Q3 2021 Valvoline Inc Earnings Call

Thanks Patty.

Good morning, everyone and welcome to Valvoline third quarter fiscal 2021 conference call and webcast.

Valvoline released results for the quarter ended June 32021 at approximately 5 PM Eastern time yesterday on exports and this presentation and remarks should be viewed in conjunction with that earnings release, a copy of which is available on our investor relations website at investors Valvoline Dot com.

As a reminder, there are slides in the appendix of our presentation that provide further information.

These results are preliminary until we file our form 10-Q with the Securities and Exchange Commission a copy of the press release has been furnished to the SEC on a form 8-K.

With me on the call today are Valvoline, Chief Executive Officer, Sam Mitchell, and Mary Michael Burger Chief Financial Officer.

As shown on slide 2 any of our remarks today that are not statements of historical fact are forward looking statements.

These forward looking statements are based on current assumptions as of the date of this presentation and are subject to certain risks and uncertainties that may cause actual results to differ materially from such statements.

Valvoline assumes no obligation to update any forward looking statements unless required by law.

In this presentation and in our remarks, we will be discussing our results on an adjusted non-GAAP basis, unless otherwise noted.

Non-GAAP results are adjusted for key items, which are unusual non operational or restructuring in nature.

We believe this approach enhances the understanding of our ongoing business.

A reconciliation of our adjusted non-GAAP results to amounts reported under GAAP and a discussion of management's use of non-GAAP measures is included in the presentation appendix.

The non-GAAP information provided is used by our management and may not be comparable to similar measures used by other companies.

Now, let me turn to slide 3 I will turn things over to Dan.

Thanks, Sean.

Our transformation to a service driven business model has reached an inflection point this year with our retail services business generating 52% of segment adjusted EBITDA on a year to year to date basis.

We expect this ongoing transformation to continue driving faster growth higher margins and stronger returns on capital.

Our exceptional Q3 results across the business reflects the continued strong momentum we have experienced this year and clearly demonstrates that our strategy is working.

We saw outstanding year over year performance, including a 75% increase in adjusted EBITDA.

3 to 5 times leverage.

Let's move to the next slide to discuss our new segments.

We've realigned the management of our business into 2 operating segments retail services formulae are quickly segment, a global products are former internationally core North American segments.

Both segments benefit from key industry drivers, including an increasing car park, expanding miles driven and growing vehicle age.

Additionally, a retail services segment also benefits from the ongoing shift from DIY bifl as well as from the industry trend towards synthetics reinforcing our transformation towards a more service driven business, let's turn to slide 6.

Our strategy is to transform from a product centric to a service driven business model.

We are redeploying the cash generated by a global product segments to accelerate the growth of the retail services segment, 2 acquisitions and company store Bill.

Additionally, we generate sufficient free cash flow for opportunistic M&A and shareholder returns via dividends and share buybacks.

Ship the services is expected to drive faster growth higher margins and stronger returns.

A transformation story is now driving an acceleration in our financial results as shown on slide 7.

The investments we have made in new store growth and acquisitions for a retail services business began bearing fruit in 2020 and have driven an inflection point in our growth this fiscal year we.

We expect our high return investments to continue driving growth in the future.

Moving into segment highlights, let's discuss retail services on slide 9.

A retail services segment, which focuses on preventive autocare delivered outstanding results for the quarter.

Our growth algorithm of driving same store sales and expanding our unit accounts within full effect as the segments delivered sales growth of 66% year over year, and 56% versus Q3 of 2019.

Key drivers are on top line performance, where system wide same store sales growth for more than 40% year over year as well as system wide unit growth of 10%.

Our same store sales strength was driven first by transactions.

We believe that we are capturing significant market share.

As well as high single digit growth rate an average ticket.

Versus Q3.2019 same store sales grew 27% and system wide unit growth was 16%.

Just that EBITDA grew substantially versus last year and versus 2019 is margins benefited from fixed costs leverage.

