Core Viewpoint - Valvoline Inc. is actively supporting Concours in the Hills, a significant automotive event in Arizona, which aims to raise funds for children's health through the Children's Miracle Network Hospitals [1] Group 1: Company Involvement - Valvoline Inc. is recognized as a leader in preventive automotive maintenance [1] - The company is participating in its twelfth year of supporting Concours in the Hills, showcasing its commitment to community engagement [1] Group 2: Event Details - Concours in the Hills is one of Arizona's premier automotive events, attracting automotive enthusiasts [1] - The event is held at Fountain Park in Fountain Hills, Arizona, and focuses on raising critical funds for children's health [1]

Core Viewpoint - The investment strategy focuses on long-term investments while also utilizing short-term shorts to identify alpha opportunities through bottom-up analysis of individual companies' fundamentals [1] Group 1: Investment Strategy - The approach emphasizes medium to long-term investment duration [1] - The goal is to identify companies with strong fundamentals, sustainable competitive advantages, and growth potential [1]

Core Insights - Valvoline reported a strong first quarter for fiscal 2026, with system-wide same-store sales increasing by 5.8% and net sales reaching $462 million, reflecting an 11% increase on a reported basis and a 15% increase when adjusted for refranchising impacts [4][7][10] Financial Performance - The company achieved a gross margin of 37.4%, up 50 basis points year-over-year, attributed to labor and product cost leverage, despite rising service delivery costs [10] - Adjusted EBITDA margin increased by 60 basis points to 25.4%, while the company reported a GAAP loss of $32.2 million primarily due to divestitures required by the FTC [12] - Operating cash flow improved to $64.8 million, with free cash flow increasing by approximately $20 million year-over-year to $7.4 million [13] Store Expansion and Acquisitions - The acquisition of Breeze added 162 stores, significantly increasing the store base, while Valvoline also opened 38 net new stores in the quarter, including 10 from franchise partners [6][8] - The company aims to add 250 new units by fiscal 2027, with a healthy pipeline for both company and franchise development [8] Customer Engagement and Market Trends - Valvoline's mobile service delivery initiative contributed about 20 basis points to same-store sales, focusing on consumer and fleet convenience [1] - The company reported strong customer feedback, with a 4.7-star rating across the network and Net Promoter Scores over 80% [7] Operational Initiatives and Technology - Management is implementing a multi-year technology strategy, including a new CRM system and cloud migration, which is expected to improve efficiencies and reduce maintenance costs over time [19] - Marketing initiatives, such as the "Instant Transfer Portal" campaign, have generated strong engagement, and the company is exploring a national advertising fund starting in fiscal 2027 [18] Financial Strategy and Leverage - Valvoline's leverage ratio stands at 3.3x net debt to adjusted EBITDA, with plans to reduce it to approximately 2.5x before resuming share repurchases [5][14] - The company anticipates a pre-tax interest expense increase of about $33 million in fiscal 2026 due to a new Term Loan B [14]

