VALVOLINE INC (VVV)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended September 30, 2025, as well as the condensed consolidated financial statements and the accompanying Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I in this Quarterly Report on Form 10-Q. Unless otherwise noted, disclosures within Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations relate solely to the Company's continuing operations.

BUSINESS OVERVIEW AND PURPOSE

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 approximately 2,500 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.

BUSINESS STRATEGY

As a pure play automotive retail services provider and the trusted leader in preventive automotive maintenance, Valvoline is well positioned to create long-term shareholder value through executing the Company’s strategic initiatives, which include:

•Driving the full potential of the core business through strategic reinvestment and improving operational efficiency in existing stores by building on Valvoline’s strong foundation in marketing, technology, and data insights;

•Delivering sustainable network growth with company-operated store expansion and accelerating the momentum of franchisee store growth; and

•Innovating to meet the changing needs of customers and the car parc, targeting customer and service expansion with a focus on fleet business, and driving non-oil change service penetration.

RECENT DEVELOPMENTS

Breeze Autocare

On December 1, 2025, the Company acquired 100% of the equity interests in Breeze Autocare (“Breeze”) for total cash consideration of $637.4 million, subject to certain customary post-closing adjustments. Breeze is a provider of automotive quick lube and other preventive maintenance services operating predominantly under the Oil ChangersSM brand with stores in California, Texas, and the Midwest. The acquisition initially included 204 service

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center stores and aligns with the Company’s strategy to expand the store network in key markets. The Company funded the Breeze acquisition with an amendment to its Senior Credit Agreement to add a seven-year $740.0 million term loan facility (the “Term Loan B”) commensurate with the closing of the transaction with excess proceeds used to pay down outstanding debt.

Dispositions

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 (income) loss, net in the Condensed Consolidated Statement of Comprehensive Income for the nine months ended June 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 $14.3 million and $74.3 million within Other (income) loss, net in the Condensed Consolidated Statements of Comprehensive Income related to these transactions during the nine months ended June 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.

THIRD FISCAL QUARTER 2026 OVERVIEW

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

•Net revenues grew 24% compared to the prior year period, primarily driven by network expansion of 332 net store additions, including the impact of acquisitions and dispositions. The increase was further supported by system-wide same-store sales ("SSS") growth of 8.0%, as well as favorable pricing and service mix. These increases were partially offset by a $3.8 million decrease related to dispositions.

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

•Adjusted EBITDA increased 25% over the prior year period primarily driven by gross profit growth and strong revenue performance, including higher volumes, favorable pricing and service mix, as well as contributions from the Breeze acquisition. These increases more than offset the impacts from dispositions and higher selling, general, and administrative expenses.

•During the quarter, the lubricant cost environment became more dynamic as industry supply conditions tightened for certain lubricant products. The Company leveraged its scale, supplier relationships and pricing actions to maintain product availability and support profitability throughout the quarter. While lubricant costs increased as the quarter progressed and are expected to remain elevated in the near term, management continues to actively manage the environment through pricing, procurement and operational initiatives.

Use of Non-GAAP Measures

To aid in the understanding of Valvoline’s ongoing business performance, certain items within this document are presented on an adjusted, non-GAAP basis. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, or more meaningful than, the financial statements presented in accordance with U.S. GAAP. The financial results presented in accordance with U.S. GAAP and reconciliations of non-GAAP measures included within this Quarterly Report on Form 10-Q should be carefully evaluated.

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The following are the non-GAAP measures management has included and how management defines them:

•EBITDA - net income/loss, plus income tax expense/benefit, net interest and other financing expenses, and depreciation and amortization;

•Adjusted EBITDA - EBITDA adjusted for the impacts of certain unusual, infrequent or non-operational activity not directly attributable to the underlying business, which management believes impacts the comparability of operational results between periods ("key items," as further described below);

•Free cash flow - cash flows from operating activities less total capital expenditures, comprised of growth and maintenance, further described below;

•Free cash flow excluding growth capital expenditures - cash flows from operating activities less maintenance capital expenditures; and

•Net debt - total debt less cash and cash equivalents.

