Q2 2023 Valvoline Inc Earnings Call
Participants
Lori A. Flees; President; Valvoline Inc.
Mary E. Meixelsperger; CFO; Valvoline Inc.
Samuel J. Mitchell; CEO & Director; Valvoline Inc.
Unidentified Company Representative
Daniel Dalton Rizzo; Equity Analyst; Jefferies LLC, Research Division
Jason M. English; VP; Goldman Sachs Group, Inc., Research Division
Michael Joseph Harrison; MD & Senior Chemicals Analyst; Seaport Research Partners
Simeon Ari Gutman; Executive Director; Morgan Stanley, Research Division
Steven Emanuel Zaccone; Senior Research Analyst; Citigroup Inc., Research Division
Presentation
Operator
Good morning, ladies and gentlemen. Welcome to today's Valvoline Second Quarter 2023 Earnings Conference Call and Webcast. My name is [Joquia]. I will be your moderator for today's call. (Operator Instructions)
I would now like to pass the conference over to your host, Elizabeth Russell. Elizabeth, please go ahead.
Unidentified Company Representative
Thanks, [Joquia]. Good morning, and welcome to Valvoline's Second Quarter Fiscal 2023 Conference Call and Webcast. This morning, at approximately 7:00 a.m. Eastern Time, Valvoline 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.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 Sam Mitchell, our CEO; and Lori Flees, our President of Regional Services; and Mary Meixelsperger, our CFO.
As shown on Slide 2, any of our remarks today that are not statements of historical facts 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, nonoperational 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 Products segment is classified as discontinued operations for the purposes of GAAP reporting.
On Slide 3, 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 on March 1, along with an update on the return of proceeds planned. 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.
Samuel J. Mitchell
Thanks, Elizabeth, and thank you all for joining us today. As we announced on March 1, 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 a 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 additions and evolving the service portfolio over time. This algorithm has a long runway to take us into the future.
Turning to Slide 8. 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 9 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.
Lori A. Flees
Thanks, Sam. As Sam said, consumer demand is strong for our quick, easy, trusted service. Our VIOC customer base has nearly doubled over the last 5 years growing at a 12% compound annual growth rate. This is driven in part by additional units, but a significant component is from the growth of our same stores. In Q2, our system-wide same-store sales growth was 13.5%. Our same-store sales growth is consistent across company-operated and franchise locations. This balanced growth is a direct result of the partnerships we have with our franchisees and the strength of our SuperPro process, which enables a consistent delivery of a high-quality customer experience.
We're pleased with the drivers of Q2 same-store sales. Approximately 30% of the Q2 same-store sales increase was driven by transactions. On ticket, we're continuing to see the benefit of lapping prior pricing actions taken during fiscal year 2022, and we remain confident in our ongoing pricing power. We continuously monitor pricing and take actions to optimize it across geographies. Additionally, our non-oil-change service penetration continues to improve and drive further ticket growth. With the continued customer base growth, our ongoing pricing power and the tailwind from premiumization and non-oil-change revenue service penetration, we remain confident in both our fiscal '23 and long-term same-store sales growth targets.
Turning to Slide 12. As expected, we saw EBITDA margin improvement both sequentially and year-over-year. The sequential quarter-over-quarter improvement in EBITDA margins of 330 basis points was driven by increased volume and improved cost leverage with higher utilization of our stores and lower G&A expense. The year-over-year improvement in EBITDA margins of 130 basis points demonstrates the recovery of our margins through the pricing actions taken in the last 12 months as well as continued transaction growth. Our stores are well staffed to gear up for the summer drive season, and we continue to anticipate a full year EBITDA margin of 25.5% to 26.5%.
Our EBITDA performance is underpinned by the growth of our mature stores, as shown on Page 13. We continue to see solid leverage and growth in our mature store group. Since fiscal year 2019, our most mature stores have continued to grow top line at a 10.1% compound annual growth rate, while delivering an even higher EBITDA CAGR of 11.5%. The top line growth of the mature stores have similar drivers as our overall performance with growth in transactions, pricing and non-oil-change revenue penetration. Our continued growth, along with the focus on ongoing operational efficiencies will enable us to continue to drive leverage and improve our mature store EBITDA.
