Valvoline(VVV) - 2025 Q3 - Quarterly Results

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 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] - Year-to-date operating cash flow from continuing operations of $180 million and free cash flow of $20 million [5] CEO Commentary 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] - The business demonstrated remarkable resilience in customer demand despite modestly down miles driven and a slower start to summer holidays [3] - Good same store sales comps were achieved with transaction growth across each month in the quarter [3] 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 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] 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) 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 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] | 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 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 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] 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 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 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 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] 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] - 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] Income from Continuing Operations and Diluted 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 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 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 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 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] - They account for depreciable assets, income tax, and interest costs related to Valvoline's tax and capital structures [38] Free Cash Flow Measures 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] - These measures indicate ongoing cash generated that is available for debt and equity holders, as well as other investment opportunities [39] - 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] Adjusted Profitability Measures 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] - 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] Key Items 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] - Net pension and other postretirement plan (income) expenses: Reflects market-driven changes and legacy amounts, not operational performance [43] - Net legacy and separation-related expenses: Associated with legacy businesses and separation from former parent company, not reflective of ongoing operations [44] - Information technology transition costs: Expenses directly related to IT transitions (e.g., ERP implementation), not considered ongoing operating expenses [45] - Investment and divestiture-related costs (income): Activity associated with significant acquisitions, investments, and divestitures, not reflective of ongoing operations [46] - Debt extinguishment and modification costs: Accelerated amortization and third-party fees related to debt transactions, not indicative of future servicing costs [47] 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 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] - Webcast and supporting materials are accessible through Valvoline's website at http://investors.valvoline.com [14] 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] - 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] - 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] 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] - The company completes more than 28 million services annually system-wide, ranging from oil changes to manufacturer-recommended maintenance [20] - Valvoline employs 11,000 team members focused on growing the core business, expanding the retail network, and planning for future vehicles [20] 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] - These statements are based on current expectations and are subject to risks and uncertainties that may cause results to differ materially [21] - 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] 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] - Media Inquiries: Angela Davied, media@valvoline.com [23]