PART I – FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS (Unaudited)](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(Unaudited)) This section presents Valvoline Inc.'s unaudited condensed consolidated financial statements, including statements of comprehensive income, balance sheets, cash flows, and stockholders' equity, along with detailed notes explaining the basis of presentation, significant accounting policies, fair value measurements, acquisitions, debt, income taxes, employee benefits, litigation, earnings per share, supplemental financial information, and subsequent events for the periods ended June 30, 2025 and 2024 [Condensed Consolidated Statements of Comprehensive Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Three Months Ended June 30 (in millions) | Metric | 2025 | 2024 | Change (YoY) | | :-------------------------------- | :----- | :----- | :----------- | | Net revenues | $439.0 | $421.4 | +4.2% | | Gross profit | $177.6 | $167.5 | +6.0% | | Operating income | $94.7 | $93.4 | +1.4% | | Income from continuing operations | $57.0 | $48.2 | +18.3% | | Net income | $56.5 | $45.9 | +23.1% | | Basic earnings per share | $0.44 | $0.35 | +25.7% | | Diluted earnings per share | $0.44 | $0.35 | +25.7% | Nine Months Ended June 30 (in millions) | Metric | 2025 | 2024 | Change (YoY) | | :-------------------------------- | :----- | :----- | :----------- | | Net revenues | $1,256.5 | $1,183.5 | +6.2% | | Gross profit | $481.0 | $448.5 | +7.2% | | Operating income | $305.4 | $232.6 | +31.3% | | Income from continuing operations | $189.2 | $125.4 | +50.9% | | Net income | $185.7 | $119.2 | +55.8% | | Basic earnings per share | $1.45 | $0.91 | +59.3% | | Diluted earnings per share | $1.44 | $0.91 | +58.2% | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025 vs. September 30, 2024 (in millions) | Metric | June 30, 2025 | September 30, 2024 | Change | | :-------------------------------- | :------------ | :----------------- | :----- | | Total current assets | $239.0 | $255.4 | -$16.4 | | Total noncurrent assets | $2,322.6 | $2,183.3 | +$139.3 | | Total assets | $2,561.6 | $2,438.7 | +$122.9 | | Total current liabilities | $327.5 | $353.9 | -$26.4 | | Total noncurrent liabilities | $1,920.5 | $1,899.2 | +$21.3 | | Stockholders' equity | $313.6 | $185.6 | +$128.0 | | Total liabilities and stockholders' equity | $2,561.6 | $2,438.7 | +$122.9 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Nine Months Ended June 30 (in millions) | Cash Flow Activity | 2025 | 2024 | Change | | :-------------------------------- | :----- | :----- | :----- | | Total cash provided by operating activities | $175.3 | $163.8 | +$11.5 | | Total cash (used in) provided by investing activities | $(71.9) | $161.4 | -$233.3 | | Total cash used in financing activities | $(103.6) | $(672.4) | +$568.8 | | Decrease in cash, cash equivalents and restricted cash | $(0.4) | $(347.1) | +$346.7 | | Cash, cash equivalents and restricted cash - end of period | $68.3 | $66.0 | +$2.3 | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Changes in Stockholders' Equity (Nine Months Ended June 30, 2025, in millions) | Item | Amount | | :-------------------------------- | :----- | | Balance at September 30, 2024 | $185.6 | | Net income | $185.7 | | Stock-based compensation, net of issuances | $4.3 | | Repurchases of common stock | $(60.3) | | Other comprehensive income (loss), net of tax | $(1.7) | | Balance at June 30, 2025 | $313.6 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1 - Basis of Presentation and Significant Accounting Policies](index=13&type=section&id=Note%201%20-%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note outlines the basis for preparing the unaudited condensed consolidated financial statements in accordance with U.S. GAAP and SEC regulations, emphasizing the use of estimates and judgments. It also details the reclassification of the Global Products business as discontinued operations and discusses recent FASB guidance on segment disclosures, income tax disclosures, and expense categories, none of which are expected to materially impact operating results, financial condition, or cash flows upon adoption - Valvoline completed the sale of its Global Products reportable segment on March 1, 2023, with its operating results and cash flows reflected as discontinued operations[23](index=23&type=chunk) - New FASB guidance on reportable segment disclosures (effective FY2025) and income tax disclosures (effective FY2026) will enhance disclosures but are not expected to impact operating results, financial condition, or cash flows[25](index=25&type=chunk)[26](index=26&type=chunk) - FASB guidance on enhanced expense category disclosures (effective FY2028) is being evaluated for presentation and disclosure impact, but not expected to affect overall results from operations[27](index=27&type=chunk)[29](index=29&type=chunk) [Note 2 - Fair Value Measurements](index=15&type=section&id=Note%202%20-%20Fair%20Value%20Measurements) This note details the fair value measurements of Valvoline's financial assets and liabilities, categorizing them within the fair value hierarchy (Level 1, Level 2, Level 3). It also provides the fair value of long-term debt, specifically the 2031 Notes, based on recent trading values Financial Assets and Liabilities at Fair Value (June 30, 2025, in millions) | Item | Total | Level 1 | Level 2 | Level 3 | NAV | | :-------------------------- | :---- | :------ | :------ | :------ | :---- | | Cash and cash equivalents: | | | | | | | Money market funds | $0.3 | $0.3 | $— | $— | $— | | Time deposits | $2.6 | $— | $2.6 | $— | $— | | Other noncurrent assets: | | | | | | | Non-qualified trust funds | $2.9 | $— | $— | $— | $2.9 | | Deferred compensation investments | $18.1 | $18.1 | $— | $— | $— | | Total assets at fair value | $23.9 | $18.4 | $2.6 | $— | $2.9 | | Deferred compensation obligations | $19.3 | $— | $— | $— | $19.3 | | Total liabilities at fair value | $19.3 | $— | $— | $— | $19.3 | Fair Value of 2031 Notes (in millions) | Date | Fair Value | Carrying Value | | :---------------- | :--------- | :------------- | | June 30, 2025 | $485.2 | $530.9 | | September 30, 2024 | $478.5 | $530.4 | [Note 3 - Acquisitions and Dispositions](index=16&type=section&id=Note%203%20-%20Acquisitions%20and%20Dispositions) This note details Valvoline's acquisition and disposition activities. During the nine months ended June 30, 2025, the Company acquired 26 service center stores for $32.3 million, expanding its retail presence. Concurrently, it disposed of 39 company-operated service centers to a new franchisee in early December 2024, recognizing a pre-tax gain of $74.3 million - Valvoline acquired 26 service center stores, including 6 former franchise locations, for an aggregate purchase price of **$32.3 million** during the nine months ended June 30, 2025, increasing company-operated stores to 983[34](index=34&type=chunk)[35](index=35&type=chunk) - In early December 2024, Valvoline sold 39 company-operated service center stores to a new franchisee, recognizing a pre-tax gain on sale of **$74.3 million** during the nine months ended June 30, 2025[40](index=40&type=chunk) Changes in Goodwill (in millions) | Item | Amount | | :-------------------- | :----- | | Balance as of September 30, 2024 | $615.3 | | Acquisitions | $23.8 | | Dispositions | $(11.4) | | Currency translation | $(0.3) | | Balance at June 30, 2025 | $627.4 | [Note 4 - Debt](index=18&type=section&id=Note%204%20-%20Debt) This note summarizes Valvoline's debt structure, including 2031 Notes, Term Loan A, and Revolver. As of June 30, 2025, total debt was $1,079.7 million, with approximately 49% at fixed interest rates. The Company was in compliance with all debt covenants and had $341.5 million remaining borrowing capacity under its revolving credit facility Total Debt (in millions) | Item | June 30, 2025 | September 30, 2024 | | :-------------------------- | :------------ | :----------------- | | 2031 Notes | $535.0 | $535.0 | | Term Loan A | $421.6 | $439.4 | | Revolver | $130.0 | $125.0 | | Debt issuance costs and discounts | $(6.9) | $(5.6) | | Total debt | $1,079.7 | $1,093.8 | | Current portion of long-term debt | $23.8 | $23.8 | | Long-term debt | $1,055.9 | $1,070.0 | - As of June 30, 2025, Valvoline was in compliance with all covenants under its long-term borrowings and had a remaining borrowing capacity of **$341.5 million** under its **$475.0 million** revolving credit facility[42](index=42&type=chunk)[44](index=44&type=chunk) - The Company guarantees future payments related to certain assigned leases (**$65.8 million** maximum potential payments) and franchisee debt obligations (**$12.1 million**), but has not recorded a liability as the likelihood of default is not considered probable[43](index=43&type=chunk) [Note 5 - Income Taxes](index=19&type=section&id=Note%205%20-%20Income%20Taxes) This note details Valvoline's income tax expense and effective tax rates. For the three months ended June 30, 2025, income tax expense was $20.0 million with an effective tax rate of 26.0%, and for the nine months, it was $65.9 million with a rate of 25.8%. The increase in expense year-over-year was primarily due to higher pre-tax earnings, and the nine-month effective rate increase was due to decreased favorable discrete tax benefits Income Tax Expense and Effective Tax Rate (in millions) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Income tax expense | $20.0 | $17.0 | $65.9 | $42.9 | | Effective tax rate percentage | 26.0% | 26.1% | 25.8% | 25.5% | - The increase in income tax expense was driven by higher pre-tax earnings, and the nine-month effective tax rate increase was due to decreases in favorable discrete tax benefits[45](index=45&type=chunk) [Note 6 - Employee Benefit Plans](index=19&type=section&id=Note%206%20-%20Employee%20Benefit%20Plans) This note summarizes the components of Net pension and other postretirement plan (income) expenses. For the three months ended June 30, 2025, the Company reported a net periodic benefit income of $(0.6) million for pension benefits and $(0.3) million for other postretirement benefits, primarily due