Going forward, we expect transactions and average ticket to drive annual growth of 6% to 8% and system wide same store sales combined with unit growth sales are expected to increase 14% to 16% per year.

We forecast annual EBITDA margins at or about 30% highlighting while we remain bullish on the growth prospects for this segment.

Shifting to the next slide we can discuss global products, which continues to generate strong cash flow, helping to fund growth and retail services.

I want to highlight the solid results in our global product segment.

Sales grew 46% year over year, driven primarily by volume growth of 37% as well as pricing.

Sales were also up in the mid teens versus Q3 of 2019.

Segment adjusted EBITDA grew in the high teens compared to last year and was up 3% versus 2019.

Discretionary free cash flow generation grew 20% year over year and was up modest rate from 2019.

An exceptional performance considering the raw materials backdrop, and highlighting the resiliency of the segment.

Global products remains on track to generate an estimated $200 million of discretionary free cash flow for fiscal 2021.

Yeah.

We have witnessed an unprecedented increase in raw material costs.

As well as limitations and raw material availability over the past few quarters.

We have had success passing through the earlier rounds of these cost increases as evidenced by sales growing faster than volume.

However, significant cost increases announced in the past quarter are anticipated to have the biggest impact on global products results in queue for.

We are in the process from executing further pricing actions through the balance of this calendar year.

Bottom line, we believe the fundamentals of a global products business are solid and expect that cost inflation is a short term impact.

Now I will turn things over to marry to review our financial results in more detail.

Thanks, Sam Ah results are summarized on slide 12.

Performance in Q3 was exceptional including record quarterly sales gross profit and adjusted earnings.

While year over year comparisons are outside to the Covid impacts last year growth versus Q3, 2019 was robust demonstrating the strength of the business overall in the benefits of our ship to service strategy.

The biggest difference between reported in adjusted gross profit in the quarter is our treatment of LIFO inventory accounting is a key item adjustment, which was discussed as part of our main business update we believe excluding the non-cash LIFO impact is important to better understand the underlying business performance and for better comparability.

Q3, we had a LIFO charge of $17 million pretax versus a credit last year 7 million.

The appendix of our presentation includes a slide showing R Q3 results over a 3 year period with and without the key items treatment of Lifeful accounting.

Growth in sales on adjusted gross profit was driven by retail services, which saw significant topline on margin improvement. In addition to strong organic growth year over year Star acquisitions contributed approximately 400.500 basis points to overall sales on EBITDA growth respectively.

The year over year increase in SG&A was related to reinstatement of spending primarily for advertising that we had restricted during the pandemic last year as we focused on liquidity as well as investments to support future growth.

Let's take a closer look at margins on the next slide.

Total company adjusted EBITDA margin expanded by 270 basis points compared to last year, and buy 100 basis points compared to 2019.

Given by improved margins in retail services, which increased nearly 700 basis points year over year, and 400 basis points versus 2019.

System wide same store sales grew 45% versus last year and on our up 27% versus 2019.

As we gain share and increase average ticket cause significant growth on same store sales is driving leverage.

Like many other retailers, we have had challenges and fully staffing or stores. We have plans in place for Q4 to invest in our store teens to maintain high service levels and help preserve the market share that we've gained.

The decline in global products margin was consistent with our expectations given the lag between raw material cost increases and pass through in pricing.

As you can free on slide 14 cash flow from operations remains strong with $296 million of operating cash flow year to date and free cash flow of 190 million.

80% of our capital expenditures have been growth focused while maintenance capital was less than 1% of sales on a year to date basis.

We believe on a capital like business model will continue to drive significant discretionary cash flow to fund our transformation.

Growth.

Growth and returned fish and growth and returns to shareholders.

Through June 30th we have returned nearly 179 to shareholders via dividends in share repurchases.

Let's take a closer look at our growth investments on the next slide.

We have significant reinvestment opportunities that projected high returns on a retail services business, we have roughly 4% share of the U S. D M oil changed market and a much smaller share of the highly fragmented auto aftermarket.

