VVV 10-K & 10-Q changes, risk factors and insider trading

Valvoline’s service center locations require large quantities of automotive products and supplies. The Company’s success depends in part on the ability to anticipate and react to changes in supply costs, and the Company is susceptible to increases in primary and secondary supply costs as a result of factors beyond its control. These factors include general economic conditions, including recessions, significant variations in supply and demand, potential increases in taxes and tariffs, pandemics, armed conflicts, war, weather conditions, currency fluctuations where Valvoline operates, commodity market speculation, labor strikes, including rail strikes, and government regulations. For example, Valvoline’s supplier for air filters experienced supply constraints in fiscal 2024 leading to delivery delays to Valvoline until the supplier was able to diversify its supply chain, which impacted non-oil change revenue in the first half of fiscal 2024. Additionally, the International Longshoreman’s Association (“ILA”) union of maritime workers contract expired on September 30, 2024 without a renewed contract negotiated until early October 2024, resulting in a brief labor strike. A more lengthy strike from the ILA could have had a negative impact on Valvoline’s suppliers resulting in an unfavorable impact to product availability and cost and negatively impacted the Company’s consolidated results of operations. Higher product and supply costs could reduce the Company’s profits, which in turn may adversely affect the business and results of operations for both company-operated and franchised stores. While the Company’s results did not include a material impact from new tariffs enacted in fiscal 2025, future changes in tariffs could have an adverse impact if the Company is not able to mitigate the effects.

In connection with the sale of Global Products, theValvoline partiesand VGO entered into a brand agreement (the “Brand Agreement”). Pursuant to the Brand Agreement, Valvoline retains ownership of the Valvoline brand for generally all retail services purposes, and Global ProductsVGO owns the brand for all product uses. The brand sharing arrangement may increase the risk of inconsistency in its use, messaging, or overall damage to the brand, which could have an adverse impact on Valvoline’s reputation and business and result in lengthy and expensive litigation or settlements.

Another component of the Company’s network growth strategy is dependent on the success of recent refranchising activities taken during fiscal 2024 and planned for early fiscal 2025.activities. Failure to achieve the expected benefits of the refranchising transactions could negatively impact the Company’s operating results and its overall long-term strategic growth objectives, including accelerating franchise store growth. In addition, if the Company’s franchise partners are unsuccessful in continuing productivity and growth objectives within their respective markets, the Company’s business results could be adversely affected. Valvoline has also guaranteed future lease commitments related to certain refranchised stores and the Company’s operating results could be negatively impacted by any increased rent obligations to the extent the franchisees default on such lease agreements.

Acquisitions are an important element of Valvoline’s overall growth strategy. Valvoline has completed a significant number of acquisitions in recent years and has developed a pipeline of future viable targets expected to complement the Company’s growth initiatives. An insufficient quantity of strategic acquisition targets in the marketplace with limited targets remaining, or the inability of Valvoline to successfully acquire those targets, may have a negative impact on Valvoline's ability to achieve its future growth projections. Valvoline expects to continue to evaluate and enter into discussions regarding a wide array of potential strategic transactions and to continue to grow organically and through acquisitions. An inability to execute these plans could have an adverse impact on Valvoline’s financial condition and results of operations. In addition, the anticipated benefits of Valvoline’s acquisitions may not be realized and the process of integrating an acquired company, business, or product may create unforeseen operating difficulties or expenditures.

The Company’s recently implemented enterprise resource planning (“ERP”) system hasimplemented in fiscal 2024 adversely impacted Valvoline’s internal controls and could continue to negatively impact the business if remedial efforts are not timelyeffectively and effective.maintained.

Valvoline relies upon its ERP application to assist in managing certain business processes and summarizing operational and financial results. Following the sale of the former Global Products reportable segment in fiscal 2023, and as part of Valvoline’s continued evolution to a standalone retail business, the Company has been in the process of separatingseparated certain business processes, information systems and applications that were previously shared to support both businesses. On January 1, 2024, Valvoline implemented a new ERP application intended to better accommodate the retail business model and support the Company’s continued growth.

A material weakness in internal control over financial reporting arose in connection with the Company’s implementation of the new ERP system and its related impact on IT general controls, which included deficiencies related to certain business processes that were not adequately designed at the time of system implementation. While the ERP system is intended to ultimately improve and enhance business processes, its implementation resulted in disruptionsdisruptions, including to maintaining an effective internal control environment and the timely processing of invoices and billings to franchisee, independent operator and fleet customers.environment. Although the newrecently-implemented ERP application has not been and is not currently utilized in the day-to-day operations of Valvoline’s retail stores and there have been no material impacts on itsthe ability to serve customers to-date, the conversion to any new IT system, including the planned implementation of a human resources information system expectedand inrelated fiscalremedial 2025,procedures for business process controls, exposes the Company to additional risks and possible continued disruptions. This includes the loss of information, unauthorized access and systematic changes, disruption to normal operations, and risks associated with integrations with other applications and processes.

