Great. Thanks, everyone, for joining us. I think it's the last fireside chat of the day. I'm pleased to be hosting the Valvoline team on stage for the first time. This afternoon, I'm joined by Lori Flees, who's Valvoline's CEO, as well as Kevin Willis, who is newly appointed CFO to the company. We've got a buy rating on shares, as well as a $40 price target. All right. So you guys have spent the past couple of days speaking with investors. First and foremost, I just wanted to start with, what do you think is most underappreciated about the Valvoline story today? What do you think is most misunderstood by investors? I'll start, and then Kevin. Yeah, sure. It'd be great to give your fresh perspective. With Valvoline, it is a strong growth story. I think it's a combination of three things that people aren't getting in aggregate. One, it's an incredibly resilient industry to operate in, with a lot of tailwinds that actually are very attractive. Miles driven is going up. That drives transactions. Age of vehicle ownership is going up. That drives ticket. The OEM-recommended mix for Premium Synthetic is going up. That drives ticket. The shift to convenience actually drives transactions. There are a lot of tailwinds in the industry that bode very well for our business. That, combined with years of investment to build scaled capability on top of a very high-quality brand, almost 160 years old brand now that stands for quality, combined with the best in industry experience, rated 4.7 stars out of 5, which is enabled by both award-winning training and proprietary technology that ensures consistency across every site. That, then you take the combined longitudinal customer data and 2,000-plus store real estate analytics data. There is a lot of capabilities that allow us to drive higher share gains in industry and better-than-average returns. Then you overlay that on massive white space opportunity. We have 5% share in an incredibly fragmented market. Our stores really only cover about 35% of the population. That would assume that it is right-sized capacity demand, which it is not. There is a lot of upside to build. We have some fantastic franchise partners that have been in the business for more than 25 years and have doubled their commitment for growth, as well as new partners that are bringing new capital to the business and just a lot of enthusiasm for the space. Yeah. Kevin, great to have you with us. Obviously, you just joined the firm. Taking a look at Valvoline with a fresh set of eyes, what are your initial takeaways and sort of where are your priorities? Sure, sure. Fresh set of eyes, but a very long history. Yep. I was with Ashland for many, many years, the last 12 as Chief Financial Officer. We took this business public at Ashland in 2016, spun it out in 2017. It was a great business then, and it's only gotten better. Super excited to be part of the team. I mean, what drew me to that, it is a great business, but also it's a great team with a great culture. That's a really nice combination. You look at where we play. Our market share today is only 5%. This is a company that's been growing double digits, top line, bottom line, for many years in a row. Same store sales growth, 18 years in a row. I mean, there's a lot of secret sauce in this. It was obvious to me before. It's even more obvious to me. I'm three weeks on the job here. I've been following this story for a really long time. It's played out very consistently over the course of time, pretty much exactly as it should have and as it's been expected to. Today, we're at a point of critical mass. As Lori said, we've invested heavily in marketing capabilities, real estate analytical capabilities that are so proprietary. Nobody else has these things. It makes it, it's never easy, but it makes it much easier as we march toward 3,500 stores to help ensure the success of that journey with very low volatility along the way. The modeling tools are very predictive, and they're very good. Those are all the things that really excite me about being here and being a part of this story. With the modeling tools being very predictive, I think it's a good segue to speak a little bit about the consumer. Obviously, there's a lot of uncertainties. I think if there was one word to sum up the past two days, it probably would be that. Lori, what are you seeing as far as the health of the consumer? Are you noticing any changes in their behaviors over the past couple of months, whether it's deferrals, whether it's trade down, maybe lower attachment rates on your non-oil change side? Meg, it's something we've been watching for because of the macroeconomic uncertainty. What we would say is our metrics are pretty stable. We don't see our customer base trading down or deferring service. Some people would say, well, that seems odd, but we're not really a discretionary purchase. I think the trade down consumers are making is the decision to hold on to a vehicle for longer and wanting to maintain that to avoid having to trade up into a new vehicle at current interest rates. Yeah. I think we've seen that for a while now, and nothing has changed on the consumer side for our business. Maybe just going back a little bit, it's either GFC or the dot-com bubble, but just curious, at an industry level, what typically happens in the quick lube market during softer economic periods? Yeah, I think the biggest impact to our business or transactions is miles