Thank you all for your patience. The conference call titled Valvoline's First Quarter Fiscal 2026 Conference Call and Webcast will begin shortly. During the presentation, you will have the opportunity to ask a question by pressing Hello, everyone, and welcome to Valvoline's First Quarter Fiscal 2026 Conference Call and Webcast. My name is James, and I will be your operator for this call. If you would like to ask a question during the presentation, you may do so by pressing The conference call will now start, and I will hand it over to our host, Elizabeth Clevinger with Investor Relations to begin. Thank you. Good morning, and welcome to Valvoline's First Quarter Fiscal 2026 Conference Call and Webcast.

This morning, Valvoline released results for the first quarter ended December 31, 2025. 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 forms 10-Q with the Securities and Exchange Commission. On this morning's call is Lori Flees, our President and CEO, and John Kevin Willis, our CFO. As shown in the accompanying presentation, 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. A reconciliation of our GAAP to adjusted non-GAAP results and a discussion of management's use of non-GAAP and key business measures is included in the presentation append. With that, I will turn it over to Lori.

Thanks, Elizabeth, and good morning. Thank you all for joining us today to review our first quarter results. We delivered a strong quarter to start the fiscal year, driven by strong productivity gains in our stores, network expansion, and margin improvement, which translated to meaningful earnings growth. I would like to begin by thanking our team members and franchise partners for their execution in delivering these results. At our December investor update, we shared our targets and are focused on executing against those. Our first quarter performance reflects good progress against these commitments. Starting with top-line highlights, we saw another double-digit increase to both system-wide store sales and net sales. System-wide same-store sales grew 13.8% on a two-year stack. This quarter, ticket contributed the majority of the comp, with all three levers contributing. Net price and premiumization were the largest drivers. We also saw continued positive transaction growth despite a tougher year-over-year comparison. As we look at same-store sales breakdown between company and franchise stores, Franchise was slightly higher than the system average for the quarter and for the two-year stack. We continue to grow our active customer base in line with what we expected while bringing in new customers, including fleet, to the network. We continue to innovate our marketing to connect with new customers. We have some fun taking inspiration from college sports with our instant transfer portal, which was designed to invite drivers to transfer from their current oil change provider to Valvoline. Customer demand for our non-discretionary services remains, and we are not seeing signs of trade down or deferral. Our customers continue to tell us they are delighted by our quick, easy, trusted service and are giving us a 4.7-star rating across our network and NPS scores over 80%. Looking at network growth, we saw…

Thanks, Lori. We provided a summary of our financial results on slides five and six. Let me spend a few moments to talk about some of the highlights. We saw strong top-line growth with net sales of $462 million, an increase of 11% on a reported basis and 15% when adjusted for the impacts of refranchising in Q1 of last year. The gross margin rate of 37.4% increased 50 basis points year over year, driven by leverage in labor and product cost, offset by increases in other service delivery costs, which includes rent, property taxes, and depreciation. Leverage would have improved by an additional 50 basis points excluding the impact of depreciation primarily from new stores. We remain committed to managing SG&A in the business. That said, SG&A as a percent of net sales increased 30 basis points year over year to 19.3%. The primary reason for this is related to a nonrecurring payroll-related benefit of about $2.4 million in the prior year quarter. Absent this benefit, year-over-year SG&A as a percentage of sales would have declined by 30 basis points. Overall, adjusted EBITDA margin increased 60 basis points to 25.4%. On a GAAP basis, we reported a loss from continuing operations of $32.2 million, largely driven by the loss on divestiture of certain Breeze stores that was required by the FTC. On an adjusted basis, income from continuing operations was $47.6 million. Turning to EPS, we saw an increase of 16%, 28% when adjusted for refranchising. As a reminder, we expect pretax interest expense to increase by about $33 million in fiscal 2026 versus fiscal 2025 due to the new term loan B. Operating cash flows improved to $64.8 million, and free cash flow was $7.4 million, improving approximately $20 million compared to the prior year quarter. Taking into consideration the new term loan, our leverage ratio is 3.3 times based on adjusted EBITDA for a trailing twelve months. As a reminder, you will now hear us talk about leverage in terms of net debt to adjusted EBITDA. As we continue our core business growth and integrate and grow Breeze, we are focused on getting our leverage back down to 2.5 times as quickly as possible so we can resume share repurchase activity. All in all, the results for this quarter are strong, with double-digit sales and profit growth, margin expansion, and improved free cash flow. I will now turn it back over to Lori to wrap up.