Implementing the new ERP system has required, and the efforts associated with mitigation, remediation, and enhancements will continue to require, the investment of significant personnel and financial resources. Failure to adequately and timely address any known or potential issues to ensure the new ERP system operates as intended could result in unexpected incremental costs and diversion of management’s attention and resources, further interruptions or delays in processes and challenges with vendor and customer relationships, difficulty in achieving and maintaining effective internal controls and issuing timely and accurate financial results. Valvoline management has implemented and executed a remedial plan, as described in Item 9A, Controls and Procedures, whichand substantial progress was made during fiscal 2025. Substantial progress towards the remediation of the material weakness has been made duringin fiscal 2024.2025 However,through managementthe remediation of the ITGC deficiencies and the efforts to enhance business process controls. Remediation of the business process control design deficiencies that aggregate to the material weakness will conclude once the controls and related documentation are consistently executed for a sufficient period of time and are determined to be effective, through formal testing, which is expected to be completed in fiscal 2026. Management cannot provide any assurance that such remedial measures, or any other remedial measures taken, will be effective and identify or address all inherent risks from implementing an ERP system. If this remediation fails or other material weaknesses arise, it may adversely affect operating results, the trading price of Valvoline’s common stock, internal control over financial reporting, or the ability to effectively manage the business.

Economic downturns, including a recession, may reduce customer demand or inhibit Valvoline’s ability to provide its services. Valvoline’s business and operating results are sensitive to declining economic conditions, credit market tightness, declining customer and business confidence, volatile exchange and interest rates, continuing inflation and other challenges, including those related to acts of aggression or threatened aggression that can affect the economy and financial markets. In the event of adverse developments or stagnation in the economy or financial markets, Valvoline’s customers may defer vehicle maintenance, oil changes, or other services, may repair and maintain their vehicles themselvesthemselves, or may be unable to obtain creditcredit, reducing their ability to spend.

Economic weakness and uncertainty may cause changes in customer preferences and habits, and if such economic conditions persist for an extended period of time, this may result in customers making long-lasting changes to their spending behaviors, which could unfavorably impact Valvoline’s business, its results of operations and cash flows. Additionally, during periods of favorable economic conditions, customers may be more likely to purchase new vehicles rather than maintaining and servicing older vehicles, which could also have an adverse impact on Valvoline’s business, results of operations, cash flows and strategic objectives. Beyond changes in customer behavior driven by economic conditions, rapid changes in the marketing landscape and the potential for OEMs to monetize or restrict access to their software and data could undermine current customer retention and acquisition strategies. These dynamics could lead to decreased customer loyalty, increased churn, and higher customer acquisition costs.

Valvoline’s performance is dependent on recruiting, developing, training, and retaining quality and diverse service center employees in large numbers. Valvoline’s service centerscenter positions are subject to high rates of turnover. Valvoline’s ability to meet labor needs while controlling costs is subject to external factors, such as unemployment levels, prevailing wage rates, wage legislation, and changes in rules governing eligibility for overtime and changing demographics. In the event of increasing wage rates, if Valvoline does not increase wages competitively, staffing levels and customer service could suffer because of declining workforce quality. Valvoline’s earnings could decrease if wage rates increase, whether in response to market demands or new wage legislation, and Valvoline is unable to adjust pricing to offset the additional costs. In addition, inflation and economic uncertainty may negatively impact Valvoline’s ability to attract and retain employees.

Valvoline relies on its information technology systems, including systems which are managed or provided by third-party service providers, to conduct its business. The Company’s point-of-sale platforms for company-operated and franchisee retail stores could be subject to cybersecurity threats, service outages, or data breaches,breaches. such as the July 2024 software update by CrowdStrike Holdings, Inc., a cybersecurity technology company, which caused a global information technology outage. This incident required temporary manual processes to maintain operations. Although it was brief and did not have a material impact to business, Valvoline’s business was adversely impacted by the outage and slowed service. Similar software-inducedSoftware-induced interruptions or any security breach involving the point-of-sale or other systems within the Valvoline network could harm business operations, result in a loss of consumer confidence, or cause costs to be incurred associated with data recovery, investigation, remediation, and data breach notification obligations required under data privacy laws, which can be significant and vary by jurisdiction.

Business disruptions, including those related to operating hazards inherent in servicing vehicles, natural disasters, severe weather conditions, climate change, supply or logistics disruptions, increasing costs for energy, temporary store and/or power outages, information technology systems and network disruptions, cybersecurity breaches, terrorist attacks, armed conflicts, war, pandemic diseases, fires, floods or other catastrophic events, could harm Valvoline’s operations as well as the operations of Valvoline’s customers and suppliers, and may adversely impact Valvoline’s financial performance. Although the impact to the Company’s results of operations and financial condition were not material, the recent hurricanes Beryl, Helene and Milton caused certain company-operated and franchised service center stores to temporarily pause operations for a period of time for safety and evacuations, in addition to being impacted by intermittent connectivity issues and limited damage to stores. In these cases when the stores remain open, they often rely upon manual processes which can slow service times and minimize transactions, or in the cases where the stores have to close for a period of time, the inability to service customers until the stores are safe to operate. Although it is impossible to predict the occurrence or consequences of any such events, they could result in reduced demand for Valvoline’s services or make it difficult or impossible for Valvoline to deliver services to its customers. In addition to leading to a disruption of Valvoline’s businesses, a catastrophic event at one of Valvoline’s service center stores or involving its employees could lead to substantial legal liability to or claims by parties allegedly harmed by the event.

Historically, Valvoline has been able to take advantage of its size and global reach as a combined products and services company. The sale of Global Products reportable segment during fiscal 2023 resulted in Valvoline being a smaller, less diversified company, potentially making it more vulnerable to changing market, regulatory and economic conditions. Following completion of the sale of Global Products, Valvoline is more concentrated geographically in the U.S. and Canada and in serving the automotive aftermarket through company-operated, independent franchise and Express Care stores that service vehicles with Valvoline products. In addition, as a smaller company, Valvoline may be unable to obtain goods or services at prices or on terms that are as favorable as those obtained by Valvoline prior to the sale of Global Products, and Valvoline’s ability to absorb costs or unexpected expenses whether due to contingencies or other risks as described herein, may be negatively impacted. Any of these factors could have an adverse effect on Valvoline’s business, financial condition, results of operations, or cash flows.

