Ladies and gentlemen, welcome to the Valvoline Inc. 3Q 2021 Earnings Conference Call. My name is Nadia, and I will be coordinating the call today. [Operator Instructions] I will now hand over to your host, Sean Cornett, from Investor Relations to begin. So Sean, please go ahead..

Thanks, Nadia. Good morning, everyone, and welcome to Valvoline's Third Quarter Fiscal 2021 Conference Call and Webcast. Valvoline released results for the quarter ended June 30, 2021, at approximately 5:00 p.m.

Eastern Time yesterday, August 4, and this presentation and remarks should be viewed in conjunction with that earnings release, a copy of which is available on our Investor Relations website at investors.valvoline.com. As a reminder, there are slides in the appendix of our presentation that provide further information.

These results are preliminary until we file our Form 10-Q with the Securities and Exchange Commission. A copy of the press release has been furnished to the SEC on a Form 8-K. With me on the call today are Valvoline's Chief Executive Officer, Sam Mitchell; and Mary Meixelsperger, Chief Financial Officer.

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 and a discussion of management's use of non-GAAP measures is included in the presentation appendix.

The non-GAAP information provided is used by our management and may not be comparable to similar measures used by other companies. Now as we turn to Slide 3, I'll turn things over to Sam..

Retail Services, formerly our Quick Lubes segment; and Global Products, our former International and Core North America segments. Both segments benefit from key industry drivers, including an increasing car park, expanding miles driven and growing vehicle age.

Additionally, our Retail Services segment also benefits from the ongoing shift from DIY to DIFM as well as from the industry trend toward synthetics, reinforcing our transformation towards a more service-driven business. Let's turn to Slide 6. Our strategy is to transform from a product-centric to a service-driven business model.

We are redeploying the cash generated by our Global Products segment to accelerate the growth of the Retail Services segment through acquisitions and company store build. Additionally, we generate sufficient free cash flow for opportunistic M-and-A and shareholder returns via dividends and share buybacks.

Shift to services is expected to drive faster growth, higher margins and stronger returns. Our transformation story is now driving an acceleration in our financial results, as shown on Slide 7.

The investments we have made in new store growth and acquisitions for our Retail Services business began bearing fruit in 2020 and have driven an inflection point in our growth this fiscal year. We expect our high-return investments to continue driving growth in the future. Moving into segment highlights. Let's discuss Retail Services on Slide 9.

Our Retail Services segment, which focuses on preventive auto Care delivered outstanding results for the quarter. Our growth algorithm of driving same-store sales and expanding our unit count was in full effect as the segments delivered sales growth of 66% year-over-year and 56% versus Q3 of 2019.

Key drivers of our top line performance were system-wide same-store sales growth of more than 40% year-over-year as well as system-wide unit growth of 10%. Our same-store sales strength was driven first by transactions. We believe that we are capturing significant market share as well as high single-digit growth rate in average ticket.

Versus Q3 2019, same-store sales grew 27%; and system-wide unit growth was 16%. Adjusted EBITDA grew substantially versus last year and versus 2019 as margins benefited from fixed cost leverage. Going forward, we expect transactions and average ticket to drive annual growth of 6% to 8% in system-wide same-store sales.

Combined with unit growth, sales are expected to increase 14% to 16% per year. We forecast annual EBITDA margins at or above 30%, highlighting why we remain bullish on the growth prospects for this segment.

Shifting to the next slide, we can discuss Global Products, which continues to generate strong cash flow, helping to fund growth in Retail Services. I want to highlight the solid results in our Global Products segment. Sales grew 46% year-over-year, driven primarily by volume growth of 37% as well as pricing.

Sales were also up in the mid-teens versus Q3 of 2019. Segment adjusted EBITDA grew in the mid to high teens compared to last year and was up 3% versus 2019.

Discretionary free cash flow generation grew 20% year-over-year and was up modestly from 2019, an exceptional performance considering the raw material backdrop and highlighting the resiliency of the segment. Global Products remains on track to generate an estimated $200 million of discretionary free cash flow for fiscal 2021.

We have witnessed an unprecedented increase in raw material costs as well as limitations in raw material availability over the past few quarters. We have had success passing through the earlier rounds of these cost increases as evidenced by sales growing faster than volume.

However, significant cost increases announced in the past quarter are anticipated to have the biggest impact in Global Products results in Q4. We are in the process of executing further pricing actions through the balance of this calendar year.