Let's take a look at the impact of our new stores on Slide 14. New stores are an important part of our long-term growth algorithm. Today, only 35% of vehicle owners live within 10 minutes of a Valvoline Service Center. New units enable us to broaden access to our proposition. Typically, our ground-up stores ramp to the revenue of a mature store performance in years 3 through 5. Recently, our new store ramps have outperformed early expectations in both speed and size of the ramp. New acquisition stores typically have a faster ramp to maturity, but the size of the ramp is generally less than that of a ground up. As all our new units mature, we expect to see at least $70 million of incremental EBITDA. While we continue to focus on ways to improve returns by driving down investment costs and improving performance, the strength of the consumer demand, along with our highly predictive real estate modeling gives us confidence in our ability to drive return on invested capital through new franchise and company units.
Now I'll turn it over to Mary to discuss our Q2 financial results.
Mary E. Meixelsperger
Thank you, Lori. The sale of Global Products is an important milestone for Valvoline. As Sam shared, Valvoline is now solely a retail automotive services business focused on preventative maintenance with nearly 1,800 stores across the U.S. and Canada. Accordingly, as of April 28, our GICS classification code has been updated to the automotive retail industry within the consumer discretionary sector. We will no longer be within the chemicals commodity sector. In addition to the change in industry classification, I want to highlight a few of the large financial impacts recorded during the quarter as a result of the transaction.
The sale of Global Products generated $2.38 billion of net proceeds after taxes and other transaction expenses. We also recognized an after-tax book gain of $1.2 billion. With the proceeds of the sale of Global Products business in hand, our cash position is very strong with a cash and cash equivalents balance of $2.3 billion at the end of the quarter. Additionally, the proceeds received from the sale are being invested in liquid assets. Our investment philosophy for the proceeds, it's safety and liquidity first than yield. Through March 31, we have earned $8.3 million of interest income related to the investment of the sale proceeds. With the tender offer, we anticipate to return up to $1 billion of the after-tax proceeds from the sale in addition to the $336 million already returned through share repurchases through April 30. Another $300 million to $400 million of the proceeds will be used for the tax payment related to the gain on sale followed by an additional $600 million for debt repayment.
Our Q2 results are summarized on Slide 17. Adjusted EBITDA improved 25.5% to just over $87 million for the quarter. This is in line with our historical first half results. Gross profit improvements were driven by increased transactions and higher average ticket from pricing actions and non-oil-change service penetration as well as unit growth. SG&A investments increased by $4.8 million from the prior year, primarily related to investments in advertising, process improvements and talent to support our future growth. While SG&A dollars increased modestly, we saw improved SG&A leverage driven by the increased sales volume.
Now I'll turn it back over to Sam.
Samuel J. Mitchell
Thanks, Mary. We are pleased with our Q2 results, and remain on track for a strong fiscal '23 performance. The completion of the sale of Global Products was an important milestone for Valvoline. As we have said, we plan to continue returning proceeds to shareholders and expect to initiate a tender offer for up to $1 billion of our common stock. Our team is doing tremendous work, and we are excited to focus on the new Valvoline as we continue to drive value for our shareholders.
Now I'll turn the call back to Elizabeth to open the line for Q&A.
Unidentified Company Representative
Thanks, Sam. (Operator Instructions) With that, [Joquia], please open the line.
Question and Answer Session
Operator
(Operator Instructions)
The first question comes from the line of Simeon Gutman with Morgan Stanley.
Simeon Ari Gutman
It's Simeon. I want to ask, Sam, about company versus franchised growth over time. Curious if it's a part of the strategy or a target that you are going to identify? Or are you going to keep it open ended and see how the business evolves over time?
Samuel J. Mitchell
Yes. Simeon, as we communicated last fall that we have an aggressive growth target to grow the network to 3,500 stores. And we expect both company and franchise stores to be part of that to achieve that. But we have an especially strong focus on accelerating our franchisee growth. And so that includes working with our current partners in accelerating their growth plans. We're making good progress there. But we also expect to attract new partners to help us accelerate growth in certain markets. So while we haven't set a specific target for that mix, we do expect that the franchise growth will accelerate to a point where it will exceed the company store growth on an annual basis, but this is a long-term plan that we'll be working on over the next 5 years.
Simeon Ari Gutman
Okay. That's helpful. The follow-up is on transactions. I think you gave us, I think, 70% price; 30%, I think, you said transactions. I don't know if you use the same terminology last quarter. If you can just talk about how transactions trended? And if weather played any role at all in that number and how the consumer is feeling based on a transaction basis, I'm not sure that's even a gauge because price is healthy and the top line is healthy, but curious if there's anything to read under at transaction level.
