Valvoline Q1 2026 Valvoline Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 Valvoline Inc Earnings Call
Speaker #1: Hello, everyone, and welcome to the Valvoline's first quarter fiscal 2026 conference call and webcast. My name is James, and I'll be your operator for this call.
Operator: Hello everyone and welcome to the Valvoline’s first quarter fiscal 2026 conference call and webcast. My name is James and I'll be your operator for this call. If you would like to ask a question during the presentation, you may do so by pressing star followed by the number 1 on your telephone keypads. The conference call will now start and I'll hand it over to our host Elizabeth Clevinger with Investor Relations to begin.
Operator: Hello everyone and welcome to the Valvoline’s first quarter fiscal 2026 conference call and webcast. My name is James and I'll be your operator for this call. If you would like to ask a question during the presentation, you may do so by pressing star followed by the number 1 on your telephone keypads. The conference call will now start and I'll hand it over to our host Elizabeth Clevinger with Investor Relations to begin.
Speaker #1: If you would like to ask a question
Elizabeth Clevinger: Thank you. Good morning and welcome to Valvoline's Q1 fiscal 2026 conference call and webcast. This morning Valvoline released results for the Q1 ended 31 December 2025. This presentation should be viewed in conjunction with that earnings release, a copy of which is available on our Investor Relations website at investors.valvoline.com. Please note that these results are preliminary until we file our Form 10-Q with the Securities and Exchange Commission. On this morning's call is Lori Flees, our President and CEO, and Kevin Willis, our CFO. As shown in the accompanying presentation, 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.
Elizabeth Clevinger: Thank you. Good morning and welcome to Valvoline's Q1 fiscal 2026 conference call and webcast. This morning Valvoline released results for the Q1 ended 31 December 2025. This presentation should be viewed in conjunction with that earnings release, a copy of which is available on our Investor Relations website at investors.valvoline.com. Please note that these results are preliminary until we file our Form 10-Q with the Securities and Exchange Commission. On this morning's call is Lori Flees, our President and CEO, and Kevin Willis, our CFO. As shown in the accompanying presentation, any of our remarks today that are not statements of historical fact are forward-looking statements.
presentation, 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 risk and uncertainties that may cause actual results to differ materially from such statements.
Elizabeth Clevinger: 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. A reconciliation of our GAAP-to-adjusted non-GAAP results and a discussion of management's use of non-GAAP and key business measures is included in the presentation appendix. With that, I will turn it over to Lori.
Speaker #2: Valvoline assumes no reconciliation of our GAAP to adjusted non-GAAP results and a discussion of management's use of non-GAAP and key business measures is included in the presentation appendix.
Elizabeth Clevinger: 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. A reconciliation of our GAAP-to-adjusted non-GAAP results and a discussion of management's use of non-GAAP and key business measures is included in the presentation appendix. With that, I will turn it over to Lori.
Speaker #2: With that, I will turn it over to
Speaker #2: Lori. Thanks, Elizabeth, and
Lori Flees: Thanks Elizabeth and good morning. Thank you all for joining us today to review our first quarter results. We delivered a strong quarter to start the fiscal year, driven by strong productivity gains in our stores, network expansion, and margin improvement, which translated to meaningful earnings growth. I'd like to begin by thanking our team members and franchise partners for their execution in delivering these results. At our December investor update, we shared our targets and our focus on executing against those. Our first quarter performance reflects good progress against these commitments. Starting with top-line highlights, we saw another double-digit increase to both system-wide store sales and net sales. System-wide, same-store sales grew 5.8% and 13.8% on a two-year stack. This quarter, ticket contributed the majority of the comp, with all three levers contributing. Net price and premiumization were the largest drivers.
Lori Flees: Thanks Elizabeth and good morning. Thank you all for joining us today to review our first quarter results. We delivered a strong quarter to start the fiscal year, driven by strong productivity gains in our stores, network expansion, and margin improvement, which translated to meaningful earnings growth. I'd like to begin by thanking our team members and franchise partners for their execution in delivering these results. At our December investor update, we shared our targets and our focus on executing against those. Our first quarter performance reflects good progress against these commitments. Starting with top-line highlights, we saw another double-digit increase to both system-wide store sales and net sales. System-wide, same-store sales grew 5.8% and 13.8% on a two-year stack. This quarter, ticket contributed the majority of the comp, with all three levers contributing. Net price and premiumization were the largest drivers.
Speaker #3: good morning. Thank you all for joining us today to review our first quarter results. We delivered a strong quarter to start the fiscal year.
Speaker #3: Driven by strong productivity gains in our stores, network expansion, and margin improvement, which translated to meaningful earnings growth, I'd like to begin by thanking our team members and franchise partners for their execution in delivering these results.
Speaker #3: At our December investor update, we shared our target and our focus on executing against those. Our first quarter performance reflects good progress against these commitments.
Speaker #3: Starting with top-line highlights, we saw another double-digit increase to both system-wide store sales and net sales. System-wide, same store sales grew 5.8%, and 13.8% on a two-year stack.
Speaker #3: This quarter, ticket contributed the majority of the comp, with all three levers contributing. Net price and premiumization were the largest drivers. We also saw continued positive transaction growth despite a tougher year-over-year compare.
Lori Flees: We also saw continued positive transaction growth despite a tougher year-over-year compare. As we look at same-store sales breakdown between company and franchise stores, franchise was slightly higher than the system average for the quarter and for the two-year stack. We continue to grow our active customer base in line with what we expected while bringing in new customers, including fleet, to the network. We continue to innovate our marketing to connect with new customers. We had some fun taking inspiration from college sports with our Instant Transfer Portal, which was designed to invite drivers to transfer from their current oil change provider to Valvoline. Customer demand for our non-discretionary services remains resilient, and we are not seeing signs of trade-down or deferral.
Lori Flees: We also saw continued positive transaction growth despite a tougher year-over-year compare. As we look at same-store sales breakdown between company and franchise stores, franchise was slightly higher than the system average for the quarter and for the two-year stack. We continue to grow our active customer base in line with what we expected while bringing in new customers, including fleet, to the network. We continue to innovate our marketing to connect with new customers. We had some fun taking inspiration from college sports with our Instant Transfer Portal, which was designed to invite drivers to transfer from their current oil change provider to Valvoline. Customer demand for our non-discretionary services remains resilient, and we are not seeing signs of trade-down or deferral.
Speaker #3: As we look at same store sales breakdown between company and franchise stores, franchise was slightly higher than the system average for the quarter and for the two-year stack.
Speaker #3: We continue to grow our active customer base in line with what we expected, while bringing in new customers, including fleet, to the network. We continue to innovate our marketing to connect with new customers. We have some fun taking inspiration from college sports with our instant transfer portal, which was designed to invite drivers to transfer from their current oil change provider to Valvoline.
Speaker #3: Customer demand for our non-discretionary services remains resilient, and we are not seeing signs of trade-down or deferral. Our customers continue to tell us they are delighted by our quick, easy, trusted service.
Lori Flees: And our customers continue to tell us they are delighted by our quick, easy, trusted service and are giving us a 4.7-star rating across our network and NPS scores over 80%. Looking at network growth, we saw significant store additions this quarter. The one-time contribution of 162 stores from the Breeze transaction is a noteworthy step forward in our path to a 3,500-plus store network. The Breeze business is performing as expected, and integration activities are underway. Our teams are working well together as we integrate the organizations. For example, the team has already consolidated and prioritized our acquisition and construction pipelines. We continue to be excited about both the growth potential of the Breeze stores as well as the opportunities to share best practices across the team. Outside of Breeze, we added 38 net new stores, with 10 coming from franchise.
Lori Flees: And our customers continue to tell us they are delighted by our quick, easy, trusted service and are giving us a 4.7-star rating across our network and NPS scores over 80%. Looking at network growth, we saw significant store additions this quarter. The one-time contribution of 162 stores from the Breeze transaction is a noteworthy step forward in our path to a 3,500-plus store network. The Breeze business is performing as expected, and integration activities are underway. Our teams are working well together as we integrate the organizations. For example, the team has already consolidated and prioritized our acquisition and construction pipelines. We continue to be excited about both the growth potential of the Breeze stores as well as the opportunities to share best practices across the team. Outside of Breeze, we added 38 net new stores, with 10 coming from franchise.
Speaker #3: And are giving us a 4.7-star rating across our network and NPS scores over 80%. Looking at network growth, we saw significant store additions this quarter.
Speaker #3: The one-time contribution of 162 stores from the Breeze transaction is a noteworthy step forward in our path to a 3,500-plus store network. The Breeze business is performing as expected, and integration activities are underway.
Speaker #3: Our teams are working well together, as we integrate the organizations. For example, the team is already consolidated and prioritized our acquisition and construction pipelines.
Speaker #3: We continue to be excited about both the growth potential of the Breeze stores as well as the opportunities to share best practices across the team.
Speaker #3: Outside of Breeze, we added 38 net new stores with 10 coming from franchise. While franchise openings were more modest in Q1, we have a healthy pipeline for both company and franchise and are confident in our full-year expectations.
Lori Flees: While franchise openings were more modest in Q1, we have a healthy pipeline for both company and franchise and are confident in our full-year expectations. We're pleased to see expansion in both our growth and adjusted EBITDA margins, driven by the work we discussed at our December investor update. Kevin will cover the details. But as we think about the rest of the year, I'll remind you that Breeze is only reflected in our Q1 results for one month, and we still expect near-term headwinds on our margin rates with the addition of 162 immature stores. Driving productivity within our stores, growing our network, and expanding margin rates translates into meaningful profit growth, and in Q1, both adjusted EBITDA and EPS grew double digits year-over-year for the quarter and grew faster than top-line sales.
Lori Flees: While franchise openings were more modest in Q1, we have a healthy pipeline for both company and franchise and are confident in our full-year expectations. We're pleased to see expansion in both our growth and adjusted EBITDA margins, driven by the work we discussed at our December investor update. Kevin will cover the details. But as we think about the rest of the year, I'll remind you that Breeze is only reflected in our Q1 results for one month, and we still expect near-term headwinds on our margin rates with the addition of 162 immature stores. Driving productivity within our stores, growing our network, and expanding margin rates translates into meaningful profit growth, and in Q1, both adjusted EBITDA and EPS grew double digits year-over-year for the quarter and grew faster than top-line sales.
Speaker #3: For the rest of the year, I'll remind you that Breeze is only reflected in our Q1 results for one month, and we still expect near-term headwinds on our margin rates with the addition of 162 immature stores.
Speaker #3: Driving productivity within our stores growing our network and expanding margin rates translates into meaningful profit growth and in Q1, both adjusted EBITDA and EPS grew double digits year-over-year for the quarter and grew faster than top-line sales.
Speaker #3: The first quarter demonstrated the strength of our business and the continued resiliency of customer demand. We executed our playbook to deliver meaningful profit growth to start the year.
Lori Flees: The first quarter demonstrated the strength of our business and the continued resiliency of customer demand. We executed our playbook to deliver meaningful profit growth to start the year. As we look to the remainder of the year, we feel it's too early to make changes to our guidance, but we are pleased with our Q1 performance. While not directly in our financial results, I want to share a couple of team highlights. First, Valvoline earned the number 1 ranking within the automotive services category for Entrepreneur Franchise 500 for the fourth year in a row, and we were also named one of Yelp's most loved brands. These recognitions highlight the strength of our franchise model and the strong customer trust and loyalty built across our network. And second, I want to thank our customers, franchisees, and teams for an incredible 16th annual campaign with Children's Miracle Network.
Lori Flees: The first quarter demonstrated the strength of our business and the continued resiliency of customer demand. We executed our playbook to deliver meaningful profit growth to start the year. As we look to the remainder of the year, we feel it's too early to make changes to our guidance, but we are pleased with our Q1 performance. While not directly in our financial results, I want to share a couple of team highlights. First, Valvoline earned the number 1 ranking within the automotive services category for Entrepreneur Franchise 500 for the fourth year in a row, and we were also named one of Yelp's most loved brands.
Speaker #3: As we look to the remainder of the year, we feel it's too early to make changes to our guidance, but we are pleased with our Q1 performance.
Speaker #3: While not directly in our financial results, I want to share a couple of team highlights. First, Valvoline earned the number one ranking within the automotive services category for entrepreneur franchise 500 for the fourth year in a row.
Speaker #3: And we were also named one of Yelp's most loved brands. These recognitions highlight the strength of our franchise model and the strong customer trust and loyalty built across our network.
Lori Flees: These recognitions highlight the strength of our franchise model and the strong customer trust and loyalty built across our network. And second, I want to thank our customers, franchisees, and teams for an incredible 16th annual campaign with Children's Miracle Network. Through funds donated by guests at the time of service, corporate-led fundraising efforts, and contributions from franchisees, we raised more than $1.8 million for local children's hospitals in the communities where we operate, a nearly 40% increase over the prior year. With that, I'll turn the call over to Kevin to provide more detail on our financial performance.
Speaker #3: And second, I want to thank our customers franchisees and teams for an incredible 16th annual campaign with children's miracle network. Through funds donated by guests at the time of service, corporate-led fundraising efforts, and contributions from franchisees, we raised more than $1.8 million for local children's hospitals in the communities where we operate.