The bottom line, we believe the fundamentals of the Global Products business are solid, and expect that cost inflation is a short-term impact. Now I'll turn things over to Mary to review our financial results in more detail..

Thanks, Sam. Our results are summarized on Slide 12. Performance in Q3 was exceptional, including record quarterly sales, gross profit and adjusted earnings.

While year-over-year comparisons are outsized due to COVID impacts last year, growth versus Q3 2019 was robust, demonstrating the strength of the business overall and the benefits of our shift to service strategy.

The biggest difference between reported and adjusted gross profit in the quarter is our treatment of LIFO inventory accounting as a key item adjustment, which was discussed as part of our May business update.

We believe excluding the non-cash LIFO impact is important to better understand the underlying business performance and for better comparability. In Q3, we had a LIFO charge of $17 million pre-tax versus a credit last year of $7 million.

The appendix of our presentation includes a slide showing our Q3 results over a three-year period with and without this key item treatment of LIFO accounting. Growth in sales and adjusted gross profit was driven by Retail Services, which saw a significant top line and margin improvement.

In addition to strong organic growth year-over-year, store acquisitions contributed approximately 400 and 500 basis points to overall sales and EBITDA growth, respectively.

The year-over-year increase in SG&A was related to reinstatement of spending, primarily for advertising that we had restricted during the pandemic last year as we focused on liquidity as well as investments to support future growth. Let's take a closer look at margins on the next slide.

Total company adjusted EBITDA margin expanded by 270 basis points compared to last year and by 100 basis points compared to 2019, driven by improved margins in Retail Services, which increased nearly 700 basis points year-over-year and 400 basis points versus 2019. System-wide same-store sales grew 40.5% versus last year and are up 27% versus 2019.

As we gained share in increased average ticket, the significant growth in same-store sales is driving leverage. Like many other retailers, we have had challenges in fully staffing our stores. We have plans in place for Q4 to invest in our store teams to maintain high service levels and help preserve the market share that we've gained.

The decline in Global Products margin was consistent with our expectations, given the lag between raw material cost increases and pass-through in pricing. As you can see on Slide 14, cash flow from operations remained strong with $296 million of operating cash flow year-to-date and free cash flow of $190 million.

80% of our capital expenditures have been growth focused, while maintenance capital was less than 1% of sales on a year-to-date basis. We believe our capital-light business model will continue to drive significant discretionary cash flow to fund our transformation, growth and returns to shareholders.

Through June 30, we have returned nearly $170 million to shareholders via dividends and share repurchases. Let's take a closer look at our growth investments on the next slide. We have significant reinvestment opportunities at projected high returns in our Retail Services business. We have a roughly 4% share of the U.S.

DIFM oil change market and a much smaller share of the highly fragmented auto aftermarket. Historically, we have acquired Quick Lube stores with returns targeted in the mid-teens, while also building new company stores that have cash-on-cash returns approaching 30% of maturity.

Our nearly $330 million in year-to-date investments in Retail Services are expected to continue driving our growth, including an incremental $40 million to $50 million of EBITDA at maturity and transforming the business model for years to come.

Our strategy is to continue deploying cash flow from our Global Products segment to fund growth in Retail Services. Our outlook for fiscal 2021 is shown on Slide 16. Based on our strong momentum, we are raising our top line guidance, and now expect 25% to 26% growth in sales driven by 19% to 21% system-wide same-store sales growth.

We've tightened the range for adjusted EBITDA, leading to $1.86 to $1.96 for adjusted EPS. We continue to anticipate strong cash generation with free cash flow of $250 million to $270 million. Let's review our long-range outlook through 2024 on the next slide.

All-in, we expect that continued growth in Retail Services and steady performance in Global Products should drive 9% to 11% revenue growth at low to 20% EBITDA margins – at low 20% EBITDA margins and adjusted EPS growth in the low to mid-teens through 2024. Returns on invested capital are anticipated to remain at or above 25%.

As Retail Services grows as a share of our business over time, we expect continued strong growth in sales, EBITDA and free cash flow generation as well as improving margins. Let me turn it back over to Sam to wrap up..

Thanks, Mary. I have a few points I want to emphasize in summary. First, as you can see on Slide 18, we're continuing to drive our strategic transformation. Our new segments and reporting are a natural next step in focusing investors on that shift to service strategy.