Valvoline is subject to federal, state and local laws, and regulations in the U.S. and Canada relating to the collection, use, retention, disclosure, security and transfer of personal data relating to its customers and employees. These laws and regulations, and their interpretation and enforcement continue to evolve and may be inconsistent from jurisdiction to jurisdiction. For example, the California Consumer Privacy Act ("CCPA") applies to Valvoline's activities conducted in the state of California. Valvoline is also subject to Canada data privacy laws, such as The Personal Information Protection and Electronic Documents Act (“PIPEDA”), due to operations throughout Canada. Complying with the CCPA, PIPEDA and other similar emerging and changing privacy and data protection requirements can be resource-intensive and may cause Valvoline to incur substantial costs as compliance requires investment in new processes, technologies, and training. Valvoline’s handling of consumer and employee personal data, including reliance on third-party providers, subjects the Company to various federal, state and local data privacy and protection requirements, which could lead to additional complexities and increased costs of operations.

New laws or regulations, or changes in existing laws or regulations or the manner of their interpretation or enforcement, could increase Valvoline’s cost of doing business and restrict its ability to operate its business or execute its strategies. This risk includes, among other things, compliance with a myriad of U.S. tax laws and regulations; franchise laws and regulations; securities laws and regulations; environmental laws and regulations; labor laws and regulations; anti-competition laws and regulations; product compliance regulations; anti-corruption and anti-bribery laws, including the Foreign Corrupt Practices Act (“FCPA”); anti-money-laundering laws; and other laws governing Valvoline’s operations.

Valvoline has substantial indebtedness and financial obligations. As of September 30, 2024,2025, Valvoline had outstanding indebtedness of $1.094$1.074 billion and available borrowing capacity of $346.8$341.6 million under its revolving credit facility. In addition, Valvoline expects to borrow $740 million in December 2025 to fund the purchase of the Breeze Autocare acquisition with excess proceeds being used to pay down outstanding debt. Valvoline may incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other general corporate purposes.

The global macroeconomic environment could be negatively affected by, among other things, disruptions to the banking system and financial market volatility resulting from bank failures and actions to reduce inflation.volatility. The Company utilizes and maintains material balances of cash and cash equivalents,equivalents and is therefore is reliant on banks and financial institutions to safeguard and allow ready access to these assets. Specifically, the Company has $68.3$51.6 million of cash and cash equivalents as of September 30, 20242025 held by various financial institutions.

In connection with Valvoline’s separation from Ashland, Valvoline assumed certain of Ashland’s historical pension and other postretirement benefit plans and related liabilities. The most significant of these plans, the U.S. qualified pension plans, are estimated to be underfunded by $51.5$71.3 million as of September 30, 2024.2025. The funded status of Valvoline's pension plans is dependent upon many factors, including returns on invested assets, the level of certain market interest rates and the discount rate used to determine pension obligations. Valvoline has taken a number of actions to reduce the risk and volatility associated with the pension plans; however, changing market conditions or laws and regulations could require material increases in the expected cash contributions to these plans in future years. Specifically, unfavorable returns on plan assets or unfavorable changes in applicable laws or regulations could materially change the timing and amount of required plan funding. In addition, a decrease in the discount rate used to determine pension obligations could result in an increase in the valuation of pension obligations, which could affect the reported funded status of Valvoline’s pension plans and future contributions. Similarly, an increase in discount rates could increase the periodic pension cost in subsequent fiscal years. If any of these events occur, Valvoline may have to make cash payments to its pension plans to satisfy minimum funding requirements, which based on current data and assumptions, are not expected for at leastin the nextnear five years.term. If such payments are required, it would reduce the cash available for Valvoline’s business. Finally, Valvoline’s policy to recognize changes in the fair value of the pension assets and liabilities annually and as otherwise required through mark to market accounting could result in volatility in Valvoline’s earnings, which could be material.

In connection with the sale of Global Products, Valvoline expects to drive growth and shareholder value as a best-in-class, pure-play automotive retail service provider. The anticipated operational, financial, strategic and other benefits may not be achieved from the Transaction, which could have an adverse impact on Valvoline’s business, financial condition and results of operations. The anticipated benefits are based on a number of assumptions, some of which may prove incorrect and could be affected by a number of factors beyond Valvoline’s control, including without limitation, general economic conditions, increased operating costs, challenges in separating the businesses information technology infrastructure and processes, regulatory developments and the other risks described in these risk factors.

Valvoline is dependent on Global ProductsVGO for its product supply and certain remaining transition services and certain indemnities have been agreed to with the Buyer, for which the Company may be negatively impacted if Global ProductsVGO is unable to provide these products and services or is unable to satisfy its indemnification obligations.

In connection with the sale of Global Products in fiscal 2023, theValvoline partiesand VGO entered into a Supply Agreement and an agreement for certain transition services.Agreement. Pursuant to the Supply Agreement, Valvoline is dependent on VGO for product supply as it purchases substantially all lubricant and certain ancillary products for its stores from Global Products and certain transition services remain in place, which includes limited information technology support expected to continue through early calendar year 2025. Valvoline is dependent on Global Products for product supply and each party is reliant on one another for the remaining transition services.VGO. Any interruption, delay, quality issue or other failure in product supply or service could adversely affect the business and results of operations and result in disputes between the parties. In addition, if either party has issues or delays with finalizing the remaining transitions, Valvoline may not be able to operate its business effectively which could cause adverse effects to its financial condition, results of operations, or cash flows.