Lori Flees: Through funds donated by guests at the time of service, corporate-led fundraising efforts, and contributions from franchisees, we raised more than $1.8 million for local children's hospitals in the communities where we operate, a nearly 40% increase over the prior year. With that, I'll turn the call over to Kevin to provide more detail on our financial performance.
Speaker #3: A nearly 40% increase over the prior year. With that, I'll turn the call over to Kevin to provide more detail on our financial performance.
Speaker #3: A nearly 40% increase over the prior year. With that, I'll turn the call over to Kevin to provide more detail on our financial performance.
Speaker #2: Thanks, Lori. We've provided a summary of our financial results on slides 5 and 6. Let me spend a few moments to talk about some of the highlights.
Kevin Willis: Thanks, Lori. We've provided a summary of our financial results on slides 5 and 6. Let me spend a few moments to talk about some of the highlights. We saw strong top-line growth with net sales of $462 million, an increase of 11% on a reported basis, and 15% when adjusted for the impacts of refranchising in Q1 of last year. The gross margin rate of 37.4% increased 50 basis points year-over-year, driven by leverage in labor and product cost, offset by increases in other service delivery costs, which includes rent, property taxes, and depreciation. Leverage would have improved by an additional 50 basis points, excluding the impact of depreciation, primarily from new stores. We remain committed to managing SG&A in the business. That said, SG&A as a percent of net sales increased 30 basis points year-over-year to 19.3%.
Kevin Willis: Thanks, Lori. We've provided a summary of our financial results on slides 5 and 6. Let me spend a few moments to talk about some of the highlights. We saw strong top-line growth with net sales of $462 million, an increase of 11% on a reported basis, and 15% when adjusted for the impacts of refranchising in Q1 of last year. The gross margin rate of 37.4% increased 50 basis points year-over-year, driven by leverage in labor and product cost, offset by increases in other service delivery costs, which includes rent, property taxes, and depreciation. Leverage would have improved by an additional 50 basis points, excluding the impact of depreciation, primarily from new stores. We remain committed to managing SG&A in the business. That said, SG&A as a percent of net sales increased 30 basis points year-over-year to 19.3%.
Speaker #2: We saw strong top-line growth, with net sales of $462 million—an increase of 11% on a reported basis and 15% when adjusted for the impacts of refranchising in Q1 of last year.
Speaker #2: The gross margin rate of 37.4% increased 50 basis points year over year. Driven by leverage and labor and product cost, offset by increases in other service delivery costs, which includes rent, property taxes, and depreciation.
Speaker #2: Leverage would have improved by an additional 50 basis points, excluding the impact of depreciation, primarily from new stores. We remained committed to managing SG&A in the business.
Speaker #2: That said, SG&A is a percent of net sales increased 30 basis points year over year to 19.3%. The primary reason for this is related to a non-recurring payroll-related benefit of about 2.4 million in the prior year quarter.
Kevin Willis: The primary reason for this is related to a non-recurring payroll-related benefit of about $2.4 million in the prior year quarter. Absent this benefit, year over year, SG&A as a percentage of sales would have declined by 30 basis points. Overall, adjusted EBITDA margin increased 60 basis points to 25.4%. On a GAAP basis, we reported a loss from continuing operations of $32.2 million, largely driven by the loss on divestiture of certain Breeze stores that was required by the FTC. On an adjusted basis, income from continuing operations was $47.6 million. Turning to EPS, we saw an increase of 16%, 28% when adjusted for refranchising. As a reminder, we expect pre-tax interest expense to increase by about $33 million in fiscal 2026 versus fiscal 2025 due to the new Term Loan B.
Kevin Willis: The primary reason for this is related to a non-recurring payroll-related benefit of about $2.4 million in the prior year quarter. Absent this benefit, year over year, SG&A as a percentage of sales would have declined by 30 basis points. Overall, adjusted EBITDA margin increased 60 basis points to 25.4%. On a GAAP basis, we reported a loss from continuing operations of $32.2 million, largely driven by the loss on divestiture of certain Breeze stores that was required by the FTC. On an adjusted basis, income from continuing operations was $47.6 million. Turning to EPS, we saw an increase of 16%, 28% when adjusted for refranchising. As a reminder, we expect pre-tax interest expense to increase by about $33 million in fiscal 2026 versus fiscal 2025 due to the new Term Loan B.
Speaker #2: Absent this benefit, year over year, SG&A is a percentage of sales would have declined by 30 basis EBITDA margin increased 60 basis points. Overall, adjusted points to 25.4%.
Speaker #2: On a gap basis, we reported a loss from continuing operations of 32.2 million. Largely driven by the loss on divestiture of certain Breeze stores that was required by the FTC.
Speaker #2: On an adjusted basis, income from continuing operations was 47.6 million. Turning to EPS, we saw an increase of 16%, 28% when adjusted for refranchising.
Speaker #2: As a reminder, we expect pre-tax interest expense to increase by about 33 million in fiscal '26 versus fiscal '25 due to the new term loan B.
Speaker #2: Operating cash flows improved to 64.8 million and free cash flow was 7.4 million, improving approximately 20 million compared to the prior year quarter. Taking into consideration the new term loan, our leverage ratio is 3.3 times based on adjusted EBITDA for a trailing 12 months.
Kevin Willis: Operating cash flows improved to $64.8 million, and free cash flow was $7.4 million, improving approximately $20 million compared to the prior year quarter. Taking into consideration the new term loan, our leverage ratio is 3.3x based on Adjusted EBITDA for a trailing 12 months. As a reminder, you'll now hear us talk about leverage in terms of net debt to Adjusted EBITDA. As we continue our core business growth and integrate and grow Breeze, we are focused on getting our leverage back down to two and a half times as quickly as possible so we can resume share repurchase activity. All in all, the results for this quarter are strong, with double-digit sales and profit growth, margin expansion, and improved free cash flow. I'll now turn it back over to Lori to wrap up.
Kevin Willis: Operating cash flows improved to $64.8 million, and free cash flow was $7.4 million, improving approximately $20 million compared to the prior year quarter. Taking into consideration the new term loan, our leverage ratio is 3.3x based on Adjusted EBITDA for a trailing 12 months. As a reminder, you'll now hear us talk about leverage in terms of net debt to Adjusted EBITDA. As we continue our core business growth and integrate and grow Breeze, we are focused on getting our leverage back down to two and a half times as quickly as possible so we can resume share repurchase activity. All in all, the results for this quarter are strong, with double-digit sales and profit growth, margin expansion, and improved free cash flow. I'll now turn it back over to Lori to wrap up.
Speaker #2: As a reminder, you'll now hear us talk about leverage in terms of net debt to adjusted EBITDA. As we continue our core business growth and integrate and grow Breeze, we are focused on getting our leverage back down to 2.5 times as quickly as possible so we can resume share repurchase activity.
Speaker #2: All in all, the results for this quarter are strong with double-digit sales and profit growth, margin expansion, and improved free cash flow. I'll now turn it back over to Lori to wrap
Speaker #2: up. Thanks,
Lori Flees: Thanks, Kevin. We delivered a strong quarter to start the year and feel confident in our ability to deliver on the guidance we set for fiscal year 2026. The Breeze integration work is underway, and our teams are working well together. The fundamentals of our business remain strong. As we shared at our investor update in December, we're an established category leader with a track record of industry-leading performance and growth. That, along with our differentiated capabilities, will continue to drive strong margins and cash generation, positioning us to deliver long-term value to our shareholders. I'll now turn it back over to Elizabeth to begin Q&A.
Lori Flees: Thanks, Kevin. We delivered a strong quarter to start the year and feel confident in our ability to deliver on the guidance we set for fiscal year 2026. The Breeze integration work is underway, and our teams are working well together. The fundamentals of our business remain strong. As we shared at our investor update in December, we're an established category leader with a track record of industry-leading performance and growth. That, along with our differentiated capabilities, will continue to drive strong margins and cash generation, positioning us to deliver long-term value to our shareholders. I'll now turn it back over to Elizabeth to begin Q&A.
Speaker #1: Kevin. We delivered a strong quarter to start the year and feel confident in our ability to deliver on the guidance we set for fiscal year 2026.
Speaker #1: The Breeze integration work is underway, and our teams are working well together. The fundamentals of our business remain strong, as we shared at our investor update in December.
Speaker #1: We're an established category leader with a track record of industry-leading performance and growth. That, along with our differentiated capabilities, will continue to drive strong margin and cash generation positioning us to deliver long-term value to our shareholders.
Speaker #1: I'll now turn it back over to Elizabeth to begin Q&A.
Elizabeth Clevinger: Thanks, Lori. Before we start the Q&A, I want to remind everyone to limit your questions to one and a follow-up. With that, operators, can you please open the line?
Elizabeth Clevinger: Thanks, Lori. Before we start the Q&A, I want to remind everyone to limit your questions to one and a follow-up. With that, operators, can you please open the line?
Speaker #3: the Q&A, I want to remind everyone Thanks, Lori. Before we start to limit your questions to one in a follow-up. With that, operators may please open the line.
Speaker #4: Thank you, Elizabeth. Lines are now open for questions, but as a reminder for our audience, if you would like to ask a question, you may do so by pressing star followed by the number one on your telephone keypads.
Operator: Thank you, Elizabeth. Lines are now open for questions, but as a reminder for our audience, if you would like to ask a question, you may do so by pressing star followed by the number one on your telephone keypads. We now have our first question from Mark Jordan from Goldman Sachs. Go ahead, please. Your line is now open.
Operator: Thank you, Elizabeth. Lines are now open for questions, but as a reminder for our audience, if you would like to ask a question, you may do so by pressing star followed by the number one on your telephone keypads. We now have our first question from Mark Jordan from Goldman Sachs. Go ahead, please. Your line is now open.
Speaker #4: And we now have our first question from Mark Jordan from Goldman Sachs. Go ahead, please. Your line is now
Speaker #4: open. Hey, this is Mark Jordan.
Mark Jordan: Hey, this is Mark Jordan. Thanks for taking my question. I joined a minute late, to apologize if this is already covered, but for same-store sales, it looks like some or all of the new brakes revenue is now included in the calculation. And I'm just wondering what impact it had on Q1, and then on the mobile channel in particular, how big is that business in terms of revenue?
Mark Jordan: Hey, this is Mark Jordan. Thanks for taking my question. I joined a minute late, to apologize if this is already covered, but for same-store sales, it looks like some or all of the new brakes revenue is now included in the calculation. And I'm just wondering what impact it had on Q1, and then on the mobile channel in particular, how big is that business in terms of revenue?
Speaker #5: Thank you for taking my question. I joined a minute late, so I apologize if this is already covered, but for same-store sales, it looks like some or all of the new breaks revenue is now included in the calculation.
Speaker #5: And I'm just wondering, what impact that had on one Q and then on the mobile channel in particular, how big is that business in terms of revenue?
Speaker #1: Thanks, Mark. Yes, we mentioned during Investor Day that we were piloting opportunities to expand our reach with mobile service delivery. We want to be transparent about the definition inclusion while we were in the early stages of doing that.
Lori Flees: Thanks, Mark. Yes, we mentioned during Investor Day that we were piloting opportunities to expand our reach with mobile service delivery. We want to be transparent about the definition of inclusion while we were in the early stages of doing that. It is relatively small, limited to a couple of markets, and it's really tied to trying to meet the needs of both consumer and fleet demands for increasing convenience. In terms of the overall contribution into our comp this quarter, it was around 20 basis points.
Lori Flees: Thanks, Mark. Yes, we mentioned during Investor Day that we were piloting opportunities to expand our reach with mobile service delivery. We want to be transparent about the definition of inclusion while we were in the early stages of doing that. It is relatively small, limited to a couple of markets, and it's really tied to trying to meet the needs of both consumer and fleet demands for increasing convenience. In terms of the overall contribution into our comp this quarter, it was around 20 basis points.
Speaker #1: It is relatively small, limited to a couple of markets. And it's really tied to trying to meet the needs of both consumer and fleet demands for increasing convenience.
Speaker #1: In terms of the overall contribution into our CompTIS quarter, it was around 20 basis points.
Speaker #4: Excellent, thank you very much for that. And then just one follow-up on franchise store growth. I know usually ramps throughout the fiscal year are usually back-half weighted, but can you just let us know how you feel about the pipeline for openings this
Mark Jordan: Excellent. Thank you very much for that. And then just one follow-up on franchise store growth. I know usually ramps throughout the fiscal year are usually back half-weighted, but can you just let us know how you feel about the pipeline for openings this year?
Mark Jordan: Excellent. Thank you very much for that. And then just one follow-up on franchise store growth. I know usually ramps throughout the fiscal year are usually back half-weighted, but can you just let us know how you feel about the pipeline for openings this year?
Speaker #4: year? Yeah, Mark, it's a great
Lori Flees: Yeah, Mark, it's a great question. We had a good quarter overall for new unit additions, but it was light on the franchise side. I will note that we had 13 gross additions. We had some closures, which are unusual, relatively small for our fleet, but those netted out to 10. When we look at January, our franchise partners have opened 9 units in January. So again, a real indication that the pipeline is robust, and considering the winter storm Fern in the back half of January, 9 was a pretty good result. So when we look at our pipeline for the rest of the year, it's still very strong, both on the company and the franchise side. We continue to build momentum to get to that 250 new units in fiscal year 2027.