Thanks, Kevin. We delivered a strong quarter to start the year and feel confident in our ability to deliver on the guidance we set for fiscal year 2026. The Breeze integration work is underway, and our teams are working well together. The fundamentals of our business remain strong. As we shared at our investor update in December, we are an established category leader with a track record of industry-leading performance and growth. That, along with our differentiated capabilities, will continue to drive strong margin and cash generation, positioning us to deliver long-term value to our shareholders. I will now turn it back over to Elizabeth to begin Q&A.

Thanks, Lori. Before we start the Q&A, I want to remind everyone to limit your question to one at a follow-up. With that, operator, can you please open the line?

Thank you, Elizabeth. Lines are now open for questions. We now have our first question from Mark Jordan from Goldman Sachs. Go ahead, please. Your line is now open.

Hey, this is Mark Jordan. Thank you for taking my question. I joined a minute late, I apologize if this is already covered. But for same-store sales, it looks like some or all of the new brakes revenue is now included in the calculation. And I am just wondering what impact that had on 1Q? And then on the mobile channel in particular, how big is that business in terms of revenue?

Thanks, Mark. Yes. We mentioned during that we were piloting opportunities to expand our reach with mobile service delivery. We want to be transparent about the definition includes inclusion while we were early in the early stages of doing that. It is relatively small, limited to a couple of markets. And it is really tied to trying to meet the needs of both consumer and fleet demands for increasing convenience. In terms of the overall contribution into our comp this quarter, it was around 20 basis points.

Excellent. Thank you very much for that. Then just one follow-up on franchise store growth. I know usually ramps throughout the fiscal year are usually back half-weighted. Can you just let us know how you feel about the pipeline for openings this year?

Yeah, Mark. It is a great question. The quarter we had a good quarter overall for new unit additions, but it was light on the franchise side. I will note that we had 13 gross additions. We had some closures, which are unusual relatively small for our fleet, but those netted out to 10. When we look at January, our franchise partners have opened nine units in January. So, again, a real indication that the pipeline is robust. And considering the winter storm firm in the back half of January, nine was a pretty good result. So when we look at our pipeline for the rest of the year, it is still very strong both on the company and the franchise side. And, you know, we continue to build momentum to get to that 250 new units in fiscal year 2027.

Perfect. Thank you very much for the insight. Congrats on a great quarter.

Thank you.

Thank you. Moving on to our questions here. We have Simeon Gutman from Morgan Stanley.

Hi. This is Skyler Tennant on behalf of Simeon Gutman. Thank you so much for taking our question. First, can you speak to the complexion of sales this quarter in terms of how pricing and units are trending? Are you seeing certain trends by region or in newer younger markets? Or do you trends seem to generally be pretty broad-based?

Thanks for the question. We actually, in the quarter, from a cadence perspective, October, November were pretty much as expected. December was strong. We saw good growth on both ticket and transaction. Ticket was the larger contributor to our same-store sales growth in the quarter. But overall, the growth was quite balanced and good both on the franchise side as well as the company side.

I think the only thing we may have seen in November was a little bit of early weather during the Thanksgiving period in some of our geographies. But other than that, there were not any notable differences or significant trends regionally across our network.

Okay. Thank you for that. And Lori, maybe how much time do you think needs to be spent on Breeze? Can you kind of give us a sense of how much focus is needed there versus the core business?

Yeah, it is a great question. I think it is important to remember that while a sizable M&A, Breeze represents less than 10% of our financial commitments for FY 2026. And you can see that the underlying business, given Breeze is only one month of Q1 results, is the momentum in that core business is really strong. Now we continue to be excited about the growth possible in the 162 oil changer stores that we have added. And we are certainly starting to share some good best practices. But I think we have got to keep context that Breeze is an important asset, and we are going to spend time to integrate it and integrate it well. But it is a small portion of the overall financial picture for us.

Okay. Thank you so much, and congratulations on the quarter.

Thank you. Thanks.

Moving on to our next question from Max Bracklenko from TD Cowen.

Hey, thanks a lot, and congrats on the nice quarter. So with the strong 1Q comps and easing compares the rest of the year, how should we think about the shape of the year in the context of your guide? Then just any comments on the first month of 2Q?