to higher expected returns on plan assets and lower interest costs Net Periodic Benefit (Income) Costs (in millions) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Pension benefits | $(0.6) | $3.6 | $(1.8) | $11.1 | | Other postretirement benefits | $(0.3) | $(0.2) | $(0.9) | $(0.7) | [Note 7 - Litigation, Claims and Contingencies](index=19&type=section&id=Note%207%20-%20Litigation%2C%20Claims%20and%20Contingencies) Valvoline is involved in various lawsuits and claims in the ordinary course of business. The Company accrues liabilities for probable and estimable losses, which were not material for the periods presented. Management believes that pending claims or proceedings will not have a material adverse effect on its condensed consolidated financial statements - Valvoline establishes liabilities for probable and reasonably estimable losses from lawsuits, claims, and other legal proceedings, which were not material for the periods presented[47](index=47&type=chunk)[48](index=48&type=chunk) - Management believes that pending claims or proceedings will not have a material adverse effect on its condensed consolidated financial statements[50](index=50&type=chunk) [Note 8 - Earnings Per Share](index=21&type=section&id=Note%208%20-%20Earnings%20Per%20Share) This note provides a summary of basic and diluted earnings per share for both continuing and discontinued operations. For the three months ended June 30, 2025, diluted EPS from continuing operations was $0.44, and for the nine months, it was $1.47 Earnings Per Share (in millions, except per share amounts) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Income from continuing operations | $57.0 | $48.2 | $189.2 | $125.4 | | Loss from discontinued operations, net of tax | $(0.5) | $(2.3) | $(3.5) | $(6.2) | | Net income | $56.5 | $45.9 | $185.7 | $119.2 | | Basic earnings per share (Continuing operations) | $0.45 | $0.37 | $1.48 | $0.96 | | Diluted earnings per share (Continuing operations) | $0.44 | $0.37 | $1.47 | $0.96 | [Note 9 - Supplemental Financial Information](index=21&type=section&id=Note%209%20-%20Supplemental%20Financial%20Information) This note provides supplemental financial details, including a reconciliation of cash, cash equivalents, and restricted cash, a summary of accounts and other receivables, and a disaggregation of net revenues by timing and category. Net revenues for the three months ended June 30, 2025, were $439.0 million, primarily from oil changes and related fees Cash, Cash Equivalents and Restricted Cash (in millions) | Item | June 30, 2025 | September 30, 2024 | June 30, 2024 | | :-------------------------------- | :------------ | :----------------- | :------------ | | Cash and cash equivalents - continuing operations | $68.3 | $68.3 | $65.7 | | Restricted cash - continuing operations | $— | $0.4 | $0.3 | | Total cash, cash equivalents and restricted cash | $68.3 | $68.7 | $66.0 | Accounts and Other Receivables (in millions) | Item | June 30, 2025 | September 30, 2024 | | :-------------------------- | :------------ | :----------------- | | Current receivables, net | $89.8 | $86.4 | | Noncurrent notes receivable, net | $4.5 | $4.3 | Net Revenues by Category (in millions) | Category | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Oil changes and related fees | $319.3 | $307.9 | $912.0 | $868.6 | | Non-oil changes and related fees | $93.9 | $93.6 | $275.2 | $258.6 | | Franchise fees and other | $25.8 | $19.9 | $69.3 | $56.3 | | Total | $439.0 | $421.4 | $1,256.5 | $1,183.5 | [Note 10 - Subsequent Events](index=24&type=section&id=Note%2010%20-%20Subsequent%20Events) This note highlights two significant subsequent events: the signing of the One Big Beautiful Bill Act on July 4, 2025, which is expected to modestly reduce cash tax payments, and Valvoline's definitive agreement to acquire Breeze Autocare for $625 million in cash, pending regulatory approvals, which will expand its quick lube service network - The 'One Big Beautiful Bill Act,' signed July 4, 2025, maintains the **21%** corporate tax rate and makes permanent beneficial tax provisions, expected to modestly reduce cash tax payments in fiscal 2025 and more significantly in future periods due to **100%** bonus depreciation[55](index=55&type=chunk)[101](index=101&type=chunk) - Valvoline signed a definitive agreement to acquire Breeze Autocare (Oil Changers brand) for **$625 million** in cash, pending regulatory approval from the FTC, which issued a Second Request on April 9, 2025[56](index=56&type=chunk)[57](index=57&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=26&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's discussion and analysis of Valvoline's financial condition and results of operations, focusing on continuing operations. It covers the business overview, strategic initiatives, recent developments including refranchising and the Breeze Autocare acquisition, a third fiscal quarter overview, and detailed analysis of net revenues, gross profit, operating expenses, and cash flows, along with the use of non-GAAP measures [Business Overview and Purpose](index=26&type=section&id=BUSINESS%20OVERVIEW%20AND%20PURPOSE) - Valvoline Inc. is a leader in automotive preventive maintenance, operating and franchising over **2,100** service center locations (Valvoline Instant Oil Change and Great Canadian Oil Change) and supporting **250** Express Care locations[62](index=62&type=chunk) - The Company's strategic initiatives include driving full potential in its core business, aggressively growing its retail footprint (company-operated and franchisee stores), and targeting customer and service expansion (fleet business, non-oil change services, evolving car parc)[63](index=63&type=chunk)[64](index=64&type=chunk) [Recent Developments](index=26&type=section&id=RECENT%20DEVELOPMENTS) - Valvoline completed three refranchising transactions in Q4 FY2024 and Q1 FY2025, selling **67** company stores to franchise partners to drive growth and long-term value[63](index=63&type=chunk) - Valvoline announced the acquisition of Breeze Autocare (Oil Changers brand) for approximately **$625 million** in cash, pending FTC regulatory approval, which is expected to incur **$15 million** in additional SG&A expenses for transaction fees and legal support[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) [Third Fiscal Quarter 2025 Overview](index=28&type=section&id=THIRD%20FISCAL%20QUARTER%202025%20OVERVIEW) - Net revenues grew **4%** YoY, driven by **4.9%** system-wide same-store sales (SSS) growth and **163** net store additions, moderated by a **$27.4 million** decrease from Refranchising Transactions[69](index=69&type=chunk) - Income from continuing operations increased **18%** to **$57.0 million**, and diluted EPS rose **19%** to **$0.44**, due to profit expansion, lower net interest, and favorable pension activity, despite Refranchising impacts and SG&A investments[69](index=69&type=chunk) - Adjusted EBITDA increased **5%** YoY, driven by gross profit expansion from strong operational performance (favorable volume and mix), offsetting growth investments in SG&A and Refranchising impacts[69](index=69&type=chunk) [Use of Non-GAAP Measures](index=28&type=section&id=Use%20of%20Non-GAAP%20Measures) - Valvoline uses non-GAAP measures like EBITDA, Adjusted EBITDA, Free Cash Flow, and Free Cash Flow excluding growth capital expenditures to provide supplemental insights into operating performance and cash generation, excluding unusual or non-operational activities[70](index=70&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) [Key Business Measures](index=29&type=section&id=Key%20Business%20Measures) - Valvoline tracks system-wide, company-operated, and franchised store counts, along with system-wide same-store sales (SSS) and store sales, to evaluate operating performance and market position[76](index=76&type=chunk)[78](index=78&type=chunk) Store Counts at End of Period | Store Type | Q3 2025 | Q3 2024 | | :-------------------- | :------ | :------ | | Company-operated | 983 | 937 | | Franchised | 1,141 | 1,024 | | Total system-wide stores | 2,124 | 1,961 | Same-Store Sales Growth (YoY) | Category | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Company-operated | 4.2% | 7.6% | 5.7% | 7.3% | | Franchised | 5.4% | 6.7% | 6.5% | 7.6% | | System-wide | 4.9% | 7.1% | 6.2% | 7.5% | [Results of Operations - Consolidated Review](index=30&type=section&id=RESULTS%20OF%20OPERATIONS) [Net revenues](index=31&type=section&id=Net%20revenues) Net revenues increased by $17.6 million (4.2%) for the three months and $73.0 million (6.2%) for the nine months ended June 30, 2025, compared to the prior year periods. This growth was primarily driven by higher volume from network expansion and system-wide SSS increases (4.9% for three months, 6.2% for nine months), reflecting higher average ticket, premiumization, non-oil change service penetration, and increased transactions. These gains were partially offset by the impact of Refranchising Transactions - Net revenues increased by **$17.6 million (4.2%)** for the three months and **$73.0 million (6.2%)** for the nine months ended June 30, 2025, driven by higher volume from network expansion and system-wide SSS growth[83](index=83&type=chunk)[85](index=85&type=chunk) - System-wide SSS growth was **4.9%** for the three months and **6.2%** for the nine months, attributed to higher average ticket from premiumization, net pricing benefits, non-oil change service penetration, and increased transactions[83](index=83&type=chunk)[85](index=85&type=chunk) - Revenue growth was partially offset by lower net revenues due to the Refranchising Transactions[83](index=83&type=chunk)[85](index=85&type=chunk) [Gross profit](index=32&type=section&id=Gross%20profit) Gross profit increased by $10.1 million (6.0%) for the three months and $32.5 million (7.2%) for the nine months ended June 30, 2025. This improvement was largely due to volume expansion, pricing, and better service mix, reflecting premiumization and non-oil change services. Gross profit margin also improved due to enhanced labor efficiency and product cost leverage, despite higher store operating expenses