VALVOLINE INC Q4 FY2024 earnings call

• Fiscal 2024 results were largely in line with expectations, driven by market-leading position, competitive advantages like brand, franchisees, operational excellence, etc.
• System wide store-sales $3.1B, 12% increase; 18th consecutive year of same-store sales growth (6.7%); adjusted EBITDA up 17% to $443M, margin 27.3%.
• Strategic priorities: Driving full potential in core business (mature stores to lift profit, brand/scale/excellence drive potential), accelerating network growth (closed 158 new stores in FY24, refranchising transactions, new franchise partners), targeting customer and service expansion (fleet business growing, non-oil change revenue service penetration up 17% CAGR past 3 years).

For fiscal year 2024, system wide store-sales were $3.1 billion, a 12% increase over the prior year. System-wide same-store sales grew 6.7% for the year, marking the 18th consecutive year of same-store sales growth. The network ended the year with 2010 stores. Adjusted EBITDA was up 17% to $443 million, and adjusted EBITDA margin improved 100 basis points to 27.3%. In the fourth quarter, net sales grew to $436 million, an almost 12% increase over the prior year, with system-wide same-store sales growing 5.4% and 15.4% on a two-year stack. For the full fiscal year, net sales grew just over 12% to $1.6 billion, with system-wide same-store sales growing 6.7% and 18.6% on a two-year stack.

• Fiscal 2025 same-store sales expected 5%-7%, network growth 160-185 new stores.
• Adjusting for refranchising impact, underlying business expected top line growth 10%-14%, adjusted EBITDA $450M-$470M.
• First quarter 2025 comp higher due to lapping prior pricing/NOCR actions and hurricane volume push; possible quarter below provided range.

• Uncertainty from political administration changes (e.g., corporate tax rate, EV shift, miles driven impact).
• Tariffs could impact COGS and require passing through or efficiency actions.
• Inflation affecting labor costs and product costs, including changes in waste oil collection reimbursement.
• Competitive pressure from outside Quick Lube segment affecting new customer acquisition.

Q: How to square 6%-9% longer-term comp sales guide with 5%-7% guide for FY25?

A: Factors include less inflationary pass through, intensified competition outside Quick Lube segment affecting new customer acquisition, but still expect to outperform industry.

Q: Backing out refranchising, adjusted EBITDA growth less than revenue growth; areas of margin compression?

A: Investments in technology, talent, and system modernization (ERP, HRIS) to scale business, which are G&A expenses; also uncertainty in cost environment like used oil collection reimbursement changes.

Q: Can you talk about competitiveness in quick oil changes and expansion in new vs existing markets?

A: Quick Lube space remains competitive, but outperforms industry; competitive dynamics relatively consistent in Quick Lube space; opportunities for new builds/acquisition not significantly different in competitive landscape, but outside Quick Lube segment sees promotional tactics affecting new customer acquisition.

Q: Impact of new same-store sales calculation method on FY25?

A: Impact expected to be 50+ basis points, starting smaller in first quarter and growing quarter over year.

Q: Repurchase activity outlook for FY2025?

A: Guided to $40M-$70M share repurchase activity, subject to market conditions and growth opportunities.