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VI

VALVOLINE INC (VVV)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 revenue grew 4% to $453.8M; adjusted EBITDA rose 5% to $130.1M (28.7% margin), while adjusted EPS was $0.45 (-2% YoY). GAAP EPS fell to $0.20 due to pension remeasurement loss and non-operational items .
  • Versus S&P Global consensus, revenue was essentially in line ($453.8M vs $454.7M*), adjusted EPS modestly missed ($0.45 vs $0.47*), and adjusted EBITDA was a slight beat ($130.1M vs $128.9M*) .
  • Same-store sales (SSS) rose 6.0% system-wide; the network added 56 net stores in Q4, ending at 2,180 stores (8.5% YoY growth) .
  • FY26 outlook (includes Breeze) calls for net revenue $2.0–$2.1B, adjusted EBITDA $525–$550M, adjusted EPS $1.60–$1.70, SSS +4–6%, and 330–360 store adds; Breeze closes Dec 1, funded by a $740M Term Loan B, pushing leverage to ~4.2x with a path back to target in 18–24 months .

What Went Well and What Went Wrong

  • What Went Well

    • 19th consecutive year of system-wide SSS growth; Q4 SSS +6.0% and system-wide store sales +11% YoY to $918M .
    • Adjusted EBITDA grew 5% YoY in Q4 to $130.1M; margin expanded 20 bps to 28.7% as labor productivity gains offset product cost pressures .
    • Strategic momentum: FTC clearance received; Breeze acquisition expected to close Dec 1, adding net 162 stores to accelerate growth and scale .
    • Quote: “System-wide store sales again saw a double-digit increase… and we delivered our 19th consecutive year of system-wide same-store sales growth.” — CEO Lori Flees .
    • Quote: “Workday… drove meaningful efficiencies in our largest cost category.” — CEO Lori Flees .

  • What Went Wrong

    • GAAP EPS fell 71% YoY to $0.20 on higher net pension/postretirement plan expenses ($26.3M loss in Q4) and other key items .
    • Product-cost headwinds persisted: base oil relief lagged crude; supply chain inflation and sharply lower used oil pricing reduced offsets, pressuring gross margin drivers .
    • Q4 adjusted EPS ($0.45) landed below consensus ($0.47*) and at the low end of internal range for FY25; higher depreciation from store mix timing, a slightly higher tax rate, and lower interest income weighed on EPS .

Financial Results

Quarterly performance vs prior quarters (oldest → newest):

MetricQ2 2025Q3 2025Q4 2025
Net revenues ($M)$403.2 $439.0 $453.8
Diluted EPS – Continuing Ops ($)$0.30 $0.44 $0.20
Adjusted EPS ($)$0.34 $0.47 $0.45
Adjusted EBITDA ($M)$104.4 $129.5 $130.1
Adjusted EBITDA Margin (%)25.9% 29.5% 28.7%
Net Profit Margin (%)9.5% 13.0% 5.6%
System-wide SSS (%)5.8% 4.9% 6.0%

Q4 actuals vs S&P Global consensus:

MetricQ4 2025 ActualS&P Global ConsensusCommentary
Revenue ($M)$453.8 $454.7*In line (slight miss)
Adjusted EPS ($)$0.45 $0.4703*Slight miss
Adjusted EBITDA ($M)$130.1 $128.9*Slight beat

Values marked with * are from S&P Global (GetEstimates).

KPIs and store footprint (oldest → newest):

KPIQ2 2025Q3 2025Q4 2025
System-wide store sales ($M)$825.5 $889.6 $918.4
System-wide SSS (%)5.8% 4.9% 6.0%
Net store additions (quarter)+33 +46 +56
Total stores (end of period)2,078 2,124 2,180
Company-operated stores950 983 1,016
Franchised stores1,128 1,141 1,164

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
System-wide SSS growthFY26N/A4%–6% New
System-wide store additionsFY26N/A330–360 New
Net revenuesFY26N/A$2.0–$2.1B New
Adjusted EBITDAFY26N/A$525–$550M New
Adjusted EPSFY26N/A$1.60–$1.70 New
Capital expendituresFY26N/A$250–$280M New

Notes:

  • FY26 outlook includes the Breeze acquisition; management will not reconcile adjusted outlook to GAAP due to uncertainty around key items .
  • Leverage expected to reach ~4.2x at close; target range restoration expected within 18–24 months via EBITDA growth and debt reduction .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q3)Current Period (Q4)Trend
Labor/tech efficiencyFocus on cost control and platform investments; SG&A rising with tech and team investments .Workday scheduling fully deployed in U.S. company stores; labor leverage +120 bps in Q4; SG&A growth moderating QoQ .Improving
Product costs & used oil pricingTariff/macro uncertainty monitored; mitigations in place .Base oil relief lagging crude; supply chain inflation; used oil prices fell sharply, limiting offsets and pressuring cost basket .Headwind
SSS algorithm and driversStrong comps with balanced ticket/transactions .FY26 SSS +4–6% expected; balance of ticket (premiumization/NOCR/pricing) and transactions; comps consistent across quarters .Stable/moderating from prior highs
Breeze acquisition & regulatorySigned; received FTC Second Request; awaiting approval .FTC clearance received; closing Dec 1; net 162 stores; leverage to ~4.2x; near-term margin mix dilutive; integration playbook in place .Executing
SG&A leverage outlookInvestment phase with commitment to moderate SG&A growth .Expect return to leverage in FY26 (ex-Breeze); inclusion of Breeze complicates optics but underlying leverage targeted .Improving
Procurement/AI enablement—Predictive procurement initiative (Arkestro) delivering savings on MRO and services; part of cost discipline toolkit .Improving

Management Commentary

  • Strategy and performance: “System-wide store sales again saw a double-digit increase to $3.5 billion, and we delivered our 19th consecutive year of system-wide same-store sales growth.” — CEO Lori Flees .
  • Efficiency: “Workday implementation… drove meaningful efficiencies in our largest cost category.” — CEO Lori Flees .
  • Margins: “Gross margin rate of 39.1% was flat YoY… labor leverage of ~120 bps offset by increased product costs… adjusted EBITDA margin increased 20 bps to 28.7%.” — CFO Kevin Willis .
  • Cost headwinds: “Used oil pricing… has come down considerably… more of a drag… we expect to see that trend continue for the time being.” — CFO Kevin Willis .
  • Capital structure and M&A: “Additional debt will increase our leverage ratio to approximately 4.2x… ~18 to 24 months to return to target leverage through EBITDA growth and debt reduction.” — CFO Kevin Willis .

Q&A Highlights

  • Breeze contribution and margins: Management declined to quantify Breeze’s revenue/EBITDA in guidance but emphasized a measured inclusion; margin optics reflect lower initial margins of acquired/new stores, improving with playbook execution .
  • EPS drivers: Q4 EPS at low end due to higher depreciation from store mix timing, slightly higher effective tax rate, and lower interest income; acknowledged modest consensus miss .
  • SSS cadence: Expect relatively consistent comps through FY26; early Q1 trends supportive; weather shifts tend to alter timing, not total demand .
  • Consumer behavior: Automotive maintenance remains non-discretionary; no trade-down; premiumization across income cohorts; slightly fewer days/miles between oil changes in FY25, not expected to continue declining .
  • Competitive landscape: Category remains fragmented; new units pull >70% of customers from outside the quick-lube channel; no markets avoided due to competition .

Estimates Context

  • Q4 results vs S&P Global consensus: revenue $453.8M vs $454.7M* (in line), adjusted EPS $0.45 vs $0.4703* (slight miss), adjusted EBITDA $130.1M vs $128.9M* (slight beat) .
  • Implication: Modest EPS shortfall despite solid operations and margin expansion reflects cost headwinds (used oil/supply chain), higher depreciation, and tax mixing; estimate drift into FY26 may reflect Breeze’s lower initial margin mix and higher interest expense (~$0.20/share impact at mid-point) embedded in guidance .

Values marked with * are from S&P Global (GetEstimates).

Key Takeaways for Investors

  • Core momentum intact: SSS +6.0% and adjusted EBITDA +5% in Q4; labor productivity gains are visible in margin mix despite product-cost headwinds .
  • Optics vs EPS: Adjusted EBITDA beat consensus slightly*, but adjusted EPS missed slightly* on depreciation/tax/interest; focus on cash earnings trajectory and store-level profitability as better indicators into FY26 .
  • FY26 guide is prudent with Breeze integration: 20% sales growth and ~15% EBITDA growth at midpoints, with margin dilution near-term from acquired/new stores and ~+$0.20/share interest drag; integration execution is the swing factor .
  • Cost basket watch: Base oil pricing lag, ongoing supply chain inflation, and weak used oil pricing are near-term gross margin risks; relief timing could provide upside if base oil follows crude .
  • Balance sheet/leverage path: Leverage to ~4.2x post-close with 18–24 months back to target; capital allocation prioritizes growth ROIC and deleveraging before buybacks .
  • Catalysts: Breeze closing (Dec 1) and Investor Update (Dec 11) for detailed long-term algorithm and synergy roadmap .
  • Execution checklist: Track SSS cadence, SG&A leverage progression, Breeze margin ramp, used oil/base oil dynamics, and CapEx/unit cost progress to validate FY26 targets .
All document-based figures are cited to company filings and call transcripts. Consensus figures are from S&P Global (GetEstimates).