Valvoline(VVV) - 2025 Q4 - Annual Report

Operational Performance - Valvoline achieved its 19th consecutive year of system-wide same-store sales growth in fiscal 2025, indicating strong operational performance[26] - Valvoline's adjusted EBITDA grew by 5.5%, reflecting strong operational performance[181] - System-wide same-store sales (SSS) growth was 6.1%, supported by premiumization and an expanding customer base[201] Growth and Expansion - Valvoline operates approximately 2,200 service center locations across the U.S. and Canada, including 2,180 service centers as of September 30, 2025[19][26] - Valvoline added 718 net new stores over the last five years, resulting in nearly 50% growth in its retail network[28] - Valvoline plans to add 170 net new system-wide stores in fiscal 2025, creating a critical need for talent[56] - System-wide store sales reached $3,453.8 million, reflecting an 11.3% growth year-over-year, with a total of 2,180 stores, an increase of 170 net new stores[200] Financial Performance - Valvoline reported a 6% growth in net revenues, reaching $3.5 billion, and a 2% increase in diluted EPS for fiscal 2025[181] - Net revenues for fiscal 2025 increased by $91.3 million, or 5.6%, to $1,710.3 million, driven by higher volume, mix, and pricing[199] - Gross profit improved by $39.7 million, or 6.4%, to $658.5 million, with a gross profit margin of 38.5%, up 30 basis points from the previous year[199][203] Strategic Initiatives - Valvoline's strategic initiatives focus on improving operational efficiency, expanding company-operated stores, and innovating services to meet customer needs[25] - The U.S. Do It For Me (DIFM) total addressable market presents significant growth opportunities for Valvoline, driven by increasing vehicle complexity and miles driven[23] Employee and Workforce Management - As of September 30, 2025, Valvoline had approximately 11,400 employees, including 10,600 full-time employees, and operates 1,016 company-owned retail service center stores[52] - New employees receive 270 hours of training within the first 60 days and an additional 240 hours in the next 140 days to support their career advancement[57] - Valvoline's total rewards strategy includes competitive compensation and benefits programs to attract and retain a diverse workforce[60] - Valvoline is committed to diversity and inclusion, aiming for its workforce to reflect the diverse communities it serves[63] Community Engagement - Valvoline's community impact initiative, "Happy to Help," focuses on supporting children's physical and mental health through charitable efforts[68] Risks and Challenges - Valvoline's services demand may decline due to factors such as economic conditions, vehicle age, and technological changes, potentially impacting sales and cash flows[82] - Economic downturns may lead to reduced customer demand for vehicle maintenance services, negatively impacting Valvoline's business[104][105] - The company faces risks in developing new services and technologies, which could affect its competitive position and operational results[83] - Valvoline's substantial indebtedness may limit its ability to fund working capital and capital expenditures, making it more vulnerable to adverse economic conditions[126] Financial Obligations and Debt - Valvoline had outstanding indebtedness of $1.074 billion as of September 30, 2025, with an available borrowing capacity of $341.6 million under its revolving credit facility[125] - Valvoline expects to borrow $740 million in December 2025 to fund the Breeze Autocare acquisition, with excess proceeds used to pay down outstanding debt[125] Cybersecurity and Compliance - Valvoline's reliance on information technology systems exposes it to cybersecurity threats, which could harm business operations and result in significant costs associated with data recovery and breach notifications[109] - The company has implemented a cybersecurity risk management program based on NIST frameworks to protect critical systems and information[154] Acquisitions and Partnerships - Valvoline is set to acquire Breeze Autocare for $593 million, which includes 207 stores, with the acquisition expected to close on December 1, 2025[179] - The company sold 67 company-owned stores to franchise partners, enhancing growth potential in respective markets[175] Legal and Regulatory Matters - Valvoline has incurred costs related to legal proceedings for alleged intellectual property infringements, which could divert resources and affect financial results[135] - The company may face liabilities from environmental damages under strict liability laws, which could adversely affect its financial position[138]