environment? What's the by When

Mary Meixelsperger

contracts So indexes. to our base waste oil oil tied are

promotional? talk saw improvement modest on in it quarter, the because So they're was tied of kind want integrally -- improvement modest ends to do about the contractually. Lori, when you a we both modestly

Lori Flees

VIOC when customers, to Sure. who've been pockets customers Simeon, retention we look we're at actually never but rate by see approach. we of seeing And location. that's competitors, for changed discounting new-to-file overall happening our it actually -- our hasn't

last We process of seen don't have have just addressing to around -- some year, difference rate feedback coming customers. to the retention in not for expect any retention by and initiatives to actually over the try year. We our we in new increase

FY customers doing get that at are deterioration or been down of on which we're new-to-file to seeing year-over-year lot and and resiliency the offered retention But on I for look marketing we're the our optimize we discounts from. are approach getting the concerned not of promotional a has customer really smarter type around we've spend the are an about a on if personalization based just the that think customer required active We're the even our discounts of to base. channel people of where discount in come what work side, almost environment fact, In any acquiring 'XX, more customer.

Operator

comes question next with Sachs. from Our McShane Kate Goldman

Katharine McShane

We first what of we've affordability any what the average change are in dealerships age to seen with in? could ask seeing And wondered headwinds? that the if Are coming we at just given of Valvoline? coming you are the age vehicles cars

Mary Meixelsperger

The average X come see, up Kate, warranty, that sweet right between age cars vehicles XX years. spot, about our we off to when of is of years around really

we change that a vehicle haven't kind the we So average range. -- age of the that quarter. see And the is -- seen of significant in really that X-year mid in any in

we continue like that I nondiscretionary demonstrate So their continuing convenient. And our for of is to our process very you share this kind service tell the spot do because us to from there's and take maintaining would that is consumer vehicles. dealerships think we more to opportunities show -- see. We their need some for

spot I market there us service entry opportunity the So X-year point, we is. of and point convenient over time, of as kind there's for from to continue will we come drive see that how think really our real that down

Lori Flees

the Yes. I'll was highest older. and that relative before Kate, age X just average of this the or months said, -- sweet of year is vehicle add, year the that XX But vehicle year in park of past came the the X between that this to of spot percentage life. the year penetration car

your customers' that's their highest the and But We with X longer. out keep in people market in consistent the that, been is age. the vehicle that's seeing are level that know we cars maintenance of So also data our has through penetration continues about preventive it the then start do cars. back their out we to a look have and or in to oil keep bring people cars. I use agree changes dealers been with for as XX Mary, to to to as way customers expecting expand actually

this I we're assumption standpoint. that We retention of time. those is, we're a it supply dynamics that's but given have specific market, the on kind pockets where held acquisition strike actually at just automotive that or think because not but may in off not see seeing it our they from may of customer a with seeing happening

Operator

with Our from Jordan comes next Jefferies. Bret question

Bret Jordan

In make color plans. of when you it mentioned recent remarks Or committee on guess, your I franchise acquisition your prepared talked more capital meeting, that. Could us you give sort story achievable? your more a about on to way talked the And that? -- is back reduction you you franchise about

Lori Flees

for it. Actually, question. asking Thanks great

of years, GC with inflation, retailers, on construction been labor in tightness, costs given have of the because the couple As up. of these all side, but past costs both material have up just just going terms going been

continued some ago results, that out back cost taking our We've bid get bring so -- as cost This our just weeks on return really that early perspective increase the in, initial -- a be on to X cost. of of trying And this the firm the actually on capital in out capital make inflation and despite franchise that new continue of that process. where order And really we costs engaged a to of for of take an doing gotten initial invested proactively. in new ways out. capital down with sure some how ahead maximizing in an company market from we're figure to capital, looking the which results. design. capital we our are cost to we return new drawings done designs builds can fresh have we're our something hire to we've attractive and deliver is partners And the capital builds. We've ensure we, we'll can opportunity is we been those on and to at We've reduce to to taken invested, relook trying A&E at to to some

haven't We to asked our done partners or because delaying franchise it builds. have new us because any they're

the fact, In it of you mentioned, the been. does that attractive traffic take is fresh in existing higher builds with on side it. can a given cash-on-cash of converting And you it's a site that more the optimized as site at look right and up the to is why to buying although is very time I traffic an the amount density, new build pipeline reason location, marketing franchise that because from when an spend than return, and is retail ever population gain than

just return invested ahead highest we're we capital. make that drive the sure trying So of on getting to

that do stores, is of amount ways build by capital, of to their we cost gets We example in significant our cars. a down. that always of out used but but ceiling the nobody continue our I've and One we're to exceed looking out for cut

a That's just cost, So to why necessary. is ceiling? which not do need completed we have extra

the relooking we're just are that And so at. those things

hasn't a many design it's take in fresh opportunity Our many, and an just perspective. years, changed to