Lori Flees: Yeah, Mark, it's a great question. We had a good quarter overall for new unit additions, but it was light on the franchise side. I will note that we had 13 gross additions. We had some closures, which are unusual, relatively small for our fleet, but those netted out to 10. When we look at January, our franchise partners have opened 9 units in January. So again, a real indication that the pipeline is robust, and considering the winter storm Fern in the back half of January, 9 was a pretty good result. So when we look at our pipeline for the rest of the year, it's still very strong, both on the company and the franchise side. We continue to build momentum to get to that 250 new units in fiscal year 2027.
Speaker #1: The quarter—we had a good quarter overall for new unit additions, but it was light on the franchise side. I will note that we had 13 gross additions.
Speaker #1: We had some closures, which are unusual relatively small for our fleet. But those netted out to 10. When we look at January, our franchise partners have opened nine units in January.
Speaker #1: So again, a real indication that the pipeline is robust. And considering the winter storm firm in the back half of January, nine was a pretty good result.
Speaker #1: So when we look at our pipeline for the rest of the year, it's still very strong, both on the company and the franchise side.
Speaker #1: And we continue to build momentum to get to that 250 new units in fiscal year
Speaker #1: '27. Perfect.
Mark Jordan: Perfect. Thank you very much for the insight. Congrats on a great quarter.
Mark Jordan: Perfect. Thank you very much for the insight. Congrats on a great quarter.
Speaker #4: Thank you very much for the insight. Congrats on a great quarter.
Speaker #1: Thank you.
Lori Flees: Thank you.
Lori Flees: Thank you.
Speaker #4: Thank you. Moving on to our questions here, we have Simeon Gutman from Morgan Stanley. Go ahead, please. Your line is now
Operator: Thank you. Moving on to our questions here, we have Simeon Gutman from Morgan Stanley. Go ahead, please. Your line is now open.
Operator: Thank you. Moving on to our questions here, we have Simeon Gutman from Morgan Stanley. Go ahead, please. Your line is now open.
Speaker #4: open. Hi,
Speaker #6: this is Skylar Tennant on behalf of Simeon Gutman. Thank you so much for taking our question. First, can you speak to the complexion of sales this quarter in terms of how pricing and units are trending, are you seeing certain trends by region or in newer, younger markets, or do trends seem to generally be pretty
Skylar Tennant: Hi, this is Skylar Tennant on behalf of Simeon Gutman. Thank you so much for taking our question. First, can you speak to the complexion of sales this quarter in terms of how pricing and units are trending? Are you seeing certain trends by region or in newer, younger markets, or do trends seem to generally be pretty broad-based?
Skyler Tennant: Hi, this is Skylar Tennant on behalf of Simeon Gutman. Thank you so much for taking our question. First, can you speak to the complexion of sales this quarter in terms of how pricing and units are trending? Are you seeing certain trends by region or in newer, younger markets, or do trends seem to generally be pretty broad-based?
Speaker #6: broad-based?
Speaker #7: Thanks for the
[Company Representative] (Valvoline): Thanks for the question. In the quarter, from a cadence perspective, October, November were pretty much as expected. December was strong. We saw good growth on both ticket and transaction. Ticket was the larger contributor to our same-store sales growth in the quarter. But overall, the growth was quite balanced and good both on the franchise side as well as the company side.
Skyler Tennant: Thanks for the question. In the quarter, from a cadence perspective, October, November were pretty much as expected. December was strong. We saw good growth on both ticket and transaction. Ticket was the larger contributor to our same-store sales growth in the quarter. But overall, the growth was quite balanced and good both on the franchise side as well as the company side.
Speaker #7: question. We actually, in the quarter, from a cadence perspective, October and November were pretty much as expected. December was strong. We saw good growth on both ticket and transaction ticket was the larger contributor.
Speaker #7: To our same-store sales growth in the quarter, but overall, the growth was quite balanced and good both on the franchise side as well as the company
Speaker #7: side. I think the only thing we
Lori Flees: I think the only thing we may have saw in November was a little bit of early weather in the Thanksgiving period in some of our geographies. But other than that, there weren't any notable differences or significant trends regionally across our network.
Lori Flees: I think the only thing we may have saw in November was a little bit of early weather in the Thanksgiving period in some of our geographies. But other than that, there weren't any notable differences or significant trends regionally across our network.
Speaker #1: may have saw in November was a little bit of early weather and the Thanksgiving period in some of our geographies, but other than that, there weren't any notable differences or significant trends regionally.
Speaker #1: Across our network.
Speaker #6: Okay. Thank you for that. And Lori, maybe how much time do you think needs to be spent on Breeze? Can you kind of give us a sense on how much focus is needed there versus the core
Skylar Tennant: Okay, thank you for that. And Lori, maybe how much time do you think needs to be spent on Breeze? Can you kind of give us a sense on how much focus is needed there versus the core business?
Skyler Tennant: Okay, thank you for that. And Lori, maybe how much time do you think needs to be spent on Breeze? Can you kind of give us a sense on how much focus is needed there versus the core business?
Speaker #1: Yeah, it's business? a great question. I think it's important to remember that while a sizable M&A Breeze represents less than 10% of our financial commitments for FY '26, and you can see that the underlining business, given Breeze was only one month of the Q1 results, is the momentum in that core business is really strong.
Lori Flees: Yeah, it's a great question. I think it's important to remember that while a sizable M&A, Breeze represents less than 10% of our financial commitments for FY26. And you can see that the underlying business, given Breeze was only one month of the Q1 results, is that the momentum in that core business is really strong. Now, we continue to be excited about the growth possible in the 162 oil changer stores that we've added, and we're certainly starting to share some good best practices. But I think we've got to keep in context that Breeze is an important asset, and we are going to spend time to integrate it and integrate it well. But it is a small portion of the overall financial picture for us.
Lori Flees: Yeah, it's a great question. I think it's important to remember that while a sizable M&A, Breeze represents less than 10% of our financial commitments for FY26. And you can see that the underlying business, given Breeze was only one month of the Q1 results, is that the momentum in that core business is really strong. Now, we continue to be excited about the growth possible in the 162 oil changer stores that we've added, and we're certainly starting to share some good best practices. But I think we've got to keep in context that Breeze is an important asset, and we are going to spend time to integrate it and integrate it well. But it is a small portion of the overall financial picture for us.
Speaker #1: Now, we continue to be excited about the growth possible in the 162 old Changer stores that we've added. And we're certainly starting to share some good best practices. I think we've got to keep context that Breeze is an important asset, and we are going to spend time to integrate it—and integrate it well.
Speaker #1: But it is a small portion of the overall financial picture for
Speaker #1: us. Okay.
Skylar Tennant: Okay, thank you so much, and congratulations on the quarter.
Skyler Tennant: Okay, thank you so much, and congratulations on the quarter.
Speaker #6: Thank you so much, and congratulations on the—
Speaker #6: quarter. Thank you.
Lori Flees: Thank you.
Lori Flees: Thank you.
Speaker #7: Thanks. Thank you.
[Company Representative] (Valvoline): Thanks.
Lori Flees: Thanks.
Operator: Thank you. Moving on to our next question from Max Rakhlenko from TD Cowen. Go ahead, please. Your line is now open.
Operator: Thank you. Moving on to our next question from Max Rakhlenko from TD Cowen. Go ahead, please. Your line is now open.
Speaker #4: Moving on to our next question from Max Breklenko from TD Cowan. Go ahead, please. Your line is now open.
Speaker #8: Hey, thanks a lot. And congrats on the nice quarter. So with a strong one Q comps and easing compares the rest of the year, how should we think about the shape of the year in the context of your guide?
Kevin Willis: Hey, thanks a lot, and congrats on the nice quarter. So with a strong Q1 comps and easing comps the rest of the year, how should we think about the shape of the year in the context of your guide? And then just any comments on the first month of Q2?
Kevin Willis: Hey, thanks a lot, and congrats on the nice quarter. So with a strong Q1 comps and easing comps the rest of the year, how should we think about the shape of the year in the context of your guide? And then just any comments on the first month of Q2?
Speaker #8: And then just any comments on the first month of QQ?
Speaker #1: You want to start and then I can cover Q2?
Lori Flees: You want to start, and then I can cover Q2?
Lori Flees: You want to start, and then I can cover Q2?
[Company Representative] (Valvoline): Sure, sure. Yeah, thanks for the question. I mean, as we said at our Q1 call and on the investor update, we've taken a measured approach to the outlook for the full year. Really, really pleased with how Q1 played out. It was a strong quarter, and we're very happy about that. There's still a lot of year left, and we want to continue to see how that unfolds. But we're confident in the guide that we put up in Q1 and reiterated at the investor update in December. So again, we feel really good about where we are. There's a lot of year left. We're still working through the Breeze transaction, obviously, in terms of integration. But Breeze also performed as expected for the month that we owned it in Q1. And so overall, it's a great start to the year.
Lori Flees: Sure, sure. Yeah, thanks for the question. I mean, as we said at our Q1 call and on the investor update, we've taken a measured approach to the outlook for the full year. Really, really pleased with how Q1 played out. It was a strong quarter, and we're very happy about that. There's still a lot of year left, and we want to continue to see how that unfolds. But we're confident in the guide that we put up in Q1 and reiterated at the investor update in December. So again, we feel really good about where we are. There's a lot of year left. We're still working through the Breeze transaction, obviously, in terms of integration. But Breeze also performed as expected for the month that we owned it in Q1. And so overall, it's a great start to the year.
Speaker #7: Yeah. Thanks for the question. I Sure. Sure. mean, as we said at our Q1 call and on the investor update, we've taken a measured approach to the outlook for the full year.
Speaker #7: Really, really pleased with how Q1 played out. It was a strong quarter and we're very happy about that. There's still a lot of year left.
Speaker #7: And we want to continue to see how that unfolds. But we're confident in the guide, that we put up in Q1 and reiterated at the investor update in December.
Speaker #7: So again, we feel really good about where we are. There's a lot of year left. We're still working through the Breeze transaction, obviously, in terms of integration.
Speaker #7: But Breeze also performed as expected for the month that we owned it in Q1. And so overall, it's a great start to the year.
Speaker #7: And again, we're very confident in meeting our commitments for the year.
[Company Representative] (Valvoline): And again, we're very confident in meeting our commitments for the year.
Lori Flees: And again, we're very confident in meeting our commitments for the year.
Speaker #1: Max, as we think about Q2—apart from winter storm firm—our start to the quarter was really strong. Now, with the snow and ice conditions that hit many of the geographies that we operate in, particularly on the company side, momentum obviously slowed.
Lori Flees: Max, as we think about Q2, apart from Winter Storm Fern, our start to the quarter was really strong. Now, with the snow and ice conditions that hit many of the geographies that we operate in, particularly on the company side, momentum obviously slowed. And we're still, in many areas, Kentucky included, still not thawed out completely, which has impacted consumers' kind of return to normal activity. I think as you look at the forecast, and the Groundhog said we have another six weeks and the polar vortex that they expect coming and the storms that could follow with that, we think it's going to take a little bit more time to recoup the transactions that pushed out. We don't see significant customer deferral when we look a couple of weeks at a time.
Lori Flees: Max, as we think about Q2, apart from Winter Storm Fern, our start to the quarter was really strong. Now, with the snow and ice conditions that hit many of the geographies that we operate in, particularly on the company side, momentum obviously slowed. And we're still, in many areas, Kentucky included, still not thawed out completely, which has impacted consumers' kind of return to normal activity. I think as you look at the forecast, and the Groundhog said we have another six weeks and the polar vortex that they expect coming and the storms that could follow with that, we think it's going to take a little bit more time to recoup the transactions that pushed out. We don't see significant customer deferral when we look a couple of weeks at a time.
Speaker #1: And we're still, in many areas—Kentucky included—still not thawed out completely, which has impacted consumers' kind of return to normal activity. I think, as you look at the forecast and the groundhogs, that we have another six weeks, and the polar vortex that they expect coming, and the storms that could follow with that, we think it's going to take a little bit more time to recoup the transactions that pushed out.
Speaker #1: We don't see significant customer deferral when we look at a couple of weeks at a time. But we do know from history that customers will return to get their cars serviced when their normal day-to-day activities resume.
Lori Flees: But we do know from history that customers will return to get their car serviced when their normal day-to-day activities resume. So we expect that as we go out through the balance of the quarter, we'll recoup some of the volume that we obviously missed as people stayed off the roads. But overall, Q2 just before the weather started very strong.
Lori Flees: But we do know from history that customers will return to get their car serviced when their normal day-to-day activities resume. So we expect that as we go out through the balance of the quarter, we'll recoup some of the volume that we obviously missed as people stayed off the roads. But overall, Q2 just before the weather started very strong.
Speaker #1: So we expect that as we go out through the balance of the quarter, we'll recoup some of the volume that we obviously missed as people stayed off the roads.
Speaker #1: But overall, Q2, before the weather started very
Speaker #1: strong. Got it.
Kevin Willis: Got it. That's very helpful. And then on Breeze, what's the latest thinking around the timing of the store conversions? How many locations do you plan to convert this fiscal year, and then what could be left for year two or year three? And then how should we think about both the revenue as well as the margin impacts the rest of the year sequentially?
