Patrick

Patrick, on behalf of Chris O'Cull, asked about the factors that could lead Valvoline to the lower end of its 4-6% comp guidance for the year, given the strong Q4 exit. He also sought an update on efforts to improve new unit build costs, potential savings, and other opportunities to enhance new unit economics.

Answer

President and CEO Lori Flees explained that the lower end of the comp guidance would imply a more even balance between transaction and ticket, while the higher end would be more ticket-weighted, driven by NOCR improvements and pricing tests. She added that new unit costs have been reduced by about 10% over the past two years, with a new prototype design delivering savings, and despite higher CapEx, returns remain strong due to improved core business fundamentals. CFO Kevin Willis mentioned sharpening the focus on converting acquired stores.

Patrick, on behalf of Chris O'Cull, asked about the specific factors that could lead to Valvoline's same-store sales falling to the lower end of the 4%-6% guidance range. He also requested an update on the company's efforts to reduce new unit build costs, potential savings, and other opportunities to enhance new unit economics.

Answer

President and CEO Lori Flees explained that the lower end of the guidance would imply a more even balance between transaction and ticket growth, while NOCR improvement and planned pricing tests could drive results to the higher end. She also reported a 10% reduction in new unit costs over the past two years, with a new prototype design delivering savings, and reiterated strong returns (30% cash-on-cash, mid-to-high teens IRR) due to improved core business fundamentals. CFO Kevin Willis added that there's also a focus on optimizing costs for converting acquired stores.

Patrick, on for Josh Tilton, asked about the expected trend for the Net Retention Rate (NRR) in 2025, following its stabilization in the current quarter.

Answer

Co-CEO and CFO Stephen Vintz did not provide a direct forecast for NRR. Instead, he reiterated the full-year CCB guidance, the cautious approach to Federal business, and the expected back-half impact from the Vulcan acquisition, stating that the overall seasonal flow should otherwise be consistent with the prior year.