As part of the sale of Global Products, the parties agreed to indemnify and reimburse one another for various matters, which include tax indemnities. Each business will be responsible for taxes related to its operations, breaches of its tax covenants, and its share of transfer taxes, while Valvoline assumes responsibility for tax matters associated with the pre-closing reorganization. There is no guarantee that these indemnification arrangements will sufficiently protect Valvoline from potential exposures or liability claims from third parties, including taxing authorities. Additionally, there can be no assurance that Global ProductsVGO can fulfill its indemnification obligations in the future. Valvoline could experience negative impacts on its business, financial position, and cash flows due to these risks.

As the quick, easy, trusted leader in automotive preventive maintenance, Valvoline is creating shareholder value by driving the full potential of its core business, acceleratingdelivering sustainable network growthgrowth, and innovatingcontinuing to innovate to meet the evolving needs of customers and the evolving car parc. With average customer ratings that indicate high levels of service satisfaction, Valvoline and the Company’s franchise partners keepsimplify vehicle care so customers movingcan withdo what drives them. This includes approximately 15-minute stay-in-your-car oil changes; battery, bulb and wiper replacements; tire rotations; and other manufacturer recommended maintenance services. The Company operates and franchises moreapproximately than 2,0002,200 service center locations through its Valvoline Instant Oil ChangeSM (“VIOC”) and Valvoline Great Canadian Oil Change (“GCOC”) retail locations and supports nearlyover 270240 locations through its Express CareTM platform.

Net revenues and Adjusted EBITDA trends have significantlycontinued increasedto increase over the past five fiscal years largely driven by strong system-wide same-store sales (“SSS”) growth, which benefited from increased transactions, higher average ticket, and continued non-oil change penetration,penetration and increased transactions, in addition to acquisitions and overall store expansion. Income from continuing operations has also followed an upward trend largelydue fromto strong top-line performanceperformance, with the exception of fiscal 20222022, where the decrease was primarily driven by a loss due to the remeasurement of pension and other postretirement plans, as well as higher separation-related expenses in connection with the planning and evaluation of the separation of the Company’s businesses that ultimately culminated in the sale of Global Products.

•Adjusted EBITDA margin - adjusted EBITDA divided by adjusted net revenues;

•Free cash flow - cash flows from operating activities less total capital expendituresexpenditures, comprised of growth and certainmaintenance, otherfurther adjustmentsdescribed as applicablebelow; and

•Discretionary freeFree cash flow excluding growth capital expenditures - cash flows from operating activities less maintenance capital expenditures and certain other adjustments as applicable.expenditures.

Management uses free cash flow and discretionary free cash flow excluding growth capital expenditures as additional non-GAAP metrics of cash flow generation. By including capital expenditures and certain other adjustments, as applicable,expenditures, management is able to provide an indication of the ongoing cash being generated that is ultimately available for both debt and equity holders as well as other investment opportunities. Free cash flow includes the impact of capital expenditures, providing a supplemental view of cash generation. Discretionary freeFree cash flow excluding growth capital expenditures includes maintenance capital expenditures, which are routine uses of cash that are necessary to maintain the Company's operationsexisting business operations, including its retail service center store network, service portfolio, and support functions. Free cash flow excluding growth capital expenditures provides a supplemental view of cash flow generation to maintain operations before discretionary investments in growth.growth capital, which expand future business operations, including the opening or expansion of retail service center stores and service capabilities. Free cash flow and discretionary free cash flow excluding growth capital expenditures have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash flows,expenditures, such as mandatory debt repayments.

The non-GAAP measures used by management exclude key items. Key items are often related to legacy matters or market-driven events considered by management to not be reflective of the ongoing operating performance. Key items may consist of adjustments related to: legacy businesses, including the separation from Valvoline's former parent company, the former Global Products reportable segment, and the associated impacts of related activity and indemnities; non-service pension and other postretirement plan activity; restructuring-related matters, including organizational restructuring plans, the separation of Valvoline’s businesses, significant acquisitions or divestitures, debt extinguishment and modification, and tax reform legislation; in addition to other matters that management considers non-operational, infrequent or unusual in nature.

Valvoline tracks its operating performance and manages its business using certain key measures, including system-wide, company-operated and franchised store counts and system-wide SSS; and system-wide store sales. Management believes these measures are useful to evaluating and understanding Valvoline's operating performance and should be considered as supplements to, not substitutes for, Valvoline's net revenues and operating income, as determined in accordance with U.S. GAAP.

Net revenues are influenced by the number of service center stores and the business performance of those stores. Stores are considered open upon acquisition or opening for business. Temporary store closings remain in the respective store counts with only permanent store closures reflected in the activity and end of period store counts. For the periods presented herein, SSS is defined as net revenues of U.S. VIOC stores (company-operated, franchised and the combination of these for system-wide SSS), with new stores, including franchised conversions, excluded from the metric until the completion of their first full fiscal year in operation. Beginning in fiscal 2025, management is updating its definition of same-store sales and in connection with this change, prior periods will be recast to present SSS on a consistent basis with the new approach. The new approach will define same stores defined at the beginning of the month following the completion of 12 full months in operation within the system to more closely conform with common retail practice.system.

