VALVOLINE INC Q1 FY2025 earnings call

• Strategic priorities: driving full potential in existing business, accelerating network growth, targeting customer and service expansion. • First quarter highlights: system-wide store sales grew 14% to $820 million, same-store sales up 8%, net sales up 11%, adjusted EBITDA up 14% to $103 million; 35 net new stores added; refranchised 39 stores in Central and West Texas. • Annual meetings: family reunion for company operations team focused on customer experience (BoomTown training for ticket growth) and employee engagement (tools for store managers to retain teams); franchise workshop with high engagement, focus on development towards 3,500+ store network, discussed real estate analytics and pipeline conversion. • Recognitions: Valvoline recognized as leading automotive services retailer and number 24 overall on Entrepreneur Franchise 500 list for 2025.

System-wide store sales grew 14% to $820 million, same-store sales grew 8%, net sales increased 11% to $414 million, and adjusted EBITDA increased 14% to $103 million. Net sales grew 11% to $414 million, adjusted EBITDA was $103 million, representing a 14% increase. Gross margin rate increased 80 basis points year over year to 36.9%, adjusted EBITDA margin was 24.8% (60 basis points improvement over prior year), adjusted net income increased 9% to $42 million.

• Full-year same-store sales comp expected to be 5% to 7%, net store additions 160 to 185 units, adjusted EBITDA $450 million to $470 million. • Q2 expected deceleration due to lapping pricing, non-oil change initiatives started in Q2 last year, and impact of Leap Day (negative 120 basis point impact on comp). • First half of the year expected to produce 40% to 45% of adjusted EBITDA, back half 55% to 60% due to seasonality.

• Refranchising impact on earnings, as reported results will be affected by the removal of refranchised stores' revenue and EBITDA. • Weather can impact sales volume, with choppy weather potentially affecting recovery of volume. • Waste oil collection challenges may impact margins, though offset by lower product costs. • Competitive promotional activities could impact market share. • Leap Day has a negative impact on Q2 same-store sales comp.

Q: Steve Shemesh asked about same-store sales and Q2 expectations.

A: Lori Flees said there was good momentum at the start of Q2 but expected deceleration due to lapping initiatives, pricing, non-oil change, and Leap Day impact (negative 120 basis points).

Q: Simeon Gutman asked about guidance alignment and upside.

A: Mary Meixelsperger said they were substantially in line with expectations, and there's upside potential towards the top end of the guidance range.

Q: Chris O'Cull asked about new unit investment and time to maturity.

A: Lori Flees discussed value-engineering building and equipment, targeting 10%-20% cost savings, and modular design to right-size bays, with maturity varying by location but trending to shorten.

Q: Steven Zaccone asked about gross margin and waste oil.

A: Mary Meixelsperger said waste oil challenges are offset by lower product costs, with modest impact expected.

Q: Justin Kleber asked about EBITDA growth and premiumization.

A: Mary Meixelsperger explained refranchising impact on EBITDA growth, and Lori Flees discussed premium oil mix (80% including synthetic blend and full synthetic) with continued trade-up potential.

Q: David Bellinger asked about buyback and premium oil mix breakdown.

A: Mary Meixelsperger discussed accelerated buyback due to undervaluation, and Lori Flees talked about premium oil mix including MaxLife (synthetic blend) and full synthetic.

Q: Alexia Morgan asked about promotions and franchise unit growth.

A: Lori Flees said no significant competitive promotion impact, and Valvoline is on track for franchise unit growth towards 150 opens a year by 2027.

Q: Thomas Wendler asked about waste oil and oil prices.

A: Mary Meixelsperger said waste oil impact is negligible, and rising oil prices would have limited impact until back half, offset by efficiencies.

Q: Bret Jordan asked about non-oil change seasonality and acquisitions.

A: Lori Flees said most non-oil change services have limited seasonality, and acquisition multiples vary by asset quality, with fragmented independent market.

Q: David Lantz asked about SG&A and fleet performance.

A: Mary Meixelsperger said SG&A deleverage is from technology investments, and Lori Flees discussed fleet growth outpacing consumer transaction growth, focus on increasing fleet penetration.