Valvoline Inc Q1 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Steven Shemesh - RBC Capital Markets - Analyst : Good morning, and thanks for taking the question. What was the start-off on same store sales? So you guys have made clear that your comparison on pricing and non-oil change revenue are going to be a little bit tougher as we as we move into 2Q. Just any initial

Question: Steven Shemesh - RBC Capital Markets - Analyst : Okay, that's great. Thank you. And maybe just a quick follow-up here on gross margin, Mary. You guys have previously talked about gross margin being in the ballpark of flat for the year, obviously, a really strong start to 1Q, up 80 basis points. Again, noted that pricing and non-oil change revenue contribution should be less, which should come out of that. But just any changes to how you're thinking about gross margin flowing through the full year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 2:00PM, VVV.N - Q1 2025 Valvoline Inc Earnings Call

Question: Steven Shemesh - RBC Capital Markets - Analyst : Okay. That's great. Thank you.

Question: Simeon Gutman - Morgan Stanley - Analyst : Hello, good morning. I'm going to ask my one follow-up just on the spot. First, it was a good quarter. I wanted to ask, is the word substantially, in line with the transcript and in the press release, curious what was substantial? What either missed or what was better? And then the follow-up is on the prior question around the guidance range for the rest of the year. Were you always expecting -- we knew it would be above the range or at the high end. Are you saying the business is still running strong and we're not flowing upside through because it performed consistent with our expectations? Or were you being more conservative, especially given the trends are continuing in the second quarter so far? Just thinking about upside to it like underlying run rate versus conservatism? Thanks.

Question: Steven Shemesh - RBC Capital Markets - Analyst : Thanks, Lori. Thanks, Mary.

Question: Chris O'Cull - Stifel Nicolaus and Company, Incorporated - Analyst : Good morning, everyone. Thanks for taking the questions. Lori, I know the company has been working on ways to reduce the investment outlay for new units. Can you provide an update on the amount of costs you expect to take out of the build-out, or what you're targeting for the investment outlay? Then I have a follow-up.

Question: Chris O'Cull - Stifel Nicolaus and Company, Incorporated - Analyst : A follow-up is, are there opportunities to reduce the time it takes for a new store to reach maturity? I believe it's not three to five years. But can you shorten that in order to improve the return as well?

Question: Simeon Gutman - Morgan Stanley - Analyst : Okay. Thanks, guys.

Question: Steven Zaccone - Citi Investment Research (US) - Analyst : Hi, good morning. Thanks very much for taking my question. I was hoping, Lori, if you could talk a bit more about that improved transaction performance. What do you think is driving that? Are you seeing some changes in the competitive landscape? Just anything to up to chime in there. And then I'm going to follow up on Simeon's question, just on the context of same-store sales. You had some prior commentary on the last call that you could potentially have a quarter below the comp range, given the strength that you're seeing here in the first quarter and that's carried into 2Q. Is it fair to say that's off the table, that you should pretty much be in the range for the remainder of the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 2:00PM, VVV.N - Q1 2025 Valvoline Inc Earnings Call

Question: Steven Zaccone - Citi Investment Research (US) - Analyst : Okay. Thanks for all the detail. The brief follow-up I had was just on gross margin. I know someone asked earlier, but on the last call you had talked about some risk with some of your, I guess, you'd say people you're selling waste oil to, adjusting our pricing. Has anything changed in that scenario? It sounds like your gross margin attrition is the same, but just help us understand if anything's coming in a little bit better or worse than expected? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 2:00PM, VVV.N - Q1 2025 Valvoline Inc Earnings Call

Question: Steven Zaccone - Citi Investment Research (US) - Analyst : Okay. Thanks for that detail.

Question: Justin Kleber - Robert W. Baird & Co., Inc. - Analyst : Good morning, everyone. Sorry about that. Thanks for taking the questions. So first of all, just on guidance, 14% EBITDA growth here in 1Q. The midpoint of the full year guide implies sub-2% over the balance of the year. It seems like a fairly big change even if we take into account the greater headwind from refranchising. So can you maybe unpack what's changing? It doesn't sound like waste oil dynamics are a major headwind here. So is the pacing of the investment spend waited for the back half of the year or are you just maintaining a conservative approach to guidance?