Wanna start, and then I can cover Q2? Sure. Sure. Yeah. Thanks for the question. I mean, as we said at our Q1 call and on the investor update, we have taken a measured approach to the outlook for the full year. Really, really pleased with how Q1 played out. It was a strong quarter, and we are very happy about that. You know, there is still a lot of year left. And we want to continue to see how that unfolds. But we are confident in the guide that we put up in Q1 and reiterated at the investor update in December. So again, we feel really good about where we are. There is a lot of year left. We are still working through the Breeze transaction, obviously, in terms of integration, but Breeze also performed as expected for the month that we owned it in Q1. And so overall, it is a great start to the year. And, again, we are very confident in meeting our commitments for the year.

Max, as we think about Q2, apart from winter storm firm, you know, our start to the quarter was really strong. Now with the snow and ice conditions that hit many of the geographies that we operate in, particularly on the company side, momentum obviously slowed. And we are still in many areas, Kentucky included, still not thawed out completely, which has impacted consumers' kind of return to normal activity. I think as you look at the forecast, and the groundhog said we have another six weeks in the polar vortex that they expect coming. And the storms that could follow with that. We think it is going to take a little bit more time to recoup the transactions that pushed out. We do not see significant customer deferral when we look a couple of weeks at a time. But we do know from history that customers will return to get their cars serviced when their normal day-to-day activities resume. So we expect that as we go out through the balance of the quarter, we will recoup some of the volume that we obviously missed as people stayed off the roads. But overall, Q2 before the weather started was very strong.

Got it. That is very helpful. And then on Breeze, what is the latest thinking around the timing of the store conversions? How many locations do you plan to convert this fiscal year? And then what could be left for year two or year three? Then how should we think about both revenue as well as the margin impacts the rest of the year? Sequentially.

Are you on the last question, because I will have Kevin answer. Are you talking Breeze specific or more broadly? On the margin and the sales and tax-free? On the P&L.

Okay.

Alright. I will cover the first one. Yep. I will cover the first part, which is this really our integration overall. We closed the transaction in December, and simultaneous with that had to complete the divestitures that were required by the FTC. And while that may sound simple, there is a lot of commingling of data in every part of the business that we had to start to separate and transition that out. And so a lot of the focus in the first month was really getting that business stood up within our portfolio and stabilizing the team to ensure that they continued to deliver. And as Kevin said, they delivered exactly as expected, and we feel really good about that business. Our teams have been meeting, obviously, over the holiday period, but we are two months into integration planning. And I would say we are having the discussion around how we integrate the Breeze stores into our network. And all the things like systems and I talked about pipelines being integrated just to make sure that we are not competing against each other in any market. So there is a lot of work underway with parts of our team. But it is a little premature for me to share the specifics on store conversions. We are obviously engaging the team specifically on that.

As far as the financial impact, consistent with the commitments that we made at the investor update in December, we would expect the Breeze stores to add about $160 million top line for the ten months that we will own the business in fiscal 2026. Around $31 million of EBITDA. And I think as a reminder, obviously, we did take on leverage to do this transaction. We expect the cash interest to be about $33 million on a pretax basis and that we would expect to have about a $0.20 per share impact on EPS for the again, the ten months that we own the business.

Awesome. Thanks a lot, and best regards.

Sure. Thank you. Next question here is from David Bellinger from Mizuho. Go ahead please. Your line is now open.

Sort of macro related. We have been hearing a lot more about these affordability concerns across most of the consumer high prices holding spending back to some degree, but Valvoline has consistently seen trade-up activity products premiumization. Why do you think that is the case? Does it say something about the pricing potential of this business and maybe something more you can gradually tap into over time?