and the impact of Refranchising Transactions - Gross profit increased by **$10.1 million (6.0%)** for the three months and **$32.5 million (7.2%)** for the nine months ended June 30, 2025, driven by volume expansion, pricing, and improved service mix[87](index=87&type=chunk)[90](index=90&type=chunk) - Gross profit margin improved due to better labor efficiency, leverage in product costs, and benefits from service mix, partially offset by higher store operating expenses and Refranchising impacts[89](index=89&type=chunk)[92](index=92&type=chunk) [Net operating expenses](index=33&type=section&id=Net%20operating%20expenses) Net operating expenses increased for the three and nine months ended June 30, 2025. Selling, general and administrative (SG&A) expenses rose due to investments in technology, talent, and advertising, as well as costs related to investment and divestiture activities. Net legacy and separation-related expenses also increased. Other income, net, saw a significant year-to-date increase primarily due to a $74.3 million gain on sale from a Refranchising Transaction Net Operating Expenses (in millions) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Selling, general and administrative expenses | $85.5 | $77.2 | $254.6 | $224.0 | | Net legacy and separation-related expenses | $0.4 | $0.1 | $1.6 | $0.2 | | Other income, net | $(3.0) | $(3.2) | $(80.6) | $(8.3) | | Net operating expenses | $82.9 | $74.1 | $175.6 | $215.9 | - SG&A expenses increased by **$8.3 million** (three months) and **$30.6 million** (nine months) due to investments in technology, talent, advertising, and costs for investment/divestiture activities[93](index=93&type=chunk) - Other income, net, increased by **$72.3 million** year-to-date, largely driven by a **$74.3 million** gain on sale of operations from a Refranchising Transaction[95](index=95&type=chunk)[96](index=96&type=chunk) [Net pension and other postretirement plan activity](index=35&type=section&id=Net%20pension%20and%20other%20postretirement%20plan%20activity) Net pension and other postretirement plan activity showed a favorable impact of $4.3 million for the three months and $13.1 million for the nine months ended June 30, 2025. This favorability resulted from higher expected returns on plan assets and reduced interest costs due to declining discount rates - Net pension and other postretirement plan activity was favorable by **$4.3 million** (three months) and **$13.1 million** (nine months) due to higher expected returns on plan assets and lower interest costs from declining discount rates[97](index=97&type=chunk) [Net interest and other financing expenses](index=35&type=section&id=Net%20interest%20and%20other%20financing%20expenses) Net interest and other financing expenses decreased by $6.2 million for the three months and $0.9 million for the nine months ended June 30, 2025. The quarterly decrease was primarily due to prior year debt modification charges. The year-to-date reduction was driven by lower debt modification expenses and reduced interest expense from prior year debt repurchases, partially offset by lower benefits from maturing investments - Net interest and other financing expenses decreased by **$6.2 million** (three months) and **$0.9 million** (nine months) due to lower prior year debt modification charges and reduced interest expense from prior year debt repurchases[98](index=98&type=chunk)[99](index=99&type=chunk) - The decrease was partially offset by **$20.4 million** of lower benefits from the prior year maturities of invested net proceeds from the sale of Global Products and remaining interest rate swaps[99](index=99&type=chunk) [Income tax provision](index=35&type=section&id=Income%20tax%20provision) Income tax expense increased to $20.0 million (26.0% effective rate) for the three months and $65.9 million (25.8% effective rate) for the nine months ended June 30, 2025, primarily driven by higher pre-tax earnings. The nine-month effective tax rate increase was due to decreased favorable discrete tax benefits Income Tax Expense and Effective Tax Rate (in millions) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Income tax expense | $20.0 | $17.0 | $65.9 | $42.9 | | Effective tax rate percentage | 26.0% | 26.1% | 25.8% | 25.5% | - Changes in income tax expense were principally driven by pre-tax earnings, with the nine-month effective tax rate increase attributable to decreases in favorable discrete tax benefits[100](index=100&type=chunk) [Loss from discontinued operations, net of tax](index=35&type=section&id=Loss%20from%20discontinued%20operations%2C%20net%20of%20tax) Loss from discontinued operations, net of tax, decreased by $1.8 million for the three months and $2.7 million for the nine months ended June 30, 2025, compared to the prior year periods. This reduction was primarily due to lower costs associated with the separation of processes and systems following the sale of the former Global Products reportable segment Loss from Discontinued Operations, Net of Tax (in millions) | Period | 2025 | 2024 | | :-------------------- | :----- | :----- | | Three months ended June 30 | $(0.5) | $(2.3) | | Nine months ended June 30 | $(3.5) | $(6.2) | - The decrease in loss from discontinued operations was primarily due to lower costs associated with the separation of processes and systems related to the sale of the former Global Products reportable segment[103](index=103&type=chunk) [Continuing operations EBITDA and Adjusted EBITDA](index=36&type=section&id=Continuing%20operations%20EBITDA%20and%20Adjusted%20EBITDA) Adjusted EBITDA from continuing operations increased by $6.3 million for the three months and $18.2 million for the nine months ended June 30, 2025. This growth was primarily driven by gross profit expansion from strong operational performance, including improvements in volumes and mix, which more than offset the impacts from Refranchising Transactions and growth investments in SG&A expenses EBITDA and Adjusted EBITDA from Continuing Operations (in millions) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | EBITDA from continuing operations | $125.8 | $116.9 | $394.7 | $299.3 | | Adjusted EBITDA from continuing operations | $129.5 | $123.2 | $336.7 | $318.5 | - Adjusted EBITDA increased due to gross profit expansion from strong operational performance (volume and mix improvements), offsetting Refranchising impacts and growth investments in SG&A[105](index=105&type=chunk) [Financial Position, Liquidity and Capital Resources](index=37&type=section&id=Financial%20Position%2C%20Liquidity%20and%20Capital%20Resources) [Overview](index=37&type=section&id=Overview) Valvoline manages its liquidity and capital resources through a disciplined approach, focusing on investing in business and growth strategies, returning capital to shareholders, and funding ongoing operations. Capital expenditures, acquisitions, and share repurchases are adjustable components of its cash flow and capital management strategy - Valvoline's capital allocation strategy prioritizes profitable growth, maintaining a target adjusted EBITDA net leverage ratio of **2.5 to 3.5 times**, and returning excess capital to shareholders[116](index=116&type=chunk) [Continuing operations cash flows](index=37&type=section&id=Continuing%20operations%20cash%20flows) For the nine months ended June 30, 2025, cash provided by operating activities increased to $180.0 million, while cash used in investing activities was $(71.9) million, and cash used in financing activities significantly decreased to $(103.6) million Continuing Operations Cash Flows (Nine months ended June 30, in millions) | Activity | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Operating activities | $180.0 | $170.0 | | Investing activities | $(71.9) | $161.4 | | Financing activities | $(103.6) | $(672.4) | [Operating activities](index=37&type=section&id=Operating%20activities) Cash flows from operating activities increased by $10.0 million, driven by higher cash earnings and lower interest payments, partially offset by unfavorable changes in net working capital, particularly a decrease in payables and accrued liabilities due to milestone payments - Cash flows from operating activities increased by **$10.0 million**, driven by higher cash earnings and **$16.4 million** lower interest payments, partially offset by unfavorable changes in net working capital (e.g., **$20 million** in product supply milestone payments)[109](index=109&type=chunk) [Investing activities](index=37&type=section&id=Investing%20activities) Cash flows from investing activities decreased by $233.3 million, primarily due to a $344.0 million decline in proceeds from investments (maturities of Global Products sale proceeds) and higher capital expenditures ($7.3 million) and acquisition activity ($4.2 million). This was partially offset by increased net proceeds from the sale of operations ($124.7 million) from a Refranchising Transaction - Investing cash flows decreased by **$233.3 million**, mainly due to a **$344.0 million** decline in proceeds from investments (maturities of Global Products sale proceeds) and increased capital expenditures (**$7.3 million**) and acquisition activity (**$4.2 million**)[110](index=110&type=chunk) - This was partially offset by **$124.7 million** in increased net proceeds from the sale of operations, primarily from a Refranchising Transaction of **39** company-operated stores[110](index=110&type=chunk) [Financing activities](index=37&type=section&id=Financing%20activities) Cash flows used in financing activities decreased by $568.8 million, largely due to $430.0 million lower net repayments on borrowings (driven by prior year tender offer for 2030 Notes) and $151.8 million lower share repurchase activity. This was partially offset by $16.4 million in excise tax payments related to prior share repurchases - Cash flows used in financing activities decreased by **$568.8 million**, primarily due to **$430.0 million** lower net repayments on borrowings (prior year tender offer for 2030 Notes) and **$151.8 million** lower share repurchase activity[111](index=111&type=chunk) - This decrease was partially offset