driven. You really saw that in Covid. The reality is it has to be sustained for a long period of time because people do worry about the safety of the vehicle. In softer economic cycles, they'll choose to drive for a vacation than fly for a vacation. If you're taking your family on a long road trip, the first thing you do is want to go get your vehicle checked and maintained. Even during Covid, the intervals expanded a little bit. Miles driven were much lower, but people were still coming in to get their car serviced as they were taking to the roads instead of the air. I do think that it does impact a certain profile of customers, but we aren't seeing it in our customer base. In 2008, 2009, you did see a little bit of trade down, but not deferral. You have to remember what the car park looked like at that time. The premium mix of oil changes was much lower. Sure. The percentage of vehicles that were recommending full synthetic was very low. The car park is different now. It's older. It's more complex. We're not seeing it at this time. We'll continue to watch for it. I think there needs to be more extreme economic circumstances for it to actually have an impact for us. Right. Small wobbles, you're probably not going to see it, but bigger downturns, if there's risk, is that what that would be? Perhaps. I I think the biggest, it's a bit of a tailwind in the short term that is new car sales go down. That's when people tend to go back to the dealers with a new car that's under warranty. As new car sales go down and people hold on to cars longer, they're in the sweet spot of servicing by providers like us. The ticket is larger because the added service requirements of the vehicle are higher. Right. And so just on ticket going higher, maybe let's pivot to tariffs. Just walk us through your cost mitigation and whether there's anything sort of newer that we should consider since you last reported just on your exposure and what the impact to the business could be in the second half of your fiscal year. Yeah, we don't see a significant impact at all on tariffs. Part of that is we have been working to diversify our supply chain and have shifted our ancillary product purchases out of China. To just step back and think about our cost in the business, the biggest cost is labor. That'll always have wage inflation, minimum wage environment pressures. That's not new. You look at lubricants as the biggest part of the product component of our cost. We don't expect to have tariffs impact the lubricant side of our business. You go to a much smaller piece, which is the ancillary products like filters, wiper blades, things like that. That will have some impact of tariff, but it's very small, and there's lots of supply options. The way that we consider mitigating is first looking for lower-cost supply routes that do not have the tariff impact or as much of a tariff impact. Beyond that, I think the industry has shown that as those industry costs go up, whether for us or others, you end up passing it through to the consumer in price. Yeah. We don't really see an impact on our profit levels for the year because whatever we can't mitigate, we can pass through, and it'll be very small. Right. Historically, the industry does not take a step back. Whatever you pass through, you are going to maintain and work from there. Yeah, this is not an industry that rolls back pricing. It maintains pricing. Maybe let's just now dive a little deeper into your own growth drivers. When we think about your comp ticket algo, it's generally comprised of premiumization, non-oil change revenues, as well as a few smaller buckets. How should we think about the ticket drivers for the rest of the fiscal year and then longer term, sort of between the three big buckets? Yeah. I'll first step back and just say, have a healthy business. We've always targeted pretty balance between transaction growth and ticket. On the ticket, there are three main contributors: Premium Mix, which is really driven by the car park, age, and the composition of the car park. That'll continue to maintain a pretty strong comp tailwind for us, consistent with what we've seen in the last couple of quarters. The second is NOCR penetration. These are non-oil change services that we've really been focusing on having execution of our team, presenting those things to customers. Last year, we just lapped a pretty big initiative in training. And we've probably had 18 months of very strong contribution of non-oil change revenue penetration lift. That has come down as we've lapped those initiatives, but it's still positive. And there's still opportunity there as we look at buy service, buy store. There's lots of opportunity there. The last one is Net Pricing, which is a combination of posted pricing and then discounting. We have always looked at price benchmarking, doing price testing across our fleet, really to make sure that we're priced right relative to the demand in the market. We will continue to adjust pricing where it's appropriate, not including any cost transfer. Sure. That continues to be a positive contribution to comp. This last quarter, it and premium mix were the biggest contributors, contributing well over a majority, and then NOCR being the last. The other one is just optimizing discounting. This is an industry that uses discounts as a way to remind people to service their car. We have such long-tenured customers and data that we can start