Mary Meixelsperger

And Lori no, I want Simeon. to go back ahead. to ahead, go -- Go

Bret Jordan

look question, great. about had had that prior -- what to to attachment, follow-up at than non-oil The the And you you add? with fleet. be question, there services you're of change as business service? system? another new store -- seeing on maybe the in you is the you're that format, you bay oil tied Is in possibility that services Or a talking new of a If to pit change a follow that's finding provide guess, more more I other if I would more guess the services are same

Lori Flees

mentioned change highest we've which services, in seen. revenue I've provide. the both change our increases non-oil really on in focused year that dollars we was for services that The fiscal revenue 'XX, $X.XX non-oil is

services is provided any the year can in and be started through, vehicle we A, so going order And we such all for them. supply do equipment requires working customer the the the the equipment whose that have just and

to why the second doing of can The of how and them just it's marketplace. our And the based do or was in services the the vehicle make we team acquires of that to is equipped to services itself what the and going sure team customers third those relative to functioning our to age trained such then customer basics the is service a it items, to that in And communicate delivery trusted as services. those others present back stores. quick, needs their presents those customer our easy, on provide really the on understands it the the proposition our and vehicle trained

trusted; opportunities, give A, that we been to make more we understand always focus. report we team point easy, really have from we B, the We'll make we they we at to that's services. easy, train see but way, stores do as our And But the quick, proposition sure and We additional discussion helping we have managers, perspective. of evaluate us love have our more are our where can we do look that, when that in good expand in of they fit to requirements one-stop that at as that and ways and reach. capital they're it. obviously validating don't in and time. and looking we're -- this sure trusted nature shop do us the And discussion, then a a them can we a anything for to should But efficiently always effectively quick, our adding fleet updates share to are leading because talk some

Mary Meixelsperger

clarify years The the to age mentioned I comment So than go years. over age versus park vehicle actual a car the and most lower actually the at we we age little indexed to is where X That's XX.X XX serve about serve, Lori, to I wanted of The a average just park car earlier. time back bit of average a I being X a made the the average park. vehicle of car at the we years.

to just correct little I spoke a wanted that. So earlier,

Operator

with from Wells Fargo. next comes David Lantz Our question

David Lantz

how moving that and impressive was through look the some management expect you SG&A as that pieces about Can quarter. fiscal you So talk the in we in of line 'XX? to move

Mary Meixelsperger

Yes.

points related and X/X to was our good We to of higher year-over-year the business does largely quarter. I you driven we're in an basis a to maintain and lot but SG&A, time some scale would opportunity leverage line. to which able well. about that that labor on of it the XXX nice really a EBITDA related X/X leverage saw think quarter, to paid we SG&A that was management. investing We real efficiencies require investment from we for year-over-year was there's profit the see margin in in by That did know be some attention efficiency as that we being SG&A where a tell SG&A the improvement the perspective of leverage year-over-year. So there's of gross growth rate and saw

in new of our coming with those guidance lot and a time -- attention a of year. focus the and that and our that in So process, plan lot area being for especially paid in place

We leverage the line. continue see on to expect SG&A to

David Lantz

system-wide fleet XX% less sales XX%. at but it's growing That's the strongly helpful. Got And today, really business, than then it. of on

how curious growth long-term how two, So rate through look you're could And one, thinking then the about, sales penetration? that year? next

Lori Flees

share on Yes. market context change in X% set And fleet X%. of our is oil the overall about less or thing The our space business is, than market X%. just one I'd around think, is I share the

opportunity we penetration So we see to market. our as where fleet just get to or share significant are overall up a

companies fleet small our is our cover year, it shared haven't actually are franchise what of we because the the fleet but to as as we fleet growth -- overall discussions some We growth with management outpace this on expanded work with to partners. will past our our having our we fleet side, rate expect that continue fantastic operators. In with well

stores XX% fleet is a less stronger accelerate. I a -- system-wide was at when is growth fleet company our And than think fleet overall, rate. the the it we'll on in side, much basis. you So to look on start But that of growth see

of and that of sure see we've doing enable we the get company-operated lot work the we for our So to the benefit to on we're again, been franchisees trying stores. fleet, can opportunity make a

Mary Meixelsperger

requests us add get customers where be. I'd fleet our locations is expanded from Lori, are the And an footprint. biggest one certain to that not in like currently of we national We they would

to act as well. the in a growth fleet our to tailwind will expand continuing that business so footprint as And

Operator

Our next Seaport Mike Research question comes with Harrison from Partners.