Kevin Willis: Got it. That's very helpful. And then on Breeze, what's the latest thinking around the timing of the store conversions? How many locations do you plan to convert this fiscal year, and then what could be left for year two or year three? And then how should we think about both the revenue as well as the margin impacts the rest of the year sequentially?
Speaker #8: That's very helpful. And then on Breeze, what's the latest thinking around the timing of the store conversions? How many locations do you plan to convert this fiscal year?
Speaker #8: And then what could be left for year two or year three? And then how should we think about both the revenue as well as the margin impacts the rest of the year?
Speaker #8: Sequentially.
Speaker #1: Are
Speaker #1: you on the last question because I'll have Kevin answer it. Are you talking Breeze specific or more broadly? On
Lori Flees: On the last question, because I'll have Kevin answer, are you talking Breeze specific or more broadly on the margin and the sales and the marketing?
Lori Flees: On the last question, because I'll have Kevin answer, are you talking Breeze specific or more broadly on the margin and the sales and the marketing?
Speaker #1: The margin and the sales impact. On the impact of Breeze, okay.
Kevin Willis: The impact of Breeze on the P&L.
Kevin Willis: The impact of Breeze on the P&L.
Speaker #8: on the P&L.
Lori Flees: Okay. All right. I'll cover the first one. Yeah. I'll cover the first part, which is just really our integration overall. We closed the transaction in December, and simultaneous with that, had to complete the divestitures that were required by the FTC. And while that may sound simple, there's a lot of co-mingling of data in every part of the business that we had to start to separate and transition that out. And so a lot of the focus in the first month was really getting that business stood up within our portfolio and stabilizing the team to ensure that they continued to deliver. And as Kevin said, they delivered exactly as expected, and we feel really good about that business. Our teams have been meeting, obviously, of the holiday period, but we're 2 months into integration planning.
Lori Flees: Okay. All right. I'll cover the first one. Yeah. I'll cover the first part, which is just really our integration overall. We closed the transaction in December, and simultaneous with that, had to complete the divestitures that were required by the FTC. And while that may sound simple, there's a lot of co-mingling of data in every part of the business that we had to start to separate and transition that out. And so a lot of the focus in the first month was really getting that business stood up within our portfolio and stabilizing the team to ensure that they continued to deliver. And as Kevin said, they delivered exactly as expected, and we feel really good about that business. Our teams have been meeting, obviously, of the holiday period, but we're 2 months into integration planning.
Speaker #1: right. I'll cover the first one. Yeah. I'll cover the first part, which is just really our integration overall. We closed the transaction in December.
Speaker #1: And simultaneous with that, had to complete the divestitures that were required by the FTC. And while that may sound simple, there's a lot of commingling of data.
Speaker #1: In every part of the business that we had to start to separate and transition that out. And so a lot of the focus in the first month was really getting that business stood up within our portfolio and stabilizing the team to ensure that they continued to deliver.
Speaker #1: And as Kevin said, they delivered exactly as expected. And we feel really good about that business. Our teams have been meeting. Obviously, you have the holiday period, but we're two months into integration planning.
Speaker #1: And I would say we're having the discussions around how we integrate the Breeze stores into our network. And all the things like systems. And I talked about pipelines being integrated just to make sure that we're not competing against each other in any market.
Lori Flees: I would say we're having the discussions around how we integrate the Breeze stores into our network and all the things like systems. I talked about pipelines being integrated just to make sure that we're not competing against each other in any market. So there's a lot of work underway with parts of our team, but it's a little premature for me to share the specifics on store conversions. We're obviously engaging the team specifically on that.
Lori Flees: I would say we're having the discussions around how we integrate the Breeze stores into our network and all the things like systems. I talked about pipelines being integrated just to make sure that we're not competing against each other in any market. So there's a lot of work underway with parts of our team, but it's a little premature for me to share the specifics on store conversions. We're obviously engaging the team specifically on that.
Speaker #1: So there's a lot of work underway with parts of our team. But it's a little premature for me to share the specifics on store conversions.
Speaker #1: We're obviously engaging the team specifically on
Speaker #1: that. As far as the financial
[Company Representative] (Valvoline): As far as the financial impact, consistent with the commitments that we made at the investor update in December, we would expect the Breeze stores to add about $160 million of top line for the 10 months that we will own the business in fiscal 26, around $31 million of EBITDA. I think as a reminder, obviously, we did take on leverage to do this transaction. We expect the cash interest to be about $33 million on a pre-tax basis, and that we would expect to have about a $0.20 per share impact on EPS for, again, the 10 months that we own the business.
Lori Flees: As far as the financial impact, consistent with the commitments that we made at the investor update in December, we would expect the Breeze stores to add about $160 million of top line for the 10 months that we will own the business in fiscal 26, around $31 million of EBITDA. I think as a reminder, obviously, we did take on leverage to do this transaction. We expect the cash interest to be about $33 million on a pre-tax basis, and that we would expect to have about a $0.20 per share impact on EPS for, again, the 10 months that we own the business.
Speaker #7: impact, consistent with the commitments that we made at the investor update in December, we would expect the Breeze stores to add about 160 million dollars of top line.
Speaker #7: For the 10 months that we will own the business in fiscal '26, around 31 million dollars of EBITDA. And I think as a reminder, obviously, we did take on leverage to do this transaction.
Speaker #7: We expect the cash interest to be about 33 million dollars. On a pre-tax basis. And that we would expect to have about a 20 cent per share impact on EPS for, again, the 10 months that we own the
Speaker #7: business. Awesome.
Kevin Willis: Awesome. Thanks a lot, Investor Relations.
Kevin Willis: Awesome. Thanks a lot, Investor Relations.
Speaker #8: Thanks a lot, investor yards.
Speaker #7: Sure.
[Company Representative] (Valvoline): Sure.
Kevin Willis: Sure.
Speaker #9: Thank you. Next question here is from David Bellinger from Mizuho. Go ahead, please. Your line is now
Operator: Thank you. Next question here is from David Bellinger from Mizuho. Go ahead, please. Your line is now open.
Operator: Thank you. Next question here is from David Bellinger from Mizuho. Go ahead, please. Your line is now open.
Speaker #9: open.
Speaker #10: Sort of
Mark Jordan: Sort of macro-related, we've been hearing a lot more about these affordability concerns across most of the consumer, high prices holding spending back to some degree. But Valvoline has consistently seen trade-up activity, product premiumization. Why do you think that's the case? Does it say something about the pricing potential of this business and maybe something more you can gradually tap into over time?
Mark Jordan: Sort of macro-related, we've been hearing a lot more about these affordability concerns across most of the consumer, high prices holding spending back to some degree. But Valvoline has consistently seen trade-up activity, product premiumization. Why do you think that's the case? Does it say something about the pricing potential of this business and maybe something more you can gradually tap into over time?
Speaker #10: macro-related. We've been hearing a lot more about these affordability concerns across most of the consumer high prices holding spending back to some degree. But Valvoline has consistently seen trade-up activity product premiumization why do you think that's the case?
Speaker #10: about the pricing potential of this business Does it say something and maybe something more you can gradually tap into over time?
Speaker #1: Yeah, David, it's a very good question. Valvoline is a strong brand and business in a category that, as you know, is non-discretionary. And there are a lot of tailwinds that affect us.
Lori Flees: Yeah, David, it's a very good question. Valvoline is a strong brand and business in a category that, as you know, is nondiscretionary. There are a lot of tailwinds that affect us. One is the aging car parc. That leads us to present more non-oil change revenue services on average per customer that then gives us that lift despite the macro maybe running counter because people feel that they need to maintain the vehicle they have such that they don't have to replace that vehicle. I also think that the car parc has evolved. As the new vehicles start to age into the car parc, the automotive manufacturer is the one who specs the kind of lubricant that is required.
Lori Flees: Yeah, David, it's a very good question. Valvoline is a strong brand and business in a category that, as you know, is nondiscretionary. There are a lot of tailwinds that affect us. One is the aging car parc. That leads us to present more non-oil change revenue services on average per customer that then gives us that lift despite the macro maybe running counter because people feel that they need to maintain the vehicle they have such that they don't have to replace that vehicle. I also think that the car parc has evolved. As the new vehicles start to age into the car parc, the automotive manufacturer is the one who specs the kind of lubricant that is required.
Speaker #1: One is the aging car park that leads us to present more non-oil change revenue services on average per customer, that then gives us that lift.
Speaker #1: Despite the macro maybe running encounter, because people feel like they need to maintain the vehicle they have, such that they don't have to replace that vehicle.
Speaker #1: I also think that the car park has evolved. And as the new vehicles start to age into the car park, the automotive manufacturer is the one who specs the kind of lubricant that is required.
Speaker #1: Now, as a customer has a high mileage vehicle, starts to get over 100,000 miles, they really do want to maintain that vehicle rather than having to trade up into a new one, or a newer one.
Lori Flees: Now, as a customer has a high-mileage vehicle [that] starts to get over 100,000 miles, they really do want to maintain that vehicle rather than having to trade up into a new one or a newer one. And so those are the things that are driving some of how we've been bucking the trend. Our team educates the customer on their choices. They educate them as to the choices for their vehicle based on the mileage and the age of the vehicle and what the OEM requires. So we just run our play and educate the customer, which builds trust, and I think that serves us well. We continue to look at pricing. I think we always want to be a little cautious given the macro environment to not move too quickly.
Lori Flees: Now, as a customer has a high-mileage vehicle [that] starts to get over 100,000 miles, they really do want to maintain that vehicle rather than having to trade up into a new one or a newer one. And so those are the things that are driving some of how we've been bucking the trend. Our team educates the customer on their choices. They educate them as to the choices for their vehicle based on the mileage and the age of the vehicle and what the OEM requires. So we just run our play and educate the customer, which builds trust, and I think that serves us well. We continue to look at pricing. I think we always want to be a little cautious given the macro environment to not move too quickly.
Speaker #1: And so those are the things that are driving some of how we've been bucking the trend. Our team educates the customer on their choices.
Speaker #1: They educate them as to the choices for their vehicle, based on the mileage and the age of the vehicle. And what the OAM requires.
Speaker #1: So we just run our play and educate the customer, which builds trust. And I think that serves us well. We continue to look at pricing.
Speaker #1: I think we always want to be a little cautious, given the macro environment, to not move too quickly. But obviously, we continue, and that pricing was a contributor to the comp this quarter.
Lori Flees: But obviously, we continue, and that pricing was a contributor to the comp this quarter, and we continue to adjust our pricing appropriately given our value proposition to the consumer.
Lori Flees: But obviously, we continue, and that pricing was a contributor to the comp this quarter, and we continue to adjust our pricing appropriately given our value proposition to the consumer.
Speaker #1: And we continue to adjust our pricing appropriately given our value proposition to the
Speaker #1: consumer. Great.
Mark Jordan: Great. Great. Thanks for all that. Second question, completely different topic, maybe for Kevin, but the material weakness for internal controls that's been in your filings, that's lasted somewhat longer than the timeline you initially laid out. So how much of that is simply waiting for approvals with the new systems in place, or is there more technical work you have to do to get all that cleaned up? Thank you.
Mark Jordan: Great. Great. Thanks for all that. Second question, completely different topic, maybe for Kevin, but the material weakness for internal controls that's been in your filings, that's lasted somewhat longer than the timeline you initially laid out. So how much of that is simply waiting for approvals with the new systems in place, or is there more technical work you have to do to get all that cleaned up? Thank you.
Speaker #10: Great. Thanks for all that. Second question, completely different topic, maybe for Kevin. But the material weakness for internal controls that's been in your filings, that's lasted somewhat longer than the timeline you initially laid out.
Speaker #10: So, how much of that is simply waiting for approvals with the new systems in place, or is there more technical work you have to do to get all that cleaned up?
Speaker #10: Thank
Speaker #10: you. Yeah.
Speaker #7: Thanks for the question. The team has put in a tremendous amount of work to get us to the point where we are. As a reminder, in fiscal '25, we really had two aspects of the material weakness that we were working on.
[Company Representative] (Valvoline): Yeah, thanks for the question. The team has put in a tremendous amount of work to get us to the point where we are. As a reminder, in fiscal 2025, we really had two aspects of the material weakness that we were working on. The first was around systems, so call it IT general controls that needed to be put in place, remediated, tested, proven to work, and proven to be effective. And we passed that test as part of fiscal 2025. That was in our 10-K disclosure. The second part of the material weakness is around business process-related controls. That work remains underway, and we continue to work with both EY, our auditor, as well as several third parties who are helping us with this project.
Mark Jordan: Yeah, thanks for the question. The team has put in a tremendous amount of work to get us to the point where we are. As a reminder, in fiscal 2025, we really had two aspects of the material weakness that we were working on. The first was around systems, so call it IT general controls that needed to be put in place, remediated, tested, proven to work, and proven to be effective. And we passed that test as part of fiscal 2025. That was in our 10-K disclosure. The second part of the material weakness is around business process-related controls. That work remains underway, and we continue to work with both EY, our auditor, as well as several third parties who are helping us with this project.
Speaker #7: The first was around systems. So call it IT general controls. That needed to be put in place for mediated, tested, proven to work. And proven to be effective.