by **$16.4 million** in excise tax payments, largely from fiscal 2023 share repurchases subject to the Inflation Reduction Act[111](index=111&type=chunk) [Continuing operations free cash flow](index=38&type=section&id=Continuing%20operations%20free%20cash%20flow) Free cash flow from continuing operations increased to $19.7 million for the nine months ended June 30, 2025, up from $17.0 million in the prior year. This increase was driven by higher operating cash flows, partially offset by increased capital expenditures, particularly in maintenance capital expenditures due to growing store count Free Cash Flow (Nine months ended June 30, in millions) | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Cash flows provided by operating activities | $180.0 | $170.0 | | Less: Maintenance capital expenditures | $(35.1) | $(23.0) | | Free cash flow excluding growth capital expenditures | $144.9 | $147.0 | | Less: Growth capital expenditures | $(125.2) | $(130.0) | | Free cash flow | $19.7 | $17.0 | - The increase in free cash flow was due to higher operating cash flows, partially offset by increased capital expenditures, mainly maintenance capital expenditures for the growing store count[113](index=113&type=chunk) [Debt](index=38&type=section&id=Debt) As of June 30, 2025, approximately 49% of Valvoline's outstanding borrowings had fixed interest rates. The Company was in compliance with all debt covenants and maintained a borrowing capacity of $341.5 million under its Revolver - Approximately **49%** of Valvoline's outstanding borrowings had fixed interest rates as of June 30, 2025[114](index=114&type=chunk) - Valvoline was in compliance with all debt covenants and had **$341.5 million** remaining borrowing capacity under its Revolver as of June 30, 2025[114](index=114&type=chunk) [Share repurchases](index=38&type=section&id=Share%20repurchases) In July 2024, the Board approved a $400.0 million share repurchase authorization. During the nine months ended June 30, 2025, the Company repurchased 1.6 million shares for $59.8 million, with $325.0 million remaining. Share repurchase activity was paused in Q2 fiscal 2025 to accelerate debt repayment related to the upcoming Breeze Autocare acquisition - A **$400.0 million** share repurchase authorization was approved in July 2024, with **$325.0 million** remaining as of June 30, 2025[115](index=115&type=chunk) - During the nine months ended June 30, 2025, Valvoline repurchased **1.6 million** shares for **$59.8 million**[115](index=115&type=chunk) - Share repurchase activity was paused in Q2 fiscal 2025 to accelerate debt repayment in connection with the Term Loan B for the Breeze Autocare acquisition[117](index=117&type=chunk) [Summary](index=38&type=section&id=Summary) As of June 30, 2025, Valvoline had $68.3 million in cash and cash equivalents, $1,079.7 million in total debt, and $341.5 million in remaining borrowing capacity. Management believes the Company has sufficient liquidity to meet its operational and financial obligations for the next twelve months - As of June 30, 2025, Valvoline had **$68.3 million** in cash and cash equivalents, **$1,079.7 million** in total debt, and **$341.5 million** in remaining borrowing capacity[118](index=118&type=chunk) - Management believes the Company has sufficient liquidity from current cash, operations, and existing financing to meet its obligations for the next twelve months[121](index=121&type=chunk) [New Accounting Pronouncements](index=40&type=section&id=New%20Accounting%20Pronouncements) This section refers to Note 1 for a discussion and analysis of recently issued accounting pronouncements and their potential impacts on Valvoline's financial statements - Refer to Note 1 for details on new accounting pronouncements and their impacts on Valvoline[122](index=122&type=chunk) [Critical Accounting Policies and Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Management reassessed its critical accounting estimates and determined there were no changes during the nine months ended June 30, 2025, from those disclosed in the Annual Report on Form 10-K for fiscal year ended September 30, 2024 - No changes were identified in critical accounting estimates during the nine months ended June 30, 2025[123](index=123&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=40&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Management reassessed the Company's quantitative and qualitative market risk disclosures and concluded there were no material changes to market risks during the nine months ended June 30, 2025, compared to those previously disclosed in its Annual Report on Form 10-K - No material changes to market risks were identified during the nine months ended June 30, 2025[124](index=124&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=40&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the evaluation of Valvoline's disclosure controls and procedures, which were deemed not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting related to the ERP system implementation. Despite this, management performed additional procedures to ensure fair presentation of financial statements. Remedial measures are actively being implemented to address the identified deficiencies [Evaluation of Disclosure Controls and Procedures](index=40&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Valvoline's CEO and CFO concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting. However, management performed additional analyses and procedures to ensure the condensed consolidated financial statements are fairly presented - Valvoline's disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting[126](index=126&type=chunk) - Despite the material weakness, management performed additional procedures to ensure the condensed consolidated financial statements are fairly presented in all material respects, with no identified material misstatements[127](index=127&type=chunk)[128](index=128&type=chunk) [Changes in Internal Control](index=41&type=section&id=Changes%20in%20Internal%20Control) Other than ongoing remediation efforts, there were no significant changes in Valvoline's internal control over financial reporting during the fiscal quarter ended June 30, 2025 - No significant changes in internal control over financial reporting occurred during the quarter, other than remediation efforts[129](index=129&type=chunk) [Material Weakness in Internal Control over Financial Reporting](index=41&type=section&id=Material%20Weakness%20in%20Internal%20Control%20over%20Financial%20Reporting) A material weakness in internal control over financial reporting persisted as of June 30, 2025, stemming from the ERP system implementation and related ineffective information technology general controls (ITGCs) and business process controls. Specifically, deficiencies were noted in user access controls, change management controls, evidence of third-party IT service organization control effectiveness, and the design of certain business process controls - A material weakness in internal control over financial reporting continued to exist as of June 30, 2025, originating from the ERP system implementation and related ineffective ITGCs and business process controls[130](index=130&type=chunk)[131](index=131&type=chunk) - Specific deficiencies include inadequate user access controls, insufficient change management controls, lack of evidence for third-party IT service organization control effectiveness, and design flaws in certain business process controls[131](index=131&type=chunk) [Remedial Measures](index=41&type=section&id=Remedial%20Measures) Management is actively implementing remedial measures to address the material weakness, including stabilizing the ERP, engaging outside consulting support, enhancing access and change management controls, implementing new ITGCs for HRIS, evaluating third-party service organization controls, and conducting end-to-end business process walkthroughs. These efforts are expected to be completed in fiscal 2025 - Remedial efforts include stabilizing the ERP, engaging outside consulting, enhancing access and change management controls, implementing new ITGCs for HRIS, evaluating third-party service organization controls, and conducting end-to-end business process walkthroughs[133](index=133&type=chunk)[136](index=136&type=chunk) - These remedial efforts are in varying stages of implementation and are expected to be completed in fiscal 2025, with effectiveness confirmed upon consistent control execution and successful operational testing[134](index=134&type=chunk) [ITEM 5. OTHER INFORMATION](index=42&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section states that no director or officer adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No director or officer adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[135](index=135&type=chunk) PART II – OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=43&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section refers to Note 7 of the Condensed Consolidated Financial Statements for a description of Valvoline's legal proceedings - Refer to Note 7 for a description of Valvoline's legal proceedings[138](index=138&type=chunk) [ITEM 1A. RISK FACTORS](index=43&type=section&id=ITEM%201A.%20RISK%20FACTORS) During the reporting period, there were no material changes to the Company's risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended September 30, 2024 - No material changes to the Company's risk factors were identified during the period covered by this report[139](index=139&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=43&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section indicates that there were no unregistered sales of equity securities or use of proceeds during the reporting period - There were no unregistered sales of equity securities and use of proceeds[140](index=140&type=chunk) [ITEM 6. EXHIBITS](index=43&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including certifications (31.1, 31.2, 32) and XBRL-related documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104) - The report includes certifications (31.1, 31.2, 32) and various XBRL taxonomy extension documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[141](index=141&type=chunk) SIGNATURE - The report was signed by J. Kevin Willis, Chief Financial Officer, on behalf of Valvoline Inc. on August 6, 2025[143](index=143&type=chunk)

