Hello, everyone, and welcome to Valvoline's First Quarter 2024 Earnings Conference Call and Webcast. My name is Nadia, and I will be coordinating the call today. I will now hand over to your host, Elizabeth Russell, Senior Director Investor Relations to begin. Elizabeth, please go ahead.

Good morning, and welcome to Valvoline's First Quarter Fiscal 2024 Conference Call and Webcast. This morning, Valvoline released results for the first quarter ended December 31, 2023. This presentation should be viewed in conjunction with that earnings release, a copy of which is available on our Investor Relations website at investors.valvoline.com. Please note that these results are preliminary until we file our Form 10-Q with the Securities and Exchange Commission. On this morning's call is Lori Flees, our CEO and President; and Mary Meixelsperger, our CFO. As shown on Slide 2, any of our remarks today that are not statements of historical fact are forward-looking statements. These forward-looking statements are based on current assumptions as of the date of this presentation and are subject to certain risks and uncertainties that may cause actual results to differ materially from such statements. Valvoline assumes no obligation to update any forward-looking statements unless required by law. In this presentation and in our remarks, we will be discussing our results on an adjusted non-GAAP basis unless otherwise noted. Non-GAAP results are adjusted for key items, which are unusual, non-operational, or restructuring in nature. We believe this approach enhances the understanding of our ongoing business. A reconciliation of our adjusted non-GAAP results to amounts reported under GAAP in a discussion of management's use of non-GAAP and key business measures is included in the presentation appendix. The information provided is used by our management and may not be comparable to similar measures used by other companies. As a reminder, the Retail Services business represents the company's continuing operations, and the former Global Products segment is classified as discontinued operations for the purposes of GAAP reporting. Today, Lori will begin with a look at the key highlights from our first quarter, and Mary will then cover our financial results. With that, I will turn it over to Lori.

Thanks, Elizabeth, and thank you all for joining us today. For the first quarter of 2024, we saw growth at the top line across the network with system-wide store sales growing 12.3% to $723 million. Profitability was in line with our expectations with adjusted EBITDA improving 23% to $90 million and adjusted EPS improving 81% to $0.29 per share. We remain on track with our full year guidance. We started the year strong with new store additions, adding 38 for the quarter, half of which were from franchise. This brings our network total to 1,890 stores. From a capital spend standpoint, we continue to focus the majority of our capital towards growth, which we expect will continue to drive a high return on invested capital. We also made additional progress on our commitment to return a substantial portion of the net proceeds from the sale of global products to shareholders through share repurchases with over $170 million returned this quarter. Before Mary covers the details of our first quarter results, I'd like to share the progress we've made on the three pillars of our growth strategy. First, we continue to drive the full potential of our existing business. This quarter, we delivered 7.1% system-wide same-store sales growth, coming from both transaction and ticket growth. We also improved our margins through better labor management. Team retention rates are an important contributor to labor management. And in December, we had our lowest attrition rate since pre-COVID. Higher retention allows us to minimize recruiting and training costs while also ensuring that our stores are well staffed with team members who have more tenure, delivering our best-in-class customer experience and added services. In November, Valvoline Instant Oil Change was named number 11 on the Forbes 2024 Best Customer Service list. I'm proud that our Valvoline and franchise-operated stores have been recognized for the best-in-class customer service they provide to our guests every day alongside companies like Chick-fil-A, who are also known for their great service. On accelerating network growth, as I mentioned, 2024 is off to a great start with 38 store additions. We continue to see a healthy mix of ground-up builds and acquisitions contributing to our growth across the system with 21 ground-up builds and 17 acquisitions this quarter. We have a robust pipeline and continue to work towards our goal of growing the network to more than 3,500 stores and a focus on accelerating franchise growth within that. And just this week, we celebrated our 1,000th franchise store as Quality Automotive Services, a 20-year franchise partner with us, opened a store in Raleigh, North Carolina. We also were recognized recently as a top franchiser in our category and number 27 overall in entrepreneurs Franchise-500. We have the best franchise partners in our category and are thrilled to share this recognition with them. On our third strategic priority, we continue to see favorable contribution in same-store sales from both non-oil-change revenue service penetration and our fleet business. As part of our separation from the Global Products business, our fleet team has implemented a new CRM system, which will enable continued growth of new fleet customers as well as growth within our existing fleet customers' portfolios. Both the non-oil-change revenue service penetration and fleet continue to have long runways of opportunity for ongoing improvement. Our team is focused on delivering fiscal year 2024 while also building the capabilities that ensure continued delivery of our long-term growth algorithm. Now I'll turn it over to Mary to walk us through our Q1 financial results.