Financial Performance - Net revenues for the three months ended December 31, 2025, increased to $461.8 million, up 11.5% from $414.3 million in the same period of 2024[8]. - Gross profit rose to $172.5 million, representing a 12.5% increase compared to $152.9 million in the prior year[8]. - Operating income decreased significantly to $18.3 million from $143.8 million, indicating a decline of 87.3% year-over-year[8]. - The net loss for the quarter was $32.8 million, a stark contrast to the net income of $91.6 million reported in the same quarter of 2024[8]. - Adjusted EBITDA increased by 14% year-over-year to $117.4 million, representing 25.4% of net revenues, compared to $102.8 million in the prior year[84]. - The company reported a loss from continuing operations of $32.2 million, with a diluted loss per share of $0.25, primarily due to a pre-tax loss of $57.9 million from the sale of 45 Breeze stores[75]. Assets and Liabilities - Total assets increased to $3,402.1 million as of December 31, 2025, compared to $2,670.4 million at the end of September 2025, reflecting a growth of 27.4%[9]. - Long-term debt increased to $1,633.6 million from $1,050.2 million, representing a rise of 55.5%[9]. - Total debt increased to $1,664.8 million as of December 31, 2025, up from $1,074.0 million as of September 30, 2025[43]. - Stockholders' equity decreased to $307.6 million from $338.5 million, a decline of 9.1%[9]. - Valvoline's total assets at fair value as of December 31, 2025, amounted to $24.0 million, while total liabilities at fair value were $21.3 million[24]. Cash Flow - Cash and cash equivalents at the end of the period rose to $69.9 million, up from $51.6 million at the beginning of the quarter[11]. - The company reported total cash provided by operating activities of $64.8 million, compared to $41.2 million in the same quarter of the previous year, marking a 57.5% increase[11]. - Valvoline reported free cash flow of $7.4 million for the three months ended December 31, 2025, compared to a negative free cash flow of $12.2 million in the same period of 2024, driven by higher operating cash flows[110]. Acquisitions and Investments - The company incurred $635.6 million in acquisitions during the quarter, significantly higher than $4.4 million in the same period last year[11]. - Valvoline acquired Breeze Autocare for $638.7 million on December 1, 2025, expanding its service center network by 204 stores[29]. - Following the Breeze acquisition, Valvoline recognized a pre-tax loss of $57.9 million from the sale of 45 acquired stores, which was required for regulatory clearance[29]. - The company incurred $12.5 million in third-party costs related to the Breeze acquisition, included in selling, general, and administrative expenses[34]. - The Breeze acquisition, completed on December 1, 2025, represented approximately 3% of net revenues for the quarter and 22% of total consolidated assets[122]. Operational Metrics - System-wide same-store sales (SSS) growth was 5.8%, driven by network expansion and improvements in service mix and pricing[75]. - Net revenues from oil changes and related fees were $337.7 million, while non-oil changes and related fees contributed $100.5 million[84]. - The company expanded its retail presence to 1,196 company-operated service center stores as of December 31, 2025, following several acquisitions[38]. - Total system-wide stores reached 2,380 by the end of the first quarter of 2026, up from 2,180 in the previous quarter[86]. Debt and Financing - The effective interest rate for Term Loan B was 5.873% as of December 31, 2025, with a principal balance of $740.0 million[48]. - Approximately 32% of Valvoline's outstanding borrowings had fixed interest rates, with the remainder at variable rates, and the company was in compliance with all debt covenants[111]. - Valvoline amended its Senior Credit Agreement to include a seven-year $740.0 million Term Loan B, which was used to fund the Breeze acquisition[112]. - The company guaranteed future payments related to certain leases totaling $87.7 million as of December 31, 2025[50]. Tax and Compliance - Income tax expense for the three months ended December 31, 2025, was $26.2 million, with an effective tax rate of (436.7)%[51]. - The effective tax rate for the three months ended December 31, 2025, was (436.7)%, primarily due to losses before income taxes and non-deductible transaction costs associated with the Breeze acquisition[98]. - Valvoline was in compliance with all covenants under its long-term borrowings as of December 31, 2025[44]. Management and Strategy - Management believes the company has sufficient liquidity to meet its cash and operating requirements for the next twelve months[117]. - Valvoline continues to focus capital expenditures on growth, with maintenance capital expenditures increasing to $8.8 million from $5.7 million year-over-year[110]. - The company is actively working on remedial measures to address a material weakness in internal control over financial reporting, which was identified following the implementation of a new ERP system[127].

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Financial Data and Key Metrics Changes - The company reported net sales of $462 million, an increase of 11% on a reported basis and 15% when adjusted for refranchising impacts from the previous year [13] - The gross margin rate increased by 50 basis points year-over-year to 37.4%, driven by labor and product cost leverage, despite increases in other service delivery costs [13][14] - Adjusted EBITDA margin increased by 60 basis points to 25.4%, with both adjusted EBITDA and EPS growing double digits year-over-year [10][14] Business Line Data and Key Metrics Changes - System-wide same-store sales grew by 5.8% and 13.8% on a two-year stack, with ticket prices being the largest contributor to this growth [7][10] - Franchise store performance was slightly above the system average, indicating strong growth in the franchise segment [8] - The company added 162 stores from the Breeze transaction and 38 net new stores, with 10 from franchise, contributing to network expansion [9][10] Market Data and Key Metrics Changes - Customer demand for nondiscretionary services remains strong, with no signs of trade-down or deferral observed [8] - The company achieved a 4.7-star rating across its network and NPS scores over 80%, reflecting high customer satisfaction [8] Company Strategy and Development Direction - The company is focused on integrating the Breeze acquisition while continuing to drive productivity and margin expansion in its core business [10][17] - Plans to establish a national advertising fund in fiscal 2027 to enhance marketing efficiency as the network grows [85] - The company aims to reduce its leverage ratio to 2.5x as quickly as possible to resume share repurchase activities [16][80] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting fiscal year 2026 guidance, citing strong fundamentals and customer demand [17] - The impact of Winter Storm Fern on Q2 performance was acknowledged, but management remains optimistic about recouping lost transactions as conditions normalize [35][111] - The company is monitoring macroeconomic factors affecting consumer spending but continues to see trade-up activity and premiumization in its services [46] Other Important Information - The company raised over $1.8 million for local children's hospitals through fundraising efforts, marking a nearly 40% increase over the prior year [12] - The company is working on improving internal controls and expects to resolve material weaknesses by the end of the fiscal year [50][51] Q&A Session Summary Question: Impact of non-oil change revenue on same-store sales - Management confirmed that non-oil change revenue contributed around 20 basis points to same-store sales this quarter [19] Question: Franchise store growth pipeline - Management indicated a robust pipeline for franchise openings, with nine units opened in January, suggesting strong momentum [20] Question: Sales composition trends - Management noted balanced growth in ticket and transaction contributions, with ticket being a larger contributor in Q1 [25][26] Question: Integration focus on Breeze - Management emphasized that Breeze represents less than 10% of financial commitments for FY 2026, allowing focus on core business growth [27] Question: Gross margin performance - Management highlighted that gross margin improved due to labor and product cost management, with expectations for continued progress [56] Question: Customer acquisition and advertising strategies - Management discussed sophisticated marketing strategies aimed at optimizing customer acquisition costs and improving return on ad spend [104] Question: Material weakness in internal controls - Management provided an update on the progress of addressing material weaknesses, indicating good progress but ongoing work is required [50][51]