Core Insights - Valvoline reported $439 million in revenue for the quarter ended June 2025, a year-over-year increase of 4.2% [1] - The EPS for the same period was $0.47, compared to $0.45 a year ago, with a surprise of +2.17% against the consensus estimate of $0.46 [1] - The revenue exceeded the Zacks Consensus Estimate of $435.64 million, resulting in a surprise of +0.77% [1] Financial Performance Metrics - Same-store sales growth was 4.9%, slightly below the estimated 5.2% by analysts [4] - System-wide franchised stores totaled 1,141, compared to the average estimate of 1,148 [4] - Total system-wide stores reached 2,124, slightly below the average estimate of 2,126 [4] - Same-store sales growth for company-operated stores was 4.2%, below the estimated 5.2% [4] - Same-store sales growth for franchised stores was 5.4%, compared to the estimated 5.7% [4] - Company-operated stores numbered 983, slightly above the average estimate of 978 [4] - Franchised stores opened totaled 19, compared to the estimated 20 [4] - Company-operated stores opened were 19, below the estimated 28 [4] Stock Performance - Valvoline's shares have returned -7% over the past month, while the Zacks S&P 500 composite increased by +0.5% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Financial Data and Key Metrics Changes - System wide sales increased by 10% to $890 million, and adjusted EBITDA rose by 12% considering refranchising impacts [6][14] - Adjusted net income was $61 million, with adjusted EPS of $0.47, an 18% increase year-over-year [18] - Gross margin rate increased by 80 basis points year-over-year to 40.5%, driven by labor leverage [15][18] - SG&A as a percentage of sales increased by 80 basis points year-over-year to 18.5% due to technology investments [16] Business Line Data and Key Metrics Changes - Same store sales increased by 4.9%, with transaction growth contributing approximately 25% to the comp [14][24] - The company added 46 new stores in the quarter, bringing the year-to-date total to 116 gross additions [10][11] - Premium product usage among customers grew both sequentially and year-over-year [7][8] Market Data and Key Metrics Changes - The company experienced strong customer demand with no evidence of customers trading down or delaying services [7] - The impact of tariffs on financials is expected to be minimal and unchanged [10] Company Strategy and Development Direction - The company is focused on driving core business potential and enhancing shareholder value through cost management and margin expansion [9][20] - The company is working with the FTC on the Breeze transaction, which may involve divesting certain stores to close the deal [12][94] - The company aims to improve return on invested capital through strategic store additions and refranchising efforts [11][63] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting same store sales expectations for the full year, narrowing guidance to 5.8% to 6.4% [9][20] - The company remains optimistic about transaction performance and overall business momentum moving into the summer season [32][34] - Management acknowledged the inflationary environment as a significant factor but believes the fundamentals of the business remain strong [38][88] Other Important Information - The company has paused share repurchases following the Grieve announcement, with $60 million in repurchases year-to-date [18] - The company expects SG&A leverage to return in fiscal year 2026 as technology investments are fully lapped [16][35] Q&A Session Summary Question: Can you discuss the scenarios for full year same store sales growth guidance? - Management noted good growth across all key metrics and expects consistent transaction growth, focusing on the midpoint of the narrowed range for Q4 [23][24] Question: What were the drivers of ticket growth? - Management indicated that premiumization, net pricing, and increased NOCR service penetration all contributed to ticket growth [27] Question: What impacted June's performance? - Management attributed the slower start in June to mild weather and timing, but noted strong customer resilience and improved performance in July [31][32] Question: How should investors think about same store sales planning for next year? - Management stated that while it's early to comment on fiscal 2026, they expect to see a return to SG&A leverage and continued strong same store sales growth [34][35] Question: Can you elaborate on the premium mix for oil changes? - Management reported that the premium mix is around 80%, driven by shifts from conventional to premium products as the car park ages [112]

Financial Data and Key Metrics Changes - System wide sales increased by 10% to $890 million, and adjusted EBITDA rose by 12% considering refranchising impacts [6][14] - Adjusted net income was $61 million, with adjusted EPS of $0.47, an 18% increase considering refranchising impacts [18] - Gross margin rate increased by 80 basis points year over year to 40.5%, driven by labor leverage of over 100 basis points [15][18] Business Line Data and Key Metrics Changes - Same store sales increased by 4.9%, with transaction growth contributing approximately 25% to the comp [6][14] - The company added 46 new stores in the quarter, bringing the year-to-date total to 116 gross additions [9][10] - SG&A as a percentage of sales increased by 80 basis points year over year to 18.5%, reflecting investments in technology infrastructure [16] Market Data and Key Metrics Changes - The company continues to see strong customer demand with no evidence of customers trading down or delaying services [7] - Premium product usage among customers grew both sequentially and year over year [7] - The company expects to narrow its same store sales guidance range to 5.8% to 6.4% for the full year [8] Company Strategy and Development Direction - The company is focused on driving core business potential and enhancing shareholder value through cost management and margin expansion [8][21] - The company is working with the FTC on the Breeze transaction, which may involve divesting certain stores to close the deal [11][96] - The company aims to improve return on invested capital through strategic store additions and refranchising efforts [10][62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of customer demand and transaction growth despite a slower start to the summer holiday season [31][33] - The company anticipates continued strong performance and is narrowing guidance ranges based on current momentum [21][86] - Management acknowledged the inflationary environment as a significant factor but remains optimistic about long-term growth potential [36][86] Other Important Information - The company has approximately $68 million in cash and a leverage ratio of 3.3x on an adjusted basis [18] - Share repurchases totaled $60 million year to date, paused following the Grieve announcement [19] - The company is focused on leveraging technology investments to improve operational efficiency and customer experience [101][104] Q&A Session Summary Question: Full year same store sales growth guidance - Management discussed the performance in April and May, noting a slower start in June due to weather but consistent transaction growth across the system [25][32] Question: Drivers of ticket growth - Management indicated that ticket growth was driven by premiumization, net pricing, and increased NOCR service penetration, but did not provide specific numbers [27] Question: June performance and July outlook - Management noted that June was impacted by mild weather but saw improved performance in July with good traffic [32][33] Question: Franchise pricing differential - Management explained that franchisees operate as independent price centers, leading to geographic pricing differences, with one large franchisee adjusting prices significantly [75][76] Question: Technology investments and SG&A growth - Management confirmed that technology investments accounted for about one-third of SG&A growth, with expectations for SG&A leverage to return in fiscal year 2026 [16][77] Question: Breeze acquisition and integration - Management discussed the potential need to divest certain stores to satisfy FTC requirements and emphasized the importance of thoughtful integration of the Breeze brand [92][96]

Core Viewpoint - Valvoline reported quarterly earnings of $0.47 per share, exceeding the Zacks Consensus Estimate of $0.46 per share, and showing an increase from $0.45 per share a year ago, indicating a positive earnings surprise of +2.17% [1] Financial Performance - The company achieved revenues of $439 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.77% and up from $421.4 million year-over-year [2] - Over the last four quarters, Valvoline has exceeded consensus EPS estimates three times and has also topped consensus revenue estimates three times [2] Stock Performance and Outlook - Valvoline shares have increased by approximately 0.2% since the beginning of the year, underperforming compared to the S&P 500's gain of 7.1% [3] - The company's earnings outlook is crucial for assessing future stock performance, with current consensus EPS estimates at $0.49 for the upcoming quarter and $1.65 for the current fiscal year [7] Industry Context - The Automotive - Retail and Wholesale - Parts industry, to which Valvoline belongs, is currently ranked in the bottom 17% of over 250 Zacks industries, which may negatively impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that the current unfavorable estimate revisions trend could lead to underperformance [5][6]

Third Quarter Fiscal 2025 Earnings Lori Flees, CEO & President Kevin Willis, CFO Elizabeth Clevinger, Investor Relations 08.06.2025 SAFE HARBOR Forward-Looking Statements 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, statements about the proposed transaction to acquire Breeze Autocare, including its Oil Changers sto ...