Thanks, Lori. On Slide 5, we'll take a closer look at our top line growth for the quarter. Net sales grew 12.3% to $373 million. System-wide, we saw same-store sales growth of 7.1% compared to 11.9% growth for the first quarter of the prior year. You'll recall that in the first quarter of 2023, we benefited from the inflationary price increases that occurred later in fiscal year 2022. That accounts for the majority of the year-over-year deceleration in same-store sales. This quarter, both company and franchise same-store sales grew within our guidance range, with 6.1% and 8% growth, respectively. The franchise side saw modestly better growth largely driven by improvements in non-oil-change revenue service penetration as franchisees continue to implement many of the best practices that have been proven out in company and franchise stores over the past year. Transaction growth contributed about 25% to the comp, driven by an increase in the customer base as well as modest contributions from miles driven. As we shared in our last earnings call, we did see some customer softness at the beginning of the quarter. Ticket contributed about 75% of the comp for the quarter. Just over half of the ticket growth came from premiumization and increased non-oil-change revenue service penetration, with the balance from pricing. As we mentioned in our last call, we increased pricing in early November in about one-third of our stores, and we have made further adjustments already in Q2. Next, let's consider some of the other drivers of the financial results. Starting with gross rates, we saw improvement from 35.7% to 36.1% or 40 basis points year-over-year. You may recall that in the first quarter of fiscal 2023, our gross margin was pressured by increased additive and delivery costs. As Lori mentioned, during the first quarter of this year, we saw labor leverage benefiting gross profit margin as we continue to focus on this as our largest cost of sales driver. We continue to see improvement in SG&A as a percentage of net sales with a 60 basis point decrease over the prior year. This was driven by a decrease in costs from rightsizing the stand-alone organization structure and partially offset by an increase in travel. Sequentially, we saw an increase in SG&A rate of approximately 140 basis points, which was expected for the first quarter due to the seasonality of our business, including the timing of our annual meetings that occur in the first quarter each year. As a reminder, our adjusted EBITDA for the first half of the year typically is in the low 40s as a percentage of the full year. Depreciation and amortization increased by $6 million from the prior year quarter due to new stores and store-related IT assets placed in service, causing about 100 basis points of deleverage in gross margin and 100 basis points in leverage in adjusted EBITDA. Overall, adjusted EBITDA margin improved 220 basis points over the prior year. On Slide 7, we'll take an additional look at our profitability metrics. As Lori mentioned, bottom line results were consistent with our expectations, with adjusted net income increasing 36% to $38.5 million, driven by an increase in operating income of just under 20%. Net interest expense also declined due to the interest income earned on the investment of the remaining proceeds from the global product sale and was effectively offset by a modest increase in the effective tax rate in the current year. Adjusted EPS saw growth of over 80% from $0.16 to $0.29 per share. The increase in operating income contributed about 40% of the EPS growth with the balance coming from the reduction in net interest expense and the change in share count due to the substantial share repurchases over the course of the prior year. Turning to Slide 8, we'll look at the balance sheet and cash position. During the first quarter, we returned just over $170 million to shareholders via share repurchases. That leaves $40 million remaining on the current $1.6 billion authorization. We anticipate the completion of the current authorization in the near term. As we have provided before, we anticipate share repurchases being an important part of our capital allocation strategy. We will continue to evaluate after the completion of the current authorization as we target a two and a half times to three and a half times rating agency adjusted leverage ratio. In the upcoming quarter, we expect to make an offer to repurchase the 2030 notes as required by the asset sale covenant triggered by the sale of the Global Products business. For Q1, cash flow from operating activities was $21.9 million and capital expenditures were $42.3 million, resulting in negative free cash flow of $20.4 million, consistent with our expectations. CapEx was up modestly over the prior year and working capital investment increased due to the timing of payments. We continue to have a strong cash position and earned interest income of $8 million during the quarter. I'll now turn it back over to Lori to wrap up.

Thanks, Mary. We continue to deliver results consistent with our transition to a high-growth retailer, driven by growth in both our same-store sales and the addition of new stores, and we are making progress across all three of our strategic pillars. As we wrap, I want to thank our team and our franchise partners for their continued hard work to start fiscal year 2024. Now I'll turn it back over to Elizabeth to begin the Q&A.