Historically, we have acquired quickly stores with returns targeted in the mid mid teens, while also building new company stores that have cash on cash return approaching 30% of maturity.

Or nearly $330 million in year to date investments in retail services are expected to continue driving our growth, including an incremental 40% to $50 million of EBITDA maturity and transforming the business model for years to come.

Our strategy is to continue deploying cash flow from our global product segment to fund growth in retail services.

Our outlook for fiscal 2021 is shown on slide 16 based on our strong momentum we are raising our top line guidance and now expect 25% to 26% growth in sales driven by 19% to 21% system wide same store sales growth, we've tightened the range for adjusted EBITDA Lee.

Leading to $1.86 to $1.96 for adjusted EPS.

We continue to anticipate strong cash generation, which free cash flow of 250 to 270 million.

Let's review on a long range outlet through 2024 on the next slide.

All in we expect the continued growth in retail services and steady performance on global products should drive 9 to 11 per cent revenue growth at low 20 per cent EBITDA margin at low 20 per cent EBITDA margins and adjusted EPS growth and the low to mid teens through 2012.

For rich.

Returns on invested capital are anticipated to remain at or above 25 per cent.

As retail services grows as a share of our business. Other time, we expect continued strong growth in sales EBITDA in free cash flow generation as well as improving margins let.

Let me turn it back over to Sam to wrap up.

Thanks Mary.

Have a few points I want to emphasize on summary, first because you can see on slide 18, we're continuing to drive our strategic transformation.

On each segments and reporting on a natural next step and focusing investors on that ship the service strategy.

Are convenient trust based service approach stands out in the auto aftermarket, which has allowed us to gain share and drive growth.

Second we've got a fantastic quarter in Q3 with record sales and adjusted earnings driven by our strong team brand and business model <unk>.

Third we are managing through a unique time, a significant cost increases.

We expect the peak margin impact of those challenges in queue for primarily in our global product segment.

We continue to be encouraged by the demand trends.

Lastly per team has done a great job in managing through the impacts of COVID-19 and supply chain tension.

They have set us up for long term success is highlighted by our targets from 2024.

From that I will turn it back to Sean to open the line for Q&A.

Thanks, Sam before we open on the line for Q&A, just want to remind everyone from limit your questions to 1 and a follow up on it.

So that we can get to everyone with that now do you read up on the line.

[noise] have come on ladies and gentlemen, if you would like to ask a question pays per staff finished by 1 kinda think keep hats and P. T..2 it's kind of a question. Please press staff and if I came from the <unk>.

And can I ask a question teaching show that you'll think as a knee jerk lately.

Our first question today comes from sign.

Simon Hickman from Morgan Stanley Simon. Please go ahead, you line as a pattern.

Thanks, Good morning, everyone. It to me and my first question is Q3 can you talk about how it track versus your expectations clearly services the retail services outperform but curious if global products profit maybe came out a little below expectations because of the price cost lag and if you could just talk about ex.

Spectation for Q4 now versus what you were thinking about last quarter.

Yeah, Q3, obviously was a really strong quarter for the business and from an expectation standpoint.

Retail services did exceed our expectations and the same store sales growth that we saw so the the underlying trends obviously had been really good for that business for quite some time and the performance of the team and our ability to grow market share has been most impressive and we really saw some strong.

Volume growth transaction growth in Q3, so that gives us encouragement as we think about performance opportunity in queue for and so we're thinking more positively about the retail services business in a momentum that it takes on the global product side.

The businesses continue to perform well from a demand perspective demand.

As.

And volume has been very solid even going back to last year.

Particularly in the DIY business into growth that we've seen in the international business and on that was the case in Q3 and as we as we anticipate queue for <unk>.

Expecting the demand to continue to be solid we're starting to see some improvement now and be modest improvement in the installer channel segment. So that's encourage you to as we see miles driven begin to pick up from on.

Been down probably about 3% on when you look back over the last quarter or so but recent trends are showing miles driven to be on.

Most flat versus 2019, and that's my point of comparison for miles driven on obviously, it's up significantly versus 2020. So so on the demand side very solid.