Third Quarter 2025 Financial Highlights Valvoline Inc. reported strong financial and operational results for the third quarter, driven by robust sales, profit, and store growth, reflecting resilient customer demand [Executive Summary](index=1&type=section&id=Q3_2025_Executive_Summary) Valvoline Inc. reported strong financial and operational results for the third quarter ended June 30, 2025, with significant growth in sales, profit, and store count, demonstrating resilience in customer demand | Metric | Q3 FY25 Value | YoY Growth (Reported) | YoY Growth (Recast) | | :-------------------------------- | :---------------- | :-------------------- | :------------------ | | Sales | $439 million | 4% | 12% | | System-wide store sales | $890 million | 10% | - | | System-wide same store sales (SSS) | - | 4.9% | - | | Reported income from continuing operations | $57 million | 18% | - | | Earnings per diluted share (EPS) | $0.44 | 19% | - | | Adjusted EBITDA | $130 million | 5% | 12% | | Adjusted EPS | $0.47 | 4% | 18% | | System-wide store additions | 46 | - | - | - Cash and cash equivalents balance of **$68 million**; total debt of **$1.1 billion** [5](index=5&type=chunk) - Year-to-date operating cash flow from continuing operations of **$180 million** and free cash flow of **$20 million** [5](index=5&type=chunk) [CEO Commentary](index=1&type=section&id=CEO_Commentary_Q3_2025) Lori Flees, President and CEO, expressed satisfaction with the strong Q3 performance, highlighting the business's resilience in customer demand despite minor market headwinds and acknowledging the dedication of franchise partners and team members - Valvoline delivered **strong sales, profit, and store growth** for the third quarter [3](index=3&type=chunk) - The business demonstrated **remarkable resilience in customer demand** despite modestly down miles driven and a slower start to summer holidays [3](index=3&type=chunk) - Good same store sales comps were achieved with **transaction growth across each month** in the quarter [3](index=3&type=chunk) Fiscal Year 2025 Outlook Valvoline updated its fiscal year 2025 guidance, narrowing ranges for key metrics while maintaining confidence in its business model and long-term shareholder value [Updated Guidance Ranges](index=2&type=section&id=Updated_Guidance_Ranges_FY2025) Valvoline narrowed its fiscal year 2025 guidance ranges to reflect updated expectations, maintaining confidence in its resilient business model for strong performance and long-term shareholder value | Metric | Updated Outlook | Prior Outlook | | :-------------------------- | :-------------------- | :-------------------- | | System-wide SSS growth | 5.8% - 6.4% | 5% - 7% | | System-wide store additions | no change | 160 - 185 | | Net revenues | $1.69 - $1.72 billion | $1.67 - $1.73 billion | | Adjusted EBITDA | $460 - $470 million | $450 - $470 million | | Adjusted EPS | $1.59 - $1.64 | $1.57 - $1.67 | | Capital expenditures | no change | $230 - $250 million | | Share repurchases | $60 million | $40 - $70 million | - Valvoline is unable to reconcile forward-looking non-GAAP financial measures (Adjusted EBITDA and Adjusted EPS) to comparable GAAP measures without unreasonable efforts due to unpredictable items affecting comparability [6](index=6&type=chunk) Operating Performance Valvoline's operating performance in Q3 FY25 demonstrated robust growth in revenues, profits, and store network expansion, with recast financials showing even stronger year-over-year improvements [Third Quarter Operating Results (GAAP)](index=2&type=section&id=Q3_Operating_Results_GAAP) Valvoline's GAAP operating results for Q3 FY25 show growth across key financial metrics, including net revenues, operating income, and income from continuing operations, with corresponding increases in EPS | Metric | Q3 FY25 Results | YoY Growth | | :-------------------------------- | :-------------- | :--------- | | Net revenues | $439.0 million | 4 % | | Operating income | $94.7 million | 1 % | | Income from continuing operations | $57.0 million | 18 % | | EPS | $0.44 | 19 % | | Adjusted EPS | $0.47 | 4 % | | Adjusted EBITDA | $129.5 million | 5 % | | System-wide store sales | $889.6 million | 10 % | [Refranchising Recast Financials](index=3&type=section&id=Refranchising_Recast_Financials) Valvoline completed the refranchising of 67 stores, and recast results, which adjust for these transactions as if they occurred prior to October 1, 2023, demonstrate significantly higher year-over-year growth rates for net revenues, Adjusted EBITDA, and Adjusted EPS - Valvoline completed the sale of **67 stores** from company to franchise through three transactions in Q4 FY24 and Q1 FY25 [11](index=11&type=chunk) | Metric | Q3 FY25 As Reported | Q3 FY24 As Reported | Q3 FY24 Recast | YoY Growth As Reported | YoY Growth Recast | | :---------------- | :------------------ | :------------------ | :------------- | :--------------------- | :---------------- | | Net revenues | $439.0 | $421.4 | $393.1 | 4 % | 12 % | | Adjusted EBITDA | $129.5 | $123.2 | $115.6 | 5 % | 12 % | | Adjusted EPS | $0.47 | $0.45 | $0.40 | 4 % | 18 % | | Metric | YTD FY25 As Reported | YTD FY25 Recast | YTD FY24 As Reported | YTD FY24 Recast | YoY Growth As Reported | YoY Growth Recast | | :---------------- | :------------------- | :-------------- | :------------------- | :-------------- | :--------------------- | :---------------- | | Net revenues | $1,256.5 | $1,244.8 | $1,183.5 | $1,105.7 | 6 % | 13 % | | Adjusted EBITDA | $336.7 | $333.4 | $318.5 | $299.8 | 6 % | 11 % | | Adjusted EPS | $1.14 | $1.11 | $1.11 | $1.01 | 3 % | 10 % | [Retail Store Operations](index=10&type=section&id=Retail_Store_Operations) Valvoline's retail operations showed robust growth in system-wide sales and same-store sales, alongside continued expansion of its store network, reaching over 2,100 locations by the end of Q3 FY25 [System-wide Sales and Same-Store Sales Growth](index=10&type=section&id=System_wide_Sales_and_SSS_Growth) Valvoline reported strong system-wide store sales and same-store sales growth for Q3 and YTD FY25, driven by both company-operated and franchised locations | Metric | Q3 FY25 | Q3 FY24 | YTD FY25 | YTD FY24 | | :-------------------------- | :------ | :------ | :------- | :------- | | System-wide store sales (in millions) | $889.6 | $808.5 | $2,535.4 | $2,277.5 | | Year-over-year growth | 10.0 % | 12.4 % | 11.3 % | 12.6 % | | Same-store sales growth: | | | | | | Company-operated | 4.2 % | 7.6 % | 5.7 % | 7.3 % | | Franchised | 5.4 % | 6.7 % | 6.5 % | 7.6 % | | System-wide | 4.9 % | 7.1 % | 6.2 % | 7.5 % | - Beginning in fiscal 2025, SSS growth is determined as the year-over-year change in net revenues of U.S. VIOC same stores (company-operated, franchised, and system-wide) that have been in operation for at least **12 full months** [28](index=28&type=chunk) [Store Network Expansion](index=10&type=section&id=Store_Network_Expansion) Valvoline continued to expand its retail network, increasing system-wide store count to over 2,100 locations by June 30, 2025, through new openings and acquisitions | Store Type | June 30, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Company-operated | 983 | 937 | | Franchised | 1,141 | 1,024 | | System-wide store count | 2,124 | 1,961 | | System-wide YoY growth | 8.3 % | 8.7 % | | Activity (Q3 FY25) | Company-operated | Franchised | | :------------------------------------------ | :--------------- | :--------- | | Beginning of period | 950 | 1,128 | | Opened | 19 | 19 | | Acquired | 8 | — | | Net conversions between company-operated and franchised | 6 | (6) | | Closed | — | — | | End of period | 983 | 1,141 | Total system-wide stores at end of Q3 FY25: 2,124 Consolidated Financial Statements Valvoline's consolidated financial statements for Q3 FY25 reflect strong revenue and profit growth, a healthy balance sheet, and positive operating cash flows [Statements of Consolidated Income](index=7&type=section&id=Statements_of_Consolidated_Income) Valvoline's Statements of Consolidated Income for Q3 FY25 show net revenues of $439.0 million, a gross profit of $177.6 million, and income from continuing operations of $57.0 million, contributing to