Fiscal 20242025 marked the 18th19th consecutive year for system-wide SSS growth withand 158the addition of 170 net storenew additionsstores, bringing the system to the2,180 system.stores. The table below highlights the growth over the last year:

Net revenues increased $175.5$91.3 million, or 12.2%5.6% over the prior year period primarily drivenattributable byto improvements inhigher volume, mix, and pricing. System-wide SSS growth increased 6.7%6.1% withreflecting thegrowth majorityin ofaverage the gains comingticket from ticketpremiumization, growth,pricing, driven by higherand non-oil change service penetration, pricingas adjustments,well andas premiumizationhigher whiletransactions transactionsupported growthby accountedan forexpanding thecustomer remaining balance.base. Year-over-year system-wide store growth of 8.5% also contributed to net revenues and volumes through the addition of 158170 net new stores. These benefits were partially offset by reduced net revenues due to the recent Refranchising Transactions. The following reconciles the year-over-year changes in Net revenues:

Gross profit improved 13.6%$39.7 year-over-year,million, largelyor 6.4% year-over-year. The improvement was driven by strong top-line growth from higher transactionvolume, volumes, increased average ticket, andreflecting continued store expansion.expansion, and a favorable mix from continued traction in premiumization and non-oil change services. These benefitsgains were partially offset by the impacts from the recent Refranchising Transactions, and increased store operating costs, including depreciation,depreciation asrelated wellto asongoing higherstore labor and material expenses.investments. The following reconciles the year-over-year changes in gross profit:

Gross profit margin rate improved compared to the prior year,year. drivenThis bymargin increasedexpansion reflects improved labor efficiency from effective management, along with lowerbenefits productfrom costsservice as a percentage of sales.mix. These benefitsgains were partially offset by businessthe miximpacts from the Refranchising Transactions, and higher depreciation.operating expenses, including deprecation.

Net pension and other postretirement plan expenseexpenses (income)

Net pension and other postretirement plan incomeexpenses decreasedincreased $39.3$11.9 million from the prior year, primarily due to a lower current year gainloss on pension and other postretirement plan remeasurement of $2.4$26.6 million in the current year compared to a gain of $41.6$2.4 million in the prior year. The lowerloss remeasurementin gainfiscal 2025 was primarily attributed to a decline in discount rates, which was moderateddriven by higherlower-than-expected actualperformance returns onof plan assets in the current yearyear, comparedwhich more than offset the gain attributable to the priorincrease year.in discount rates.

(c)Activity associated with legacy businesses, including the separation from Valvoline’s former parent company and its former Global Products reportable segment. This activity includes the recognition of and adjustments to indemnity obligations to its former parent company; certain legal, financial, professional advisory and consulting fees; and other expenses incurred by the continuing operations in connection with and directly related to these separation transactions and legacy matters. This incremental activity directly attributable to legacy matters and separation transactions is not considered reflective of the underlying operating performance of the Company’s continuing operations. During fiscal three months ended September 30, 2023, the Company recognized $25.7 million of pre-tax expense to reflect its increased estimated indemnity obligation which also resulted in an income tax benefit of $29.0 million to reflect the release of valuations allowances in connection with the amendment of the Tax Matters Agreement with Valvoline’s former parent company.

(d)Consists of expenses incurred directly related to the Company’s information technology transitions, primarily efforts related to implementing stand-alone enterprise resource planning and human resource information systems duringthat generally began in fiscal years 2023 andfollowing 2024.the sale of the former Global Products reportable segment. These expenses include data conversion, temporary support, training, and redundant expenses incurred from duplicative technology platforms, and temporary support, which areincludes consulting fees and professional services to support certain enhanced manual procedures and material weakness remediation efforts. These incremental costs are directly associated with technology transitions and are not considered to be reflective of the ongoing expenses of operating the Company’s technology platforms.

(e)Consists of activity directly associated with specific significant acquisitions, investments and divestitures, including legal, advisoryprofessional and consulting fees,fees suchfor aslegal diligenceand costs,advisory services, in addition to gains or losses recognized upon dispositiondisposition, temporary financing costs directly associated with expected transactions, acquisition-related incentive compensation costs, and expense recognized to reduce the carrying values of investments determined to be impaired. TheseThis costsactivity areis not considered to be reflective of the underlying operating performance of the Company’s ongoing continuing operations.

Adjusted EBITDA increased $62.6$24.2 million, or 16.5%,5.5%, for the year ended September 30, 20242025 compared to the prior year. This growth was primarily attributable to strong gross profit expansion, which benefitedexpansion from higherstrong averageoperational ticketperformance drivenincluding byimprovements non-oilin change service penetration, net pricing benefits,volumes and increased premiumization, along with increased transactions and unit growth,mix, in addition to operational efficiencies, primarilyefficiencies in labor management, thatwhich furthermore contributedthan tooffset the increase.impacts Thesefrom benefitsrefranchising wereand partially offset bygrowth investments in SG&A expenses to support the stand-alone business and future growth.expenses.

The following table sets forth free cash flow and discretionary free cash flow fromexcluding continuinggrowth operationscapital andexpenditures reconcilesreconciled to cash flows from operating activities to both measures.activities. As previously noted, these free cash flow hasmeasures have certain limitations, including that itthey doesdo not reflect adjustments for certain non-discretionary cash flows,expenditures, such as mandatory debt repayments. Refer to “Use of Non-GAAP Measures” within this Item 7 for additional information regarding thisthese non-GAAP measure.measures.

