Valvoline Inc.

Net sales in Q3 were $545 million, up 24% year over year. Gross margin was 40%, down 50 basis points year over year. EBITDA increased 25% to $162 million, with EBITDA margin expanding 30 basis points to 29.8%, and EPS increased 21% to $0.57 per share. System-wide store sales increased 19%, crossing $1 billion in a quarter for the first time, and same-store sales increased 8%. Year to date, operating cash flow improved $105 million to $285 million and free cash flow was $112 million, up approximately $93 million from last year. The company ended the quarter with net debt to adjusted EBITDA leverage of 2.8x, about a 10% sequential decline, and noted annual cash interest expense should improve by about $1.8 million after a Term Loan B repricing. For the rest of the year, Valvoline raised full-year system-wide same-store sales guidance to 7.5% to 8% and narrowed adjusted EBITDA guidance to $550 million to $560 million and EPS guidance to $1.70 to $1.75 per share.

Lori Flees said the company delivered another good quarter with sales and profit growth in line with expectations and emphasized that the business is showing strength and resilience despite a changing supply and macro backdrop. She highlighted 19% system-wide sales growth, 8% same-store sales growth, and progress in the Breeze integration, including 12 stores converted to the Valvoline Instant Oil Change brand with early performance slightly ahead of expectations. Her tone was confident but measured, with repeated emphasis on disciplined execution, customer resilience, and managing through industry-wide supply constraints.

Kevin Willis said Q3 net sales reached $545 million, gross margin was 40%, SG&A as a percent of net sales fell to 17%, EBITDA was $162 million, and EPS was $0.57. He explained that gross margin was pressured by higher service delivery costs and new store depreciation, though excluding depreciation gross margin would have improved by 10 basis points, and he noted EBITDA margin compression for the full year should be closer to half of the roughly 100 basis points previously expected. He also cited year-to-date operating cash flow of $285 million, free cash flow of $112 million, leverage of 2.8x net debt to adjusted EBITDA, and approximately $1.8 million of annual interest savings from the Term Loan B repricing. On guidance, he said the company raised full-year same-store sales to 7.5% to 8% and narrowed adjusted EBITDA and EPS ranges to $550 million-$560 million and $1.70-$1.75.

Analysts focused heavily on the impact of rising finished lubricant and Group III base oil costs, whether price increases can offset the pressure without hurting traffic, and how quickly margins might recover. Management said the company is trying to keep price and cost aligned, expects elevated costs to persist for 4 to 6 months after the Strait fully reopens, and wants to protect gross profit dollars without pricing too far ahead of competitors and risking elasticity. Questions also covered Q4 SG&A leverage, the timing of store openings, Breeze integration, and whether supply constraints could create share gains; management said there is opportunity to win customers from competitors facing shortages and that the Breeze deal is tracking at or above expectations with little attrition in conversions.