a year-to-date net income of $185.7 million | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net revenues | $439.0 | $421.4 | $1,256.5 | $1,183.5 | | Gross profit | $177.6 | $167.5 | $481.0 | $448.5 | | Operating income | $94.7 | $93.4 | $305.4 | $232.6 | | Income from continuing operations | $57.0 | $48.2 | $189.2 | $125.4 | | Net income | $56.5 | $45.9 | $185.7 | $119.2 | | Diluted earnings per share (Continuing operations) | $0.44 | $0.37 | $1.47 | $0.96 | | Diluted earnings per share | $0.44 | $0.35 | $1.44 | $0.91 | [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed_Consolidated_Balance_Sheets) As of June 30, 2025, Valvoline's total assets increased to $2,561.6 million from $2,438.7 million at September 30, 2024, with a corresponding increase in stockholders' equity to $313.6 million | Category | June 30, 2025 (in millions) | September 30, 2024 (in millions) | | :-------------------------- | :-------------------------- | :------------------------------- | | Total current assets | $239.0 | $255.4 | | Total noncurrent assets | $2,322.6 | $2,183.3 | | Total assets | $2,561.6 | $2,438.7 | | Total current liabilities | $327.5 | $353.9 | | Total noncurrent liabilities | $1,920.5 | $1,899.2 | | Total liabilities | $2,248.0 | $2,253.1 | | Stockholders' equity | $313.6 | $185.6 | | Total liabilities and stockholders' equity | $2,561.6 | $2,438.7 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed_Consolidated_Statements_of_Cash_Flows) For the nine months ended June 30, 2025, Valvoline generated $180.0 million in operating cash flows from continuing operations, while investing and financing activities resulted in net outflows | Cash Flow Activity | Nine months ended June 30, 2025 (in millions) | Nine months ended June 30, 2024 (in millions) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Total cash provided by operating activities | $175.3 | $163.8 | | Investing cash flows from continuing operations | $(71.9) | $161.4 | | Financing cash flows from continuing operations | $(103.6) | $(672.4) | | Decrease in cash, cash equivalents and restricted cash | $(0.4) | $(347.1) | | Cash, cash equivalents and restricted cash - end of period | $68.3 | $66.0 | - Operating cash flows from continuing operations were **$180.0 million** for the nine months ended June 30, 2025, up from **$170.0 million** in the prior year [26](index=26&type=chunk) Non-GAAP Financial Measures and Reconciliations This section provides reconciliations of GAAP to non-GAAP financial measures, including adjusted income, EBITDA, and free cash flow, along with definitions and rationale for their use - Non-GAAP measures are used to enable comparison of financial trends and results between periods and provide a useful supplemental presentation of Valvoline's operating performance [18](index=18&type=chunk) - These measures have limitations as analytical tools and should not be considered in isolation from, an alternative to, or more meaningful than, GAAP financial results [18](index=18&type=chunk) [Income from Continuing Operations and Diluted EPS Reconciliation](index=12&type=section&id=Income_and_EPS_Reconciliation) Valvoline provides a reconciliation of GAAP income from continuing operations and diluted EPS to adjusted non-GAAP figures, accounting for key items such as pension expenses, legacy costs, IT transition costs, and investment/divestiture-related costs to offer a clearer view of underlying operational performance | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Reported income from continuing operations | $57.0 | $48.2 | $189.2 | $125.4 | | Total adjustments, after tax | $3.8 | $10.1 | $(42.3) | $19.7 | | Adjusted income from continuing operations | $60.8 | $58.3 | $146.9 | $145.1 | | Reported diluted EPS from continuing operations | $0.44 | $0.37 | $1.47 | $0.96 | | Adjusted diluted EPS from continuing operations | $0.47 | $0.45 | $1.14 | $1.11 | [Adjusted Net Revenues and EBITDA Reconciliation](index=13&type=section&id=Adjusted_Net_Revenues_and_EBITDA_Reconciliation) This section reconciles GAAP income from continuing operations to EBITDA and Adjusted EBITDA, detailing adjustments for key items. For Q3 FY25, Adjusted EBITDA from continuing operations was $129.5 million, with an Adjusted EBITDA margin of 29.5% | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Reported net revenues | $439.0 | $421.4 | $1,256.5 | $1,183.5 | | Income from continuing operations | $57.0 | $48.2 | $189.2 | $125.4 | | EBITDA from continuing operations | $125.8 | $116.9 | $394.7 | $299.3 | | Key items - subtotal | $3.7 | $6.3 | $(58.0) | $19.2 | | Adjusted EBITDA from continuing operations | $129.5 | $123.2 | $336.7 | $318.5 | | Net profit margin | 13.0 % | 11.4 % | 15.1 % | 10.6 % | | Adjusted EBITDA margin | 29.5 % | 29.2 % | 26.8 % | 26.9 % | [Free Cash Flows from Continuing Operations Reconciliation](index=14&type=section&id=Free_Cash_Flows_Reconciliation) Valvoline presents a reconciliation of operating cash flows to free cash flow and free cash flow excluding growth capital expenditures, providing insights into cash generation available for debt, equity holders, and investments | Metric | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Operating cash flows from continuing operations | $180.0 | $170.0 | | Additions to property, plant and equipment | $(160.3) | $(153.0) | | Free cash flow from continuing operations | $19.7 | $17.0 | | Maintenance additions to property, plant and equipment | $(35.1) | $(23.0) | | Free cash flow excluding growth capital expenditures | $144.9 | $147.0 | [Definitions of Non-GAAP Measures and Adjustments](index=15&type=section&id=Definitions_of_Non_GAAP_Measures_and_Adjustments) This section provides management's definitions and rationale for using non-GAAP financial measures, including EBITDA, adjusted profitability, and free cash flow, explaining how these metrics offer a supplemental view of operating performance by excluding certain 'key items' not reflective of ongoing business operations [EBITDA Measures](index=15&type=section&id=EBITDA_Measures_Definition) EBITDA measures offer a supplemental view of Valvoline's operating performance by adjusting for non-operating items like depreciation, amortization, interest, and taxes - EBITDA measures provide a **meaningful supplemental presentation** of Valvoline's operating performance between periods on a comparable basis [38](index=38&type=chunk) - They account for depreciable assets, income tax, and interest costs related to Valvoline's tax and capital structures [38](index=38&type=chunk) [Free Cash Flow Measures](index=15&type=section&id=Free_Cash_Flow_Measures_Definition) Free cash flow metrics are used to assess cash generation available for debt, equity holders, and investments, with a focus on cash flow before growth capital expenditures - Management uses **free cash flow** and **free cash flow excluding growth capital expenditures** as additional non-GAAP metrics of cash flow generation [39](index=39&type=chunk) - These measures indicate **ongoing cash generated** that is available for debt and equity holders, as well as other investment opportunities [39](index=39&type=chunk) - Free cash flow excluding growth capital expenditures provides a supplemental view of cash flow generation before investments in growth capital, focusing on **maintenance capital expenditures** [39](index=39&type=chunk) [Adjusted Profitability Measures](index=15&type=section&id=Adjusted_Profitability_Measures_Definition) Adjusted profitability measures facilitate period-over-period comparisons by excluding items not reflective of Valvoline's core operational performance - Adjusted profitability measures (adjusted net income, diluted earnings per share, and EBITDA) enable the **comparison of financial trends and results** between periods [40](index=40&type=chunk) - They exclude certain items that may not be reflective of the Company's underlying and ongoing operational performance or vary independently of business performance [40](index=40&type=chunk) [Key Items](index=15&type=section&id=Key_Items_Definition) Key items are defined as unusual, infrequent, or non-operational activities that are excluded from adjusted financial