Thanks, Lori. With that, please open the line.

Thank you. Our first question today goes to Steven Zaccone of Citi. Steven, please go ahead. Your line is open.

Great. Good morning. Thanks very much for taking my question. Our first question was on the ticket versus transaction performance in the quarter. Could you just elaborate a little bit more how your outlook for the year has changed versus when you spoke to us in November, I think it was more 50-50? So just curious there. And then along those same lines, you had a comment about adjusting pricing in the second quarter. Could you just elaborate on that also?

Sure, Steve. I'll start with ticket. We did see in the quarter about 25% of the comp come from transactions. And we do expect longer term to see a more balanced contribution from transactions versus ticket. The first quarter was impacted by a day mix change that caused just under 100 basis points of impact on the transaction side. So, if you exclude that day mix impact, we would have been more like one third coming from transactions and two thirds coming from ticket. Long term, we still expect to see a more balanced approach from transactions and ticket, but we are continuing to benefit from some pricing changes, just under half of the ticket portion of our comp store sales growth came from pricing with just over half coming from premiumization and non-oil-change revenue service penetration improvements. So, I would tell you that I think longer term, I'm still expecting to see more of a balance short term in the quarter, we did see a little bit of a heavier tilt toward ticket for the quarter as it relates to the second part of your question.

Yes, I would like to make a comment. First, when we discussed this year, we mentioned that we would aim for a balance in transactions for fiscal '24, with a focus on ticket sales due to several initiatives we have been implementing. We are concentrating on optimizing discounts to enhance the net price, along with ongoing efforts on NOCR and the benefits from a premium mix. Regarding pricing, we are continuously benchmarking and conducting various pricing tests. Our strategies align with what we've shared in previous quarters, as we analyze pricing based on each store, region, and competitive landscape, in addition to adjustments following any acquisitions. We regularly modify our pricing to reach our target rates, which include a pricing list we aim to optimize across all stores for all three tiers of our oil change services. Recently, we've also been reviewing our additional services and made adjustments where we previously did not apply inflationary increases due to supply constraints. We will keep doing this. Our long-term and current guidance remains between 6% and 9% for same-store sales, and we believe that ticket sales will play a significant role in achieving that target. In the upcoming years, we anticipate ticket sales to contribute about half of our growth, with pricing being a substantial factor as well.

Okay. That's all-helpful detail. Just a brief follow-up then if we stick with same-store sales. Is there anything to be mindful of from a performance in the second quarter relative to the overall year? I know the 1-year, it's a little bit tougher. And then we've heard about some choppy trends across retail in terms of weather, but anything you can say on second quarter performance relative to the full year would be helpful.

Yes, Steven. We've certainly seen some choppiness in January and the start of the second quarter, primarily weather related. I think you're aware that we saw some pretty significant arctic cold across the country in January that really lasted for a couple of weeks. Typically, our business is nondiscretionary. And so when we see those kinds of weather impacts to our business, we typically see pent-up demand that occurs after that weather pattern clears. And in fact, that's what we're experiencing now. With some of the weather-related weakness we saw earlier in the month of January, we've seen that bounce back nicely. So I would tell you that there haven't really been any surprises for us in terms of where sales are trending, and we're feeling good about the guidance that we've provided for the full year.

Thank you. The next question goes to Simeon Gutman of Morgan Stanley. Simeon, please go ahead. Your line is open.

Great. Hey guys, this is Michael Kessler on for Simeon. Thanks for taking our questions. Maybe first on unit growth, it was pretty solid in Q1 on both sides, company and franchise. So just curious, visibility for the rest of the year in the pipeline and then any updates we've talked to take in the past about some of the actions you've taken to further improve visibility in the pipeline on the franchisee side. Both with existing franchisees and also sourcing new ones. So I just have an update on how that's going?

Thank you, Michael. We experienced a strong start to 2024 with a total of 38 new additions, evenly split between franchise and company. The fourth quarter generally tends to be strong for acquisitions, particularly as it aligns with the end of the year for franchises. We anticipated these additions and had full visibility of them, marking a robust beginning. We feel confident in our guidance of $140 million to $170 million for the year, with $55 million to $70 million expected from franchise partners. Unlike last year, we anticipate a more balanced distribution throughout the year, although Q2 may experience a seasonal dip in new builds due to weather conditions. Overall, we are optimistic about our guidance. Regarding our network growth, we are focused on reaching over 3,500 units and significantly increasing new franchise units. Our goal is to achieve 150 million units per year by 2027, and we’re making steady progress. This includes our current franchise partners, with whom we have had positive discussions and are exploring ways to support them with retail analytics, real estate assistance, and business development. Additionally, we aim to attract more franchise partners to develop untapped regions and support existing franchisees looking to transition. We recognize that aligning transition and expansion timing takes time, but we are encouraged by the ongoing conversations and the progress we are making.