Our convenient trust-based service approach stands out in the auto aftermarket, which has allowed us to gain share and drive growth. Second, we had a fantastic quarter in Q3 with record sales and adjusted earnings driven by our strong team, brand and business model. Third, we are managing through a unique time of significant cost increases.

We expect the peak margin impact of those challenges in Q4, primarily in our Global Products segment. We continue to be encouraged by the demand trends. Lastly, our team has done a great job in managing through the impacts of COVID-19 and supply chain tensions. They have set us up for long-term success, as highlighted by our targets through 2024.

And with that, I'll turn it back to Sean to open the line for Q&A..

Thanks, Sam. [Operator Instructions] With that, Nadia, please open the line..

[Operator Instructions] Our first question today comes from Simeon Gutman from Morgan Stanley. Simeon, please go ahead. Your line is open..

Thanks. Good morning, everyone. It's Simeon. My first question is Q3 – can you talk about how a track versus your expectations? Clearly, services – the Retail Services outperform. But I'm curious if Global Products profits maybe came in a little below expectations because of the price cost lag.

And if you could just talk about expectations for Q4 now versus what you were thinking about last quarter?.

Yes. Q3 obviously was a really strong quarter for the business. And from an expectation standpoint, Retail Services did exceed our expectations in the same-store sales growth that we saw.

So the underlying trends, obviously, have been really good for that business for quite some time, and the performance of the team and our ability to grow market share has been most impressive. And we really saw some strong volume growth, transaction growth in Q3. And so that gives us encouragement as we think about performance opportunity in Q4.

And so we're thinking more positively about the Retail Services business and the momentum that it takes.

On the Global Products side, the businesses continue to perform well from a demand perspective, demand as – and volume has been very solid, even going back to last year, particularly in the DIY business and the growth that we've seen in the international business. And that was the case in Q3.

And as we anticipate Q4, we're expecting the demand to continue to be solid. We're starting to see some improvement now in the modest improvement in the installer channel segment.

So that's encouraging, too, as we see miles driven begin to tick up from what's been down probably about 3% when you look back over the last quarter or so, but recent trends are showing miles driven to be almost flat versus 2019. And that's my point of comparison for miles driven. Obviously, it's up significantly versus 2020.

So on the demand side, very solid. It's really in Global Products where the cost increases have been more significant than we had anticipated, say, going back to the spring. So that creates the margin challenges for Q4.

And yet, we feel that through the pricing actions that we'll be taking through the balance of this year, we'll get back to where we need to be when it comes to unit margins for that business. So again, from the fundamentals in the business, really feel good about Global Products. The challenge has, of course, been on the supply chain side.

With the inflation with some of the raw material availability, but the team has just done an excellent job to meet our customer needs during a pretty tight period here. So hope to see that improving.

And lastly, call out modest risk in the international business, particularly in Southeast Asia right now with some of the COVID-19 impacts that continue to be a factor.

But the underlying demand for the business and the strength that we've had in international growth across really all of our regions give us a lot of confidence in the long-term growth of that business..

So my follow-up. Thanks for that, Sam. It relates to Slide 17, the long-term growth expectation revenue CAGR of 9% to 11% and then the adjusted EPS of 12% to 14%. Those are unquestionably great, it's a great outlook, and it's definitely above the run rate that we've seen historically, at least the CAGRs.

Is it because of the growing mix of Retail Services on the business, or you fundamentally think that, that international plus, I guess, legacy North America will also grow faster? Like what are those changes due to?.

Yes. First and foremost, it's the strength of Retail Services and the growth that we're seeing. It has been outstanding, and it's twofold. It's in same-store sales growth. The operational performance of the business continues to be exceptionally strong as we continue to gain that share.

And then obviously, we've had really good success in driving our store growth, and that's also really important for us to gain market share. And that is a big opportunity for us. As I think we shared, in this past year, that we believe our share of the do-it-for-me market in preventive maintenance is more in that 4% to 5% range.

And so our opportunity to grow our retail business and adding units, both through our ground-up program, but also through acquisitions, acquisition pipeline continues to be solid and working with our franchisees to drive growth. We have a lot of levers to continue to drive growth to continue to gain share.

And then our ability to expand and drive ticket growth, we're very bullish on that, too.

And then coming back to Global Products and that long-term outlook, we do expect that the International business will be the key driver behind the growth that we expect – modest growth that we expect in overall Global Products whereas the North American business, we expect more steady performance.

And so we've made really nice progress, both in terms of seeing good, stable performance coming out of North America and then accelerated growth in the international markets..