Yeah. David, it is a good question. Valvoline is a strong brand and business in a category that, as you know, is nondiscretionary. And there are a lot of tailwinds that affect us. One is the aging car park that leads us to present more non-oil change revenue services on average per customer that then gives us that lift despite the macro maybe running counter because people feel that they need to maintain the vehicle they have. Such that they do not have to replace that vehicle. I also think that the car park has evolved. And as the new vehicles start to age into the car park, the automotive manufacturer is the one who specs the kind of lubricant that is required. Now as a customer has a high mileage vehicle, starts to get over 100,000 miles, they really do want to maintain that vehicle rather than having to trade up into a new one. Or a newer one. And so those are the things that are driving some of how we have been bucking the trend. Our team educates the customer on their choices. They educate them as to the choices for their vehicle, based on the mileage, and the age of the vehicle, and what the OEM requires. So we just run our play and educate the customer, which builds trust, and I think that serves us well. We continue to look at pricing. I think we always want to be a little cautious given the macro environment to not move too quickly. But, obviously, we continue, and net pricing was a contributor to the comp this quarter, and we continue to adjust our pricing appropriately given our value proposition to the consumer.

Great. Great. Thanks for all that. Second question, completely different topic, maybe for Kevin. But the material weakness for internal controls that has been in your filings that has lasted somewhat longer than the timeline you initially laid out. So how much of that is simply waiting for approvals with the new systems in place? Or is there more technical work you have to do to get all that cleaned up? Thank you.

Yeah. Thanks for the question. The team has put in a tremendous amount of work to get us to the point where we are. As a reminder, in fiscal 2025, we really had two aspects of the material weakness that we were working on. The first was around systems. So let us call it IT general controls. That needed to be put in place, remediated, tested, proven to work. Proven to be effective. And we passed that test as part of fiscal 2025. That was in our 10-K disclosure. The second part of the material weakness is around business processes related controls. That work remains underway. And we continue to work with both our auditors as well as several third parties who are helping us with this project. What it really comes down to is just a massive amount of work to get everything in place, in terms of controls documented, making sure that we have the right controls in place and then proving to ourselves and to our auditors that those controls are working and that the overall control environment is effective. And that is what the team is working on as we speak. And has been working on for a while. But good progress has been made. We are still climbing the hill, and it is certainly our expectation that by the end of this fiscal year, we will be able to put this to bed. As a reminder, the test or the opinion is an annual opinion. And so, we will not be out of the woods on this until we get through the fiscal year and have a chance to review the control environment in its entirety based on the work that has been done, the testing we have done, the testing they will do, to arrive at that conclusion and an opinion.

But I will just add that both us and E&Y do not have concerns on any statement any risk of our financial statements not being accurate and of the business. So this is around business process controls, making sure they are documented, making sure they are executed, making sure they are tested. It is not any concern around the financial reporting of the business.

Understood. Thank you both.

Thanks for that question, David. Next up we have Steven Zaccone from Citi. Go ahead please. Your line is now open.

Great. Good morning. Thanks very much for taking my question. I wanted to start on the gross margin performance because it clearly came in stronger than expected. Can you elaborate a little bit more on the strength in the quarter? And then do you see this organic growth rate of kind of 50 basis points expansion as the right run rate for the balance of the year? And then help us understand how Breeze will impact that gross margin performance since you have better visibility at this point than when you first gave guidance a couple of months ago?

Yes, thanks for the question. We were pleased with the gross margin progress that we made in the quarter versus prior year. As indicated in the prepared remarks, we were up about 50 basis points year over year. Labor and product were the primary drivers of that. We have been working and continue to work on the labor piece of the equation. The team has done a great job with that as we have expected. We have not only held on to, but been able to improve upon, that labor leverage a bit, and we would expect that progress to continue. The team is really looking at all aspects of store spend, controllable store spend, and labor has been a big focus because it is the largest piece of COGS. Product side, we did see some benefit in the quarter. We have seen base oil come down just a bit. As a reminder, we get the benefit of that, but we also pass that benefit along to our franchise partners. So those two were the primary driver. On the flip side of that, we did see increases to other service delivery costs, which include things like rent, property taxes, depreciation. Those increases are largely driven by adding new stores, especially the depreciation part, which was about 50 basis point negative versus prior year. But we did also see some increases in terms of both the rent and property taxes. Again, primarily related to new stores, but also just ordinary course. In terms of the full year and the Breeze impact, as we said, we are bringing 162 immature stores into the system that will have a negative impact on overall margin. Believe at the investor update, we indicated that we would expect it to be about 100 basis points of EBITDA margin impact. We continue to expect that to be the case, but obviously are working with the Breeze team and with our internal team to improve the business, to grow the business so that we can increase those margins, both gross and EBITDA.

Okay. And just a clarification. The 100 bps of pressure for margin, is it more weighted to grosses than SG&A? As we think about the model?

