Executive Summary

Q1 FY2025 delivered 11% revenue growth to $414.3M, system-wide SSS up 8.0%, and adjusted EBITDA up 14% to $102.8M; reported EPS from continuing operations rose to $0.73, boosted by a $71M pre-tax gain from refranchising .
Adjusted EPS of $0.32 reflects underlying performance; adjusted EBITDA margin was 24.8% versus 28.5% in Q4 and 29.2% in Q3, as refranchising and tech investments weighed sequential margins .
Full-year guidance reaffirmed: SSS 5–7%, net revenues $1.67–$1.73B, adjusted EBITDA $450–$470M, store additions 160–185; management flags Q2 comp deceleration, including a ~120 bps leap day headwind .
Strategic catalyst: definitive agreement to acquire Breeze Autocare (~200 stores) for ~$625M, expanding the network to >2,200 locations; expected to be initially EPS-neutral and accretive over time .

What Went Well and What Went Wrong

What Went Well

Strong top-line and comp: Sales +11% to $414.3M; system-wide SSS +8.0%; system-wide store sales +14% to $820.3M .
Store growth and refranchising momentum: 35 net additions (14 franchise, 21 company-op before refranchising); 39 stores transferred to franchise in early December, supporting accelerated development in Central/West Texas .
Management confidence and balanced comp drivers: “We are on track for our full-year guidance,” with “more balanced ticket and transaction contribution to same-store sales growth” .

What Went Wrong

Sequential margin compression: Adjusted EBITDA margin fell to 24.8% from 28.5% (Q4) and 29.2% (Q3), with SG&A deleverage from technology investments and refranchising mix shift .
Near-term comp headwinds: Q2 expected deceleration as pricing and non-oil change initiatives lap prior actions and leap day creates ~120 bps drag on comp; waste oil recoveries expected lower but partly offset by product cost declines .
Free cash flow negative: Free cash flow from continuing operations was $(12.2)M in Q1 on higher capex, despite operating cash flow of $41.4M .

Financial Results

Summary Financials (Continuing Operations)

Metric	Q3 2024	Q4 2024	Q1 2025
Net revenues ($USD Millions)	$421.4	$435.5	$414.3
Reported Diluted EPS - Continuing Ops ($)	$0.37	$0.68	$0.73
Adjusted EPS ($)	$0.45	$0.46	$0.32
Adjusted EBITDA ($USD Millions)	$123.2	$124.1	$102.8
Adjusted EBITDA Margin (%)	29.2%	28.5%	24.8%
Net Profit Margin (%)	11.4%	20.5%	22.7%
Gross Profit ($USD Millions)	$167.5	$170.3	$152.9

Notes:

Q1 YOY growth highlights per company: Revenue +11%, adjusted EPS +10%, adjusted EBITDA +14% .

Operational KPIs and Store Metrics

KPI	Q3 2024	Q4 2024	Q1 2025
System-wide store sales ($USD Millions)	$808.5	$826.8	$820.3
System-wide SSS (%)	6.5%	5.4%	8.0%
Company-operated SSS (%)	6.7%	5.9%	8.2%
Franchised SSS (%)	6.4%	5.1%	7.8%
System-wide store count (end of period)	1,961	2,010	2,045
Company-operated stores	937	950	932
Franchised stores	1,024	1,060	1,113

Balance Sheet Snapshot

Metric	Q3 2024 (6/30)	Q4 2024 (9/30)	Q1 2025 (12/31)
Cash and cash equivalents ($USD Millions)	$65.7	$68.3	$60.0
Long-term debt ($USD Millions)	$1,125.7	$1,070.0	$1,009.3
Current portion of long-term debt ($USD Millions)	$23.8	$23.8	$23.8

Cash flow (Q1 2025): Operating cash flows from continuing ops $41.4M; free cash flow $(12.2)M .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
System-wide SSS growth	FY2025	5%–7%	5%–7%	Maintained
System-wide store additions	FY2025	160–185	160–185	Maintained
Net revenues	FY2025	$1.67–$1.73B	$1.67–$1.73B	Maintained
Adjusted EBITDA	FY2025	$450–$470M	$450–$470M	Maintained
Adjusted EPS	FY2025	$1.57–$1.67	$1.57–$1.67	Maintained
Capital expenditures	FY2025	$230–$250M	$230–$250M	Maintained
Share repurchases	FY2025	$40–$70M (subject to market)	Program paused pending Breeze financing; $346M remaining auth at Q1-end	Paused near term

Additional cadence commentary: Q2 comp expected to decelerate due to lapping initiatives and ~120 bps leap day headwind; earnings skew ~40–45% in H1, ~55–60% in H2, with H1 at top of range due to refranchising .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024)	Previous Mentions (Q4 2024)	Current Period (Q1 2025)	Trend
Non-oil change revenue (NOCR)	Largest driver of SSS; penetration momentum	Continued contribution to SSS	Ongoing positive ticket contribution; process/training emphasis to sustain gains	Positive, moderating due to lapping
Refranchising & mix	Announced refranchising of 17 stores	Two transactions completed; 28 stores converted; 38 more announced	39 stores transferred in December; refranchising reduces reported revenue/EBITDA YOY	Ongoing; impacts near-term margins/EBITDA
Waste oil economics	Not highlighted	Flagged pricing risk on prior call	Lower recoveries expected; modestly offset by lower product costs	Neutral to slight headwind
Technology investments (ERP/HRIS)	ERP transition ongoing	Material weakness persisted; tech upgrades continue	SG&A deleverage driven by tech investments	Ongoing investment
Network growth	33 additions; 1,961 stores	49 additions; 2,010 stores	35 net additions; 2,045 stores; Breeze deal adds ~200 stores	Accelerating
Pricing/promo environment	Stable; rational market behavior	Stable	No outsized competitor promos; strong ROAS	Stable
Fleet business	Not detailed	Not detailed	Outpacing consumer transactions; expanding accounts and penetration	Positive
Build cost optimization	Not detailed	Not detailed	Targeting 10–20% lower prototype build cost; modular bay strategy	Improving returns