Thank you for the information. I’d like to follow up on capital allocation and shareholder returns. I understand that Q2 will be significant with the repurchase of the notes and the buyback. It seems like you’re also considering the next steps after that. Given the current leverage, which appears to be healthy and possibly at the lower end of your stated range, I’m interested in the options available, including the possibility of increasing leverage to enhance returns once the buyback is completed. Are you leaning towards a more conservative approach to see how things unfold, or what factors will influence your decisions after Q2?

Yes, Michael. I'll begin by discussing our target leverage ratio, which is an adjusted measure based on how rating agencies, particularly S&P, assess our leverage. For your awareness, the rating agency accounts for both operating leases and employee benefit plan obligations. When these adjustments are made, the total outstanding liabilities related to operating leases and pensions amount to around $400 million, equating to approximately one full turn of leverage. Currently, we are slightly above the upper limit of our targeted leverage range. Therefore, our primary focus for capital allocation will be to return to that targeted range. After that, we'll consider leveraging our balance sheet and operating cash flows to deliver additional returns to shareholders. I anticipate that it will take some time in the upcoming quarters to bring our leverage back below the high end of our desired range. Following that, I expect our focus will shift back to capital allocation for returning cash to shareholders through share repurchases once we are within our targeted leverage ratio.

Thank you. The next question goes to Daniel Imbro of Stephens Inc. Daniel, please go ahead. Your line is open.

Yeah. Hey, good morning, everybody. Thanks for taking our questions. Maybe want to start on gross margins. We saw a little bit of a larger step down maybe 4Q to 1Q on the gross margin side that we have seasonally in the past, especially with the easy comparison last year. Can you just talk through maybe the drivers of gross margin like labor? And how you're thinking about that line item for the rest of the year as comps maybe improved with using clears?

Yes, absolutely, Daniel. I will tell you, we saw year-over-year gross margin leverage of about 40 basis points. And if you take out the depreciation impact actually saw 140 basis points of leverage before the impact of higher levels of depreciation. And that's certainly one of the things that impacted margins sequentially from Q4 to Q1 as well, as the depreciation impact. We're pleased with the labor leverage we saw in the quarter. We saw some very meaningful labor leverage that was offset modestly by some operating expense deleverage. That's really timing related in the quarter. It is a seasonally low quarter from a sales perspective. And we also have done a better balancing, if you would, of managing our maintenance expenses throughout the year. We also, with new stores opening, saw some deleverage from those new stores as well. So there was no surprise for us in terms of how we managed, I would say, for the balance of the year. We will likely continue to see leverage at the margin line, although I wouldn't expect to see as much labor leverage as we saw in the first quarter necessarily.

Yes, Daniel, I'll just add. Q1, we have to manage our labor, and there's always a step down as folks transition from the summer jobs back into college. And then as our volume starts to drop, we have to manage that labor pretty extensively. So when you see the difference Q4 to Q1, some of that is literally just the leverage of the cars coming through the stores and how we balance labor. But the year-over-year compare from a margin perspective was really strong, and our teams have made a lot of progress since last year, we would have talked about the fact that we were focused on labor management and optimization and better scheduling, as you'll recall from previous earnings calls. And really, a lot of the improvement year-over-year is a testament to that, although some of those low-hanging fruit improvements happened in Q2. So the year-over-year compare from a labor management won't be quite as strong because you'll have started to see some of the labor impact hitting in Q2. So this is the last cycle. Though we still have opportunity, and we continue to manage the labor line, which is our largest cost of sales item. And the biggest thing we're proud of is that our attrition rates are so low. As I mentioned, we've got the lowest attrition rate ending the quarter that we've had since pre-COVID, which is really a testament to the work our team has been doing across the recruiting side and setting expectations and how we attract talent to also how we onboard and train the talent to ensure that we can keep the technicians that we're training in the stores for longer. And those things are the things that we're really proud about. And then our central ops team that we put in place has really been driving with operations, some of the tools that have enabled them to manage that so effectively.