It's really on and global products, where the cost increases are have been more significant than we had anticipated say going back to the spring.

That creates the margin challenges for Q4.

And.

And.

And yet.

Feel that through the pricing actions that will be taking honestly the balance of this year, we will get back to where we need to be when it comes to the unit margins for that business.

So again from.

The fundamentals in the business.

Feel good about global products.

The challenges of course spin on the supply chain side with with the inflation with some of the raw material availability, but the team is just on an excellent job to to meet our customer needs.

We're in a pretty tight period here, so hope to see that improving.

And.

And lastly, callout modest risks in the international business, particularly in South East Asia right now with some of the COVID-19 impacts that continue to be a factor, but the underlying demand for the business and the strength that we've had an international growth across really all of our regions give us a lot of confidence.

The the longterm growth to that business.

So my fall on thanks for that damn it it relates to the slide 17, the long term growth expectation revenue CAGR from 9 to 11, and then they get adjusted EPS of 12 to 14.

Those are on Questionably, great outfits, a great outlook and it's definitely above the run rate that we've seen historically at least the cagr's.

Is it because of the growing mix of retail services on the business or your fundamentally think that international plus I guess legacy North America will also grow faster like 1 of those changes do too.

Yes, first and foremost it's the strength of retail services in the growth that we're seeing it has been.

Outstanding and it's it's twofold. It's it's in same store sales growth the operational performance of the business continues to be exceptionally strong as we continue to gain strength scanned at share and then obviously, we've had really good success and driving our store growth and that's also really important for us to gain market.

Share and that that is a big opportunity for US is that I think we shared in this past year that we believe our share of that do it for me market in preventive maintenance is is on that 4% to 5% range and so our opportunity to grow our retail business and adding units both through.

Our ground up program, but also through acquisitions acquisition pipeline continues to be solid and working with our franchisees to drive growth. We have a lot of levers to continue to drive growth to continue to gain share and then.

Our ability to expand and drive ticket growth.

We're very bullish on that too.

And it keeps coming back to global products in that long term outlook, we do expect that the international business will be the key driver behind the growth that we expect modest growth that we expect an overall global products, whereas the north American business, we expect more steady performance and until we've made really nice progress both in turn.

Of seeing good stable performance coming out of North America, and then accelerated growth in the international markets.

Thanks, everyone for good luck.

Thanks, So I mean.

Thank you. Our next question comes from Mike Harrison from <unk> Research partners like Please go ahead. Your line is a P I N.

Hi, good morning.

Conglomerate, Michael nice quarter.

Mickey was 1 on.

If we could begin a little bit on the I believe you said that average ticket in retail services was up in the high single digits.

Can you just.

Maybe give us a little more color on on how much of that was increase in non oil change revenue and how much of that was was maybe pier pricing.

Yeah. So.

3 drivers behind on on average ticket III primary drivers and when as you point out is non I'll change revenue and a second 1 is pricing and then the other part is mixed in terms of the premium mix of oil changes as they continued to drive synthetic growth and the biggest growth factor in this past <unk>.

Porter and that average ticket was coming from the Premiumization of the oil changes. So we have a significant.

Ticket and margin pick up as customer's car owners.

<unk> 2 synthetics and so that's been on real strength of ours, that's a long term tail.

[noise] tailwind for us as more of the newer cars require synthetic oil changes. So that was a key driver in the quarter will that less on price that not all change revenue also contributing to overall ticket growth.

And as we've shared and highlighted in the last quarter's call non I'll change revenue. We see is a really important longterm driver for us as we execute on some of the additional services that we provide from filters to OEM services are new battery program. These are all great opportunities.

For us to to drive ticket that way, but with multiple levers to drive ticket and then also the strength of the digital marketing programs and reaching more potential customers to drive new customers into our stores.

Has really been impressive and so we're just in a sweet spot that we expect to continue as we continue to improve.

R R digital marketing programs and execute better in the stores. So it really hitting on all cylinders right now.