to optimize because we know what it takes and when to give a discount and when not. By moving our customer data into the Cloud, we have more real-time analytics, and we can optimize that with even greater efficiency. Those are the things that will continue to benefit us over the longer term. I would expect that some of the drivers on ticket will remain pretty constant for the rest of the year. It seems like on ticket, sort of the biggest swing factor as we think about your longer-term guide, it is really just on price, right? Like that is the one piece that has got the most variability. How do you think about, bigger picture, what price could look like in a more inflationary period versus if we are lapping all of this inflation over the past couple of years and pushing through price does become more of a challenge? What are sort of the high end and the low end of the price component that could look like? Yeah, I think I just go back to history, Meg, which I think is always a good indication of what the future ranges could be. When I joined the company, our same store sales for the year was over 11%, of which about 80-plus percent of it was ticket. And of that, 60% of that was driven by price. Right. It then moved to 9 and still was the lion's share driven by ticket and a good half driven by price. Those are some pretty big price drivers of same store sales growth. In this year, it's much different. You're getting back to more lower wage inflation type pass-through. Now, we don't pass, we never look at pricing as a way to just pass through costs. We do that when it's more extreme. We are looking at price more in a competitive landscape and based on utilization of our capacity. If our stores are busy, we got to ask ourselves if we're priced correctly. Those are times when you actually look at pricing, when demand exceeds supply. You also want to look at competitors in the market and see what they're doing broadly. We know what our proposition gives people in terms of time. That's something that we take into account. It seems like you're not really seeing any changes on the competitive side. Everyone is still being pretty rational, not a pickup in discounting or promotions. No, we don't. Again, this is a very fragmented market. There are very few players, in fact, one that has a number of rooftops as we do. They are a very different proposition than us. Most others have half or significantly fewer locations. Even when they do create some promotional activity to drive traffic, it does not have an outsized impact on our network. We are not seeing any unreasonable or aggressive promotional tactics right now. It is a great business, and I think people are continuing to see opportunities for growth in it. We are not seeing anything out of the norm. On the non-oil change side, you've done a really nice job growing that business. I think it's a little bit more than 20% now of your mix. It's been a big driver the past 18 months, two years. What's ahead? What do you have left in the tank? Because you have made a lot of progress there. Should we see potentially menu expansion? Is it more about just continuing to focus on the service side and picking up a higher mix? What's next? Yeah, I think non-oil change revenue is an area that I think during Covid we let get away from us and pulling cabin air filters to show our guests what the health of that filter was for the passengers in the vehicle. I think a lot of the low-hanging fruit was just fixing equipment and making sure there was backup, making sure that we had supplies for the vehicles that we serve, and training our team to follow the process. We still have a very high variability between our top quartile stores and our bottom quartile stores. It's not that the top quartile stores are less busy, so they have more time. They're also our highest performing stores. It's also not income demographic driven between the top quartile and the bottom quartile. It ends up being execution of the basics. Now, all of our quartiles have improved, but the top quartile has also gotten higher. Right. The difference is 3x between the bottom quartile and the top quartile, which tells you there's still a lot of opportunity in the basics. We're also, we can look at the data by store, by service, and see where there's opportunity relative to the cars that they're serving. We dig down and we talk about what is it that gets in the way of providing those services and how do we block and tackle to get it. There's a lot of opportunity, whether it be in the visual areas where we visually show the customer, and that can include cabin air filters, air filters, and battery, to even the OEM services. It's just about making sure our team can explain it so the customer knows why they should get it, that we show our price relative to competitors who offer it, like dealers. Sure. They understand the value. Just staying on that, but pivoting a little bit, when we look at cars per day, the FDDs lay out a lot of the information. The top cohort is significantly outperforming. The bottom cohort, sort of similar to non-oil change, both are improving, but the top cohort continues to improve by a greater pace. Is there an ability to leverage best learnings, either through technology or soft data, to continue to get the bottom third or quartile, whichever it is, higher? Obviously, notwithstanding you are sort of where the market is that you operate in, but I would imagine