Valvoline Inc Q3 2025 Earnings Call Transcript

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

Question: Mark Jordan - Goldman Sachs - Analyst : Hi, thank you for taking my questions. I guess as we think about going forward, your same-store sales growth guidance implies a pretty wide range of outcomes for 4Q. Can you talk about the different scenarios you see playing out there that might lead you to the high end and low end of the range?

Question: Mark Jordan - Goldman Sachs - Analyst : Okay. Perfect. Thank you very much. And then I think on -- transactions are 25% of the comp there. So 75% or so over ticket. Can you break out the drivers of the ticket, the magnitudes there NOCR, net pricing and premiumization?

Question: Mark Jordan - Goldman Sachs - Analyst : Great. Thanks very much and congrats on the quarter.

Question: Steven Zaccone - Citi Investment Research (US) - Analyst : Great. Good afternoon or good morning. Thanks very much for taking my question. I wanted to follow up on the previous question. Can you just help us understand a bit more maybe what you saw in June? Do you think it was weather? Do you think it's some macro impact? And then just given the guidance for the fourth quarter, we can kind of do the range, what are you seeing thus far in July? Like have you seen a bit of an improvement versus what you saw in June?

Question: Steven Zaccone - Citi Investment Research (US) - Analyst : Okay. That's helpful detail. And then I'm going to ask the question just how should we start to think about same-store sales planning for next year, since you clearly have confidence you're going to be able to return to SG&A leverage. Maybe just help us think about the preliminary planning for same-store sales growth next year.

Question: Steven Zaccone - Citi Investment Research (US) - Analyst : Great. Thanks for all the detail. Best of luck.

Question: Simeon Gutman - Morgan Stanley - Analyst : Hey, good morning, everyone. My first question on transactions and ticket on -- so this 1/3, 2/3, we've been, I think, in this mode for a bit. It used to be a little more balanced. So could it get to be more balanced and then getting to a slightly higher sustainable comp rate. Do you need the transactions to lift? And is that expected to happen? Or is this the new normal?

Question: Simeon Gutman - Morgan Stanley - Analyst : And then a follow-up and it's related. If you look at the immature stores that are ramping, the oil changes per day. So I guess that would be the transaction gauge. Those ramps are normal, below average, above average? How do you -- how would you characterize them?

Question: Simeon Gutman - Morgan Stanley - Analyst : Okay. Thanks. Good luck, everyone.

Question: Michael Harrison - Seaport Global Securities LLC - Analyst : Hi, good morning. Welcome to Kevin. Looking forward to working with you again. To the extent that average ticket is going up, I was hoping we could dig in a little bit on how much of that is pure pricing. Presumably, you guys are responding to some higher costs for parts or filters or maybe some increases in labor costs and trying to push pricing. You also noted some incremental pricing actions by your franchisees as well. So I was just wondering if you could give us any help around quantifying that pure pricing component of average ticket, really just trying to get a sense of how much pricing momentum could be reflected in average ticket into next year?

Question: Michael Harrison - Seaport Global Securities LLC - Analyst : Alright. Very helpful. Thank you. And then I had a couple of questions related to acquisitions. I see that you acquired eight stores in the quarter. Was that one transaction or multiple transactions. And I'm just hoping that maybe you can give us some color on what the pipeline of store acquisitions looks like -- it seems like maybe you're still moving forward on some of these smaller deals even with the Brede transaction kind of pending here.

Question: Michael Harrison - Seaport Global Securities LLC - Analyst : Alright. Thanks for that. I did just want to clarify, though, there were six conversions from franchisees, but it looks like there were also eight acquired stores. Was that one transaction or multiple? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 06, 2025 / 1:00PM, VVV.N - Q3 2025 Valvoline Inc Earnings Call

Question: Michael Harrison - Seaport Global Securities LLC - Analyst : Alright. Thank you very much.

Question: Steven Shemesh - RBC Capital Markets - Analyst : Hey, good morning, and thanks for taking the questions. I wanted to ask two on Breeze, and I'll throw them both out there. First, -- the Breeze stores do about $1 million in sales per store versus an average Valvoline about [$1.7 million]. So first one is, structurally, is there any reason for that gap. And then secondly, as we think about integrating Breeze onto the platform from an SG&A standpoint, we're lapping over the tech. We're talking about getting back to leverage. Are there any costs associated with the deal that might throw a wrench in that plant?

Question: Steven Shemesh - RBC Capital Markets - Analyst : Got it. Thanks 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. AUGUST 06, 2025 / 1:00PM, VVV.N - Q3 2025 Valvoline Inc Earnings Call

Question: David Bellinger - Mizuho Securities - Analyst : Hey, good morning. Thanks for the questions here. I want to follow up on the franchise side. It seems like at least one of these large franchisees was taking more price. You spoke to that and maybe more price just across the Board on the franchise platform. Can you speak to the magnitude of that differential versus company-owned? Any consumer pushback in those markets? And if not, should the company owned pricing close that gap over the next several quarters? Is that an opportunity for the core company owned to push price a bit more forcefully going forward?