Alright, and then I'm trying to understand in the retail services segment. The difference between same store sales and the overall sales growth that overall growth number was 66 per cent same store sales was 48 and a half. So the delta is call at 25 per cent and that's.

Really significantly higher than what you've shown in the past several quarters I know that that different should be new stores, but the store counters only 10% on a year obligation. So can you help I guess explains some of the mass that's going on with this revenue growth that is not considered <unk>.

<unk> same store sales.

Yeah.

Like we had.

Quite a few acquisitions that we did in the first quarter of this year.

And so I think part of what you're seeing is just the sales contribution.

From acquisitions in the in the quarter.

We did see just over $20 million a benefit of sales from the acquisitions that we did.

This year.

So that that that did help and then again.

The new stores that we've added to both acquisition and through builds.

Provided.

Those stores are are are growing at an accelerated rate.

As they ramp up in terms of our system and our marketing capabilities.

So that's the other component that's really a nice driver is.

Related to.

On those new stores in the rate of growth that we're seeing there.

Alright, Thank you very much.

[noise]. Thank you Mike. Our next question comes from Alexander of get free No onions. Please go ahead you line as a pattern.

Good morning. This is Dan was on for launch how are you.

We're going to mention that day.

Obviously, having issues like everybody else, but you have a plan for Q4 I was just wondering if at the end.

To enhance government benefits is kind of part of the assumptions that things will get better.

With Labour shoes are later on here more towards the end of the year.

So.

Well you should liberties are are you from actually and you cut out just a little bit then thanks.

So you you mentioned that labor issues.

Just now, but you have a plan for them to end in queue for on just wondering if that's because government benefits from anything that should help you or if you're taking other steps besides that to kind of make sure your stores are staffed.

Yeah you.

The labor market certainly has been challenging but again really impressed with the work of our team talent acquisition team in the execution in the stores.

So first of all what we saw on Q3.

Was outstanding same store sales performance growth and transactions and as we track our customer satisfaction weekly daily and all of our stores across the system.

We know that we're delivering on our promise a quick easy trusted so.

Even though staffing has been a challenge.

We still been able to to move our force around and continued to deliver on.

An outstanding customer experience.

That said.

We are flow of applicants for some of the hourly positions.

He gets it impacted by the government programs and where they have ended and we've seen an ice pick up an African flow. We've got a number of new marketing tools that we're using to help drive.

At that African flow and talent acquisition and so on pleased with the performance of that team and keeping up with our growth because not only are we growing within the store. We're seeing of course, the tremendous growth that we've had in units and we need to keep up with that.

Our approach to labor has has always been been.

Modestly above say the market in terms of our pay.

In benefits, we offer a nice programming package.

And through the summer months, where where.

We've got a short term program that we've put in place from premium pay for the summer.

Roughly in the 710% range.

And we think that's going to help us continue to staff or stores appropriately.

So.

We do hope that.

Yes.

That the environment improves over time, we expect that to be the case, but for us having.

Having a world class retail team out on our stores executing really well is really critical to our success and so we we obsess over we focus on creating that culture that makes it attractive or employees to stay with us opportunities for growth and training.

A really key to what differentiates valvoline from other retail service providers. So this this has been a source of competitive advantage for us in the past and we continue to invest in our our team to make sure. It continues to be a source of advantage into the future.

That's that's really helpful. Thank you for the color and then just <unk> with global products Uhm your person to prices.

As as would be warranted by the environment, but it just seems like it's it's probably a little bit easier now than it has been on the past is it just the change your environment or you do something different or your customers accepted piece modernists worst day, 2.3 years ago.

Yeah that again as I said earlier the demand environment has been really strong and that's been good for both.

Retailers in particular.

And installers as it starts to improve.

With miles driven improving.

But for US it speaks to the strength of the developing brand and what we bring to our customers and the ability to drive traffic at your ability to drive.

Profitability for the installer with our programs from marketing to training et cetera, and so historically, we've always been able to capture.

A strong premium.

