Press release·03/02/2025 04:31:47

Valvoline’s Strong Financial Performance in Q1 2025

Valvoline, the leading provider of automotive maintenance services, has reported impressive financial results for the first quarter of fiscal year 2025. The company’s strategic initiatives, focused on driving growth in its core business, expanding its retail footprint, and targeting customer and service expansion, have translated into solid financial performance.

Revenue Growth Driven by Same-Store Sales and Unit Expansion

Valvoline’s net revenues grew 11% over the prior year period, reaching $414.3 million. This growth was driven by a combination of strong system-wide same-store sales (SSS) growth of 8.0% and the addition of 155 net new stores to the system compared to the prior year. The increase in average ticket and transactions contributed to the robust SSS performance, reflecting Valvoline’s success in driving non-oil change service penetration, premiumization, and pricing initiatives.

Profitability Expansion and Operational Efficiency

Valvoline’s income from continuing operations grew an impressive 177% to $93.9 million, and diluted earnings per share increased 181% to $0.73 in the three months ended December 31, 2024, compared to the prior year period. This significant growth was primarily attributable to the gain recognized from refranchising initiatives, which are intended to accelerate franchise store growth, as well as gross profit expansion from operations.

Adjusted EBITDA, a key non-GAAP measure used by management to assess the company’s underlying performance, increased 14% over the prior year period. This growth was driven by the strong top-line performance, with benefits from higher average ticket, increased transactions, and unit growth. Additionally, the company achieved operational efficiencies in labor and materials costs, which partially offset the increased investments in selling, general, and administrative expenses to support the company’s growth initiatives.

Shareholder Value Creation through Share Repurchases

During the quarter, Valvoline returned $39.3 million to its shareholders through the repurchase of 1.0 million shares of its common stock. This is part of the company’s broader capital allocation framework, which prioritizes profitable growth, maintaining a target leverage ratio, and returning excess capital to shareholders.

Non-GAAP Measures Provide Insights into Valvoline’s Performance

To aid in the understanding of Valvoline’s ongoing business performance, the company presents certain financial information on an adjusted, non-GAAP basis. These non-GAAP measures include EBITDA, Adjusted EBITDA, free cash flow, and discretionary free cash flow. Management believes these measures provide a meaningful supplemental presentation of the company’s operating performance and allow for better comparison of financial trends and results between periods.

The non-GAAP measures exclude the impact of certain unusual, infrequent, or non-operational items, such as legacy business activities, separation-related expenses, and investment and divestiture-related income. This allows investors to better understand the company’s underlying and ongoing operational performance.

Key Business Measures Demonstrate Valvoline’s Market Position

Valvoline tracks several key business measures, including system-wide, company-operated, and franchised store counts, as well as system-wide store sales and same-store sales (SSS). These metrics provide insights into the company’s market position and overall store and operating performance.

As of the end of the first quarter of fiscal 2025, Valvoline’s system-wide store count stood at 2,045, comprising 932 company-operated stores and 1,113 franchised stores. The system-wide store sales grew 13.5% year-over-year, reflecting the company’s success in expanding its retail footprint and driving strong same-store sales performance.

Continued Investments in Growth and Operational Efficiency

Valvoline’s net operating expenses decreased to 2.2% of net revenues in the first quarter of fiscal 2025, compared to 19.3% in the prior year period. This significant improvement was primarily driven by a $71.5 million increase in other income, net, which was largely attributable to a $73.9 million gain on the sale of operations from a refranchising transaction.

The company’s selling, general, and administrative (SG&A) expenses increased by $8.3 million, reflecting investments in technology, talent, and advertising to support the growing stand-alone retail business and its customer base. These investments are aimed at driving continued growth and scaling the business.

Liquidity and Capital Resources Remain Strong

Valvoline’s liquidity and capital resources remain strong, with cash and cash equivalents of $60.0 million and total debt of $1,033.1 million as of December 31, 2024. The company also had $401.5 million in remaining borrowing capacity under its Revolver.

Cash flows from operating activities increased by $19.5 million compared to the prior year, driven by higher cash earnings and lower interest payments. Free cash flow, which includes the impact of capital expenditures, also improved, reflecting the company’s focus on driving profitable growth and maintaining a disciplined approach to capital allocation.

Outlook and Future Prospects

Valvoline’s strategic initiatives, including driving the full potential of its core business, aggressively growing its retail footprint, and targeting customer and service expansion, have positioned the company for continued success. The company’s strong financial performance, operational efficiency, and robust liquidity provide a solid foundation for future growth and value creation for shareholders.

As Valvoline navigates the evolving automotive industry landscape, the company remains committed to its strategic priorities, investing in key areas to support its stand-alone retail business, and delivering sustainable long-term shareholder value.