Thanks, everyone. Good luck..

Thanks, Simeon..

Thank you. Our next question comes from Mike Harrison from Seaport Research Partners. Mike, please go ahead. Your line is open..

Hi, good morning..

Good morning, Mike..

Congrats on a nice quarter..

Thank you..

I was wondering if we could dig in a little bit on the – I believe you said the average ticket in Retail Services was up in the high single-digits.

Can you just maybe give us a little more color on how much of that was increase in non-oil change revenue and how much of that was maybe pure pricing?.

Yes. So there's three drivers behind average ticket, three primary drivers. And one, as you point out, is non-oil change revenue. And a second one is pricing. And then the other part is mix in terms of the premium mix of oil changes as they continue to drive synthetic growth.

And the biggest growth factor in this past quarter in that average ticket was coming from the premiumization of the oil changes. So we have a significant ticket and margin pickup as customers car owners shift to synthetics. And so that's been a real strength of ours.

That's a long-term tailwind for us as more of the newer cars require synthetic oil changes. So that was a key driver in the quarter, a little bit less on price, but non-oil change revenue also contributing to overall ticket growth.

And as we've shared and highlighted in the last quarter's call, non-oil change revenue, we see as a really important long-term driver for us as we execute on some of the additional services that we provide from filters to OEM services, our new battery program. These are all great opportunities for us to drive ticket that way.

But with the multiple levers to drive ticket and then also the strength of the digital marketing programs in reaching more potential customers to drive new customers into our stores has really been impressive.

And so we're just in a sweet spot that we expect to continue as we continue to improve our digital marketing programs and execute better in the stores. So, really hitting on all cylinders right now..

All right. And then I'm trying to understand in the Retail Services segment, the difference between same-store sales and the overall sales growth. That overall growth number was 66%, same-store sales was 48.5%. So the delta is, call it, 25%, and that's really, significantly higher than what you've shown in the past several quarters.

I know that, that difference should be new stores but the store count is only up 10% on a year-over basis.

So can you help, I guess, explain some of the math that's going on with this revenue growth that is not considered part of same-store sales?.

Yes. I think, Mike, we had quite a few acquisitions that we did in the first quarter of this year. And so I think part of what you're seeing is just the sales contribution from acquisitions. In the quarter, we did see just over $20 million of benefit of sales from the acquisitions that we did this year, so that did help.

And then again, the new stores that we've added through both acquisition and through builds, provided that those stores are growing at an accelerated rate as they ramp up in terms of our system and our marketing capabilities.

So that's the other component that's really a nice driver is related to those new stores and the rate of growth that we're seeing there..

All right. Thanks very much..

Thank you, Mike. Our next question comes from Laurence Alexander of Jefferies. Laurence, please go ahead. Your line is open..

Good morning. This is Dan Rizzo on for Laurence.

How are you?.

Good morning, Dan..

You mentioned that you're obviously having issues like everybody else, but you have a plan for Q4.

I was just wondering, if the end to enhance government benefits is kind of part of the assumptions that things will get better with labor issues later in the year or towards the end of the year?.

You cut out just a little bit, Dan. Thanks..

No. So you mentioned that labor issues exist now, but you have a plan for them to end in Q4.

I was wondering, if that's because government benefits are running that should help you or if you're taking other steps besides that to kind of make sure your stores are staffed?.

Yes. The labor market certainly has been challenging, but again, really impressed with the work of our team, the talent acquisition team and the execution in the stores. So first of all, what we saw in Q3 was outstanding same-store sales performance, growth in transactions.

And as we track our customer satisfaction weekly, daily in all of our stores across the system, we know that we're delivering on our promise they're quick EV trusted. So even though staffing has been a challenge. We've still been able to move our force around and continue to deliver on an outstanding customer experience.

That said, we – in our flow of applicants for some of the hourly positions, we did see it impacted by the government programs and where they have ended we've seen a nice pickup in applicant flow. We've got a number of new marketing tools that we're using to help drive that applicant flow and talent acquisition.

And so I'm pleased with the performance of that team in keeping up with our growth because not only are we growing within the store, we're seeing, of course, the tremendous growth that we've had in units, and we need to keep up with that. Our approach to labor has always been modestly above say, the market in terms of our pay and benefits.

We offer a nice program and package. And through the summer months, we've got a short-term program that we've put in place some premium pay through the summer, roughly in the 7% to 10% range. And we think that's going to help us continue to staff our stores appropriately, but we do hope that the – environment improves over time.