Purses other competitors and and that's always been the case and in this environment.

Costs are going up for all lubricant competitors so.

Everyone recognizes that given the the the size of these increases that that's.

The importance of dicing through pricing is is.

To continue to be the case and so we see the market moving up our competitors also moving up.

And.

And so we fully expect to recover these cost increases.

With some lag effect that will hit us primarily in queue for we'll probably see some lag impact into the balance of the calendar year into Q1.

But with the pricing actions that we're negotiating and planning to execute we expect to fully recover our costs from being good shape moving forward and hopefully the supply chain challenges material availability begins to normalize over time too and there's dynamics at play where we're starting to see that happen but.

It has been a pretty unusual time on very significant cost increases and challenges on the supply chain side, but longer term fundamentals look good.

Strength of the brand very good.

Thank you very much.

Thank you.

Next question comes from Stephanie more of China. Stephanie. Please go ahead can on his iPad.

Hi, good morning, everybody.

Good morning, Stephanie pretty Stephanie at.

He wanted to touch a bit on my first question, it's more of a clarification on any of them. The last 1 would be I'm, sorry, I think most of us understand that the margin pinch kind of expected on the fourth corner just as your question Christ and and find the lag and save up to barely next year, what does that mean for holding on to price next year and it's.

And we get insurance on it were raw material pricing does come down I think it should as a supply environment and prints, but shed margins expand at that point and I think we talked about this in the past, but it is this kind of similar to coding companies or even Sherwin Williams, where you have that benefit of pricing when that when.

Materials to come down any any color there.

Alright, once you get through this environment would be helpful.

Yeah in the past and I've.

Of course on business a business for quite some time and I've been through these cycles before and what we typically see is in a in a rising raw material environment, we see that negative price costs lag in fact, but we've always been successful at recovering our cost and then.

On a market where raw materials are falling there's typically.

A positive price costs lag, but also.

Typically a positive benefit to our margins too and so we would expect that at the same time, we're not taking anything significant into our plans as we begin to plan for next year.

Not necessarily counting on that instead, we're looking at just the basic fundamentals of recovering cough continuing to drive.

Volume growth share growth taken advantage of the strength that we're seeing in the international markets.

Solid DIY performance in North America, and then working with our installers to to strengthen their business too is miles driven begins to improve and then of course.

They were expecting.

Continued strong strength in a retail services business.

And Sam I would just add to that on the retail services businesses.

On.

As we see on.

Raw material costs.

Decline, our expectation as well hang on to pricing and the retail services business fell.

Over time, some of that volatility helps us in the retail services business I think which is I think more analogous to day that coatings business. Stephanie that you talked about and so I do think as retail services become the bigger part of the business you're going to see will hang on to that pricing.

And that will continue to benefit the business other time.

Yeah to emphasize that point, we've never taken a.

Price decrease in retail services.

I mean over the last 5 years I think are are priced CAGR is up 4% in a mid single digits.

And retail services, so we've got really significant pricing power there.

Great No that's really helpful and then I'm from me.

I can send the retail services side, I see tremendous growth and gaining share. It in any of your data can you kind of parse out who you are gaining the share from is it.

More on the dealership side Mitchell.

Or any any color that would be really helpful. Thank you.

Based on our new customer growth, we're continuing to see it from.

All competing channels. So we're seeing.

New customers coming from the dealership channel from the tire repair channel.

The DIY DFM shift these have all been good sources of growth for us. So we're <unk>, we're really seen it broadly and that's not surprising when you consider what.

What we deliver consistently versus the balance of the marketplace, we have a unique offering.

And when it comes to competing quick rubes.

The industry data shows that quickly car counts share is has been flat for a lotta years. So.

As we continue to grow car counts.

And the industry stays flat.

We're taking significant share from competing quit groups. We just have a more sophisticated models stronger digital marketing and then the.

Talked about some detail the strength of our team in the stores and how we care for the customer with that are quick easy trusted approach to preventive maintenance.

Well. Thank you so much <unk>.