The decrease in free cash flow from continuing operations over the prior year was driven primarilyimpacted by lowerincreased capital expenditures during the current year, which were partially offset by higher cash flows provided by operating activities in the current year as described above. TheseThe changes,increase in additioncapital toexpenditures over the prior year period was primarily driven by higher maintenance capital expenditures, resultedprincipally inattributed lowerto freefacility cashand flowequipment fromexpenditures. theHigher prior year. New store construction primarily drove increasedgrowth capital expenditures duringwere primarily driven by new store construction, including the currenttiming year,and asmix of new store additions at the end of the year. The Company continues to focus the majority of its capital spend toward growth, which is expected to drive a high return on invested capital.

On April 16, 2024, Valvoline completed the Debt Tender Offer with 99.7% of the outstanding principal amount tendered by the holders of the 2030 Notes. The Debt Tender Offer was made to comply with the requirements of the asset sale covenant under the indenture governing the 2030 Notes in connection with the sale of Global Products and Valvoline’s use of the related net proceeds. The Company used cash and cash equivalents on hand, in addition to borrowing $175.0 million on the Revolver to facilitate the $598.3 million purchase of the 2030 Notes at par, plus accrued and unpaid interest, and cancelled the 2030 Notes accepted for purchase. The Company elected to repurchase the remaining balance outstanding of $1.7 million on April 29, 2024 pursuant to the terms and conditions of the indenture governing the 2030 Notes. In connection with the completion of the Debt Tender Offer, Valvoline recognized a loss on extinguishment of the 2030 Notes of $5.1 million within Net interest and other financing expenses in the Consolidated Statements of Comprehensive Income during the year ended September 30, 2024, comprised of the write-off of related unamortized debt issuance costs and discounts.

As the quick, easy, trusted leader in automotive preventive maintenance, Valvoline Inc. (“Valvoline” or the “Company”) is creating shareholder value by driving the full potential of its core business, delivering sustainable network growth, and continuing to innovate to meet the evolving needs of customers and the car parc. With average customer ratings that indicate high levels of service satisfaction, Valvoline and the Company’s franchise partners simplify vehicle care so customers can do what drives them. This includes approximately 15-minute stay-in-your-car oil changes; battery, bulb and wiper replacements; tire rotations; and other manufacturer recommended maintenance services. The Company operates and franchises moreapproximately than 2,4002,500 service center locations through its Valvoline Instant Oil ChangeSM (“VIOC”), Valvoline Great Canadian Oil Change, and Oil ChangersSM retail locations and supports over 240 locations through its Express CareTM platform.

Immediately following the acquisition, 45 of the acquired Breeze stores were sold in accordance with the Federal Trade Commission (“FTC”) Decision and Order that required the disposal of certain acquired locations for the Company to receive regulatory clearance to close the Breeze acquisition. The fair value of the net assets divested was $90.0 million. As a result, the Company recognized a $57.9 million pre-tax loss on sale within Other loss (income), loss, net in the Condensed Consolidated Statement of Comprehensive Income for the sixnine months ended MarchJune 31,30, 2026.

Valvoline completed the sale of 10 company-operated service center stores to a franchisee during the first fiscal quarter of 2026 and completed the sale of 39 company-operated service center stores to a new franchisee during the first fiscal quarter of 2025. Valvoline recognized pre-tax gains on sale of $14.8$14.3 million and $74.2$74.3 million within Other loss (income), loss, net in the Condensed Consolidated Statements of Comprehensive Income related to these transactions during the sixnine months ended MarchJune 31,30, 2026 and 2025, respectively. These transactions, together with executed development agreements are expected to provide significant growth in the respective markets and deliver long-term value to shareholders. The impact of these dispositions on year-over-year comparability of financial results is discussed further herein.

SECONDTHIRD FISCAL QUARTER 2026 OVERVIEW

The following were the significant events for the secondthird fiscal quarter of 2026, each of which is discussed more fully in this Quarterly Report on Form 10-Q:

•Net revenues grew 25%24% compared to the prior year period, primarily driven by network expansion of 331332 net store additions, including the impact of acquisitions and dispositions. The increase was further supported by system-wide same-store sales ("SSS") growth of 8.2%,8.0%, as well as favorable service mixpricing and pricing.service mix. These increases were partially offset by a $3.8 million decrease related to dispositions.

•Income from continuing operations grew 18%14% to $45.3$65.0 million and Diluted earnings per share increased 17%16% to $0.35$0.51 compared to the prior year period. The increase was primarily driven by profitstrong expansionrevenue fromgrowth operations,and higher gross profit, partially offset by investments inhigher Selling, general, and administrative expenses and increased interest expense associated with the Term Loan B.

•Adjusted EBITDA increased 28%25% over the prior year period dueprimarily todriven by gross profit growth and strong operationalrevenue performance, including improvementshigher involumes, mixfavorable pricing and pricing,service alongmix, withas well as contributions from networkthe growth.Breeze Thisacquisition. increaseThese increases more than offset the impacts offrom dispositions and higher Selling,selling, general, and administrative expenses to support growth.expenses.