Speaker #7: And we passed that test as part of fiscal '25. That was in our 10-K disclosure. The second part of the material weakness is around business processes related controls.
Speaker #7: That work remains underway, and we continue to work with both EY, our auditor, as well as several third parties who are helping us with this project.
Speaker #7: What it really comes down to is just a massive amount of work to get everything in place in terms of controls documented, making sure that we have the right controls in place, and then proving to ourselves and to our auditors that those controls are working and that the overall control environment is effective.
[Company Representative] (Valvoline): What it really comes down to is just a massive amount of work to get everything in place in terms of controls documented, making sure that we have the right controls in place, and then proving to ourselves and to our auditors that those controls are working and that the overall control environment is effective. That's what the team is working on as we speak and has been working on for a while. Good progress has been made. We're still climbing the hill. It's certainly our expectation that by the end of this fiscal year, we will be able to put this to bed. As a reminder, the test or the opinion is an annual opinion.
Mark Jordan: What it really comes down to is just a massive amount of work to get everything in place in terms of controls documented, making sure that we have the right controls in place, and then proving to ourselves and to our auditors that those controls are working and that the overall control environment is effective. That's what the team is working on as we speak and has been working on for a while. Good progress has been made. We're still climbing the hill. It's certainly our expectation that by the end of this fiscal year, we will be able to put this to bed. As a reminder, the test or the opinion is an annual opinion.
Speaker #7: And that's what the team is working on as we speak, and has been working on for a while. Good progress has been made. We're still climbing the hill.
Speaker #7: And it's certainly our expectation that by the end of this fiscal year, we will be able to put this to bed. As a reminder, the test or the opinion is an annual opinion.
Speaker #7: And so we won't be out of the woods on this until we get through the fiscal year and EY has a chance to review the control environment in its entirety based on the work that's been done, the testing we've done, the testing they'll do to arrive at that conclusion and an opinion.
[Company Representative] (Valvoline): And so we won't be out of the woods on this until we get through the fiscal year and EY has a chance to review the control environment in its entirety based on the work that's been done, the testing we've done, the testing they'll do to arrive at that conclusion and an opinion.
Mark Jordan: And so we won't be out of the woods on this until we get through the fiscal year and EY has a chance to review the control environment in its entirety based on the work that's been done, the testing we've done, the testing they'll do to arrive at that conclusion and an opinion.
Speaker #1: But I'll just add that both us and E&Y do not have concerns on any statement, any risk of our financial statements not being accurate and reflective of the business.
Lori Flees: But I'll just add that both us and EY do not have concerns on any risk of our financial statements not being accurate and reflective of the business. So this is around business process controls, making sure they're documented, making sure they're executed, making sure they're tested. It's not any concern around the financial reporting of the business.
Lori Flees: But I'll just add that both us and EY do not have concerns on any risk of our financial statements not being accurate and reflective of the business. So this is around business process controls, making sure they're documented, making sure they're executed, making sure they're tested. It's not any concern around the financial reporting of the business.
Speaker #1: So this is around business process controls, making sure they're documented, making sure they're executed, making sure they're tested. It's not any concern around the financial reporting of the
Speaker #1: So this is around business process controls, making sure they're documented, making sure they're executed, making sure they're tested. It's not any concern around the financial reporting of the business.
Speaker #10: Understood. Thank you
Speaker #10: Understood. Thank you both. Thanks for that question,
Mark Jordan: Understood. Thank you both.
Mark Jordan: Understood. Thank you both.
Operator: Thanks for that question, David. Next up, we have Steven Zaccone from Citi. Go ahead, please. Your line is now open.
Operator: Thanks for that question, David. Next up, we have Steven Zaccone from Citi. Go ahead, please. Your line is now open.
Speaker #4: David. Next up, we have Steven Zaccon or Zacone from Citi. Go ahead, please. Your line is now
Speaker #4: open.
Speaker #11: Great. Good morning. Thanks very much for taking my question. I wanted to start on the gross margin performance because clearly came in stronger than expected.
Steven Zaccone: Good morning. Thanks very much for taking my question. I wanted to start on the gross margin performance because clearly came in stronger than expected. Can you elaborate a little bit more on the strength in the quarter? And then do you see this organic growth rate of kind of 50 basis points expansion as the right run rate for the balance of the year? And then help us understand how Breeze will impact that gross margin performance since you have better visibility at this point than when you first gave guidance a couple of months ago.
Steven Zaccone: Good morning. Thanks very much for taking my question. I wanted to start on the gross margin performance because clearly came in stronger than expected. Can you elaborate a little bit more on the strength in the quarter? And then do you see this organic growth rate of kind of 50 basis points expansion as the right run rate for the balance of the year? And then help us understand how Breeze will impact that gross margin performance since you have better visibility at this point than when you first gave guidance a couple of months ago.
Speaker #11: Can you elaborate a little bit more on the strength in the quarter? And then do you see this organic growth rate of kind of 50 basis points expansion as the right run rate for the balance of the year?
Speaker #11: And then help us understand how Breeze will impact that gross margin performance, since you have better visibility at this point than when you first gave guidance a couple of months ago.
Speaker #7: Yeah. Thanks for the question. We were pleased with the gross margin progress that we made in the quarter versus prior year. As indicated in the prepared remarks, we were up about 50 basis points year over year.
[Company Representative] (Valvoline): Yeah, thanks for the question. We were pleased with the gross margin progress that we made in the quarter versus prior year. As indicated in the prepared remarks, we were up about 50 basis points year-over-year. Labor and product were the primary drivers of that. We've been working and continue to work on the labor piece of the equation. The team's done a great job with that. As we've expected, we've not only held on to but been able to improve upon that labor leverage a bit. We would expect that progress to continue. The team's really looking at all aspects of store spend, controllable store spend. Labor's been a big focus because it's the largest piece of COGS. Product side, we did see some benefit in the quarter. We have seen base oil come down just a bit.
Steven Zaccone: Yeah, thanks for the question. We were pleased with the gross margin progress that we made in the quarter versus prior year. As indicated in the prepared remarks, we were up about 50 basis points year-over-year. Labor and product were the primary drivers of that. We've been working and continue to work on the labor piece of the equation. The team's done a great job with that. As we've expected, we've not only held on to but been able to improve upon that labor leverage a bit. We would expect that progress to continue. The team's really looking at all aspects of store spend, controllable store spend. Labor's been a big focus because it's the largest piece of COGS. Product side, we did see some benefit in the quarter. We have seen base oil come down just a bit.
Speaker #7: Labor and product were the primary drivers of that. We've been working and continue to work on the labor piece of the equation. The team's done a great job with that as we've expected.
Speaker #7: We've not only held on to, but been able to improve upon that labor leverage a bit. And we would expect that progress to continue.
Speaker #7: The team's really looking at all aspects of store spend, controllable store spend, and labor has been a big focus because it's the largest piece of COGS.
Speaker #7: Product side, we did see some we did see some benefit in the quarter. We have seen base oil come down just a bit as a reminder.
[Company Representative] (Valvoline): As a reminder, we get the benefit of that, but we also pass that benefit along to our franchise partners. So those two were the primary driver. On the flip side of that, we did see increases to other service delivery costs, which include things like rent, property taxes, and depreciation. Those increases are largely driven by adding new stores, especially the depreciation part, which was about a 50 basis point negative versus prior year. But we did also see some increases in terms of both the rent and property taxes, again, primarily related to new stores, but also just ordinary course. In terms of the full year and the Breeze impact, as we said, we're bringing 160 or we brought 162 immature stores into the system that will have a negative impact on overall margin.
Steven Zaccone: As a reminder, we get the benefit of that, but we also pass that benefit along to our franchise partners. So those two were the primary driver. On the flip side of that, we did see increases to other service delivery costs, which include things like rent, property taxes, and depreciation. Those increases are largely driven by adding new stores, especially the depreciation part, which was about a 50 basis point negative versus prior year. But we did also see some increases in terms of both the rent and property taxes, again, primarily related to new stores, but also just ordinary course. In terms of the full year and the Breeze impact, as we said, we're bringing 160 or we brought 162 immature stores into the system that will have a negative impact on overall margin.
Speaker #7: We get the benefit of that, but we also passed that benefit along to our franchise partners. So those two were the primary driver. On the flip side of that, we did see increases to other service delivery costs, which include things like rent, property taxes, depreciation.
Speaker #7: Those increases are largely driven by adding new stores, especially the depreciation part, which was about 50 basis points negative versus prior year. But we did also see some increases in terms of both the rent and property taxes.
Speaker #7: Again, primarily related to new stores, but also just ordinary course. In terms of the full year and the Breeze impact, as we said, we're bringing 106.
Speaker #7: So we brought 162 immature stores into the system. That will have a negative impact on overall margin. I believe at the investor update, we indicated that we would expect it to be about 100 basis points of EBITDA margin impact.
[Company Representative] (Valvoline): I believe at the investor update, we indicated that we would expect it to be about 100 basis points of EBITDA margin impact. We continue to expect that to be the case, but obviously, we're working with the Breeze team and with our internal team to improve the business, to grow the business so that we can increase those margins, both gross and EBITDA.
Steven Zaccone: I believe at the investor update, we indicated that we would expect it to be about 100 basis points of EBITDA margin impact. We continue to expect that to be the case, but obviously, we're working with the Breeze team and with our internal team to improve the business, to grow the business so that we can increase those margins, both gross and EBITDA.
Speaker #7: We continue to expect that to be the case, but obviously, our working with the Breeze team and with our internal team to improve the business, to grow the business so that we can increase those margins both gross and EBITDA.
Speaker #4: Okay. And just a clarification. It's 100 bits of pressure for margin. Is it more weighted to grosses than SG&A? What do you think about the model?
Steven Zaccone: Okay. And just a clarification, the 100 bips of pressure for margin, is it more weighted to grosses than SG&A as we think about the model?
Steven Zaccone: Okay. And just a clarification, the 100 bips of pressure for margin, is it more weighted to grosses than SG&A as we think about the model?
Speaker #1: It's more on the EBITDA line. It's a bit of both, but 100
Lori Flees: It's more on the EBITDA line. It's a bit of both, but it's 100 basis points on the EBITDA line because they do have a corporate center.
Lori Flees: It's more on the EBITDA line. It's a bit of both, but it's 100 basis points on the EBITDA line because they do have a corporate center.
Speaker #1: basis points on the EBITDA line. Okay. Because they do have a corporate center
Speaker #4: Okay. Second question is just you talked about pricing and ticket in particular being a bigger contributor to the cost. Just remind us, how do you see the balance of the year for same-store sales between ticket and
Steven Zaccone: Okay. Second question is just you talked about pricing and ticket in particular being a bigger contributor to the comp. Just remind us, how do you see the balance of the year for same-store sales between ticket and transaction?
Steven Zaccone: Okay. Second question is just you talked about pricing and ticket in particular being a bigger contributor to the comp. Just remind us, how do you see the balance of the year for same-store sales between ticket and transaction?
Speaker #4: Transaction? We'd expect, on an overall—
[Company Representative] (Valvoline): We'd expect on an overall basis to really be balanced as we have been. As you look at fiscal 2025, as we talked through that, it's more heavily weighted to ticket, but transaction growth is also very important. And I think also importantly, we saw transaction growth across the system in Q1 just as we did in fiscal 2025. We would expect to see that for the balance of the year, really across the system, both franchise and company. And so both are important to the comp. It has been the case that ticket has been a bigger driver, and we would expect that to continue to be the case. But again, both are quite important to the comp.
Steven Zaccone: We'd expect on an overall basis to really be balanced as we have been. As you look at fiscal 2025, as we talked through that, it's more heavily weighted to ticket, but transaction growth is also very important. And I think also importantly, we saw transaction growth across the system in Q1 just as we did in fiscal 2025. We would expect to see that for the balance of the year, really across the system, both franchise and company. And so both are important to the comp. It has been the case that ticket has been a bigger driver, and we would expect that to continue to be the case. But again, both are quite important to the comp.
Speaker #7: basis to really be balanced as we have been. As you look at fiscal '25, as we talked through that, it's more heavily weighted to ticket, but transaction growth is also very important.
Speaker #7: And I think also importantly, we saw transaction growth across the system in Q1 just as we did in fiscal '25. We would expect to see that for the balance of the year.
Speaker #7: Really, really across the system, both franchise and company. And so both are important to the comp. Has been the case that ticket has been a bigger driver, and we would expect that to continue to be the case.
Speaker #7: But again, both are quite important to the comp.
Speaker #4: Thanks for all the detail. Thank you for the question. Moving on, we now have Scott Sember from Roth Capital Partners. Go ahead, please. Your line is now
Steven Zaccone: Thanks for all the detail.
Steven Zaccone: Thanks for all the detail.
Operator: Thank you for the question. Moving on, we now have Scott Stember from Roth Capital Partners. Go ahead, please. Your line is now open.
Operator: Thank you for the question. Moving on, we now have Scott Stember from Roth Capital Partners. Go ahead, please. Your line is now open.
Speaker #4: open.
[Analyst] (Stephens): Good morning, and thanks for taking my questions.
Tom Wendner: Good morning, and thanks for taking my questions.
Speaker #3: questions. I have a
Speaker #1: Hi, Scott.
Lori Flees: Hi, Scott.
