Same-Store Sales Guidance
Q: How confident are you in the 6-9% comp sales target?
A: Management acknowledged that comps were light in Q4 due to external factors like the Crowdstrike event and hurricanes, impacting franchise stores more than company stores. They expect to regain some of that business in Q1 fiscal '25 and anticipate strong comps overall. However, they are evaluating the longer-term 6-9% comp sales guidance due to uncertainties, including a changing political administration, potential tariffs, and competitive pressures.

Margin Pressure and EBITDA Growth
Q: Why is adjusted EBITDA growing less than revenue?
A: Adjusted EBITDA is expected to grow at a lesser pace than total revenues due to investments in technology modernization and talent. The company is making significant G&A investments in updating their ERP and HRIS systems, which were outdated and not fit for retail. There's also uncertainty around underlying costs, including potential reductions in used oil collection reimbursements and labor inflation impacting COGS.

Competitive Environment
Q: How is increased competition affecting growth?
A: Management noted increased competitiveness from players outside the Quick Lube segment, with other automotive channels promoting oil changes to drive traffic. This makes new customer acquisition more challenging and could impact same-store sales growth. They expect to outperform the industry, which has been trending at 3-4% growth post-COVID, but are adjusting expectations accordingly.

Refranchising Strategy
Q: What's the rationale behind refranchising stores?
A: The company is refranchising stores to accelerate market share growth in a more capital-efficient way. By partnering with well-capitalized franchisees committed to higher unit development, they achieve faster network expansion and improved long-term returns, despite short-term dilution. They've completed transactions involving 66 stores with $24 million EBITDA, focusing on long-term value creation.

Gross Margin Outlook
Q: What's the expectation for gross margins next year?
A: Gross margins are expected to be relatively flat year-over-year. While they benefited from lower product costs in Q4 , uncertainties such as potential changes in used oil collection reimbursements and continued labor cost increases may impact margins. Labor inflation is expected to moderate but still affect COGS.

Tariff Exposure
Q: How could tariffs impact your costs?
A: Tariffs could indirectly affect costs through suppliers. Base oils for lubricants are often imported, and tariffs could increase their cost. Some ancillary products like filters and wipers sourced from China could also be impacted. The company is exploring mitigation strategies like alternative sourcing and inventory management.

Non-Oil Change Revenue Growth
Q: How is non-oil change revenue performing?
A: Non-oil change revenue was the biggest contributor to ticket growth in 2024. Improvements came from all services, driven by staff training and increasing the speed of service. There's variability across stores, influenced by staff experience, but all quartiles improved year-over-year.

Share Repurchase Plans
Q: What are your share repurchase plans for FY '25?
A: The company guided to total share repurchase activity of $40 million to $70 million for fiscal year 2025, subject to market conditions and investment opportunities. They believe distributing a significant portion of free cash flow to shareholders is essential for long-term value creation.

Fleet Business Growth
Q: What are your expectations for Fleet business growth?
A: The Fleet business has grown transactions at a 14% CAGR over the last 3 years. Management expects the Fleet business to continue growing faster than the Consumer business in FY '25 and beyond, supported by investments in business-to-business sales teams.

Store Opening Cadence
Q: How many new stores are you opening in FY '25?
A: The company plans to open 160 to 185 new units in fiscal 2025, with approximately 100 company-operated stores and the balance franchised. They aim for a more even opening cadence throughout the year, with efforts to improve consistency across quarters.

Consumer Behavior Trends
Q: Are customers deferring services or trading down?
A: Management has not observed customers deferring services or trading down. Demand for preventative maintenance remains resilient, and non-oil change revenue per transaction increased year-over-year in Q4. While higher-income customers tend to spend more on added services, all income levels showed growth.

Impact of Promotional Activity
Q: How is promotional activity affecting you?
A: Increased promotions in the market could impact new customer acquisition, as other channels offer discounts or bundled pricing on preventative maintenance. While the company holds its pricing, heightened promotional activity may require more effort to attract customers, potentially affecting same-store sales growth.

Waste Oil Collection Reimbursements
Q: How will changes in waste oil reimbursements affect you?
A: The company received notification that collection reimbursement payments for used oil will substantially decrease. While historically, collection revenues hedged product costs, it's unclear if this will hold true going forward. There's uncertainty about the short-term impact, but longer term, lower base oil costs may benefit margins.

Labor Cost Inflation
Q: How is labor cost inflation affecting margins?
A: Labor is the largest component of COGS, and continued wage increases and minimum wage hikes are impacting costs. The company expects labor inflation to moderate but still influence margins. Investments in technology and tools are being made to mitigate labor cost increases.

Same-Store Sales Calculation Impact
Q: What's the impact of the new comp calculation on FY '25?
A: Changing the method for calculating same-store sales to include stores after 12 months instead of 15 months will have an impact of over 50 basis points on FY '25 comps. This impact will grow each quarter throughout the year.