The following summarizes the results of the Company’s continuing operations for the periods ended MarchJune 3130:

Net revenues increased $100.6$105.6 million, or 25.0%24.1% for the three months ended MarchJune 31,30, 2026 compared to the prior year period, primarily reflectingdriven by network growth of 331332 net new system-wide stores, drivenincluding bycontributions from the Breeze acquisition and other store openings. System-wide SSS also increased 8.2%,8.0%, supported by higher average ticket from net pricing benefits,actions, ongoing premiumization, and non-oil change service penetration, along with favorablemodest transactiongrowth trends.in transactions. These increases were partially offset by lower net revenues dueresulting tofrom disposition activity. The following reconciles the year-over-year change in net revenues:

For the sixnine months ended MarchJune 31,30, 2026, Net revenues increased $148.1$253.7 million, or 18.1%20.2% compared to the prior year, primarily driven primarily by network growth,expansion, including the Breeze acquisition, as well as improvements in service mixacquisition and pricing.other store openings, which increased the system-wide store base. System-wide SSS revenue grew 7.0%,7.4%, reflecting higherthe averagebenefits ticket from netof pricing benefits,actions, continued growth in premiumization, and favorablehigher transaction trends.volumes. These benefitsfavorable impacts were partially offset by thelower impactrevenues ofassociated with disposition activity. The following reconciles the year-over-year change in year-to-date net revenues:

Gross profit increased $36.5$37.3 million, or 24.3%,21.0%, for the three months ended MarchJune 31,30, 2026 compared to the prior year period driven by contributions from acquired stores and servicenetwork mix.growth. These increases were partially offset by higher expenses associated with network expansion, including labor, depreciation, as well as higher laboroccupancy, and other service delivery costs. The following reconciles the year-over-year change in gross profit:

Gross profit margin declined slightly1.0% in the three months ended MarchJune 31,30, 2026 compared to the prior year period, primarily reflecting higher store operating expenses, including depreciation relatedand tooccupancy newcosts storeassociated growth,with thenetwork impact of recent dispositions,expansion and acquisitions, as well as higher laborlabor, and other service delivery costs. These impacts were partially offset by improved product cost leverage.

Gross profit improved $56.1$93.4 million, or 18.5%,19.4%, for the sixnine months ended MarchJune 31,30, 2026 compared to the prior year period, primarily driven by favorable service mix, volume growth, including contributions from acquired stores, service mix, and pricing. These increases were partially offset by higher expensescosts associated with supporting network expansion, including depreciationlabor, fromoccupancy, new storesdepreciation, and other storeservice growthdelivery investments.expenses. The following reconciles the year-over-year change in year-to-date gross profit:

Gross profit margin improveddeclined 0.3% in the sixnine months ended MarchJune 31,30, 2026 compared to the prior year period, primarily reflectingas favorable product costs and labor efficiency,efficiency partiallywere more than offset by higher store operating expenses relatedassociated towith new storenetwork growth and the impact of the recent dispositions.

Details of the components of net operating expenses are summarized below for the periods ended MarchJune 3130:

Selling, general and administrative expenses (“SG&A”) increased by $15.1$20.2 million and $41.5$61.7 million for the three and sixnine months ended MarchJune 31,30, 20262026, respectively, compared to the prior year periods. The increases reflect continued investments to scale the business and support long-term growth.growth, including the current year Breeze acquisition. The primary contributors were outside services, talent, advertising, and advertising,technology which combined to increase expense by $8.3$13.5 million and $18.2$33.5 million in the three and sixnine months ended MarchJune 31,30, 2026, respectively. Additionally, investment and divestiture activityactivity, namely the acquisition of Breeze, increased selling, general and administrative expensesSG&A by $4.5$5.2 million and $18.9$24.1 million in the three and sixnine months ended MarchJune 31,30, 2026, respectivelyrespectively, primarily related to consulting fees and professional services to support legal, regulatory, diligence and integration efforts.

Net legacy and separation-related expenses decreased $0.3 million for the three months ended June 30, 2026 compared to the prior year period, primarily due to lower expenses associated with legacy businesses. Net legacy and separation-related expenses increased $0.1 million and $4.9$4.6 million for the three and sixnine months ended MarchJune 31,30, 2026, respectively,2026 compared to the prior year period, primarily due to expenses associated with legacy businesses and an increase in estimated reserves related to certain obligations assumed from the Company’sCompany's former parent company.

Other loss (income), loss, net was unfavorablefavorable by $2.2 million and $116.1$0.1 million for the three months ended June 30, 2026 and sixunfavorable by $116.0 million for the nine months ended MarchJune 31,30, 2026, respectively,2026 compared to the prior year periods, primarilyreflecting duedifferences toin the Company’sCompany's store disposition activity.activity Forbetween theperiods. sixThe months ended March 31, 2026, theyear-to-date variance was dueprimarily indriven largeby part to thea $57.9 million pre-tax loss recognized on the FTC-required divestiture of 45 Breeze stores immediately following the Breeze acquisition. Further, in the current year-to-date period, the Company recordedrecognized a $14.8$14.3 million gain on the sale of 10 company-operated stores, compared to a $74.2$74.3 million gain on the sale of 39 stores in the prior year.year period.

Net pension and other postretirement plan activity was favorable compared to the prior year by $0.3$0.4 million and $0.6$1.0 million for the three and sixnine months ended MarchJune 31,30, 2026, respectively, due to lower interest costs attributed to the decline in discount rates, partially offset by lower recurring expected returns on plan assets as a result of the most recent annual remeasurement of the plans.