Lori Flees: Hi, Scott.
[Analyst] (Stephens): I have a question. Thanks. A question about just the bigger picture, potential gains that the quick lube market, particularly Valvoline, is seeing maybe from people trading down from car dealerships. Could that be a potential benefit in this very high inflationary environment? Are you seeing that? Just trying to get a sense of where things are coming from.
Tom Wendner: I have a question. Thanks. A question about just the bigger picture, potential gains that the quick lube market, particularly Valvoline, is seeing maybe from people trading down from car dealerships. Could that be a potential benefit in this very high inflationary environment? Are you seeing that? Just trying to get a sense of where things are coming from.
Speaker #3: question. Thanks. A question about just bigger picture. Potential gains that the quick loop market, particularly Valvoline is seeing, maybe for people trading down from car dealerships.
Speaker #3: Could that be a potential benefit in this very high inflationary environment? Are you seeing that and just trying to get a sense of where things are coming from?
Speaker #1: Yeah. When we open a new store, and we track where our customers last got their oil changed, we know that they come from where they're going in the marketplace.
Lori Flees: Yeah. When we open a new store and we track where our customers last got their oil changed, we know that they come from where they're going in the marketplace. And about 35% to 40% of customers still go back to a dealership. And so we know and track that when we open a new store and we bring in a new set of customers into our system, about that same proportion are coming from outside the quick lube market and within dealerships. Now, I don't want to get into the psyche of the customers as to whether or not they're doing that to trade down.
Lori Flees: Yeah. When we open a new store and we track where our customers last got their oil changed, we know that they come from where they're going in the marketplace. And about 35% to 40% of customers still go back to a dealership. And so we know and track that when we open a new store and we bring in a new set of customers into our system, about that same proportion are coming from outside the quick lube market and within dealerships. Now, I don't want to get into the psyche of the customers as to whether or not they're doing that to trade down.
Speaker #1: And about 35 to 40 percent of customers still go back to a dealership. And so we know and track that when we open a new store, and we bring in a new set of customers into our system, about that same proportion are coming from outside the quick loop market and within dealerships.
Speaker #1: Now, I don't want to get into the psyche of the customers as to whether or not they're doing that to trade down. I think the reality is, as we offer a much more convenient service, where it's stay in your car, you don't have to make an appointment, you don't have to wait in a waiting room, you don't have to leave your car and come back for it, it's 15 minutes or less, it's a much more convenient experience for the consumer.
Lori Flees: I think the reality is, as we offer a much more convenient service where it's stay in your car, you don't have to make an appointment, you don't have to wait in a waiting room, you don't have to leave your car and come back for it, it's 15 minutes or less. It's a much more convenient experience for the consumer. And I think that's really what the consumer is making the decision on. We don't get into the details of why they decided to pick us in enough detail across our system to be able to say it's much different than that. I am sure there are people who trade down, but I think convenience is likely the largest driver of switching.
Lori Flees: I think the reality is, as we offer a much more convenient service where it's stay in your car, you don't have to make an appointment, you don't have to wait in a waiting room, you don't have to leave your car and come back for it, it's 15 minutes or less. It's a much more convenient experience for the consumer. And I think that's really what the consumer is making the decision on. We don't get into the details of why they decided to pick us in enough detail across our system to be able to say it's much different than that. I am sure there are people who trade down, but I think convenience is likely the largest driver of switching.
Speaker #1: And I think that's really what the consumer is making the decision on. I can't—we don't get into the details of why they decided to pick us in enough detail across our system to be able to say, "It's much different than that." I am sure there are people who trade down, but I think convenience is likely the largest driver of switching.
Speaker #3: Got it. And then, last question. Obviously, store closures due to Winter Storm Fern, but once stores start opening up again, could you potentially talk about potential benefits that you guys will see, whether it's batteries, windshield wipers need to be replaced because of the ice?
[Analyst] (Stephens): Got it. And then last question. Obviously, store closures due to Winter Storm Fern, but once stores start opening up again, could you potentially talk about potential benefits that you guys will see, whether it's batteries, windshield wipers need to be replaced because of the ice? Just talk about any tailwinds we can get from that.
Tom Wendner: Got it. And then last question. Obviously, store closures due to Winter Storm Fern, but once stores start opening up again, could you potentially talk about potential benefits that you guys will see, whether it's batteries, windshield wipers need to be replaced because of the ice? Just talk about any tailwinds we can get from that.
Speaker #3: tailwinds we can get from Just talk about any
Speaker #3: that.
Speaker #1: Yeah.
Lori Flees: Yeah, absolutely. And this time of year, we always see that. So while this store may have been broader in reach and maybe more prolonged in some areas, the things that you're talking about are the things that are driven during this time. So batteries that are older tend to falter during this time and need to be replaced. Windshield wipers definitely need to be replaced. So these are things that we typically see in our business. And as we have these weather impacts, we do try to modulate our labor. So we won't add labor. We won't do as much new customer marketing during this time, and we wait until the weather pattern has passed. And then we ramp that back up again in order to serve the customers who did not get service during the winter sort of storm period.
Lori Flees: Yeah, absolutely. And this time of year, we always see that. So while this store may have been broader in reach and maybe more prolonged in some areas, the things that you're talking about are the things that are driven during this time. So batteries that are older tend to falter during this time and need to be replaced. Windshield wipers definitely need to be replaced. So these are things that we typically see in our business. And as we have these weather impacts, we do try to modulate our labor. So we won't add labor. We won't do as much new customer marketing during this time, and we wait until the weather pattern has passed. And then we ramp that back up again in order to serve the customers who did not get service during the winter sort of storm period.
Speaker #1: Absolutely. And this time of year, we always see that. So while this storm may have been broader in reach and maybe more prolonged in some areas, the things that you're talking about are the things that are driven during this time.
Speaker #1: So batteries, batteries that are older tend to falter during this time and need to be replaced. Windshield wipers definitely need to be replaced. So these are things that we typically see in our business.
Speaker #1: And as we have these weather impacts, we do try labor. So we won't add labor. We won't do new as much new customer marketing during this time, and we wait until the weather pattern has passed.
Speaker #1: And then we ramp that back up again in order to serve the customers who did not get service during the winter sort of storm period.
Speaker #1: But all the things you're talking about are exactly right. At this time of year, we always have storms. It just depends on when in the quarter they happen and for how long they last.
Lori Flees: But all the things that you're talking about are exactly right. At this time of year, we always have storms. It just depends on when in the quarter they happen and for how long they last.
Lori Flees: But all the things that you're talking about are exactly right. At this time of year, we always have storms. It just depends on when in the quarter they happen and for how long they last.
Speaker #3: Got it. That's all I have. Thank you.
[Analyst] (Stephens): Got it. That's all I have. Thank you.
Tom Wendner: Got it. That's all I have. Thank you.
Speaker #1: Thank you, Scott.
Lori Flees: Thank you, Scott.
Lori Flees: Thank you, Scott.
Speaker #4: All right. Thank you. And moving on to our next question here, it is from Steve Shemis from RBC Capital Markets. Go ahead, please. Your line is now open.
Operator: All right. Thank you. Moving on to our next question here is from Steven Shemesh from RBC Capital Markets. Go ahead, please. Your line is now open.
Operator: All right. Thank you. Moving on to our next question here is from Steven Shemesh from RBC Capital Markets. Go ahead, please. Your line is now open.
Speaker #8: Thank you for taking the question and good morning. So as we think about the comp, sounds like ticket was maybe 4.5 points given the tougher transaction compare.
Steven Zaccone: Thank you for taking the question, and good morning. So as we think about the comp, it sounds like ticket was maybe 4.5 points given the tougher transaction compare. Any color you can share just on the breakdown of premiumization, list price, and non-oil change revenue?
Steven Zaccone: Thank you for taking the question, and good morning. So as we think about the comp, it sounds like ticket was maybe 4.5 points given the tougher transaction compare. Any color you can share just on the breakdown of premiumization, list price, and non-oil change revenue?
Speaker #8: Any color you can share just on the breakdown of premiumization, list price, and non-oil change revenue?
Speaker #7: Yeah. We don't normally—we don't normally get into the specific components of it. As we look at the mix between ticket and transaction, I would say that for the quarter, ticket was roughly three-quarters of the comp as the way to think about it.
[Company Representative] (Valvoline): Yeah, we don't normally get into the specific components of it. As we look at the mix between ticket and transaction, I would say that for the quarter, ticket was roughly three-quarters of the comp, is the way to think about it. But again, as we look at the comp, we saw growth in all those categories that you mentioned on the transaction side. And in terms of ticket, also positive in terms of price, premiumization, and NOCR for the quarter. So again, a good balance. But yes, ticket was a bit higher in the quarter than maybe what we saw in, say, Q4 of fiscal 2025.
Steven Zaccone: Yeah, we don't normally get into the specific components of it. As we look at the mix between ticket and transaction, I would say that for the quarter, ticket was roughly three-quarters of the comp, is the way to think about it. But again, as we look at the comp, we saw growth in all those categories that you mentioned on the transaction side. And in terms of ticket, also positive in terms of price, premiumization, and NOCR for the quarter. So again, a good balance. But yes, ticket was a bit higher in the quarter than maybe what we saw in, say, Q4 of fiscal 2025.
Speaker #7: But again, as we look at the comp, we saw growth in all those categories that you mentioned on the transaction side. And in terms of ticket, also positive in terms of price, premiumization, and NOCR for the quarter.
Speaker #7: So again, a good balance, but yes, ticket was—ticket was a bit higher in the quarter than maybe what we saw in, say, Q4 of fiscal
Speaker #7: '25. Got it.
Steven Zaccone: Got it. That's helpful. And maybe just as a follow-up on a different topic. So at the time the deal was announced, you talked about 18 to 24 months from deal close to delever to 2.5 times to potentially resume share repurchases. As I just kind of look at the model, at least on my end, it seems like you could maybe get there by year-end. So I guess just from where you are today, 2 months of Breeze under your belt, is 18 months still the right way to think about it, or do you think you can potentially get there sooner?
Steven Zaccone: Got it. That's helpful. And maybe just as a follow-up on a different topic. So at the time the deal was announced, you talked about 18 to 24 months from deal close to delever to 2.5 times to potentially resume share repurchases. As I just kind of look at the model, at least on my end, it seems like you could maybe get there by year-end. So I guess just from where you are today, 2 months of Breeze under your belt, is 18 months still the right way to think about it, or do you think you can potentially get there sooner?
Speaker #8: That's helpful. And maybe just as a follow-up on a different topic. So at the time that deal was announced, you talked about 18 to 24 months from deal close to deliver to 2.5 times to potentially resume share of purchases.
Speaker #8: As I just kind of look at the model, at least on my end, it seems like you could maybe get there by year-end. So I guess just from where you are today, two months of breeze under your belt, is 18 months still the right way to think about it, or do you think you can potentially get there sooner?
Speaker #7: Well, we wanted to frame it up in terms of a target that we felt very comfortable with. And we're still comfortable with that. To your point, we'll continue to monitor this.
[Company Representative] (Valvoline): Well, we wanted to frame it up in terms of a target that we felt very comfortable with, and we're still comfortable with that. To your point, we'll continue to monitor this. And as we make progress on the balance sheet, as the top line and EBITDA continues to grow, our commitment is once we're back in the range, you should expect us to return to share repurchases. So if we get there sooner, then we will, in fact, start repurchasing shares sooner as well. Does that answer your question?
Steven Zaccone: Well, we wanted to frame it up in terms of a target that we felt very comfortable with, and we're still comfortable with that. To your point, we'll continue to monitor this. And as we make progress on the balance sheet, as the top line and EBITDA continues to grow, our commitment is once we're back in the range, you should expect us to return to share repurchases. So if we get there sooner, then we will, in fact, start repurchasing shares sooner as well. Does that answer your question?
Speaker #7: And as we make progress on the balance sheet, as the top line and EBITDA continues to grow, our commitment is once we're back in the range, you should expect us to return to share repurchases.
Speaker #7: So if we get there sooner, then we will, in fact, start repurchasing shares sooner as well. That answer your question?
Speaker #8: It does. Thank you very much. And good
Steven Zaccone: It does. Thank you very much, and good luck.
Steven Zaccone: It does. Thank you very much, and good luck.
Speaker #8: luck. Thank you.
[Company Representative] (Valvoline): Thank you.
Steven Zaccone: Thank you.
Speaker #1: Thanks,
Lori Flees: Thanks, Steve.
Lori Flees: Thanks, Steve.
Speaker #1: Steve. Thank you.
Operator: Thank you. Moving on to our next question here, we have Chris O'Cull from Stifel. Go ahead, please. Your line is now open.
Operator: Thank you. Moving on to our next question here, we have Chris O'Cull from Stifel. Go ahead, please. Your line is now open.
Speaker #4: Moving on to our next question here. We have Chris Oakle from Sifo. Go ahead, please. Your line is now open.
Speaker #3: Thanks. Good morning, guys. Lori, we noticed in the FDD that the company may start a national ad fund in fiscal '27. Can you talk about why now may be the right time to launch a fund, and maybe your learning about the potential efficiency of national advertising, and maybe how quickly the system could grow if this fund is implemented over the next few years, if that's the path you move forward with?