Michael Harrison

last optimization higher see expect what about where detail mentioned and you efforts And retention. also, actions a year? is was are? to bit talk marketing efforts are you could earlier year-on-year? year was optimize to some that Or I you've improve marketing just undertaking to more be this little do pretty spend in it similar some your it moving to those Lori, of work you hoping

Lori Flees

our I'll let Mary at look efforts, it's spend overall. -- marketing. about the in around terms we talk marketing But new store of

new for market a of that market are optimization building. that our penetration spend therefore, But would of both penetrated is or of marketing we're than the store and faster before marketing and, we're some stores our is effective get entry we've doing therefore we're less number that lot costs more new trying the the new around given focus the markets already that marketing franchise are. the Obviously, company brand what stores launching brand tactics a most that a mentioned be tied store much the in ramp where and requires for exists some in new and those is we So key where and on to we're lower in-filling sales. store so around

how are months reengage we ways within number them. that, inactive. Second promotion customers come to on than the haven't of are Day And And XX and like some doing a how days a the of Those our lower to tends customers. who things they inactive what that we're pilots volume to do we Father's last to want be just ran to reactivate where would is capacity to us on by last for doing find our year that tactics inactive, means it be.

on can a are customer customers to And market it's we defect. busy, to in going one, reengage and as chance they a come so going great be if speed they're not inactive get before fantastic to the days experience, a to that to is

that after new way really optimizing go that base. doing a is we our The channels based on store the customers other in thing more surgical and

mature than around making not maybe growing that we have are growing have marketplace. dollars market And acquisition stores stores. in we new stores pace the the less other in those are demographics and that customer the So are that spending that been XX areas years same in for sure at and we're

our digital you CRM we that So relative done is when another optimizing see the given we a on acquisition efficient on still saw last we there's per and side, change, basis. The they just doing tools. backbone these customer is expectations? of us we have do be digital want are cost on our is the the to look comment to on in to retail existing opportunities down more last But relative a robust broader that we more marketing taking industry. oil also compare them, the at digital It have, what We've channels really but had Mary, that spend customers reminding is so and acquisition marketing a to to things new standout. effective you side. But marketing to customer for the one continue customer both that time that new dollars get and our need

Mary Meixelsperger

Yes.

stores. overall, the as in new line component a with So growth for SG&A of year our store for company marketing growing new will be count

mentioned be So it single-digit consistent I a that growth to I with earlier. SG&A expect pretty high

Lori in marketing see driving will spend. which the is much it We of in is marketing, will talked growth, existing efficiencies pretty in A primary of be about our but the increases what in marketing growth with line store driver spend. lot

So -- we're for year overall, the single-digit seeing likely new I'd in a for marketing increase year. the high that say

Michael Harrison

Mary. a And then housekeeping of questions, helpful. very That's couple right. All

give you First as next number can can a what to that you up D&A for that interest bit all, sequentially year? as of move little $XX million guidance well us to maybe expense expect drove And you level? us D&A somewhat understand some help Did expense that?

Mary Meixelsperger

just certainly of service. to it. About was to new in increase XX% the online. technology stores We of some expected was XX% related new Yes. that coming placed related

expect year, see more stores, make modestly to this amortization technology improved in of in that we half see forward to depreciation consistent in year and But the the service the I Now where prior drive technology would depreciation continue saw probably in higher new and to the where experience we increases depreciation was we'll quarter. of we placed kind more forward, it efficiencies quarters amortization to a tell moving I component the the quarters in of as it some and moving earlier stores. that, but related and investments of you X catch-up didn't captured get with and about from had

little going you'll So I see bit of technology had a we catch investments that think some of because some was unusual higher the quarter up. quarter the But we're bit new forward, because likely rate growth itself -- fourth a making. that

Michael Harrison

And year? for interest expense next

Mary Meixelsperger

Yes.

look current income expense, the had income offset at our interest $XX I you think year, interest in if that expense. of interest So interest we million

I short-term And for given would see still tender equivalents the have of million so We'll cash, second we the in $XXX of XXXX some that with investments. that quarter. expect bonds at conditions and cash our year-end go some away, market fiscal time

spread. benefit bit we a a given So continue But little see has term once I to a through net interest expense interest based variable more and to based think see you'll our elevated excuse -- the plus cash position. on which rate income SOFR the or X% you'll outstanding A, in me, XXXX bonds interest current year, rate on discount loan normalized under just start to that, rate the that are a

guidance, points we're I basis think so. in shape. bit interest I that tell built Fed cushion we that move of or the good XXX we're our will our little another guidance you see assuming in in EPS a rates going to -- So

And built is guidance. into so that EPS our

Operator

further we with questions. no And have that,

So I'll back closing call turn the to for any Lori comments.

Lori Flees

you and and all questions. and look spending Emily, with Thanks, of for Since today the I to time thank thoughtful last your and ongoing our joining you for discussions. investors us I've forward enjoyed many update, our

the that business, about we're am a 'XX. resilient momentum durable excited have into We taking I and FY and

So I Thanks. appreciate today. your time

Operator

call, you, disconnect your for concludes today. now joining our lines. and may you This everyone, Thank us

Valvoline (VVV) 9 Nov 232023 Q4 Earnings call transcript