We expect that to be the case. But for us, having a world-class retail team out in our stores executing really well is really critical to our success. And so we obsessed over, we focus on creating that culture that makes it attractive for employees to stay with us.

Opportunities for growth and training are really key to what differentiates Valvoline from other retail service providers. So this has been a source of competitive advantage for us in the past, and we continue to invest in our team to make sure it continues to be a source of advantage into the future..

All right. That's really helpful. Thank you for the color. And then just with Global Products, you're passing through prices as would be warranted by the environment. But it just seems like it's probably a little bit easier now than it has been in the past.

Is it just a change in our environment, or are you doing something different or your customers accepting this more than a more, say, two or three years ago?.

Yes. Again, as I said earlier, the demand environment has been really strong, and that's been good for both retailers, in particular, and installers as it starts to improve with miles driven improving.

But for us, it speaks to the strength of the Valvoline brand and what we bring to our customers and the ability to drive traffic and ability to drive profitability for the installer with our programs from marketing to training, et cetera. And so historically, we've always been able to capture a strong premium versus other competitors.

And that's always been the case. And in this environment, costs are going up for all lubricant competitors. So everyone recognizes that given the size of these increases that that's the importance of passing through pricing is – it's going to continue to be the case. And so we see the market moving up. Our competitors are also moving up.

And so we fully expect to recover these cost increases with some lag effect that will hit us. Primarily in Q4, we'll probably see some lag impact into the balance of the calendar year into Q1, but with the pricing actions that we're negotiating and plan to execute, we expect to fully recover our costs and be in good shape moving forward.

And hopefully, the supply chain challenges, material availability begins to normalize over time, too. And there's dynamics at play where we're starting to see that happen. But it has been a pretty unusual time of very significant cost increases and challenges on the supply chain side.

But longer term, fundamentals look good, strength of the brand, very good..

Thank you very much..

Thanks, Dan..

Thank you, Laurence. Our next question comes from Stephanie Moore of Truist. Stephanie, please go ahead. Your line is open..

Hi. Good morning, everybody..

Good morning, Stephanie..

Good morning, Stephanie..

I wanted to touch a bit on – my first question, it's more of a clarification, and even on the last one would be. So I think most of us understand that the margin pinch kind of expected in the fourth quarter just as you're pushing price and the commodity lags.

But as you look to really next year, what does that mean for holding on to price next year, especially if we get into an environment where raw material pricing does come down? I think it should as the supply environment improves.

But shouldn't margins expand at that point? And I think we've talked about this in the past, but is this kind of similar to coating companies or even Sherwin-Williams, where you have that benefit of pricing when raw materials do come down? Any color there once you get through this environment would be helpful..

Yes. In the past, and of course, I've been with the business for quite some time, I've been through these cycles before. And what we typically see is in a rising raw material environment, we see that negative price cost lag impact, but we've always been successful at recovering our cost.

And then in a market where raw materials are falling, there's typically both a positive price/cost lag, but also typically a positive benefit to our margins too. And so we would expect that. At the same time, we're not baking anything significant into our plans as we begin to plan for next year, not necessarily counting on that.

Instead, we're looking at just the basic fundamentals of recovering costs, continuing to drive volume growth, share growth, taking advantage of the strength that we're seeing in the international markets solid DIY performance in North America and then working with our installers to strengthen their business too as miles driven begins to improve.

And then, of course, we're expecting continued strong strength in our Retail Services business..

And Sam, I would just add to that. In the Retail Services businesses, as we see our raw material costs decline, our expectation is we'll hang on to pricing in the Retail Services business.

So over time, some of that volatility helps us in the retail services business, I think which is, I think, more analogous to the coatings business, Stephanie, that you talked about.

And so I do think as Retail Services become the bigger part of the business, you're going to see – we'll hang on to that pricing and that will continue to benefit the business over time..

Yes. To emphasize that point, we've never taken a price decrease in Retail Services..

Yes. I mean, over the last five years, I think our price CAGR is up 4%, mid-single digits in Retail Services. So we've got really significant pricing color there..

Great. That's really helpful. And then for me, switching just to the Retail Services side, obviously, tremendous growth and gaining share. In any of your data, can you kind of parse out who you're gaining the share from? Is it more on the dealership side, or any color there would be really helpful? Thank you..

Yes. Based on our new customer growth, we're continuing to see it from all competing channels. So we're seeing new customers coming from the dealership channel, from the tire repair channel, the DIY to DIFM shift. These have all been good sources of growth for us.