Chris O'Cull: Thanks. Good morning, guys. Lori, we noticed in the FDD that the company may start a national ad fund in fiscal 2027. Can you talk about why now may be the right time to launch a fund, but maybe you're learning about the potential efficiency of national advertising and maybe how quickly the system could grow if it's funded over the next few years, if that's the path you move forward with?
Chris O'Cull: Thanks. Good morning, guys. Lori, we noticed in the FDD that the company may start a national ad fund in fiscal 2027. Can you talk about why now may be the right time to launch a fund, but maybe you're learning about the potential efficiency of national advertising and maybe how quickly the system could grow if it's funded over the next few years, if that's the path you move forward with?
Speaker #1: Absolutely. You hit on the main driver. As our network has grown, and the reach and densification has improved, moving from a hyper-local-only marketing spend to a national fund drives significant efficiency.
Lori Flees: Absolutely. You hit on the main driver. As our network has grown and the reach and densification has improved, moving from a hyper-local-only marketing spend to a national fund drives significant efficiency. And as it relates to some of the company store spending, we've already started shifting some of our company marketing spend for stores into more national funding. And as we've proven out and shown the benefits of that to our franchisees, that's the reason why we're moving towards that. In terms of how big it could get, I think it's premature to say, but we'll obviously just keep monitoring. And as we see more efficiency, we'll obviously balance our spend.
Lori Flees: Absolutely. You hit on the main driver. As our network has grown and the reach and densification has improved, moving from a hyper-local-only marketing spend to a national fund drives significant efficiency. And as it relates to some of the company store spending, we've already started shifting some of our company marketing spend for stores into more national funding. And as we've proven out and shown the benefits of that to our franchisees, that's the reason why we're moving towards that. In terms of how big it could get, I think it's premature to say, but we'll obviously just keep monitoring. And as we see more efficiency, we'll obviously balance our spend.
Speaker #1: And as it relates to some of the company store spending, we've already started shifting some of our company marketing spend for stores into more national funding.
Speaker #1: And as we've proven out and shown the benefits of that to our franchisees, that's the reason why we're moving towards that. In terms of how big it could get, I think it's premature to say.
Speaker #1: But we'll obviously just keep monitoring. And as we see more efficiency, we'll obviously balance our
Speaker #1: spend. Okay.
Chris O'Cull: Okay. When do you think you would have an estimate for what the contribution rate could be? I think the FDD mentioned a quarter of a point, but I assume it'll be much larger than that.
Chris O'Cull: Okay. When do you think you would have an estimate for what the contribution rate could be? I think the FDD mentioned a quarter of a point, but I assume it'll be much larger than that.
Speaker #3: When do you think you would have an estimate for what the contribution rate could be? I think the FDD mentioned like a quarter of a point, but I assume it’ll be much larger than that.
Speaker #1: Again, I think we're working in partnership with our franchisees. And I think the FDD spells out how we're going to start. And I think based on the results and the performance of the national fund, we'll continue to optimize across the marketing pools of spend.
Lori Flees: Again, I think we're working in partnership with our franchisees, and I think the FDD spells out how we're going to start. I think based on the results and the performance of the national fund, we'll continue to optimize across the marketing pools of spend.
Lori Flees: Again, I think we're working in partnership with our franchisees, and I think the FDD spells out how we're going to start. I think based on the results and the performance of the national fund, we'll continue to optimize across the marketing pools of spend.
Speaker #3: Okay. And then I know the average sales ramp of new stores is in that 3 to 5-year range, but can you talk about the variance around that average in markets where brand awareness is high versus markets maybe where brand awareness and penetration are relatively low?
Speaker #3: Okay. And then I know the average sales ramp of new stores is in that 3 to 5-year range, but can you talk about the variance around that average in markets where brand awareness is high versus markets maybe where brand awareness and penetration are relatively low?
Chris O'Cull: Okay. And then I know the average sales ramp of new stores is in that 3 to 5-year range, but can you talk about the variance around that average in markets where brand awareness is high versus markets maybe where brand awareness and penetration are relatively low?
Chris O'Cull: Okay. And then I know the average sales ramp of new stores is in that 3 to 5-year range, but can you talk about the variance around that average in markets where brand awareness is high versus markets maybe where brand awareness and penetration are relatively low?
Speaker #1: I'm not sure I caught the first part of your question.
Lori Flees: I'm not sure I caught the first part of your question.
Lori Flees: I'm not sure I caught the first part of your question.
Speaker #7: Three to five-year
[Company Representative] (Valvoline): 3 to 5-year ramp.
Lori Flees: 3 to 5-year ramp.
Speaker #1: Oh, three to ramp. five-year ramp. Got it. Got it.
Lori Flees: Oh, 3 to 5-year ramp. Got it, got it.
Lori Flees: Oh, 3 to 5-year ramp. Got it, got it.
Speaker #3: How does that compare in how does it compare in markets where the awareness is high versus maybe expansion or greenfield markets?
Chris O'Cull: How does it compare in markets where the awareness is high versus maybe expansion or greenfield markets?
Chris O'Cull: How does it compare in markets where the awareness is high versus maybe expansion or greenfield markets?
Speaker #1: Yeah, so what we typically see is the ramp in the first three years is a bit faster if we are adding a store to a market that has good brand awareness.
Lori Flees: Yeah. So what we typically see is the ramp in the first three years is a bit faster. If we are adding a store to a market that has good brand awareness, and it would be a little slower. But we do modulate our marketing spend given that. And that's all factored into our new unit forecasts, which continue to drive really strong IRR returns in the mid-teens. And so that's factored into those forecasts.
Lori Flees: Yeah. So what we typically see is the ramp in the first three years is a bit faster. If we are adding a store to a market that has good brand awareness, and it would be a little slower. But we do modulate our marketing spend given that. And that's all factored into our new unit forecasts, which continue to drive really strong IRR returns in the mid-teens. And so that's factored into those forecasts.
Speaker #1: And it would be a little slower, but we do modulate our marketing spend given that. And that’s all factored into our new unit forecast, which continues to drive really strong IRR returns in the mid-teens.
Speaker #1: And so that's factored into those
Speaker #1: forecasts.
Speaker #3: Great. Thanks,
Chris O'Cull: Great. Thanks, guys.
Chris O'Cull: Great. Thanks, guys.
Speaker #3: guys.
Speaker #4: Thank you. We now
Operator: Thank you. We now move on to our next question here from Tom Wendner from Stephens. Go ahead, please. Your line is now open.
Operator: Thank you. We now move on to our next question here from Tom Wendner from Stephens. Go ahead, please. Your line is now open.
Speaker #4: move on to our next question here from Tom Wendler from Stevens. Go ahead, please. Your line is now
Speaker #4: open. Hey, good morning, everyone.
[Analyst] (Stephens): Hey, good morning, everyone. Thanks for the question. You've now lapped some of the larger refranchising activity in fiscal quarter Q4 2024 and Q1 2025. Can you give us a little bit of an idea of how much the 10 stores refranchised this last quarter impacted results?
Tom Wendner: Hey, good morning, everyone. Thanks for the question. You've now lapped some of the larger refranchising activity in fiscal quarter Q4 2024 and Q1 2025. Can you give us a little bit of an idea of how much the 10 stores refranchised this last quarter impacted results?
Speaker #2: Thanks for the question. You've now lapped some of the larger refranchising activity, in fiscal quarter Q4 2024 and Q1 2025. Can you give us a little bit of an idea of how much the 10 stores refranchised this last quarter impacted results?
Speaker #1: Yeah. First, I'll just comment and restate what we have been saying for the better part of last year and in our December investor update that we really don't have any plans to do any further large-scale refranchising.
Lori Flees: Yeah. First, I'll just comment and restate what we have been saying for the better part of last year and in our December investor update that we really don't have any plans to do any further large-scale refranchising, but we do make transfers. And I think what you're referring to is we had a 10-store transfer in Q1 from company to franchise. Similarly, in Q3 of fiscal 2025, we had a 6-store transfer from franchise to company. And we're really doing that to optimize market boundaries so that either the franchise or company can optimize our SG&A and marketing spend in a geography. Now, the specific transfers in Q1 were not really material from a financial standpoint, and we incorporated that into our guidance.
Lori Flees: Yeah. First, I'll just comment and restate what we have been saying for the better part of last year and in our December investor update that we really don't have any plans to do any further large-scale refranchising, but we do make transfers. And I think what you're referring to is we had a 10-store transfer in Q1 from company to franchise. Similarly, in Q3 of fiscal 2025, we had a 6-store transfer from franchise to company. And we're really doing that to optimize market boundaries so that either the franchise or company can optimize our SG&A and marketing spend in a geography. Now, the specific transfers in Q1 were not really material from a financial standpoint, and we incorporated that into our guidance.
Speaker #1: But we do make transfers. And I think what you're referring to is, we had a 10-store transfer in Q1 from company to franchise.
Speaker #1: Similarly, in Q3 of fiscal '25, we had a 6-store transfer from franchise to company. And we're really doing that to optimize market boundaries so that either the franchise or company can optimize our G&A and marketing spend in a geography.
Speaker #1: Now, the specific transfers in Q1 were not and we incorporated that into our guidance. So unlike the previous refranchising where there were three transactions that happened over a two-quarter period and fairly sizable, we're not going to continue to adjust numbers or recast them going forward for these small transfer transfers
Lori Flees: So unlike the previous refranchising, where there were three transactions that happened over a two-quarter period and fairly sizable, we're not going to continue to adjust numbers or recast them going forward for these small transfers between.
Lori Flees: So unlike the previous refranchising, where there were three transactions that happened over a two-quarter period and fairly sizable, we're not going to continue to adjust numbers or recast them going forward for these small transfers between.
Speaker #1: between. Perfect.
[Analyst] (Stephens): Perfect. Appreciate the color. Maybe on a separate note here, the Instant Transfer Portal campaign, I think you'd mentioned you saw some early success in the first few weeks of this quarter before the storm. Can you maybe give us some early reads on the Instant Transfer Portal? Is that the driver there?
Tom Wendner: Perfect. Appreciate the color. Maybe on a separate note here, the Instant Transfer Portal campaign, I think you'd mentioned you saw some early success in the first few weeks of this quarter before the storm. Can you maybe give us some early reads on the Instant Transfer Portal? Is that the driver there?
Speaker #2: Appreciate the color. Maybe on a separate note here, the instant transfer portal campaign—I think you'd mentioned you saw some early success in the first few weeks of this quarter before the storm.
Speaker #2: Can you maybe give us some early reads on the instant transfer portal? Is that the driver?
Speaker #2: there? I would
Lori Flees: I would say that all of the marketing activities that we do end up driving engagement in our brand and conversion into our stores. The Transfer Portal was a really creative opportunity that our marketing team and our marketing partners came up with to sort of capitalize on a lot of the frenzy in college sports. It created very strong creative engagement, which is around brand impressions and offers, which, when we look at that relative to our other social performance, it benchmarked very well. So when you're trying to find new ways to reach new customers who haven't had the experience of your brand, this kind of creativity goes a long way. And I'm really proud of the team for some of the things that they're working on and that they've done.
Lori Flees: I would say that all of the marketing activities that we do end up driving engagement in our brand and conversion into our stores. The Transfer Portal was a really creative opportunity that our marketing team and our marketing partners came up with to sort of capitalize on a lot of the frenzy in college sports. It created very strong creative engagement, which is around brand impressions and offers, which, when we look at that relative to our other social performance, it benchmarked very well. So when you're trying to find new ways to reach new customers who haven't had the experience of your brand, this kind of creativity goes a long way. And I'm really proud of the team for some of the things that they're working on and that they've done.
Speaker #1: say that all of the marketing activities that we do end up driving engagement in our brand. And conversion into our stores. The transfer portal was a really creative opportunity that our marketing team and our marketing partners came up with to sort of capture on a lot of the frenzy in college sports.
Speaker #1: It created very strong creative engagement, which is around brand impressions and offers. Which when we look at that relative to our other social performance, it benchmarked very well.
Speaker #1: So when you're trying to find new ways to reach new customers who haven't had the experience of your brand, this kind of creativity goes a long way.
Speaker #1: And that I'm really proud of the team for some of the things that they're working on, and that they've done.
Speaker #2: right. I appreciate you answering my questions in great quarter, guys.
[Analyst] (Stephens): All right. I appreciate you answering my questions, and great quarter, guys.
Tom Wendner: All right. I appreciate you answering my questions, and great quarter, guys.
Speaker #1: Thank you. Thank
Lori Flees: Thank you.
Lori Flees: Thank you.
Speaker #3: you. All
Chris O'Cull: Thank you.
Chris O'Cull: Thank you.
Speaker #4: right. Moving on to our next question. This is from Peter Keith from Piper Sandler. Go ahead, please. Your line is now
Operator: All right. Moving on to our next question. This is from Peter Keith from Piper Sandler. Go ahead, please. Your line is now open.
Operator: All right. Moving on to our next question. This is from Peter Keith from Piper Sandler. Go ahead, please. Your line is now open.
Speaker #4: open. Hi.
Sarah: Hi, this is Sarah on for Peter. Thanks for taking our questions. First, can you just give us an update on some of the progress with your technology initiatives? Are you finding the company's move to a cloud-based tech architecture is providing any competitive advantages in the channel? And then if so, what are these?
