Valvoline Inc Q2 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Michael Harrison - Seaport Global Securities LLC - Analyst : Hi, good morning.

Question: Michael Harrison - Seaport Global Securities LLC - Analyst : I apologize if I missed this, but, can you break out the 5.8% same store sales between ticket and car count? I know you mentioned that non-oil change revenue was decelerating in terms of the average ticket contribution, and it sounds like there was some day mix headwind to the car count, but how roughly how did that break out?

Question: Michael Harrison - Seaport Global Securities LLC - Analyst : All right, thanks for the detail there. And then, just in terms of the EBITDA margin decline compared to the prior year, it seems like that's kind of related to what's going on with SG&A costs and you mentioned the refranchising impact on SG&A costs. And I'm just curious, is that An area where you're going to be taking some cost actions at some point in the rest of the year, or is it something that we just need to see you kind of grow into in terms of additional store growth over time? Any thoughts on how we should see that SG&A as a percent of sales trend in the second half and into next year would be very helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 1:00PM, VVV.N - Q2 2025 Valvoline Inc Earnings Call

Question: Michael Harrison - Seaport Global Securities LLC - Analyst : All right. Thanks very much.

Question: Steven Shemesh - RBC Capital Markets - Analyst : Great, thank you for taking the question. Just higher level, there's obviously a lot of hesitation around the state of the consumer right now. So, against that backdrop, can you maybe just provide a little perspective on the cadence of comps throughout the quarter and what you guys are seeing quarter to date?

Question: Steven Shemesh - RBC Capital Markets - Analyst : Got it. That's very helpful. And then just a follow up on gross margin. Are you seeing any impact from base oil deflation, any benefit at this point, and maybe just a refresher on how exactly your contracts work and when that would actually flow through the P&L?

Question: Steven Shemesh - RBC Capital Markets - Analyst : Got it. Thanks very much and best wishes, Mary.

Question: Simeon Gutman - Morgan Stanley - Analyst : Hey, good morning, everyone, and, congratulations, Mary. My first question, I heard the comments, quarter to date sounded fine. If we take the run rate that you did in the second quarter and then add back 50 basis points, is that like holding everything else constant, which I realize there's a lot of assumption in there. That should be, the baseline run rate going forward for comps through the second half of the year.

Question: Simeon Gutman - Morgan Stanley - Analyst : Okay. And my follow up, the franchise store comp being a bit ahead of the company owned, we've seen spreads like this before, so it may just be, seasonal location. Can you just talk about simplistically, I guess on paper, you can argue that you should franchise more. And then should the rate of refranchising this year puts that spread even a little bit higher, what should we expect with that spread and how do we read it? Like, how should we look at it?

Question: Simeon Gutman - Morgan Stanley - Analyst : Okay, thanks, Lori. Good luck.

Question: Max Rakhlenko - TD Cowen. - Analyst : Great, thanks a lot and congrats on a nice quarter. Can you guys first discuss the pricing environment that, you're seeing and whether peers are starting to move their price points around and then bigger picture, how do you think the competitive environment could evolve if the backdrop were to soften? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 1:00PM, VVV.N - Q2 2025 Valvoline Inc Earnings Call

Question: Max Rakhlenko - TD Cowen. - Analyst : Got it, appreciate all the color. I will go ahead. Okay, so next question. Just curious, because the pricing component of ticket accelerate in 2Q, and if so, what do you attribute that to?

Question: Max Rakhlenko - TD Cowen. - Analyst : Oh, did the pricing component of ticket accelerate in 2Q, and if it did, what do you attribute that to?

Question: Max Rakhlenko - TD Cowen. - Analyst : Got it. Thanks a lot in best regards.

Question: Ariana Warden - Citi Investment Research - Analyst : Hi, this is Ariana Warden on the student's account. Thank you for taking our questions. The first question is, what can we expect with the drivers of change sales growth in the second half between ticket and transaction?

Question: Ariana Warden - Citi Investment Research - Analyst : Yeah, same for sales growth in the second half.

Question: Ariana Warden - Citi Investment Research - Analyst : Got it, thank you. And then my follow up is, can you talk a bit more about ghost margin performance, in the second quarter, and how to perform versus your own expectations, and if your full year view on ghost margin being flattish year over year has changed at all? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 1:00PM, VVV.N - Q2 2025 Valvoline Inc Earnings Call

Question: David Bellinger - Mizuho Securities - Analyst : Hey, good morning. Thanks for the question, Mary, thanks for all your help over the years. First one, just another crack on the SG&A side, are there any areas of the business where you're seeing OpEx overages are running hotter than your internal plan, and then should we expect you to leverage SG&A as you go into fiscal 2026?

Question: David Bellinger - Mizuho Securities - Analyst : Yes, got it. Thanks for that. And then, just a follow up on an earlier one. It was still a little unclear. How do lower oil prices impact your gross margins? And can you talk about the amount and timing of any impact that you might, see?