measures to improve comparability of operational results - Key items are unusual, infrequent, or non-operational activities not directly attributable to the underlying business, which management believes impact the comparability of operational results between periods [41](index=41&type=chunk) - Net pension and other postretirement plan (income) expenses: Reflects market-driven changes and legacy amounts, not operational performance [43](index=43&type=chunk) - Net legacy and separation-related expenses: Associated with legacy businesses and separation from former parent company, not reflective of ongoing operations [44](index=44&type=chunk) - Information technology transition costs: Expenses directly related to IT transitions (e.g., ERP implementation), not considered ongoing operating expenses [45](index=45&type=chunk) - Investment and divestiture-related costs (income): Activity associated with significant acquisitions, investments, and divestitures, not reflective of ongoing operations [46](index=46&type=chunk) - Debt extinguishment and modification costs: Accelerated amortization and third-party fees related to debt transactions, not indicative of future servicing costs [47](index=47&type=chunk) Corporate Information and Disclosures This section provides details on Valvoline's conference call, key business measure definitions, company overview, forward-looking statements, and investor/media contacts [Conference Call Webcast](index=4&type=section&id=Conference_Call_Webcast) Valvoline hosted a live audio webcast for its third quarter fiscal 2025 conference call on August 6, 2025, with supporting materials and an archived version available on its investor relations website - Live audio webcast of Q3 FY25 conference call held on **August 6, 2025, at 9 a.m. ET** [14](index=14&type=chunk) - Webcast and supporting materials are accessible through Valvoline's website at http://investors.valvoline.com [14](index=14&type=chunk) [Key Business Measures Definitions](index=4&type=section&id=Key_Business_Measures_Definitions) Valvoline defines and utilizes key business measures such as system-wide, company-operated, and franchised store counts, along with system-wide SSS and store sales, as supplementary tools to evaluate operating performance alongside GAAP measures - Valvoline tracks operating performance using **system-wide, company-operated, and franchised store counts**, and **system-wide SSS and store sales** [15](index=15&type=chunk) - These measures are considered supplements to, not substitutes for, Valvoline's net revenues and operating income, as determined in accordance with U.S. GAAP [15](index=15&type=chunk) - SSS is defined as net revenues of U.S. Valvoline Instant Oil Change (VIOC) stores with same stores defined at the beginning of the month following the completion of **12 full months** in operation within the system [16](index=16&type=chunk) [About Valvoline Inc.](index=5&type=section&id=About_Valvoline_Inc) Valvoline Inc. is a leading provider of preventive automotive maintenance, operating an extensive network of over 2,100 service centers across the U.S. and Canada, performing more than 28 million services annually - Valvoline Inc. delivers quick, easy, trusted service at more than **2,100 franchised and company-operated service centers** across the United States and Canada [20](index=20&type=chunk) - The company completes more than **28 million services annually** system-wide, ranging from oil changes to manufacturer-recommended maintenance [20](index=20&type=chunk) - Valvoline employs **11,000 team members** focused on growing the core business, expanding the retail network, and planning for future vehicles [20](index=20&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward_Looking_Statements) The report includes forward-looking statements regarding Valvoline's future operations, financial results, growth strategies, and market opportunities, which are inherently subject to risks and uncertainties detailed in SEC filings, and the company assumes no obligation to update them - Statements about proposed transactions, growth strategy, benefits from acquisitions and refranchising, future opportunities, financial/operating results, and market opportunities are **forward-looking** [21](index=21&type=chunk) - These statements are based on current expectations and are subject to **risks and uncertainties** that may cause results to differ materially [21](index=21&type=chunk) - Additional information regarding these risks is described in Valvoline's SEC filings (Forms 10-K and 10-Q), available on its website or the SEC's website [21](index=21&type=chunk) [Investor and Media Contacts](index=5&type=section&id=Investor_and_Media_Contacts) Contact information for investor and media inquiries is provided for direct communication with Valvoline's respective departments - Investor Inquiries: Elizabeth B. Clevinger, **+1 (859) 357-3155**, IR@valvoline.com [22](index=22&type=chunk) - Media Inquiries: Angela Davied, media@valvoline.com [23](index=23&type=chunk)

Core Viewpoint - Wall Street anticipates a year-over-year increase in earnings for Valvoline, driven by higher revenues, with a focus on how actual results compare to estimates impacting stock price [1][2]. Earnings Expectations - Valvoline is expected to report quarterly earnings of $0.46 per share, reflecting a +2.2% change year-over-year, with revenues projected at $435.64 million, up 3.4% from the previous year [3]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analyst assessments [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates a positive Earnings ESP of +0.44% for Valvoline, suggesting recent bullish sentiment among analysts, although the stock holds a Zacks Rank of 4, complicating predictions of an earnings beat [12]. Historical Performance - In the last reported quarter, Valvoline's expected earnings were $0.36 per share, but it delivered $0.34, resulting in a surprise of -5.56%. Over the last four quarters, the company has beaten consensus EPS estimates twice [13][14]. Market Reaction Factors - An earnings beat or miss may not solely dictate stock movement, as other factors can influence investor sentiment and stock performance [15].

Company Overview - Valvoline Inc. is a leader in preventive automotive maintenance, operating approximately 2,100 service centers across the United States and Canada [3] - The company performs over 28 million services annually, including quick oil changes and various maintenance services [3] - Valvoline employs around 11,000 team members focused on business growth, retail network expansion, and future vehicle planning [3] Financial Reporting - Valvoline plans to report its financial results for the fiscal third quarter on August 6, 2025 [1] - A live audio webcast for analysts and investors will take place on the same day at 9 a.m. ET [1] - A replay of the webcast will be available shortly after the call concludes on the company's Investor Relations website [2]

Core Insights - Valvoline Inc. released its FY24 Impact Report, showcasing its contributions to environmental, social, and governance issues during the 2024 fiscal year [1][2] Company Achievements - The company achieved a record-breaking fundraising year for Children's Miracle Network Hospitals and opened its 2000th store, reflecting significant growth and community impact [2] - Valvoline Inc. operates over 2,000 service centers across the U.S. and Canada, completing more than 28 million services annually, including quick oil changes and various maintenance services [4] - The company employs approximately 11,000 team members focused on expanding the business and preparing for future vehicle needs [4] Environmental and Social Initiatives - Valvoline Inc. became an EPA Green Power Partner and was recognized as a Top 30 Retail Partner for its efforts in increasing renewable energy usage [6] - The launch of the "Happy to Help" community impact platform emphasizes youth health and mental well-being, alongside record donations to Children's Miracle Network Hospitals [6] - The company is expanding professional growth and development opportunities for its service center employees as it grows its network [6]