that there's a lot of learnings that you can get from your top operators. Absolutely. I mean, we've talked about our immature stores, which, by the way, when we do our FTD, we include a pretty big subset of our stores. Not all of those stores are at full maturity. We talk about how our mature stores, we expect to deliver an incremental $70 million of EBITDA. That does drive some of the difference between bottom quartile and top quartile stores. That being said, we have stores that execute the process with speed and others who execute at the minimum standards. It is about putting in the right technology. One of the things that we've been doing is making sure that in every store, our network, so the Wi-Fi availability, supports the technicians going to the parking lot to scan in vehicles. That starts the service faster. As they pull into the lot, we get things started so that they're only in the bay for a very short period of time for us to pull and replace the lubricants. When you can do that, the speed with which you're moving people through is very fast. It's making sure, again, it's taking the data and looking at stores that are in the bottom quartile, adjusting for age and saying what's getting in the way of top quartile performance, and then blocking and tackling to get to remove those obstacles. With that in mind, as we think now about the transaction drivers over the medium term, what do you view to be sort of the key buckets? I think you generally want transactions and ticket to be split roughly 50/50. Yeah. You know one of the contributors to the comp is new stores maturing. That'll continue. Then we have fleet sales, which is additive on that, and a number of our marketing initiatives that we do. There are operational standards around throughput. How many cars per bay, per day can you get through? Where do you have constraints? How do you remove those so you can get one more car a day? Again, it's just the operational flow. It's like an industrial engineering problem-solving that the likes of most QSRs for drive-through have gone through in spades. Those are the things that we're working on to drive throughput. We know that when there are two cars waiting outside each bay, a customer will drive up and drive off. That's what we have to avoid, is we want to serve all customers when they want to be served. How often does that happen where someone drives up and there's at least a little bit of a wait and they just drive off to whoever else? Yeah, it's not something that we've shared. It's actually difficult to measure. We're trying to use sophisticated cameras and AIs to start to measure that. We know it happens. We have customers who tell us it happens. Sometimes we're lucky enough that it's a loyal customer and they'll just come back another time. We know some customers need to get it done when they need to get it done. That's what we're focused on. Let's pivot next to refranchising. Can you just talk about the strategy a little bit? What are your thoughts on the execution and what have been some of the key learnings? Yeah, sure. This is an area Kevin is starting to dig into. I will ask him to also share his thoughts. You know, it is one of the things that we talked about when we shared in earnings because as we recast the numbers and try to clarify the impact that refranchising has had in this year, it is important that we also talk about why it is going to deliver long-term shareholder value. It is really about getting the right price combined with the right development agreements. It is really about the annuity stream that you create from the forward of those stores plus the growth in stores that you are going to capture added to the transaction price. I would tell you that the three transactions are ahead of schedule versus what we initially modeled, which is great. One, we are not surprised because they have incentives at risk. When we laid out the incentives, which we changed two years ago, we created part of the incentive mix was for a development agreement and you had to be in good standing. As we created these transactions, they're tied, the transaction and the franchise agreement for the stores we sell is tied to a development agreement, which doubles or triples the number of stores in those markets within a five-year period of time. What that means is you got to keep them on track for development. We have a piece of the incentive that is applied to all product volume for all of the stores they have, not just the new ones, but all of them. If they are on track with the development agreement, they get paid that money for the quarter. If they're not, they don't get paid. They're ahead because that is a meaningful incentive to drive their four-wall EBITDA and their return on capital invested. They're ahead by a good amount. We feel good about the way things are started. It's early, right? It's only a few months in for some of them. The pipeline that they're developing gives us confidence that they'll stay on track. Just a couple of questions off of that. First, it'll probably be a two-parter, but should we expect more deals ahead? With that, how do you think about the right mix of corporate versus franchise stores for you as the market has historically rewarded businesses that are 70%, 80%, 90% franchise mix? Where do you see yourself on that journey and how does ongoing refranchising fit in? You take this one because we were just talking about