Understood. I appreciate all the color. And then maybe a follow-up on the comp growth outlook. So you said there was 100 basis points of a negative impact from the calendar in the fiscal first quarter. That will improve I guess, can you remind us how winter weather historically should impact non-oil-change revenue? Would you see a higher service battery attachment here in the second quarter where that becomes more of a positive tailwind for the ticket growth? Just trying to think about what are the impacts as you see that pent-up demand come back into the stores. Thanks.

Yes, great question, Daniel. Battery sales typically increase when cold weather sets in, which we usually observe in December. This past December was relatively subdued due to milder weather across most regions. However, in January, we saw a significant impact from widespread arctic cold, which made people reluctant to go out and led to school closures. This situation has caused some pent-up demand for batteries to carry over into January and February, as people get back in their cars and realize their battery needs replacement. We do notice these seasonal trends, and while batteries represent a small segment of our overall sales, we did expect these effects with the colder weather.

Thank you. And the next question goes to Kate McShane of Goldman Sachs. Kate, please go ahead. Your line is open.

Hi, good morning. Thanks for taking our question. We wanted to ask about your initiative on reducing costs of the new builds and where you are, I guess, in that process? And how we should think about unit economics going forward as a result of this initiative.

Thank you, Kate. As we mentioned in our last earnings call, we have been working internally on redesigning our stores and removing costly design elements that do not add value. Some of these changes will take time to implement. We are currently reviewing opportunities with our franchise partners and comparing the build and site costs they have experienced. We still believe there are opportunities we can pursue, and we are actively working on reducing the costs associated with converting an acquisition store into a Valvoline store, for example. Some of these changes will begin to reflect in our capital costs for new builds, but implementing the new builds will take time. We will provide more information once we have finalized the details and can communicate the expected differences. There are opportunities, and our teams are collaborating with contractors, permitting companies, and landlords to ensure everything is aligned so we can take advantage of them.

And in terms of unit economics, Kate, with the current construction costs, we continue to see mid-teens returns substantially higher than our weighted average cost of capital and still feel really good about the relative unit economics of the ground-up for new builds that we're doing from a company perspective as well, we're continuing to see growth in new builds from our franchise partners as well. So any benefit we receive from lower overall capital cost will simply help us to increase that return even further.

Thank you. The next question goes to Bret Jordan of Jefferies. Bret, please go ahead. Your line is open.

Hey, good morning. Could you give us any updates on the non-oil-change offerings? What's been particularly successful or what you see sort of adding to that product list?

On the non-oil-change revenue, the performance compared to last year is largely due to having a more experienced team in the store that understands how to sell the product and consistently present and perform that service. We are seeing improvements as we emphasize training and ensure that the necessary equipment for the service is updated and available in the store. We have faced supply chain issues in recent years, particularly after COVID, and we are working to get our supply chain back on track to provide the right air filters for all the vehicles we service. Additionally, we focus on making sure the team is trained and understands the importance of the services we provide. Our top-performing stores generate significantly more non-oil-change revenue compared to the lower-performing ones, indicating an opportunity to enhance the training and tools across our store network to achieve similar results. The aging car park also works in our favor, as many of our recommended services become more relevant as vehicle mileage increases. We find that items like wiper blades and air filters are visually significant, allowing us to demonstrate to customers the need for replacements based on basic process execution in the supply chain. For OEM services, the experience of the team and the availability of the right equipment are crucial, and we focus on addressing any barriers that may hinder our ability to service vehicles. For instance, during each customer visit, we perform a battery test as part of our standard checks, but we've discovered inconsistency in conducting these tests. Customers often do not purchase a battery immediately but instead take our advice and return later, sometimes after comparing prices, which we are competitively positioned for. We also realized our battery testers need to be positioned correctly on newer vehicles, which can have plastic casings that obstruct proper testing. When we encounter these issues, we improve our training and provide online modules for our team members to ensure they know how to properly use the testers on newer vehicles. Overall, while we have made some basic improvements, I believe there is still a lot of potential to tap into.

Okay. Great. And then on regional performance, was there any dispersion to note and I guess, maybe a spread between softer regions versus stronger regions in the comp?

Yes, we do consider factors like weather, particularly at this time of year, as it can influence car volume due to regional patterns. Overall, we do not observe significant differences in performance across the U.S. and Canada. We analyze store demographics and customer behavior, and we find that things tend to remain consistent, except when weather impacts customer visits from week to week. Aside from that, we see no notable or material differences.