So we're really seeing it broadly, and that's not surprising when you consider what we deliver consistently versus the balance of the marketplace, we have a unique offering. And when it comes to competing Quick Lubes, the industry data shows that Quick Lube car counts share has been flat for a lot of years.

And so as we continue to grow car counts, and the industry stays flat, we know we're taking significant share from competing Quick Lubes. And we just have a more sophisticated model, stronger digital marketing.

And then as we talked about in some detail, the strength of our team and the stores and how we care for the customer with that our Quick, Easy, Trusted approach to preventive maintenance..

Well, thank you so much for all the color..

Sure..

Thank you, Stephanie. Our next question comes from Chris Shaw of Monness, Crespi. Chris, please go ahead. Your line is open..

Yes. Good morning, everyone.

How are you doing?.

Good morning, Chris..

Good morning. Let's just drill down on the same-store sales more, but not quantitatively as much as qualitatively.

So understanding the bigger ticket, some share gains, I guess, maybe on the ticket side, do you think it's people are just – are they flush with money either as some don't know, government tax credits unemployment whatever it is or not having to commute.

Is it the fact that people are coming back to the office? Is it miles-driven up? On the share side, I understood made sense to me why you were gaining share last year, I mean significant share because a lot of things were closed and people change their habits. But they'll still be gaining share.

What are the reasons behind that, that you seem to add? What's the customer, I guess, psyche that's changed that's really helping all the things because the numbers just was so good this quarter.

I'm just kind of curious, what are you seeing anything change in the customer?.

So yes, I mean, we know one thing for sure is that the consumer demand for convenience just continues to grow. And so our ability to deliver a differentiated service experience and save our customers' time is important. And our ability to present the services effectively so that they trust Valvoline for their preventive maintenance is really key.

And those are like the basic fundamentals for why we're continuing to drive growth.

And we've created an approach process supported by technology and our connection with the customer to both the experience in the stores and what happens outside the stores with our digital platform to market to them effectively is what's enabling us to create these very strong returns.

And so there really is nothing about, say, the short-term environment that is dramatically – that is having a big impact on our results. It's just improved driving, obviously, miles driven helps us and synthetic growth helps us. But this is – will be the 15th straight year of same-store sales growth for us.

So it's something that we have built into how we operate and how we continue to learn and get better at all the different levers that improve the customer experience and target those future customers who haven't yet experienced, what Valvoline is all about.

So that's what's so encouraging is that each year, our team is getting better and smarter and we're able to strengthen the value proposition. And for us, long term, we see an opportunity to grow our service offering while still maintaining that speed and convenience, that will be key for us.

And we're dead-focused on how do we make deal procure easy for car owners, vehicle owners. And that includes fleet owners, too, where we see that as a nice opportunity in front of us..

Sam, I would also add. This macro trend toward convenience is not dissipating. It's absolutely a trend that our retail business plays directly into. And probably just as importantly, we are a very, very data-driven business. We have a lot of information that we collect on the vehicles that we service. We know our customers well.

And the smaller operators and the other – the broader auto aftermarket simply is further behind and may not ever have those capabilities. And how we are able to use that data to create an improved customer experience and to target market to new customers. And that is a huge competitive advantage for us.

We've been – asked as a data-driven marketing business for a long time, and our teams just continue to improve their capabilities there. And it's a key competitive differentiator in our business versus what customers, consumers are faced with and looking at when they're out there looking for these preventative maintenance services.

So the combination, I think, of convenience and awareness of what we can do for the customers is huge. And finally, I think our customer satisfaction with the services allows us to just have really record retention levels in customers coming back to us. So that customer experience is so critical as well.

We created a model that I think has just a really significant competitive moat and one that's allowing us to take significant market share..

That data is not showing any like big drop in drain interval or anything like that. It's just things you are doing that you think that are really helping..

Yes, absolutely. I mean we understand drain interval. We understand – we know when a customer is likely to meet their next oil change. We understand what their OEM recommends for their vehicle, all of those things come into play when we're using our targeted marketing..

Got it. Thank you..

Thank you, Chris. [Operator Instructions].

Okay, Nadia. It sounds like we don't have any questions left on the line. So I think we're ready to wrap the call..

All right. Thank you..

Perfect. Thank you, ladies and gentlemen. We currently no further questions. Please disconnect your lines. Thank you all for joining..