It is more on the EBITDA line. It is a bit of both, but 100 basis points on the EBITDA line. Because they do have a corporate center.

Okay. Second question is just you talked about pricing. And ticket, you know, in particular being a bigger contributor to the comp. Just remind us, how do you see the balance of the year for same-store sales between ticket and transaction?

We would expect on an overall basis to really be balanced as we have been. As you look at fiscal 2025, as we talk through that, it is more heavily weighted to tickets, but transaction growth is also very important. And I think also importantly, we saw transaction growth across the system in Q1 just as we did in fiscal 2025. We would expect to see that for the balance of the year. Really across the system, franchise and company. And so both are important to the comp. It has been the case that ticket has been a bigger driver, and we would expect that to continue to be the case. But again, both are quite important to the

Thanks for the detail.

Moving on, we now have Scott Stember from ROTH Capital Partners. Go ahead please. Your line is now open.

Good morning, and thanks for taking my questions.

Hi, Scott. I have a question.

Thanks. A question about just bigger picture. Potential gains at the quick lube market at particularly, Valvoline is seeing, maybe from people trading down from car dealerships. Could that be a potential benefit in this very high inflationary environment? Are you seeing that? I am just trying to get a sense of where things are coming from.

Yeah. When we open a new store and we track where our customers last got their oil changed, we know that they come from where they are going in the marketplace. And about 35 to 40% of customers still go back to a dealership. And so we know and track that when we open a new store, and we bring in a new set of customers into our system about that same proportion are coming from outside the QuickLube market and within dealerships. Now I do not want to get into the psyche of the customers as to whether or not they are doing that to trade down. I think the reality is we offer a much more convenient service where it stays in your car. You do not have to make an appointment. You do not have to wait in a waiting room. You do not have to leave your car and come back for it. It is fifteen minutes or less. It is a much more convenient experience for the consumer and I think that is really what the consumer is making the decision on. I cannot we do not get into the details of why they decided to pick us. In enough detail across our system to be able to say it is much different than that. I am sure there are people who trade down, but I think convenience is likely the largest driver of switching.

Got it. And then last question. Obviously, store closures due to winter storm Fern. But once stores start opening up again, could you potentially talk about potential benefits that you guys will see, whether it is batteries, windshield wipers need to be replaced because of the ice. Just talk about any tailwinds we can get from that.

Yeah. Absolutely. And this time of year, we always see that. So while this storm may have been broader in reach, and maybe more prolonged in some areas. The things that you are talking about are the things that are driven during this time. So batteries that are older tend to falter during this time and need to be replaced. Windshield wipers definitely need to be replaced. So these are things that we typically see in our business, and as we have these weather impacts, we do try to modulate our labor. So we will not add labor. We will not do as much new customer marketing during this time, and we wait until the weather pattern has passed. And then we ramp that back up again in order to serve the customers who did not get service during the winter sort of storm period. But all the things you are talking about are exactly right. This time of year, we always have storms that just depends on when in the quarter they happen, and for how long they last.

Got it. That is all I have. Thank you.

Thank you.

Scott.

Alright. Thank you. And moving on to our next question here is from Steve Chimas from RBC Capital Markets. Go ahead, please. Your line is now open.

Thank you for taking the question and good morning. So as we think about the comp, sounds like ticket was maybe four and a half points given the tougher transaction compare. Any color you can share just on the breakdown of premiumization with price and non-oil change revenue?

Yeah. We do not normally get into the specific components of it. As we look at the mix between ticket and transaction, I would say that for the quarter, ticket was roughly three-quarters of the comp is the way to think about it. But again, as we look at the comp, we saw growth in all those categories that you mentioned on the transaction side. And in terms of ticket, also positive in terms of price premiumization and NOCR for the quarter. So, again, a good balance, but, yes, ticket was a bit higher in the quarter than maybe what we saw in, say, '25.

Got it. That is helpful. And maybe just as a follow-up on a different topic. So at the time that deal was announced, you talked about eighteen to twenty-four months from deal, from deal closed to delever to two and a half times to potentially resume share repurchases. I just kind of look at the model, at least on my end, it seems like you could maybe get there by year-end. So I guess just from where you are today, two months of Breeze under your belt, is eighteen months still the right way to think about it, or do you think you can potentially get there sooner?