Question: David Bellinger - Mizuho Securities - Analyst : And those aren't necessarily passed on to consumers, right? You would hold your pricing firm or is that a leverage you could play if we do get more pro promotional in any way?

Question: David Bellinger - Mizuho Securities - Analyst : Yeah, very helpful commentary. Thanks again, Mary.

Question: Mark Jordan - Goldman Sachs - Analyst : Good morning. This is Mark Jordan on for Kate. Thank you for taking our questions. It sounds like non-oil change revenue continues to be a tail end here, but maybe in the near term it'll be less so as we have last year's initiatives. So, can you remind us what your penetration is right now with non-oil change and how that varies by quartile? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 1:00PM, VVV.N - Q2 2025 Valvoline Inc Earnings Call

Question: Mark Jordan - Goldman Sachs - Analyst : Perfect, thank you for that. And then, I guess it sounds like you're not seeing any changes in customer behavior, which is good to hear, but if we think about the potential for, maybe a softer macro at some point, would you expect to see some degree of deferral with oil change intervals maybe extending out a month or two or another 1,000 miles, and would you expect to see, certain of these attachment rates for some non-oil change services come under pressure?

Question: Mark Jordan - Goldman Sachs - Analyst : Perfect. Thank you very much.

Question: Thomas Wendler - Stephens Inc. - Analyst : Hey, good morning, everyone. Maybe just one more from me. Hey, as we think about the development agreements you have, how should we be thinking of the pace of new locations there? I think you noted 20 new stores and 25, and then you've kind of talked around the franchisee going from one to four new locations a year. Just any color on that?

Question: Thomas Wendler - Stephens Inc. - Analyst : Perfect, I appreciate the color.

Question: Chris O'Cull - Stifel Nicolaus and Company, Incorporated - Analyst : Thanks. Good morning, guys. Lori, I had a question about the Breeze Autocare system. Can you talk a little bit about the level of investment needed to integrate that system and I'm thinking about rebranding technology investments, but just curious what you discovered during your due diligence.

Question: Chris O'Cull - Stifel Nicolaus and Company, Incorporated - Analyst : Okay, thank you.

Question: Justin Kleber - Robert W. Baird & Co., Inc. - Analyst : Hey, good morning. Thanks everyone for taking the questions. Curious if you gave any thought to tightening the comp outlook like you did last year after 2Q. It doesn't sound to me like the business is getting any more volatile, but the implied back cap guide is pretty wide and it looks like it would include something below 4% at the low end. I assume you're not planning the business at that level, but it's just trying to understand what the biggest swing factors are in your view as it relates to the second half comp. Is it more about transactions or is it more about tickets?

Question: Justin Kleber - Robert W. Baird & Co., Inc. - Analyst : Got it. Okay, thanks for that. And then just a modeling question as we think about the third quarter, and it sounds like you're going to have an Easter shift headwind. I don't know if there's any other offsetting day mix impacts, but just how are you thinking about or how should we think about the headwind to the comp from Easter moving into fiscal 3Q this year.

Question: Justin Kleber - Robert W. Baird & Co., Inc. - Analyst : All right. Thanks so much.

Question: Peter Keith - Piper Sandler Companies - Analyst : Hey, thanks. Good morning, everyone. On the re-franchising, I don't think it was quantified, but is there a way that you could give us the lost sales and EBITDA in the quarter from the refranchising and what those numbers will then look like for Q3 so we can make sure we get our model set appropriately?

Question: Peter Keith - Piper Sandler Companies - Analyst : Okay. Thank you for that. We're swimming in a lot of burning this morning, so I'll take a closer look once the call concludes. What about on the EBITDA margin decline, including the refranchising for the rest of the year and all the various puts and takes? Is this the low water mark for year on year EBITDA down margin decline and perhaps there's continued decline, but just not to the tune of what we saw in Q2?

Question: Peter Keith - Piper Sandler Companies - Analyst : Okay. Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 1:00PM, VVV.N - Q2 2025 Valvoline Inc Earnings Call

Question: David Lantz - Wells Fargo Securities, LLC - Analyst : Hey, good morning, and thanks for taking my questions. Can you talk about the cadence of new store openings in the second half of the year and if the demand proves shoppier than expected on the back of tariffs, would you contemplate pushing any of those openings to '26?

Question: David Lantz - Wells Fargo Securities, LLC - Analyst : Got it. That's helpful. And then on gross margin, it seems like expectations are still flat for the year, but is there anything we should keep in mind in Q3 and Q4 as we're modeling outside of the compares?

Question: David Lantz - Wells Fargo Securities, LLC - Analyst : Got it. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 1:00PM, VVV.N - Q2 2025 Valvoline Inc Earnings Call