• System-wide Store Sales: $3.1 billion, a 12% increase over the prior year.
• Same-Store Sales Growth: 6.7% for the fiscal year.
• Number of Stores: Ended the year with 2,010 stores.
• Adjusted EBITDA: $443 million, up 17% from the previous year.
• Adjusted EBITDA Margin: Improved by 100 basis points to 27.3%.
• Net Sales for Q4: $436 million, an almost 12% increase over the prior year.
• Net Sales for Fiscal Year: $1.6 billion, a 12% increase over the prior year.
• Adjusted Net Income: $206 million, a 7% increase from the previous year.
• Adjusted EPS: $1.57 per share, a 33% increase from the previous year.
• Net Debt: $1 billion at the end of fiscal 2024.
• Cash Flows from Operating Activities: $283 million for the fiscal year.
• Share Repurchases: $227 million for the full year.

• Warning! GuruFocus has detected 4 Warning Sign with VVV.

Release Date: November 19, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Valvoline Inc (NYSE:VVV) reported a 12% increase in system-wide store sales, reaching $3.1 billion for fiscal year 2024.
• The company achieved its 18th consecutive year of system-wide same-store sales growth, with a 6.7% increase for the year.
• Adjusted EBITDA rose by 17% to $443 million, with an improved margin of 27.3%.
• Valvoline Inc (NYSE:VVV) added 158 new stores in fiscal year 2024, demonstrating strong network growth.
• The company continues to see growth in its fleet business, with transactions growing at over a 14% compounded annual growth rate over the last three years.

Negative Points

• Net revenues and same-store sales came in just below the midpoint of the fiscal year 2024 guidance range.
• Capital expenditures were modestly above the planned range due to the timing of certain payments.
• The company reported a material weakness related to IT general controls, which requires further remediation.
• Valvoline Inc (NYSE:VVV) faces potential margin pressure due to expected increases in labor costs and uncertainties around product costs.
• The company anticipates a more challenging consumer environment, which may impact its ability to take pricing actions at the same level as in the past.

Q & A Highlights

Q: Comps were a bit light this quarter. How should we think about the 6% to 9% longer-term comp sales algorithm, especially with the possibility of a quarter below 5% next year? A: Mary Meixelsperger, CFO, explained that the fourth quarter comps were impacted by the CrowdStrike event and hurricanes. They expect to regain some business in the first quarter of fiscal '25. For the full year, ticket will drive the majority of same-store sales growth. Lori Flees, CEO, added that they are evaluating the longer-term same-store sales guidance, considering political and economic uncertainties.

Q: If we back out the refranchising piece for 2025, adjusted EBITDA seems to grow at a lesser pace than total revenues. Can you explain this? A: Mary Meixelsperger, CFO, noted that they are taking a conservative view due to uncertainties in the cost environment, including potential changes in used oil collection reimbursements and labor costs. They are also investing in technology and talent, which impacts EBITDA growth.

Q: What is the decision criteria for refranchising stores, and could there be more in the future? A: Lori Flees, CEO, stated that refranchising is considered when a well-capitalized partner can commit to significant development in a market. This strategy is capital-efficient and drives long-term growth. Mary Meixelsperger, CFO, added that they are monitoring the recent transactions and will evaluate future opportunities based on long-term shareholder value.

Q: Can you discuss the competitiveness in quick oil changes and opportunities in new versus existing markets? A: Lori Flees, CEO, mentioned that the Quick Lubes space remains competitive but stable. They see promotional tactics in other channels, especially during consumer pressure periods. Opportunities for new builds and acquisitions remain consistent, with no significant changes in the competitive landscape.

Q: Regarding non-oil change revenue, where did you finish in fiscal '24, and what drives variability across the system? A: Lori Flees, CEO, highlighted that non-oil change revenue was a significant contributor to ticket growth, with improvements across all services. Variability is driven by staff tenure and training, with more experienced teams achieving higher penetration rates. All quartiles improved year-over-year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.