Net interest and other financing expenses increased $10.8$9.3 million and $18.8$28.1 million for the three and sixnine months ended MarchJune 31,30, 2026, respectively, compared to the prior year periods. The increases were primarily driven by higher recurring interest expense of $10.2$10.1 million and $12.8$22.8 million, respectively, largely attributable to the addition of the Term Loan B.B following the Breeze acquisition. The increase for the three months ended June 30, 2026 was partially offset by lower financing costs, as the prior year period included acquisition-related financing fees that exceeded costs incurred in connection with the Term Loan B repricing in the current year period. Additionally, for the nine months ended June 30, 2026, financing and debt modification costs increased by $4.0 million, primarily due to a $3.2 million increase in fees incurred to maintain access to the Term Loan B and related financing prior to the closing of the Breeze acquisition.

The year-over-year changeschange in the effective tax rate for the three and sixnine months ended MarchJune 31,30, 20262026, werewas primarily attributed to the Breeze acquisition and the immediate FTC-required divestiture required forof 45 of the acquired stores. The $57.9 million pre-tax loss on divestiture did not generate a tax benefit; rather, nondeductible goodwill drove an unfavorable tax effect of $20.0 million and contributed to a taxable gain on the divestiture that resulted in $6.3 million of income tax expense in the sixnine months ended MarchJune 31,30, 2026. Additionally, certain transaction costs became nondeductible in connection with the acquisition close and increased income tax expense by $4.8$4.3 million in the current year-to-date period.

Loss from discontinued operations, net of tax decreasedwas $0.2flat millionfor the three months ended June 30, 2026 and decreased $1.9 million infor the three and sixnine months ended MarchJune 31,30, 2026, respectively, compared to the prior year periods, primarilyreflecting due to thea reduced level of post-sale activity as separation-related matters continue to wind down following the divestiture of the former Global Products business.business, As time has passed since the sale, separation activities have concluded, and thewith remaining expenses areactivity largely limited to post-closing tax matters and indemnities.

Adjusted EBITDA from continuing operations increased $29.2$32.9 million and $43.8$76.7 million in the three and sixnine months ended MarchJune 31,30, 2026, respectively, compared to the prior year periods. The increase was primarily driven by gross profit expansion,growth and strong revenue performance, including higher volumes, contributions from network growth, and improvements infavorable pricing and costservice efficiency.mix, as well as contributions from the Breeze acquisition. These benefits more than offset the impacts of dispositions and higher selling, general, and administrative expenses.expenses to support growth.

Valvoline’s continuing operations cash flows as reflected in the Condensed Consolidated Statements of Cash Flows are summarized as follows for the sixnine months ended MarchJune 3130:

Cash flows provided by operating activities increased $67.0$104.6 million from the prior year period primarily driven by $80.4 million of higher cash earnings and, to a lesser extent, lower spend on cloud computing implementation in the current year period.

The decreaseincrease in cash flows fromused in investing activities of $709.7$689.4 million was primarily due to $634.5$620.4 million higher net cash consideration paid for acquisitions, mainly related to the Breeze acquisition. In addition, the Company received $57.4 million lower proceeds from the sale of operations during the current year compared to proceeds received from disposition activity in the prior year. Finally, higher capital expenditures ofwere $9.8higher by $12.0 million from increased maintenance capital expenditures related to store technology upgrades.

Cash flows provided by financing activities increased $676.7$613.1 million from the prior year substantially driven by an increase in net borrowings, inclusive of payments for debt issuance costs, of $601.1$540.6 million. The current year activity is driven by the proceeds from the issuance of the Term Loan B offset by a $50.0 million prepayment on the Term Loan A and net repayments on the Revolver balance. In addition, the Company did not repurchase any shares of its common stock during the sixnine months ended MarchJune 31,30, 2026 as the Company acceleratesaccelerated debt repayment following the Term Loan B issuance, which resulted in less cash used in financing activities of $76.8 million compared to the prior year.

The increase in free cash flow from continuing operations over the prior year was due to higher cash flows provided by operating activities as described above, partially offset by increased capital expenditures in the current period. The increase in capital expenditures compared to the prior year was primarily driven by higher maintenance capital expenditures related to store technology upgrades. The Company continues to focus the majority of its capital spend toward growth, which is expected to drive a high return on invested capital.

Approximately 32%33% of Valvoline's outstanding borrowings at MarchJune 31,30, 2026 had fixed interest rates, with the remainder bearing variable rates. As of MarchJune 31,30, 2026, Valvoline was in compliance with all covenants of its debt obligations and had borrowing capacity of $470.1 million remaining under its Revolver.

In July 2024, the Board approved a share repurchase authorization of $400.0 million (the “2024 Share Repurchase Authorization”), which has no expiration date. During the sixnine months ended MarchJune 31,30, 2026, the Company did not repurchase any shares of its common stock. As of MarchJune 31,30, 2026, $325.0 million remained available for share repurchases under the 2024 Share Repurchase Authorization.

Valvoline had cash and cash equivalents of $84.7$84.2 million, total debt of $1,657.7$1,602.0 million, and total remaining borrowing capacity of $470.1 million under its Revolver as of MarchJune 31,30, 2026. Valvoline’s ability to continue to generate positive cash flows from operations is dependent on general economic conditions, the competitive environment in the industry, and is subject to the business and other risk factors described in Item 1A of Part I of the Annual Report on Form 10-K for the fiscal year ended September 30, 2025.

The Company’s critical accounting estimates are described in Item 7 of Part II in Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025. Management reassessed the critical accounting estimates as disclosed in the Annual Report on Form 10-K, and determined there were no changes in the sixnine months ended MarchJune 31,30, 2026.