Lori A. Flees
Simeon, this is Lori. I'll go ahead and answer that question. We saw weather at the end of Q1, which actually pushed a little bit of volume in January. But overall, we had transaction growth in every month. We are lapping significant price changes or increases that we made in fiscal year 2022. So that will be the bulk, and we made those changes in Q3 of last year. So you'll see the ticket component of growth, that lapping finish. But the transaction growth was very strong. There was -- there's pockets of weather that shifted things around within months, a little bit between months, but overall, we saw transaction -- good transaction growth across all regions and across all months.
Mary E. Meixelsperger
I would add to that, Simeon, that we're really pleased with Q2 transaction growth. With the pricing increases that we have been passing through, we had seen a larger portion of our comp being sourced from ticket versus transactions. And we thought that seeing the transaction growth in Q2 at close to 30% of the total comp was really encouraging, and we're really pleased with what we're seeing and customer retention and new customer acquisition.
Operator
The next question comes from the line of Steven Zaccone with Citi.
Steven Emanuel Zaccone
I wanted to follow up on Simeon's question, just talking about same-store sales. So the first half, clearly above the full year guidance range. Can you talk a little bit more detail about the second half expectations just because it moderates on a 1-year basis? That commentary about ticket versus transaction, how should we expect the balance to be between ticket and transaction in that second half same-store sales?
Mary E. Meixelsperger
Sure. Steve, this is Mary. We did take some pretty aggressive price increases last year that primarily impacted the second half of the year. So we are expecting to see that we'll be lapping that in Q3 and Q4. In that lapping of price, those price changes will drive some of the moderation in comp in the back half versus what we saw in the front half. We expect over time -- over the long term time to see balance between price ticket and transactions. And we believe that we'll start seeing more of that balance in the back half of the year in terms of our overall comp store sales as we're looking forward. But again, we expect to see more balance over time as we're balancing through some of these pricing actions that we took in the latter part of last year.
Samuel J. Mitchell
I think the good news is, is that we're continuing to see the strength from the consumer. The back half of the year, we do higher volume in our stores as we think about the summer drive season. And so the trends that we're seeing in the business are really solid, both in terms of the transactions, the share growth that we're seeing and then the strength in the ticket. As we've talked about at the beginning of the year, we got a strong focus on added services, and we continue to see good performance from our team and effectively presenting and executing those services.
Lori A. Flees
Yes. I'm sorry. I'll add on. When we say 30% is transaction and 70% is ticket, that ticket increase is not all price. There is a component of price in there, but there's also continued tailwinds for premiumization as well as our non-oil-change revenue service penetration. And those latter 2 points will continue through this year. We've made significant investments in training and process as well as ensuring we have the right equipment that is working in every store, and our team is trained to use it. So we believe strongly that the ticket part of the growth will continue. It's just the piece that is -- the price lap will subside. And when you look at our guidance for FY '23, we definitely will be within guidance, and so you can sort of see that, that will moderate as Mary had said.
Steven Emanuel Zaccone
Great. Then the follow-up I had is just about the margin improvement in the second half of the year because clearly, good execution here in the second quarter. I know you don't guide to gross margin versus SG&A, but can you just help us think through some of the building blocks, like should the back half of the year follows a similar pattern with more SG&A leverage, driving the EBITDA margin improvement.
Mary E. Meixelsperger
Yes. Steve, you should -- we will definitely see margin benefits in the back half of the year from both SG&A leverage as well as from just gross margin leverage in -- as we see higher volumes in the back half of the year and then the full benefit of the pricing and some of the other adjustments that we've made in terms of the gross profit. So when Lori talked about our full year guidance around our EBITDA margin in the 25.5% to 26.5% for the full year, you can kind of back into what the back half needs to be to be able to -- for us to get there. And we think we're going to see really strong margin improvement sequentially as well as year-over-year in that back half period. Lori, is there anything you'd add to that?
Lori A. Flees
No, I agree. And we've made some investments from a technology standpoint, for example, in store scheduling, we'll be rolling out the second wave of that in -- later this year. But those things just help us ensure that labor is scheduled to meet the demand, but we don't overspend on labor. That helps us from a gross profit perspective. And then on the SG&A, we always get leverage on the basic expenses of upgrading our stores when more volume comes in. So we always see leverage increasing quarter-over-quarter as volumes go up.
Operator
The next question comes from the line of Mike Harrison with Seaport Research Partners.
Michael Joseph Harrison
I wanted to ask a little bit about what you're seeing on raw material costs. It looks like base oil came down again kind of early mid-April. That flow through on your gross margin should be a positive for your company-owned stores. But I was wondering if you can help us understand the timing on how that flows through to franchisees and how that franchisee impact of lower raw material costs will affect your gross margins?