And our next question goes to David Lantz of Wells Fargo. David, please go ahead. Your line is open.

Hey, good morning, guys. Thanks for taking my question. So I was just curious if you could walk through the building blocks to the 6% to 9% system-wide comp outlook inside some of the expected benefits from non-oil-change revenues and premiumization?

Yes, from the standpoint of same-store sales, we observed benefits from premiumization and increased non-oil-change revenues. Additionally, pricing strategies contributed positively. On the transaction front, we experienced growth in our customer base and a beneficial impact from miles driven, although this was not as strong as the growth from our customer base. We also noted an unfavorable impact from the day mix on transactions, just under 100 basis points. In terms of ticket sales, the improvements stemmed from premiumization, enhancements in non-oil-change revenue penetration, and pricing strategies, which included some improvements in discounting as well as price increases implemented during the quarter. Overall, these factors contributed to system-wide same-store sales growth.

Sorry, David, sorry. I was just going to add, as you think about the guidance that we've provided in the 6% to 9% for the year, we've said that that's going to be more skewed towards ticket, but more balanced than what we saw in the last year. And as you think about that, we have premiumization, which has been consistently driving between 100 and 150 basis points. We have non-oil-change revenue, which has been driving 100 to 150 basis points. And then you've got pricing adding to the ticket inclusive of any optimization of discounting, and then you've got the transaction increase, so when you look at all those variables, you can see why ticket will be a slightly higher contributor in this year. But overall, really feel strong about the 6% to 9% system-wide same-store sales growth.

Sure. We haven't been reporting fleet output on a quarter-to-quarter basis. However, I can say that we continue to see great opportunity in our fleet business, which is growing faster than our overall business both in terms of ticket sales and vehicles served per day. This growth is definitely contributing to non-oil-change revenue growth as well as an improved premium mix and transaction growth from the same-store sales perspective.

Thank you. The next question goes to Jim Chartier of Monness Crespi Hardt. Jim, please go ahead. Line is open.

Good morning. Thanks for taking my question. First, the day mix pressure in the first quarter, is that going to be positive to the second quarter, or is that more spread out across the year?

No, it will reverse to positive in the second quarter. We'll see a benefit from day mix change in Q2.

Okay. Great. And then you mentioned the implementation of the new CRM system, can you just help us understand what the incremental capabilities of the system are and then where you see the biggest opportunities in terms of driving transactions and margins?

So I'll cover I think your question on CRM is specific to fleet, but your margin and transaction, was that also specific to fleet or more broad.

I think your question about the CRM is related to the fleet.

Okay. As we transitioned away from global products, we moved to a new CRM system that previously served multiple aspects of our business, including business development efforts with potential franchisees and independents. The fleet team has an inside sales team that actively reaches out to customers, and we also have marketing initiatives to attract customers directly. This system significantly enhances efficiency for our inside sales operation. Compared to our previous system, the new one offers additional features tailored to our needs, which should improve our inside sales team's effectiveness. This will help us sign up new fleet accounts and follow up on existing ones more effectively, while also keeping track of everything as our fleet customer base expands. A robust CRM system is crucial for managing accounts and following up on leads for new fleet accounts. Overall, it will enable our team to be more productive, resulting in increased sales and improved account management.

Okay. And then with transactions becoming a bigger part of the comp going forward, it kind of implies an acceleration in growth in transactions. What do you see as the biggest drivers to accelerate the transaction growth?

From an overall perspective, as we expand the network, that will lead to growth in transactions. When looking at same-store sales, our marketing optimization efforts and our focus on best practices from the high-growth retail sector—not just within our category—will help attract customers. Additionally, we anticipate that fleet will continue to contribute to transaction growth.

And the other piece, Lori, is really just continued benefit from miles driven. We'll continue to see lesser, but continuing benefit as we see miles driven continue to increase.

Yes. And the last one, I think, to add is around the speed of service. So we continue to look at our process and the technology that we use in stores to make our process and our best-in-class customer experience easier and faster to deliver, and we know that if we can take a minute out of that service time, it's more cars that can go through the days during peak periods. And so that, we believe, will continue to provide us a tailwind on transactions going forward. So it's all four of those things, Jim, that will drive the transaction side.

Thank you. We have no further questions. I will now hand back to Elizabeth for any closing comments.

Thank you all for your time today and for your thoughtful questions. We look forward to our ongoing discussions. This concludes our call for today.

Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.