Well, we wanted to frame it up in terms of a target that we felt very comfortable with, and we are still comfortable with that. To your point, we will continue to monitor this. And as we make progress on the balance sheet as the top line and EBITDA continues to grow, our commitment is once we are back in the range, you should expect us to return to share repurchases. So if we get there sooner than we will in fact start repurchasing shares sooner as well.

That answer your question?

It does. Thank you very much, and good luck.

Thank you. Thanks, Steve.

Thank you. Moving on to our next question here, we have Chris O'Cull from Stifel. Go ahead please. Your line is now open.

Lori, we noticed in the FTD that the company may start a national ad fund in fiscal 2027. Can you talk about why now may be the right time to launch a fund, but maybe you are learning about the potential of national advertising and maybe how quickly the system could grow this fund over the next few years, if that is the path you move forward with.

Absolutely. You hit on the main driver. As our network has grown and the reach and densification has improved, moving from a hyper-local only marketing spend to a national fund drives significant efficiency. And as it relates to some of the company store spending, we have already started shifting some of our company marketing spend for stores into more national funding. And as we have proven out and shown the benefits of that to our franchisees, that is the reason why we are moving towards that. In terms of how big it could get, I think it is premature to say, but we will obviously just keep monitoring. And as we see more efficient, we will obviously balance our spend.

Okay. When do you think you would have an estimate for what the contribution rate be? I think the FDD mentioned, like, a quarter of a point, but I assume it will be much larger than that.

Again, I think we are working in part with our franchisees and I think the FTD spells out how we are going to start. And I think based on the results and the performance of the national fund, we will continue to optimize across the marketing pools of spend.

Okay. And then I know the average sales ramp of new stores is in that three to five-year range, but can you talk about the variance around that average in markets where brand awareness is high? Versus markets maybe where brand awareness and penetration are relatively low.

I am not sure I caught the first part of your three to five-year ramp. Oh, three to five-year ramp. Got it. Got it. How does that compare in how does it compare in markets where the awareness is high versus maybe expansion or greenfield market?

Yeah. So what we typically see is the ramp in the first three years is a bit faster. If we are adding a store to a market that has good brand awareness, and it would be a little slower. But we do modulate our marketing spend given that. And that is all factored into our new unit forecast, which continue to drive really strong IRR returns in the mid-teens. And so that is factored into those forecasts.

Great. Thanks, guys.

Thank you. We now move on to our next question here from Thomas Wendler from Stephens. Go ahead please. Your line is now open.

Hey, good morning, everyone. Thanks for the question. You have now lapped some of the larger refranchising activity in fiscal quarter 4Q 2024 and 01/2025. Can you give us a little bit of an idea of how much the 10 stores refranchised this last quarter impacted results?

Yes. First, I will just comment and restate what we have been saying for the better part of last year and in our December investor update that we really do not have any plans to do any further large-scale refranchising, but we do make transfers. And I think what you are referring to is we had a 10-store transfer in Q1. From franchise to from company to franchise. Similarly, in '25, we had a six-store transfer from franchise to company. And we are really doing that to optimize market boundaries so that either the franchise or company can optimize our G&A and marketing spend. In a geography. Now the specific transfers in Q1 were not really material from a financial standpoint, and we have incorporated that into guidance. So unlike the previous refranchising where there were three transactions that happened over a two-quarter period and fairly sizable, we are not going to continue to adjust numbers or recast them going forward for these small transfers between.

Perfect. Appreciate the color. Maybe on a separate note here, the instant transfer portal campaign I think you had mentioned you saw some, you know, early success on the first few weeks of this quarter before the storm. Can you maybe give us some early reads on the transfer portal? Is that the driver there?

I would not. I would say that all of the marketing activities that we do end up driving engagement. In our brands and conversion into our stores. The transfer portal was a really creative opportunity that our marketing team and our marketing partners came up with to sort of capture on a lot of the frenzy in college sports. It created very strong creative engagement with is around, you know, brand impressions and offers. Which when we look at that relative to our other social performance, it benchmarked very well. So you know, when you are trying to find new ways to reach new customers who have not had the experience of your brand, this kind of creativity goes a long way, and that I am really proud of the team for some of the things that they are working on and that they have done.

Alright. I appreciate you answering my questions, and great quarter, guys.