Mary E. Meixelsperger
Sure, Mike. I'll take it and talk about the company store side, and maybe Lori can jump in on the franchise side. From a company store perspective, we are just starting to see some flow through on lower base oil costs. Unfortunately, we're seeing some pressure on the pricing we're getting for used oil. As you probably recall, we sell all of our used oil, and that's always been kind of a natural partial hedge to the product cost changes, but there's been a lot of softness in the base oil market overall that's causing some of that -- those base oil costs to come down.
And as a result, we're starting to see some pressure on the reclaimed oil value that we're getting in the marketplace as well. But I do expect back half, we'll see some modest benefits there. I'm not expecting that we'll see anything -- I certainly think it's well within what we've been guiding to in terms of the business. On the franchise side, Lori, do you want to speak to the franchise pass-through?
Lori A. Flees
Yes. On the franchise pass-through, we have a contractual agreement around certain thresholds of how quickly we pass those through. Because of the used oil pricing decline as the base oils are coming down, we're working with our franchise partners to pass that through fairly quickly as we start to realize it. We do have pockets where delivery fees are continuing to be higher just as our distributor partners struggle to keep staffed. And so we're still managing the overall cost portfolio pretty tightly, both on behalf of our company stores and on behalf of franchisees. But I wouldn't expect us to have a negative or positive impact on the base oil within our financials. Our intent is to pass on the benefit to the franchisees as soon as we realize it.
Michael Joseph Harrison
All right. Perfect. And then just curious, you have this slide that shows the growth in your customer base. Can you maybe talk a little bit more about where these new customers are coming from? I'm curious if you're still benefiting from some of the dealerships out there that may be struggling with labor constraints and with service times having to be planned out, maybe weeks in advance.
Lori A. Flees
Yes. That's a great question. We continue to source new customers both from independents and other service providers as well as dealerships. When we look at our customer vehicles served per day, about 67% of them -- about 2/3 of them are customers that we've seen in the past year. And about 20% of them are new and the rest are customers that we've seen -- we just haven't seen them within the last 12 months.
And when we look at those new customers, 40% of them, which is roughly the population that still goes to the dealership, are coming from -- their last oil change was provided by the dealership. And that remains fairly consistent as we work through this year. So -- and those customers, once they have the quick, very easy, very transparent service. It's a very strong relationship, and we're really happy with the retention of those customers.
Operator
The next question comes from the line of Laurence Alexander with Jefferies.
Daniel Dalton Rizzo
This is Dan Rizzo in for Laurence. When you talk about non-oil change services, is there a particular service that you guys focus on that have some sort of advantage versus some competitors?
Lori A. Flees
Yes, it's a great question. The one thing that we have to focus on is items of safety, and those are things like lights and windshield wipers, and cabin air filters. So they are the basics, which I think most good quick lube providers are offering. That -- those -- the items do not actually take much time and they provide significant convenience to our customers. But there are certain times of year when we do have a pickup in other services that I think differentiate us from other quick lubes. For example, we've seen a pickup during this time as we always do on air conditioning recharge. In the colder months, we see an increase in the battery replacement. And we charge -- we test every battery that we can that comes into our service centers, and give the customers a report, and that builds confidence such that when their battery moves to a health indicator of red or yellow, it becomes a much easier conversation on having Valvoline replace it. So what I would say is we do a lot of the OEM preventative maintenance services that a customer could get at a dealership, we do that at 25% to 40% cheaper than a dealership, which is highly attractive, and it's a very quick service. People don't have to leave their car with us. They drive in and we can do those services relatively quickly, and they can save money. So those are the things that differentiate us, are more of the OEM services, the battery replacement, AC recharge. And some of those things are seasonal.
Daniel Dalton Rizzo
That's actually very helpful. And then is -- my second question, is the labor sourcing an issue? Or is it a diminishing issue? Or how should we think about it just as things kind of evolve here from a macro perspective?
Lori A. Flees
Yes. Talent retention -- acquisition and retention is obviously a critical focus for our business. We've been spending a significant amount of time implementing recruiting tools that are shortening the time of hire from application to hire in 7 days. And those are serving us very well in the market. We've also been very focused on onboarding and training changes so that we can have a higher retention rate in the first 90 days. Really happy with the results that the team has driven where we're at a low attrition rate relative to last year and the year before for the current period. And we're well staffed. So we typically need to staff up in every store to hit the drive season. And at the present time, we need less than 1 hire per store to hit the demand that we're expecting in the summer. So we're very well staffed.