it. Yeah, yeah, yeah, exactly. I mean, as you look at it, there is no ideal mix for us. If you look at the company-owned stores, these are mid to high-teen IRR, at maturity, 30% cash-on-cash return assets. There is no reason to not do that. On the franchise side, as Lori talked about refranchising, in the near term, it creates, I would say, an optical headwind from the standpoint that you're taking revenue and a certain level of profitability out of the business. As you look at it from a comp perspective, you really have to think through that. We've tried to communicate what that means. Part of our objective, getting to 250 stores per year by 2027, is very directly tied to these development agreements that these large franchisees have signed up for. What we will see from that is more of an uplift from an overall ROIC perspective, from a margin perspective, from a top-line perspective as we go forward in the coming five years, helping us get to that 3,500 store- level, but also helping us grow margins, top-line, EPS at a faster clip, ultimately, as these things mature and progress. It makes all the sense in the world. I mean, if you're very short-term focused, you probably scratch your head. If you're thinking about this business in the long term, it's absolutely the right thing to do and the right way to do it. To be clear, though, these are tough deals to put together because the economics have to be right. It's complicated. It's not just a matter of we're going to sell this group of stores for this amount of money and everybody's happy. Other things have to happen. You have to understand the economics of bringing in two to three times the size from a market perspective of the stores you're selling and what that financial stream of dollars is going to look like and what that's going to do to your financial performance over the course of the next three to five years as all of that starts to ramp. It is very, very compelling. Yeah. As we have talked about internally, in terms of doing more of this down the road, we do not see any big refranchising deals on the horizon. I mean, there may be some small deals here and there. They are hard to put together. It takes a lot of work, takes a lot of time. It has to be meaningful for us and the franchisee. What we've done so far, and all of that kind of happened pretty close together, we're happy with that, but we really do not see chunks of that down the road. Got it. Okay. That makes sense. In the last couple of minutes on margins, obviously some pressure this year from investments on SG&A, from refranchising and pulling some of the revenues out. How do you think about your EBITDA margin opportunity over the medium to longer term? You do have some numbers that are out there. My guess is they'll be updated at some point. As we think gross margin and SG&A once we exit this year, sort of where are the bigger opportunities from here? Yeah, I mean, based on where our business is performing, it is in line with the algorithm that we talked about building from 26% EBITDA margin to 29%. I would say in this year, we're not seeing a margin lift because we had refranchising bringing the year-over-year sales growth down, combined with the technology investment that we knew we needed to make, which was a significant part, about a third of the SG&A growth came from that. Now, that's not going to continue to grow at that pace. SG&A will start to grow at a much slower rate. We've always talked about high single digits, which feels about right given some of the infrastructure we'll continue to build out to support a bigger network. When we talk about those margins, I think those still feel pretty spot on, although we're refreshing and we may have upside from there. I don't see a significant change that would lessen that margin expansion opportunity. On store openings, still confident in the 250 by 2027. Do you think the franchise piece can get there? Yeah, I do. That is the exciting part. Although everyone keeps saying, when is it going to come? When is it going to come? When you look at the development commitments that people have made, it takes a while for the refranchising to build the pipeline. We knew that would take some time. We also have updated development agreements with our big franchise partners. They are doubling their commitment. We always talked about going from 50 to 150 and 100 of the 150 would come from existing. That came from a re-upping on the commitments. New partners would make up the remainder. I very much feel like we are on pace to get to the 250. There is a lot of commitment. We were talking about it earlier. We have started to support our franchisees more as well. Not just giving them permitting support, which I think we had some issues a couple of years ago getting caught out by ground-up permitting, but also real estate and construction management support more so than we ever have. It sounds like balancing the carrot and the stick with your franchisee relationships. Correct. I mean, we want them to be successful. It is what drives the compounding effect of our business. Yeah, we can pull incentives away and we can threaten them with some things. The reality is we want them to be successful. We are putting some services in place, which, by the way, they pay for because they also see the value. That is a win-win for us and our partners. I think that's a great way to end it. Thanks so much for joining me. Thank you.