Financial Data and Key Metrics Changes - The company reported net sales of $462 million, an increase of 11% on a reported basis and 15% when adjusted for refranchising impacts from the previous year [13] - Gross margin rate improved to 37.4%, up 50 basis points year-over-year, driven by labor and product cost leverage [13][14] - Adjusted EBITDA margin increased by 60 basis points to 25.4%, with both adjusted EBITDA and EPS growing double digits year-over-year [10][14] Business Line Data and Key Metrics Changes - System-wide same-store sales grew by 5.8% and 13.8% on a two-year stack, with ticket prices being the largest contributor [7][10] - Franchise same-store sales were slightly higher than the system average, indicating strong performance across both company and franchise stores [8] - The company added 162 stores from the Breeze transaction and 38 net new stores, with 10 from franchise [9][10] Market Data and Key Metrics Changes - Customer demand for nondiscretionary services remains strong, with no signs of trade-down or deferral observed [8] - The company achieved a 4.7-star rating across its network and NPS scores over 80%, reflecting high customer satisfaction [8] Company Strategy and Development Direction - The company is focused on network expansion, productivity gains, and margin improvement to drive earnings growth [6][10] - Integration of the Breeze stores is underway, with expectations for continued growth and sharing of best practices across the teams [9][17] - The company aims to maintain its position as a category leader with a focus on long-term value creation for shareholders [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting guidance for fiscal year 2026, despite potential near-term headwinds from immature stores [10][17] - The company noted that customer behavior is expected to normalize post-weather disruptions, with a strong start to Q2 before the impact of Winter Storm Fern [35][111] - Management highlighted the importance of maintaining customer trust and loyalty, which has been bolstered by strong brand recognition and service quality [11][47] Other Important Information - The company raised over $1.8 million for local children's hospitals through fundraising efforts, marking a nearly 40% increase over the prior year [12] - The company is working on improving internal controls and expects to resolve material weaknesses by the end of the fiscal year [50][53] Q&A Session Summary Question: Impact of non-oil change revenue on same-store sales - Management confirmed that non-oil change revenue contributed around 20 basis points to same-store sales this quarter, with mobile service delivery being in early stages [19] Question: Franchise store growth pipeline - Management indicated a robust pipeline for franchise openings, with nine units opened in January and a target of 250 new units for fiscal year 2027 [20] Question: Trends in sales composition - Management noted that ticket prices were the larger contributor to same-store sales growth, with balanced growth across both ticket and transaction metrics [25][62] Question: Impact of Breeze on financials - Breeze stores are expected to add approximately $160 million in top line and $31 million in EBITDA for the 10 months of ownership in fiscal 2026 [42] Question: Material weakness in internal controls - Management stated that significant progress has been made in addressing material weaknesses, with expectations to resolve issues by the end of the fiscal year [50][53] Question: Gross margin performance - Management highlighted that gross margin improved due to labor and product cost leverage, with expectations for continued progress [57] Question: Customer acquisition and marketing strategies - Management discussed the effectiveness of their marketing strategies, including lifecycle management and customer engagement, which have improved return on ad spend [104]