Now that doesn't mean we don't have pockets of opportunity. There are certain markets where our attrition is higher than where we want it to be and/or the pipeline is not as robust as we would want it to be. In those cases, we work local solutions with the team in the market to try to remedy that. But as a system, we're really happy with where we are from a staffing standpoint and just the level of experience and training that, that team already has going into this part of the year.
Operator
The final question comes from the line of Jason English with Goldman Sachs.
Jason M. English
Congratulations on completing the deal. Congratulations on being reclassified in the GICS code, but you still got me, the staples guy calling in. So a couple of quick questions. The same-store sales guidance for the back half of the year, implicitly based on your first half delivery and full year guide is 4% to 11%. I think I did the math correct, and correct me if I'm wrong. What are the factors that would have you come in on the low end versus the high end of that?
Mary E. Meixelsperger
So in terms of the low end, I think you'd have to see a pretty dramatic macro shift that's not already reflected in the broader macro numbers for us to come in at the low end, that would probably imply some trade down for us from premium oil changes to nonpremium. We think that's probably unlikely, I would think more toward the midpoint in terms of where we think we're going to be in the back half relative to continued both ticket strength that could be impacted by trade down if we saw a deeper impact on consumers than what we're seeing today, along with continued strength in transactions similar to what we saw in the second quarter.
Lori A. Flees
Yes. I'll just add. I think trade down is one. I think the other piece is that we're also always looking at miles driven and interval. And just given concerns around recession, and whether or not it affects people's summer plans either to the positive or to the negative as it relates to miles driven is something that we are watching. We haven't seen any signs of the customer changing their behavior, but we also recognize the forward-looking economic forecast has some uncertainty on the consumer side. So that's something that we're watching. We don't see anything coming through. We see very strong resiliency in demand.
The other thing is new customer acquisition. We are finding ways to optimize our marketing spend, shifting it to digital channels for new customer acquisition. But we do see competitors in certain markets, particularly on the dealership side, using oil change or preventative maintenance as the way to get people back in the dealership to shop for cars during this period. And so the ability for us to attract new customers without heavy discounting of our proposition is something that also could impact us more in the summer period. Again, we don't see those impacts. But given where the inflation and consumer sentiment is, those would be the things that would move us to the lower end of that range.
Samuel J. Mitchell
All that said, I mean, we're feeling good about where the business is today. And as Lori mentioned, the store stopping is strong, the current performance is solid. So we'd expect to have a very good summer.
Jason M. English
Yes. I think that came through open, the responses to the questions. And back to the base oil question from earlier. I don't recall you guys talking about related to resale of used oil as either positive or negative contributors. This is the first time I recall you guys talking about it as a negative offset. Why is it different now? Why would it be moving different from base oil than we have in the past, and be an offset to the benefit that you otherwise wouldn't have had historically?
Mary E. Meixelsperger
Yes. It's a really good question, Jason. And the kind of the long-term relationships between base oil and crude and then between base oil and used oil, those relationships have been kind of put into a change since the Russian-Ukraine conflict and the sanctions on Russian oil and how that's affected the upstream supply chain for both base oils and then used oil that we've always had. We've talked about used oil in the past, Jason, and we just haven't talked about it in a while. There have been times in the business history since I've been here in the last 7 years where we've had to pay to have used oil removed from the facilities versus being paid for it. So it's definitely always been a factor within the business. Just never anything that's ever been material enough in relationship to the overall product cost for us to spend a lot of time on it.
In this case, I think there's just softness in the base oil market that's creating softness in the re-refined base oil markets that's probably putting faster pressure on the used oil market than what we're seeing in kind of the conventional base oil markets. I have no further insight than that, except to say that we're definitely seeing it not giving us a significant pass-through on the base oil reductions as we might have otherwise seen except for some of the pressure we're seeing on the used oil pricing that we're getting from the market. And as you might imagine, we're working very hard. We think it's a very valuable commodity out there. There's more re-refineries opening here in the U.S., and we think there's increased demand over time. We have very high-quality used oil that we produce in our stores, available to be sold. And we think that there continues to be good opportunity there. We just think short term here, it's going to be a little bit of offset pressure for us as we move forward.
Operator
There are no additional questions waiting at this time. So I would now like to pass the conference back over to the management team for any additional or closing remarks.
Samuel J. Mitchell
All right. Well, thank you all for joining us today. We're excited to move forward with the new Valvoline following the close of the sale of Global Products business with our plans to return the proceeds to shareholders through a tender offer in place. We are focused on driving growth and high returns on capital as a pure-play automotive retail business.
I'd like to thank our store team members and franchise partners for all the work they do to drive our business. We appreciate your time today. Thank you.
Operator
That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.