Management Commentary

CEO: “Our resilient and differentiated business model continues to deliver double-digit profit growth fueled by strong and more balanced ticket and transaction contribution to same store sales growth” .
CEO on outlook: “We are on track for our full-year guidance” and “encouraged by the momentum our new and existing franchise partners are building” .
CFO on margins: Gross margin rate +80 bps YoY to 36.9% driven by labor efficiency and modestly lower product costs; SG&A rate +40 bps due to technology investments; adjusted EBITDA margin +60 bps YoY to 24.8% .
CFO on cadence: Expect 40–45% of adjusted EBITDA in H1 and 55–60% in H2, with H1 at the top end due to refranchising timing .

Q&A Highlights

Comp cadence: Q2 comp deceleration expected from lapping pricing/NOCR initiatives and leap day (~120 bps headwind); underlying transaction growth remains strong and balanced with ticket .
Refranchising impact: On a pro forma basis, Q1 would remove ~$12M revenue and ~$3M EBITDA; FY2024 refranchised store impact ~$100M sales and ~$25M earnings — a key driver of lower reported growth ex underlying performance .
Gross margin and waste oil: Lower waste oil recovery anticipated mainly in Q2, offset by modestly lower product costs; full-year margin guidance unchanged .
Premiumization tailwind: Synthetic/high-mileage mix continues to drive 100–150 bps annual comp benefit; ~80% premium oil mix in FDD (includes synthetic blend and full synthetic) .
Capital efficiency: New prototype and equipment re-contracting targeting 10–20% lower build costs; modular design to right-size bays and capex .

Estimates Context

Wall Street consensus (S&P Global) for Q1 2025 EPS and revenue was unavailable due to SPGI request limits; therefore, a precise actual vs. consensus comparison cannot be provided at this time (Values retrieved from S&P Global)*.
Management indicated results were “substantially in line” with internal expectations and noted consensus may have been lower due to assumptions around refranchising timing .

Key Takeaways for Investors

Underlying momentum intact: Double-digit revenue growth and 8% SSS highlight demand resilience; transaction growth balanced with ticket, suggesting sustainable comp drivers .
Watch reported vs. pro forma: Refranchising will depress reported revenue/EBITDA vs. prior periods but supports faster, capital-efficient growth; focus on adjusted and pro forma trajectories .
Margin dynamics: Sequential adjusted EBITDA margin compression to 24.8% reflects mix/SG&A investments; full-year margin outlook unchanged; monitor waste oil/product cost interplay in Q2 .
Near-term comp cadence: Expect Q2 deceleration from lapping and leap day; use intra-quarter checks focusing on transactions and NOCR penetration execution .
Network expansion catalyst: Breeze Autocare acquisition adds ~200 stores and scale benefits; initially EPS-neutral, accretive over time; leverage targeted at 2.5–3.5x within 24 months post-close .
Capital allocation: Q1 buybacks of $39M with additional ~$20M post-quarter; program paused near term to fund Breeze; $346M remaining authorization offers future flexibility .
Medium-term thesis: Premiumization, fleet, and disciplined store development (including lower build costs) underpin multi-year SSS and unit growth, with refranchising and M&A accelerating network scale .

Sources:
Q1 FY2025 8-K and press release **[1674910_0001674910-25-000031_q12025earningsrelease.htm:0]** **[1674910_0001674910-25-000031_q12025earningsrelease.htm:3]** **[1674910_0001674910-25-000031_q12025earningsrelease.htm:4]** **[1674910_0001674910-25-000031_q12025earningsrelease.htm:5]** **[1674910_0001674910-25-000031_q12025earningsrelease.htm:6]** **[1674910_0001674910-25-000031_q12025earningsrelease.htm:7]** **[1674910_0001674910-25-000031_q12025earningsrelease.htm:8]**; Q1 FY2025 press release **[1674910_20250206CL13039:0]** **[1674910_20250206CL13039:4]** **[1674910_20250206CL13039:5]**.
Q1 FY2025 earnings call transcript **[1674910_VVV_3414720_1]** **[1674910_VVV_3414720_3]** **[1674910_VVV_3414720_4]** **[1674910_VVV_3414720_6]** **[1674910_VVV_3414720_7]** **[1674910_VVV_3414720_8]** **[1674910_VVV_3414720_9]** **[1674910_VVV_3414720_12]** **[1674910_VVV_3414720_13]** **[1674910_VVV_3414720_14]** **[1674910_VVV_3414720_16]** **[1674910_VVV_3414720_17]** **[1674910_VVV_3414720_18]** **[1674910_VVV_3414720_23]** **[1674910_VVV_3414720_24]**.
Q4 FY2024 press release **[1674910_20241119CL60294:0]** **[1674910_20241119CL60294:1]** **[1674910_20241119CL60294:2]** **[1674910_20241119CL60294:6]** **[1674910_20241119CL60294:7]**.
Q3 FY2024 press release **[1674910_20240807CL78156:0]** **[1674910_20240807CL78156:5]** **[1674910_20240807CL78156:6]** **[1674910_20240807CL78156:7]**.
Breeze Autocare acquisition press releases **[1674910_20250220CL23415:0]** **[1674910_20250220CL23415:1]** **[1674910_79aff20b33594a299c2fb3b6a57307da_0]**.

VALVOLINE INC (VVV)·Q1 2025 Earnings Summary