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VI

VALVOLINE INC (VVV)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered resilient growth: net revenues $439.0M (+4% YoY; +12% YoY on refranchising recast), adjusted EPS $0.47 (+4% YoY; +18% recast), adjusted EBITDA $129.5M (+5% YoY; +12% recast), system-wide SSS +4.9%, and 46 net new stores added .
  • Guidance tightened: FY25 net revenues to $1.69–$1.72B, adjusted EBITDA to $460–$470M, adjusted EPS to $1.59–$1.64, and SSS narrowed to 5.8%–6.4%; share repurchases set at $60M (prior $40–$70M) .
  • Margin drivers: gross margin rate expanded 80 bps to 40.5% on labor optimization and demand planning tools; SG&A was 18.5% of sales, reflecting technology investments (tempo expected to moderate with leverage returning in FY26) .
  • Key narrative catalysts: continued premiumization and NOCR penetration supporting ticket, transactions growing despite a slower start to summer in June; Breeze Autocare path to close may include targeted divestitures per FTC discussions, timing late Q4 or early FY26 .

What Went Well and What Went Wrong

What Went Well

  • Strong top-line and profit: revenues $439.0M (+4% YoY), adjusted EBITDA $129.5M (+5% YoY), adjusted EPS $0.47 (+4% YoY); on refranchising recast, revenue/EBITDA/EPS growth was +12%/+12%/+18% respectively .
  • Operational execution: 46 store additions (33 company-operated, 13 franchised), system-wide SSS +4.9%; CEO: “We delivered good same store sales comps with transaction growth across each month” .
  • Pricing/mix and service attachment: premiumization, net pricing, and improved NOCR penetration drove ticket growth; management reiterated “no evidence of customers trading down or delay services” .

What Went Wrong

  • June softness: “slower start to the summer holidays” tempered comps; weather and timing cited as contributors, with transactions improving as July progressed .
  • SG&A deleverage: SG&A rose to 18.5% of sales (+80 bps YoY) due to tech investments and refranchising mix; leverage expected to return as investments lap in FY26 .
  • Store-expense headwinds: increased depreciation (~50 bps) from new stores offset some labor leverage in gross margin .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Net Revenues ($USD Millions)$414.3 $403.2 $439.0
GAAP Diluted EPS ($)$0.73 $0.29–$0.30 (reported diluted $0.29; continuing ops $0.30) $0.44
Adjusted EPS ($)$0.32 $0.34 $0.47
Adjusted EBITDA ($USD Millions)$102.8 $104.4 $129.5
Adjusted EBITDA Margin %24.8% 25.9% 29.5%
System-wide Store Sales ($USD Millions)$820.3 $825.5 $889.6
System-wide SSS (%)8.0% 5.8% 4.9%
SSS BreakdownQ1 2025Q2 2025Q3 2025
Company-operated SSS (%)8.2% 4.8% 4.2%
Franchised SSS (%)7.8% 6.6% 5.4%
System-wide SSS (%)8.0% 5.8% 4.9%
KPIsQ1 2025Q2 2025Q3 2025
System-wide Store Count (units)2,045 2,078 2,124
Company-operated Stores (units)932 950 983
Franchised Stores (units)1,113 1,128 1,141
Net Store Additions (quarter)+35 +33 +46
Consensus vs Actual (S&P Global)Q1 2025Q2 2025Q3 2025
EPS Estimate ($)0.299*0.359*0.454*
EPS Actual ($)0.32*0.34*0.47*
Revenue Estimate ($USD Millions)399.8*404.1*436.3*
Revenue Actual ($USD Millions)414.3*403.2*439.0*
EBITDA Estimate ($USD Millions)95.7*106.1*122.8*
EBITDA Actual ($USD Millions)98.8*96.2*125.8*
# EPS Estimates13*12*10*
# Revenue Estimates12*11*9*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
System-wide SSS GrowthFY 20255% – 7%5.8% – 6.4%Narrowed
System-wide Store AdditionsFY 2025160 – 185No changeMaintained
Net Revenues ($B)FY 2025$1.67 – $1.73$1.69 – $1.72Narrowed
Adjusted EBITDA ($M)FY 2025$450 – $470$460 – $470Raised low end
Adjusted EPS ($)FY 2025$1.57 – $1.67$1.59 – $1.64Narrowed
Capital Expenditures ($M)FY 2025$230 – $250No changeMaintained
Share Repurchases ($M)FY 2025$40 – $70$60Set to $60M