Thank you. Thank you.

Alright. Moving on to our next question. This is from Peter Keith from Piper Sandler. Go ahead, please. Your line is now open.

Hi. This is Sarah on for Peter. Thanks for taking our questions. First, can you just give us an update on some of the progress with your technology initiatives? Are you finding the company has moved to a cloud-based tech architecture providing any competitive advantages in the channel? And then if so, what are these?

As you know, we have since we became a pure-play high-growth retail services company, we have been investing in tech in retail-specific technology. You know, in the first year, we implemented a new CRM system for both our fleet business as well as our franchise and business development businesses. Or areas. We then implemented SAP or the first phase of SAP in 2024. And in fiscal 2025, we implemented HRIS. We also in fiscal 2025, moved our customer data into the cloud and we have been slowly working on replatforming our proprietary system we call SuperPro. For our stores. We have upgraded our infrastructure in the stores so that it could support a cloud-based architecture. And so we are in the process of becoming more modern. And with that, you typically see the maintenance cost from a technology go down, so you get efficiency. As you get into more of the capabilities of SAP and HRIS, you get more efficiencies in your back office. And then on the customer side, you end up having a better, more consistent process where you can optimize and take time out of the service experience for the customer or take labor out. As you apply more technology and tools to the store day-to-day operations. So I would say this is a journey for us, but we are through some of the basic parts of the technology, replatforming, and now we are getting into the more value-added efficiency and effectiveness driving initiatives. But we do not see the investment in technology continuing to need to go up, as we have mentioned in our Investor Day update. We did grow technology spend and we will continue to spend in technology. But we do not see the year-over-year growth of that going faster than sales. In fact, we would expect that to moderate.

Okay. Thank you. That is very helpful. And then just on advertising, were you guys winning in most here and then just early results that you are seeing?

We have a pretty sophisticated marketing playbook that includes both what we call our life cycle management, which is us keeping in touch with the customer. We can predict when the customer is going to need to come back in for not just an oil change, but for also added services. Based on their driving pattern and what we see or in doing look-alike analysis. So we have a fairly robust process of keeping in touch with our customers. And that we just continue to optimize in terms of how and when we insert certain promotions to that communication process. And then as it relates to new customer acquisition and new store openings, you know, we continue to modify to drive down our customer acquisition costs in those environments. We continue to test new channels. And I would say that the performance continues to improve. Our return on ad spend is very productive, and we continue to optimize that. At the same time, as optimizing the discounting or optimizing net pricing. For every transaction that we have in our stores.

Okay. Thank you.

Thank you. And moving on, we now have David Lantz from Wells Fargo.

Hey, good morning and thanks for taking my questions. So you guys called out the nonrecurring payroll-related item in SG&A in Q1, but curious if you can talk through some of the puts and takes through the balance of the year.

Yeah. Happy to answer that. Yeah. We did have a nonrecurring item Q1 of last year. Taking that out of the equation, we did see SG&A leverage of 30 basis points year over year, which our commitment is to continue to do that throughout the balance of the year and going forward. As we look at the rest of the year, we should continue to see overall improvement from a core business perspective. We are very focused on scrutinizing spend across really all categories, not just SG&A, but also capital costs around store bills as well as cost of goods sold as we have talked about with labor improvement and other areas. So we are continuing to really bear down on these categories. And would expect to continue to see improvement as we go throughout the course of the year.

Got it. That is helpful. And then clearly, you know, winter storm burn is driving some choppiness around transactions. But curious if you guys could help us parse out the potential impact to Q1 comps that that will have.

You mean Q2? Yeah. I think it is a little too early to say. We had a strong start to the year, and our expectations really are not changing for Q2 through Q4. Obviously, we are monitoring the weather, and we make adjustments. But, again, if you look at history for our business, as we have a weather pattern cycle through, it just shifts around when we capture the demand and serve the guests. It does not have a long-term impact or downward impact on our business. So again, we have to be smart to manage labor cost and manage our marketing spend. And when we do that, and we have proven we have gotten better at doing that as we apply more tools and technology, we can manage both our sales line and our profit line pretty effectively.

Thank you.

Thank you, David, for that question. And that is it, our questions queue are now clear, which concludes today's call. Thank you all for joining, and you can now disconnect your lines. Everyone, have a great day. Bye for now.