Sarah Whitaker: Hi, this is Sarah on for Peter. Thanks for taking our questions. First, can you just give us an update on some of the progress with your technology initiatives? Are you finding the company's move to a cloud-based tech architecture is providing any competitive advantages in the channel? And then if so, what are these?
Speaker #1: This is Sarah on for Peter. Thanks for taking our questions. First, can you just give us an update on some of the progress with your technology initiatives?
Speaker #1: Are you finding the company's move to a cloud-based tech architecture is providing any competitive advantages in the channel? And then, if so, what are these?
Speaker #1: As you know, since we became a pure-play, high-growth retail services company, we have been investing in retail-specific technology. In the first year, we implemented a new CRM system for both our fleet business, as well as our franchise and business development businesses.
Lori Flees: As you know, since we became a pure-play high-growth retail services company, we have been investing in retail-specific technology. In the first year, we implemented a new CRM system for both our fleet business as well as our franchise and business development businesses, or areas. We then implemented SAP, or the first phase of SAP, in 2024. In fiscal 2025, we implemented HRIS. We also, in fiscal 2025, moved our customer data into the cloud. We have been slowly working on replatforming our proprietary system we call Super Pro for our stores. We've upgraded our infrastructure in the stores so that it could support a cloud-based architecture. We're in the process of becoming more modern. With that, you typically see the maintenance costs from a technology standpoint go down. You get efficiency.
Lori Flees: As you know, since we became a pure-play high-growth retail services company, we have been investing in retail-specific technology. In the first year, we implemented a new CRM system for both our fleet business as well as our franchise and business development businesses, or areas. We then implemented SAP, or the first phase of SAP, in 2024. In fiscal 2025, we implemented HRIS. We also, in fiscal 2025, moved our customer data into the cloud. We have been slowly working on replatforming our proprietary system we call Super Pro for our stores. We've upgraded our infrastructure in the stores so that it could support a cloud-based architecture. We're in the process of becoming more modern. With that, you typically see the maintenance costs from a technology standpoint go down. You get efficiency.
Speaker #1: Or areas. We then implemented SAP or the first phase of SAP in 2024. And in fiscal '25, we implemented HRIS. We also in fiscal '25 moved our customer data into the cloud.
Speaker #1: And we have been slowly working on re-platforming our proprietary system. We call it Super Pro. For our stores, we've upgraded our infrastructure in the stores so that it could support a cloud-based architecture.
Speaker #1: And so, we're in the process of becoming more modern. And with that, you typically see the maintenance costs, from a technology standpoint, go down.
Speaker #1: So you get efficiency. As you get into more of the capabilities of SAP and HRIS, you get more efficiencies in your back office. And then on the customer side, you end up having a better, more consistent process where you can optimize and take time out of the service experience for the customer or take labor out as you apply more technology and tools to the store day-to-day operations.
Lori Flees: As you get into more of the capabilities of SAP and HRIS, you get more efficiencies in your back office. And then on the customer side, you end up having a better, more consistent process where you can optimize and take time out of the service experience for the customer or take labor out as you apply more technology and tools to the store day-to-day operations. So I would say this is a journey for us, but we're through some of the basic parts of the technology, replatforming, and now we're getting into the more value-added efficiency and effectiveness-driving initiatives. But we don't see the investment in technology continuing to need to go up, as we've mentioned in our investor day update. We did grow technology spend, and we will continue to spend in technology, but we don't see the year-over-year growth of that going faster than sales.
Lori Flees: As you get into more of the capabilities of SAP and HRIS, you get more efficiencies in your back office. And then on the customer side, you end up having a better, more consistent process where you can optimize and take time out of the service experience for the customer or take labor out as you apply more technology and tools to the store day-to-day operations. So I would say this is a journey for us, but we're through some of the basic parts of the technology, replatforming, and now we're getting into the more value-added efficiency and effectiveness-driving initiatives. But we don't see the investment in technology continuing to need to go up, as we've mentioned in our investor day update. We did grow technology spend, and we will continue to spend in technology, but we don't see the year-over-year growth of that going faster than sales.
Speaker #1: So, I would say this is a journey for us, but we're through some of the basic parts of the technology replatforming, and now we're getting into the more value-added, efficiency- and effectiveness-driving initiatives.
Speaker #1: But we don't see the investment in technology continuing to need to go up, as we've mentioned. And at our Investor Day update, we did grow technology spend.
Speaker #1: And we will continue to spend in technology but we don't see the year-over-year growth of that going faster to than sales in fact we would expect that moderate.
Lori Flees: In fact, we would expect that to moderate.
Lori Flees: In fact, we would expect that to moderate.
Speaker #3: Okay, thank you. That's very helpful. And then just on advertising—where are you guys leaning in most here? And then just early results that you're seeing?
Sarah: Okay. Thank you. That's very helpful. And then just on advertising, where are you guys leaning in most here, and then just early results that you're seeing?
Sarah Whitaker: Okay. Thank you. That's very helpful. And then just on advertising, where are you guys leaning in most here, and then just early results that you're seeing?
Speaker #1: We have a pretty sophisticated marketing playbook that includes both what we call our lifecycle management, which is us keeping in touch with the customer.
Lori Flees: We have a pretty sophisticated marketing playbook that includes both what we call our lifecycle management, which is us keeping in touch with the customer. We can predict when the customer is going to need to come back in for not just an oil change, but also for added services based on their driving pattern and what we see, or in doing look-alike analysis. So we have a fairly robust process of keeping in touch with our customers. And that we just continue to optimize in terms of how and when we insert certain promotions to that communication process. And then as it relates to new customer acquisition and new store openings, we continue to modify to drive down our customer acquisition costs in those environments. We continue to test new channels. And I would say that the performance continues to improve.
Lori Flees: We have a pretty sophisticated marketing playbook that includes both what we call our lifecycle management, which is us keeping in touch with the customer. We can predict when the customer is going to need to come back in for not just an oil change, but also for added services based on their driving pattern and what we see, or in doing look-alike analysis. So we have a fairly robust process of keeping in touch with our customers. And that we just continue to optimize in terms of how and when we insert certain promotions to that communication process. And then as it relates to new customer acquisition and new store openings, we continue to modify to drive down our customer acquisition costs in those environments. We continue to test new channels. And I would say that the performance continues to improve.
Speaker #1: We can predict when the customer is going to need to come back in for not just an oil change but for also added services.
Speaker #1: Based on their driving pattern and what we see or in doing look-alike analysis. So we have a fairly robust process of keeping in touch with our customers.
Speaker #1: And we just continue to optimize in terms of how and when we insert certain promotions into that communication process. And then, as it relates to new customer acquisition and new store openings, we continue to modify to drive down our customer acquisition cost in those environments.
Speaker #1: We continue to test new channels and I would say that the performance continues to improve. Our return on ad spend is very productive. And we continue to optimize that.
Lori Flees: Our return on ad spend is very productive, and we continue to optimize that at the same time as optimizing the discounting or optimizing net pricing for every transaction that we have in our stores.
Lori Flees: Our return on ad spend is very productive, and we continue to optimize that at the same time as optimizing the discounting or optimizing net pricing for every transaction that we have in our stores.
Speaker #1: as optimizing the discounting or optimizing net pricing for every At the same time transaction that we have in our stores.
Speaker #3: Okay. Thank
Speaker #3: Okay. Thank you. Thank you.
Sarah: Okay. Thank you.
Sarah Whitaker: Okay. Thank you.
Operator: Thank you. And moving on, we now have David Lance from Wells Fargo. Go ahead, please. Your line is now open.
Operator: Thank you. And moving on, we now have David Lance from Wells Fargo. Go ahead, please. Your line is now open.
Speaker #4: And moving on, we now have David Lance from Wells Fargo. Go ahead, please. Your line is now open.
Speaker #5: Hey, good morning and thanks for taking my questions. So you guys called out the non-recurring payroll-related item in SCNA and Q1, but curious if you can talk through some of the puts and takes through the balance of the
[Analyst] (Stephens): Hey, good morning, and thanks for taking my questions. So you guys called out the non-recurring payroll-related item in SG&A in Q1, but curious if you can talk through some of the puts and takes through the balance of the year.
Tom Wendner: Hey, good morning, and thanks for taking my questions. So you guys called out the non-recurring payroll-related item in SG&A in Q1, but curious if you can talk through some of the puts and takes through the balance of the year.
Speaker #5: year. Yeah.
[Company Representative] (Valvoline): Yeah, happy to answer that. Yeah, we did have the non-recurring item Q1 last year. Taking that out of the equation, we did see SG&A leverage of 30 basis points year-over-year, which our commitment is to continue to do that throughout the balance of the year and going forward. As we look at the rest of the year, we should continue to see overall improvement from a core business perspective. We're very focused on scrutinizing spend across really all categories, not just SG&A, but also capital costs around store bills as well as cost of goods sold as we've talked about with labor improvement and other areas. So we're continuing to really bear down on these categories and would expect to continue to see improvements as we go throughout the course of the year.
Tom Wendner: Yeah, happy to answer that. Yeah, we did have the non-recurring item Q1 last year. Taking that out of the equation, we did see SG&A leverage of 30 basis points year-over-year, which our commitment is to continue to do that throughout the balance of the year and going forward. As we look at the rest of the year, we should continue to see overall improvement from a core business perspective. We're very focused on scrutinizing spend across really all categories, not just SG&A, but also capital costs around store bills as well as cost of goods sold as we've talked about with labor improvement and other areas. So we're continuing to really bear down on these categories and would expect to continue to see improvements as we go throughout the course of the year.
Speaker #2: Happy to answer that. Yeah, we did have the non-recurring item Q1 of last year. Taking that out of the equation, we did see SG&A leverage of 30 basis points year over year, which our commitment is to continue.
Speaker #2: To do that throughout the balance of the year and going forward. As we look at the rest of the at the rest of the year, we should continue to see overall improvement from a core business perspective.
Speaker #2: We're very focused on scrutinizing spend across really all categories, not just SG&A, but also capital costs around store bills as well as cost of goods sold as we've talked about with labor So we're continuing to improvement and other areas.
Speaker #2: Really bear down on these categories, and would expect to continue to see improvement as we go throughout the course of the year.
Speaker #4: it. That's helpful. And then Got clearly, winter storm burn is driving some choppiness around transactions, but curious if you guys could help us parse out the potential impact to Q1 comps if that'll have.
[Analyst] (Stephens): Got it. That's helpful. And then clearly, Winter Storm Fern is driving some choppiness around transactions, but curious if you guys could help us parse out the potential impact to Q1 comps that that'll have. Excuse me, Q2.
Tom Wendner: Got it. That's helpful. And then clearly, Winter Storm Fern is driving some choppiness around transactions, but curious if you guys could help us parse out the potential impact to Q1 comps that that'll have. Excuse me, Q2.
Speaker #4: Excuse me, Q2. Q2.
Speaker #1: You
Lori Flees: You mean Q2? Yeah, I think it's a little too early to say. We had a strong start to the year, and our expectations really are not changing for Q2 through Q4. Obviously, we're monitoring the weather, and we make adjustments. But again, if you look at history for our business, as we have a weather pattern cycle through, it just shifts around when we capture the demand and serve the guests. It doesn't have a long-term impact or downward impact on our business. So again, we have to be smart to manage labor costs and manage our marketing spend. And when we do that, and we're getting better at doing that as we apply more tools and technology, we can manage both our sales line and our profit line pretty effectively.
Lori Flees: You mean Q2? Yeah, I think it's a little too early to say. We had a strong start to the year, and our expectations really are not changing for Q2 through Q4. Obviously, we're monitoring the weather, and we make adjustments. But again, if you look at history for our business, as we have a weather pattern cycle through, it just shifts around when we capture the demand and serve the guests. It doesn't have a long-term impact or downward impact on our business. So again, we have to be smart to manage labor costs and manage our marketing spend. And when we do that, and we're getting better at doing that as we apply more tools and technology, we can manage both our sales line and our profit line pretty effectively.
Speaker #1: Mean Q2? Yeah, I think it's a little too early to say. We had a strong start to the year, and our expectations really are not changing for Q2 through Q4.
Speaker #1: Obviously, we're monitoring the weather and we make adjustments. But again, if you look at history for our business, as we have a weather pattern cycle through, it just shifts around when we capture the demand and serve the guests.
Speaker #1: It doesn't have a long-term impact or downward impact on our business. So, again, we have to be smart to manage labor costs and manage our marketing spend.
Speaker #1: And when we do that—and we've proven we're getting better at doing that as we apply more tools and technology—we can manage both our sales line and our profit line pretty effectively.
Speaker #4: Thank you. Thank you, David, for that question. And that is it. Our questions queue is now clear, which concludes today's call. Thank you all for joining, and you can now disconnect your lines.
[Analyst] (Stephens): Thank you.
Tom Wendner: Thank you.
Operator: Thank you, David, for that question. That is it. Our questions for you are now clear, which concludes today's call. Thank you all for joining, and you can now disconnect your lines. Everyone, have a great day. Bye for now.
Operator: Thank you, David, for that question. That is it. Our questions for you are now clear, which concludes today's call. Thank you all for joining, and you can now disconnect your lines. Everyone, have a great day. Bye for now.