Question: Justin Kleber - Robert W. Baird & Co., Inc. - Analyst : Okay. That's very helpful, Mary. Thanks for framing the refranchising impacts. And my follow-up, just related to the tailwind from premiumization. If I look at your latest STD, it shows your premium oil mix is about 80%. Curious how much higher do you think that penetration can realistically go? And then also, just if you could share any insights on maybe how that 80% breaks down between fully synthetic versus some synthetic blends?

Question: Justin Kleber - Robert W. Baird & Co., Inc. - Analyst : Fair enough. Thanks so much for the insights and best of luck.

Question: David Bellinger - Mizuho Securities USA - Analyst : Thank you all. Good morning. I will go back to your Q2 comments on the detail again. Maybe we could take a bigger step back here, right. It seems like the Q2 comp is mainly impacted by the comparison, the leap day shift. If you ex out all that, it still seems like every

Question: David Bellinger - Mizuho Securities USA - Analyst : No, that's fair enough. But it's not like you've seen a step change on the transaction growth side as you entered Q2 being -- (multiple speakers)

Question: David Bellinger - Mizuho Securities USA - Analyst : The other pieces of the business through these one-time like shifts. The underlying growth rate on the transaction side has not changed materially?

Question: David Bellinger - Mizuho Securities USA - Analyst : No, go ahead. Sorry.

Question: David Bellinger - Mizuho Securities USA - Analyst : Yeah, understood. That's very helpful. Just to shift over to changing gears onto the buybacks. You've repurchased almost $40 million this quarter alone. That's really towards the low-end of your full year guidance. But how should we think about buybacks over the balance of the year? And what would allow you to potentially go to the high-end of the range or even above is very good to see to the marketplace, or just how are you thinking about that change over the balance of the year?

Question: David Bellinger - Mizuho Securities USA - Analyst : Perfect. Thank you.

Question: Alexia Morgan - Piper Sandler & Co. - Analyst : Hi, Alexia Morgan on for Peter Keith. Thanks for taking our question. My first question would be on the promotional environment. We've heard from our checks that it -- the promotions have come down a bit or promotions have moderated recently. Can you talk about what you saw there in Q1 just as it related to prior quarters and then how you're thinking about promotions in Q2? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 2:00PM, VVV.N - Q1 2025 Valvoline Inc Earnings Call

Question: Alexia Morgan - Piper Sandler & Co. - Analyst : Great. Thank you. And then my follow-up, just more on unit growth, specifically on the franchise side. Are you still on track to -- for your longer-term target, 150 franchisee opened the year by 2027? Or how you're thinking about the bridge to that?

Question: Alexia Morgan - Piper Sandler & Co. - Analyst : Thank you.

Question: Thomas Wendler - Stephens Inc. - Analyst : Hey. Good morning, everyone. I just want to touch on the waste oil one more time. Sounds like that didn't really flow through or become an issue for the margin this quarter. But I think it was mentioned, maybe, impacting 2Q. So maybe you could touch on that. And then, just maybe your thoughts on how the company could be impacted if we see increasing oil prices. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 2:00PM, VVV.N - Q1 2025 Valvoline Inc Earnings Call

Question: Thomas Wendler - Stephens Inc. - Analyst : Mary, I appreciate the color. Thank you.

Question: Bret Jordan - Jefferies - Analyst : Hey. Good morning, guys. Could you talk about seasonality of the non-oil change business. Obviously, you'd think using batteries and wipers would benefit from the winter weather we've been having. But could you talk about the mix there and what the weather impact has been?

Question: Bret Jordan - Jefferies - Analyst : Okay. And then, you talked about the independent quick lube operators and a potential, I guess, acquisition partner. What are the evaluation trends there? Are they looking at these businesses, seeing a lot of franchise quick lube additions in the market making them inclined to sell? Or how do you -- with both average multiple for those independents?

Question: Bret Jordan - Jefferies - Analyst : Okay. Thank you.

Question: David Lantz - Wells Fargo Securities, LLC - Analyst : Hey, good morning, and thanks for taking my questions. So SG&A per company operated store grew high single-digits in Q1. But considering the franchising activity in the recently closed acquisition, curious how you're thinking about these trends throughout the balance of the year?

Question: David Lantz - Wells Fargo Securities, LLC - Analyst : Got it. That's really helpful. (multiple speakers)

Question: David Lantz - Wells Fargo Securities, LLC - Analyst : Yeah, just one more. Can you talk about fleet performance in the quarter? And any additional color you can provide around account wins as well?

Question: David Lantz - Wells Fargo Securities, LLC - Analyst : Got it. Thanks so much.