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Tariffs/macroMinimal FY25 operating cost headwind (<$4M system-wide), 1–2% COGS annualized; mitigation via sourcing shifts and pricing flexibility .Expectations unchanged; minimal financial impact in FY25 .Stable/low impact
Technology investmentsCloud marketing database, HRIS (Workday) phase 1; tech spend driving SG&A deleverage in Q2 .Labor leverage benefits emerging; Workday demand planning improving scheduling; SG&A leverage expected to return FY26 .Improving returns, SG&A leverage later
Premiumization & NOCRTicket driven by premium mix and NOCR; balanced ticket/transaction (approx. 2/3 ticket, 1/3 transactions; close to 50/50 adjusted for calendar) .Premiumization, net pricing, NOCR drove ticket; premium mix ~80% (blends + full synthetic) with room to increase .Continuing tailwinds
Labor optimizationDiscussed staffing, low attrition ahead of summer .Labor management delivered >100 bps leverage; gross margin rate up 80 bps YoY to 40.5% .Positive leverage
Breeze Autocare & FTCSecond Request from FTC; targeted for close in 2H FY25 .Working with FTC; potential targeted divestitures; hoped close late Q4 or early FY26 .Progressing, timing uncertain
Franchise pricing vs companyFranchise comps outpaced company due to pricing actions by large franchisee; expected to lap over time .Differential persists; no notable consumer pushback; geographic cost differences influence pricing .Normalizing over time

Management Commentary

  • CEO Lori Flees: “Our business continues to demonstrate remarkable resilience in customer demand despite miles driven being modestly down… We delivered good same store sales comps with transaction growth across each month in the quarter” .
  • CEO Lori Flees on consumer behavior: “We continue to see no evidence of customers trading down or delay services. In fact, the percentage of customers using our premium products grew both sequentially and year over year” .
  • CFO Kevin Willis on margins: “Gross margin rate increased 80 basis points year over year to 40.5%… driven by labor leverage… partially offset by increased depreciation from the addition of new stores” .
  • CEO Lori Flees on Breeze: “This path to close could include a plan to divest certain stores subject to FTC approval… We hope to close in late Q4 or early fiscal 2026” .
  • CFO Kevin Willis on outlook: “We narrowed the ranges around the midpoint, and we raised the low end of the adjusted EBITDA range based on performance to date” .

Q&A Highlights

  • Same-store sales cadence and drivers: transactions contributed ~25% of comp; ticket the balance, with June softness tied to weather/holiday timing; momentum improved in July even excluding prior-year incident tailwinds .
  • SG&A trajectory: tech investments accounted for ~one-third of YoY SG&A increase; leverage expected to return in FY26 as investments lap and operational benefits scale .
  • Franchise pricing dynamics: a large franchisee took significant price adjustments, lifting franchise comps ahead of company-owned; geographic cost differences also influence pricing; limited consumer pushback .
  • Labor optimization: demand planning and Workday-enabled scheduling delivered >100 bps labor leverage within gross margin expansion .
  • Breeze integration and brand: operations are similar to VIOC; no major stumbling blocks anticipated; careful approach to integration and brand considerations given local loyalty .

Estimates Context

  • Q3 2025 beat across metrics: EPS $0.47 vs $0.454 consensus*, revenue $439.0M vs $436.3M*, EBITDA $125.8M vs $122.8M*.
  • Q2 2025 modest misses: EPS $0.34 vs $0.359*, revenue $403.2M vs $404.1M*, EBITDA $96.2M vs $106.1M*.
  • Q1 2025 beats: EPS $0.32 vs $0.299*, revenue $414.3M vs $399.8M*, EBITDA $98.8M vs $95.7M*.
  • Implication: FY25 guidance tightening (higher low end for adjusted EBITDA, narrowed EPS range) alongside Q3 beats suggests potential estimate upward revisions for EBITDA and EPS, with SG&A leverage timing (FY26) an important model consideration .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Resilient demand and mix: premiumization and NOCR continue to support ticket growth; management sees no trade-down behavior, underpinning durability of comps .
  • Margin trajectory improving: labor optimization delivered gross margin expansion; adjusted EBITDA margin improved sequentially to 29.5% .
  • Network growth intact: 46 additions in Q3; FY25 target of 160–185 additions reaffirmed; refranchised markets building pipelines .
  • Guidance credible and tightened: raised EBITDA low end and narrowed ranges for revenue/EPS/SSS, signaling confidence into year-end .
  • Breeze Autocare optionality: constructive FTC dialogue; potential targeted divestitures; closing late Q4/early FY26 would add scale with limited integration friction per management .
  • Watch SG&A leverage re-emergence: tech investments are front-loaded; management expects SG&A leverage to return in FY26 as benefits scale .
  • Estimate revisions: Q3 beats may prompt upward adjustments to near-term EBITDA/EPS; Q2 misses already digested, with momentum and guidance supporting H2 continuity .

View original Q3 press release and 8-K tables for detailed reconciliations and non-GAAP definitions .