Sure.

Thank you Stephanie our next question comes from Crenshaw from a nurse Crispy Fries. Please go ahead on line as a pattern.

Yeah. Good morning, everyone How're, you doing Monica I'd like to drill down on it drill down on the strength herself more but I I quantitatively qualitatively so understanding the bigger ticket share game I guess.

They got the tickets side or do you think it's people are just.

Are they flush with money either from I don't know government tax credits or unemployment whenever it is or not having to commute.

Is it the fact that people are coming back from the office of the miles driven up on.

On a share side, you know I understood it.

Sent to me why you were gaining share last year, a significant share because logging for clothes and people change their habits, but still be gaining share you know what what are the reasons behind on it you see what's the customer I guess psyche, that's changed that really helping other thing because the number just so good this quarter I'm just kind of curious what you're seeing anything change the customer.

Well I mean, we know 1 thing for sure is that day.

The consumer demand for convenience is.

Just continues to grow and so our ability to deliver a differentiate differentiate service experience and save our customers time is important and.

Our ability to.

Present, the services effectively so that May May Trust valvoline.

Further preventive maintenance is really key and those are the like the basic fundamentals per why we're continuing to to drive growth and we've created.

And approach.

Process supported by technology, and our connection with the customer.

To both be experienced in the stores and what happens outside the stores with our digital platform.

To market to them effectively.

Is once the neighboring us to to create these <unk>.

Very strong returns and so there really is nothing about.

Say the short term environment.

That is dramatically.

On.

No that is having a big impact on our results, it's just to improve driving obviously.

Driven helps us and synthetic growth helps us.

This is will be the 15th straight year of same store sales growth from so it's it's something that we have built into how we operate and how we continue to learn and get better at all the different levers that improve the customer experience and target those future customers, who haven't yet experienced what filing is all about.

So.

That's what's so encouraging is that.

Each year, our team is getting better and smarter and and we're able to strengthen the value proposition and for us long term.

We see an opportunity to.

Grow our service offering.

While still maintaining that speed and convenience.

That will be key for us and we're dead focused on how do we make vehicle care easy for current owners vehicle owners.

And that includes fleet on as to where we see that as an on nice opportunity in front of us see him on eyelid also add this macro trend towards convenience is.

Not dissipating, it's absolutely a trend that R retail business plays directly into.

And probably just as importantly, we are a very very data driven business.

We have.

We have a lot of.

Information that we collect on the vehicles that we service, we know our customer as well and he had the smaller operators and the other broader auto aftermarket simply is further behind in and may not ever have those capabilities and how we are able to use that data.

To create an improved customer experience and 2 <unk>.

Target market to new customers and that is a huge competitive advantage for us we've been we've been active data data driven marketing business for a long time and.

In our our team just continue to do.

Improve their capabilities, there and it's a key competitive.

Differentiator in our business versus what.

Customers consumers are.

Faced with and looking at when they're out there looking for these preventative maintenance services. So that combination I think of convenience and R and awareness 7 what we can do for the customers is is huge and finally I think.

Our customer satisfaction with the services.

<unk> allows us to just have really record retention levels in in customers coming back to us. So.

Debt customer experience is so critical as well it's we.

<unk> the model that I think it's just a really significant competitive mode.

And 1 that's allowing us to take significant market share.

So that that day does not showing any like big drop it drained interval or anything like that it's just things you are doing that you think they're really helping.

Yeah, absolutely I mean, we understand drain intervals, we understand.

We know when our customer is likely to need their next oil change we understand.

What their OEM recommends for their vehicle all of those things come into play when we were using our targeted marketing.

Got it thank you.

Thank you guys as a final reminder, ladies and gentlemen, if you would like to ask a question. Please press staff satisfy 1 not no telephone keypads now.

Okay now it sounds like we don't have any questions left on the line. So I think we're ready to Iraq per call.

Alright, thank you.

Perfect. Thank you, ladies and gents spending account you have nice day other questions.

Okay disconnect your lines. Thank you for joining.