Valvoline Inc.

Good morning, ladies and gentlemen. Welcome to today's Valvoline Second Quarter 2023 Earnings Conference Call and Webcast. My name is Jaquita. I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to your host, Elizabeth Russell. Elizabeth, please go ahead.

Thanks, Jaquita. Good morning, and welcome to Babelene's second quarter fiscal 2023 conference call and webcast. This morning, at approximately 7 a.m. Eastern Time, Babelene released results for the second quarter ended March 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.babelene.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 Sam Mitchell, our CEO, Lori Sleese, our President of Racial Services, and Mary Michaelsberger, our CFO. As shown on slide two, 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. Babling 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 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 product segment is classified as discontinued operations for the purposes of GAAP reporting. On slide three, you'll see the agenda for today's call. We'll begin by discussing the closing of the sale of global products that we announced March 1st, along with an update on the return of proceeds plan. We will then talk about our second quarter highlights share operational insights, and end with a review of our second quarter results. Now I'd like to turn the call over to Sam.

Thanks, Elizabeth, and thank you all for joining us today. As we announced on March 1st, the sale of the global products business is now complete. Our teams have done an excellent job completing the transaction while remaining focused on delivering a strong Q2. Total cash purchase price for the sale was $2.65 billion, with approximately $2.38 billion of net proceeds after taxes and other transaction expenses. In Q4, we announced the Board had authorized a $1.6 billion share repurchase. Through April, we have returned $336 million through open market share repurchases this fiscal year, with just over $200 million of that coming from the current authorization. After thoughtful consideration, management and our board of directors concluded that a modified Dutch auction tender would allow us to most efficiently and expeditiously return the sale proceeds to our shareholders. We expect to proceed with a tender offer of up to $1 billion subject to market conditions. We are excited to focus on driving growth and increasing value of the new Valvoline. The new Valvoline is a pure play automotive retail business that is high growth, high margin, and with a high return on invested capital. The new Valvoline is primed to deliver long-term value to our shareholders through our best-in-class retail platform. We are focused on growing system-wide store sales, increasing units through both company operated and franchised editions, and evolving the service portfolio over time. This algorithm has a long runway to take us into the future. Turning to slide eight, let's take a look at some key highlights from the quarter. The top line growth continues to be strong with almost $660 million in system-wide store sales for the quarter, which is an increase of 18.5% compared to prior year. For same-store sales, we continue to see consistent growth across our network with an overall growth of 13.5%. As we expected, we saw improved profit performance in Q2 with a 25.5% increase in adjusted EBITDA over prior year and a 19% increase over Q1. This comes on adjusted revenue growth of 19% over prior year and 4% over Q1. Additionally, we continue to be on track for unit additions with 19 company-operated and 16 franchise locations added this quarter bringing our total store count to 1,781. Slide nine provides a look at our growth over recent years. We have seen substantial growth across key metrics including store count, same-store sales growth, system-wide sales, and EBITDA. We continue to see resiliency and strength in the demand for the quick, easy, and trusted preventive maintenance service we provide to our customers. We have a great track record of growth, and that will continue in fiscal year 2023. Now I'll turn it over to Lori to look at more details of our Q2 results and share some operational insights.