Financial Data and Key Metrics Changes - Valvoline reported net sales of $462 million, an increase of 11% on a reported basis and 15% when adjusted for refranchising impacts from the previous year [12] - The gross margin rate improved by 50 basis points year-over-year to 37.4%, driven by labor and product cost leverage, despite increases in service delivery costs [12][13] - Adjusted EBITDA margin increased by 60 basis points to 25.4%, while EPS grew by 16%, or 28% when adjusted for refranchising [12][13] Business Line Data and Key Metrics Changes - System-wide same-store sales grew by 5.8% and 13.8% on a two-year stack, with ticket prices being the largest contributor to this growth [5][6] - Franchise same-store sales were slightly higher than the system average, indicating strong performance across both company and franchise stores [6] - The company added 162 stores from the Breeze transaction and 38 net new stores, with 10 from franchise [7][8] Market Data and Key Metrics Changes - Customer demand for nondiscretionary services remains strong, with no signs of trade-down or deferral observed [6] - Valvoline's customer satisfaction is reflected in a 4.7-star rating and NPS scores over 80% [6] Company Strategy and Development Direction - The company aims to expand its network to over 3,500 stores, with a focus on productivity and margin improvement [5][9] - Valvoline is integrating the Breeze stores and expects to leverage best practices across the organization [8][9] - The company is also exploring a national advertising fund to enhance marketing efficiency as its network grows [84] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting fiscal year 2026 guidance, citing strong core business fundamentals despite near-term headwinds from immature stores [10][15] - The company anticipates that customer behavior will normalize post-weather disruptions, with expectations of recouping lost transactions [34][111] Other Important Information - Valvoline raised over $1.8 million for local children's hospitals, marking a nearly 40% increase from the previous year [11] - The company is focused on reducing leverage to 2.5 times adjusted EBITDA to resume share repurchase activities [14][79] Q&A Session Summary Question: Impact of non-oil change revenue on same-store sales - Management confirmed that non-oil change revenue contributed around 20 basis points to same-store sales this quarter [18] Question: Franchise store growth pipeline - Management indicated a robust pipeline for franchise openings, with nine new units opened in January [19] Question: Trends in sales composition - Management noted that ticket prices were the larger contributor to same-store sales growth, with balanced growth across both ticket and transaction [24][61] Question: Breeze integration focus - Management stated that Breeze represents less than 10% of financial commitments for FY 2026, emphasizing strong core business momentum [26] Question: Gross margin performance - Management highlighted that gross margin improved due to labor and product cost leverage, with expectations for continued progress [55] Question: Customer trade-down behavior - Management noted that convenience is a significant driver for customers switching from dealerships to Valvoline, rather than solely price considerations [66] Question: Impact of Winter Storm Fern - Management acknowledged that while the storm affected transactions, historical patterns suggest customers will return for service once conditions normalize [111]

分组1 - Valvoline reported quarterly earnings of $0.37 per share, exceeding the Zacks Consensus Estimate of $0.34 per share, and showing an increase from $0.32 per share a year ago, resulting in an earnings surprise of +9.37% [1] - The company posted revenues of $461.8 million for the quarter ended December 2025, which was slightly below the Zacks Consensus Estimate by 0.06%, and an increase from $414.3 million year-over-year [2] - Valvoline's stock has increased approximately 14.6% since the beginning of the year, outperforming the S&P 500's gain of 1.1% [3] 分组2 - The earnings outlook for Valvoline is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The trend of estimate revisions for Valvoline was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] - The current consensus EPS estimate for the upcoming quarter is $0.34 on revenues of $485.81 million, and for the current fiscal year, it is $1.67 on revenues of $2.03 billion [7] 分组3 - The Oil and Gas - Refining and Marketing industry, to which Valvoline belongs, is currently ranked in the bottom 22% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Par Petroleum, another company in the same industry, is expected to report quarterly earnings of $1.21 per share, reflecting a significant year-over-year increase of +253.2%, although its consensus EPS estimate has been revised down by 54% over the last 30 days [9]

First Quarter Fiscal 2026 Earnings • Lori Flees, CEO & President • Kevin Willis, CFO • Elizabeth Clevinger, Investor Relations • 02.04.2026 SAFE HARBOR Forward-Looking Statements F I R S T Q U A R T E R F I S C A L 2 0 2 6 E A R N I N G S / 0 2 . 0 4 . 2 0 2 6 2 Certain statements herein, other than statements of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include, without limitation, statemen ...