Valvoline(VVV) - 2025 Q1 - Quarterly Report

Financial Performance - Net revenues for the three months ended December 31, 2024, increased to $414.3 million, up 10.4$373.4 million in the same period of 2023[9] - Gross profit rose to $152.9 million, representing a 13.4$134.8 million in the prior year[9] - Operating income significantly improved to $143.8 million, up 128.5$62.8 million in the previous year[9] - Net income for the quarter was $91.6 million, a substantial increase of 187.5$31.9 million in the same quarter of 2023[9] - Basic earnings per share increased to $0.71, compared to$0.24 in the prior year, reflecting a growth of 195.8%[9] - Comprehensive income for the quarter was $84.7 million, compared to$36.1 million in the same quarter of 2023[9] - Income from continuing operations grew 177% to $93.9 million, with diluted earnings per share increasing 181$0.73[52] - Adjusted EBITDA rose by 14% over the prior year period, driven by strong top-line growth and operational efficiencies[52] - Gross profit margin improved to 36.9% in Q1 2025 from 36.1% in Q1 2024[62] Cash Flow and Capital Management - Cash flows from operating activities totaled $41.2 million, up from$19.9 million in the same period last year[13] - The company repurchased $45.7 million of common stock during the quarter, compared to$171.7 million in the same period of the previous year[13] - Total cash, cash equivalents, and restricted cash decreased to $60.4 million as of December 31, 2024, from$420.7 million a year earlier[41] - Cash provided by operating activities was $41.4 million, an increase of$19.5 million from the prior year[79] - Free cash flow from continuing operations was $(12.2) million, reflecting higher capital expenditures for new store construction[84] - The company repurchased 0.6 million shares for$20.5 million, leaving $325.0 million remaining under the share repurchase authorization[45] - During the three months ended December 31, 2024, the Company repurchased 1.0 million shares of its common stock for$39.3 million, leaving $345.5 million available for repurchase as of December 31, 2024[86] - The share repurchase authorization is part of a broader capital allocation framework aimed at delivering value to shareholders through profitable growth and returning excess capital[88] Assets and Liabilities - Total current assets decreased to$212.7 million from $255.4 million as of September 30, 2024[11] - Total assets decreased to$2,349.8 million from $2,438.7 million as of September 30, 2024[11] - Total debt as of December 31, 2024, was$1,033.1 million, down from $1,093.8 million as of September 30, 2024[31] - Valvoline's total assets at fair value amounted to$27.2 million as of December 31, 2024, with $23.5 million classified as Level 1 inputs[26] - Valvoline's total liabilities at fair value were$22.8 million as of December 31, 2024, with deferred compensation obligations accounting for the entire amount[26] - As of December 31, 2024, Valvoline had cash and cash equivalents of $60.0 million, total debt of$1,033.1 million, and total remaining borrowing capacity of $401.5 million[89] Tax and Other Income - The effective tax rate for the three months ended December 31, 2024, was 26.2$71.5 million, primarily due to a $73.9 million gain on the sale of operations related to a refranchising transaction[71] Operational Highlights - System-wide same-store sales (SSS) growth was 8.0$820.3 million for the three months ended December 31, 2024, representing a year-over-year growth of 13.5%[63] - Valvoline operates and franchises over 2,000 service center locations, with a focus on expanding its retail footprint[50] - The company plans to target customer and service expansion, particularly in the fleet business and non-oil change services[52] Internal Controls and Risk Management - A material weakness in internal control over financial reporting was identified due to the implementation of a new ERP system, which is being addressed through various remedial measures[99] - Management has established a plan to stabilize the ERP and enhance access controls, with completion expected during fiscal 2025[103] - There were no material changes to the Company's risk factors during the period covered by this report[108] - Management reassessed critical accounting estimates and determined there were no changes in the three months ended December 31, 2024[92] - The Company continues to generate positive cash flows from operations, which are dependent on general economic conditions and competitive environment[89] - Management believes the Company has sufficient liquidity to meet its cash and operating requirements for the next twelve months[90]