Question: David Bellinger - Mizuho Securities - Analyst : Got it. Thanks for clarifying on that. And then just to pivot over to the tech investments. I think you mentioned 1/3 of the SG&A growth this quarter. that could equate to something like 20 basis point to 30 basis point impact. Is that the right level of SG&A margin we should get back next year as we move behind this the smaller investment cycle within OpEx? Any way to frame what that potential could be into next year? Thank you.

Question: David Bellinger - Mizuho Securities - Analyst : Got it. Thank you, both. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 06, 2025 / 1:00PM, VVV.N - Q3 2025 Valvoline Inc Earnings Call

Question: Peter Keith - Piper Sandler Companies - Analyst : Hi, good morning, Lori and Kevin. Elizabeth, Kevin, nice to [meet] you. I wanted to ask about the labor leverage. You saw 100 basis points of gross margin benefit. So that was fairly impressive. You talked about taking advantage of new demand planning tools. So is there something unique to this quarter? Or is this some -- in the ballpark of the type of labor leverage you can see on a go-forward basis with similar comp performance?

Question: Peter Keith - Piper Sandler Companies - Analyst : Okay. That sounds exciting. And then I guess with Kevin or Lori, so I don't know if it's a question for Lori or for Kevin, but I think a lot of investors have been eager to see if you're going to put in place a new long-term comp growth framework. Is that still the plan? And is that something maybe you're thinking about with the fiscal Q4 print?

Question: Peter Keith - Piper Sandler Companies - Analyst : Okay. Very good. Thanks so much.

Question: Peter Keith - Piper Sandler Companies - Analyst : Very good. Thank you, and good luck.

Question: Chris O'Cull - Stifel Nicolaus and Company, Incorporated - Analyst : Thanks. Good morning, everyone. Lori, are you surprised that you may need to sell some of the Breeze shops to get approval, just given how fragmented the market is today? And does that influence your thinking about future opportunities, acquisition opportunities?

Question: Chris O'Cull - Stifel Nicolaus and Company, Incorporated - Analyst : Okay. And then -- do you see any -- I'm assuming you're going to be converting the brand to Valvoline. I'm just curious, do you see any risk in converting the brand of Valvoline. Just given the equity, I'm sure that chain has in several other markets? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 06, 2025 / 1:00PM, VVV.N - Q3 2025 Valvoline Inc Earnings Call

Question: Chris O'Cull - Stifel Nicolaus and Company, Incorporated - Analyst : Great. Thanks, guys.

Question: Justin Kleber - Robert W. Baird & Co., Inc. - Analyst : Good morning, everyone. Thanks for taking the questions. Wanted to follow up on the tech spend. Just given investors have been so focused on the cost and the deleverage in the model and not as much on what the paybacks are. So nice to see the labor leverage showing up in margin. Can you remind us some of the other benefits or efficiencies you expect to realize from all these tech investments?

Question: Justin Kleber - Robert W. Baird & Co., Inc. - Analyst : Thank you, both, for that all the color. Super helpful. Just an unrelated follow-up, and I apologize if I missed this, but your prior guidance for the full year assumed a flattish gross margin. Just curious how you would have us be thinking about gross margin in 4Q? Should we expect to see

Question: Justin Kleber - Robert W. Baird & Co., Inc. - Analyst : Thank you.

Question: Thomas Wendler - Stephens Inc. - Analyst : Hey, good morning, everyone. Thanks for taking my questions. I wanted to kick it off here with the $740 million of the Term Loan B. $625 million of that's kind of accounted for the Breeze acquisition leaving $115 million remaining kind of to be deployed. How are you thinking about utilizing that?

Question: Thomas Wendler - Stephens Inc. - Analyst : Okay. I appreciate that. And then kind of an unrelated one for me hearing. There's been a little bit of discussion about premiumization kind of impacting last quarter. Can you give us an idea of what the current premium mix is for the oil changes? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 06, 2025 / 1:00PM, VVV.N - Q3 2025 Valvoline Inc Earnings Call

Question: Thomas Wendler - Stephens Inc. - Analyst : Perfect. I Appreciate the color. Thank you.

Question: David Lantz - Wells Fargo Securities, LLC - Analyst : Hey, good morning, guys. Thanks for taking my questions. Any early indications on how we should think about franchise unit growth in '26? Just trying to get a bit more color on thinking through the ramp to 150 per year by '27?

Question: David Lantz - Wells Fargo Securities, LLC - Analyst : Got it. That's helpful. And then just one more. Any update on fleet performance and how that looks today and if it's still outperforming the company average?

Question: David Lantz - Wells Fargo Securities, LLC - Analyst : Thank you.