Non-GAAP measures include adjustments from results based on U.S. GAAP that management believes enables comparison of certain financial trends and results between periods and provides a useful supplemental presentation of Valvoline's operating performance that allows for transparency with respect to key metrics used by management in operating the business and measuring performance. The manner used to compute non-GAAP information used by management may differ from the methods used by other companies and may not be comparable. For a reconciliation of the most comparable U.S. GAAP measures to the non-GAAP measures, refer to the “Results of Operations” and “Financial Position, Liquidity and Capital Resources” sections below.

Management believes EBITDA measures provide a meaningful supplemental presentation of Valvoline’s operating performance between periods on a comparable basis due to the depreciable assets associated with the nature of the Company’s operations as well as income tax and interest costs related to Valvoline’s tax and capital structures, respectively. Adjusted EBITDA measures enable comparison of financial trends and results between periods where certain items may not be reflective of the Company’s underlying and ongoing operations performance or vary independent of business performance.

Management uses free cash flow and free cash flow excluding growth capital expenditures as additional non-GAAP metrics of cash flow generation. By including capital 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. Free cash flow excluding growth capital expenditures includes maintenance capital expenditures, which are uses of cash that are necessary to maintain the Company's existing 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 before investments in growth capital, which expand future business operations, including the opening or expansion of retail service center stores and service capabilities. Free cash flow and free cash flow excluding growth capital expenditures have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash 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 sale of 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, 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.

Details with respect to the description and composition of key items recognized during the respective periods presented herein are set forth below in the “EBITDA and Adjusted EBITDA” section of “Results of Operations” that follows.

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Key Business Measures

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 store sales. Management believes these measures are useful to evalu

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ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated financial statements and the accompanying Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K. Unless otherwise noted, disclosures herein relate solely to the Company’s continuing operations.

BUSINESS OVERVIEW AND PURPOSE

As the quick, easy, trusted leader in automotive preventive maintenance, Valvoline 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 approximately 2,200 service center locations through its Valvoline Instant Oil ChangeSM (“VIOC”) and Valvoline Great Canadian Oil Change (“GCOC”) retail locations and supports over 240 locations through its Express CareTM platform.

Valvoline's fiscal year ends on September 30 of each year.

RECENT DEVELOPMENTS

Refranchising

Valvoline sold 67 company-owned stores to existing and new franchise partners through the completion of three transactions that occurred in the fourth quarter of fiscal 2024 and the first quarter of fiscal 2025 (the “Refranchising Transactions”). These conversions, combined with executed development agreements, are expected to provide accelerated growth in the respective markets and deliver long-term value to shareholders. The Refranchising Transactions impact the comparability of financial results year-over-year as further discussed further below.

During October 2025, the Company entered into an agreement and completed the sale of 10 company-owned service center stores and related net assets to a franchisee. The Company will derecognize the related net assets and expects to recognize a gain on sale in the first quarter of fiscal 2026 to reflect the completion of this transaction.

Breeze Autocare

In February 2025, Valvoline signed a definitive agreement to acquire Breeze Autocare from Greenbriar. Breeze Autocare is an independent provider of automotive quick lube and other preventive maintenance services operating predominantly under the Oil Changers brand, with an extensive footprint in California, Texas, and the Midwest.

In November 2025, Valvoline received clearance from the Federal Trade Commission (“FTC”) to close the acquisition of Breeze Autocare subject to a Decision and Order from the FTC. Valvoline will acquire 207 Breeze Autocare stores, and consistent with the Decision and Order, Valvoline will divest 45 of those locations to

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Mainstreet Auto, LLC (“Mainstreet”), for a net purchase price of $593 million, subject to (i) adjustments for store acquisitions and sale-leaseback transactions completed by Breeze Autocare since signing and (ii) customary closing adjustments. The Breeze Autocare acquisition is expected to close on December 1, 2025, with the divestiture to Mainstreet occurring shortly thereafter. The Company intends to fund the Breeze Autocare acquisition with a newly issued $740 million Term Loan B commensurate with the closing of the transaction with excess proceeds being used to pay down outstanding debt.

FISCAL 2025 OVERVIEW

Key operating highlights from continuing operations are presented below, each of which is discussed more fully in this Annual Report on Form 10-K:

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Summarized below are Valvoline's trends in the results of its continuing operations Net revenues, Income from continuing operations, and Adjusted EBITDA over the last five fiscal years:

(a)Adjusted EBITDA is a non-GAAP measure, further described and defined within the “Use of Non-GAAP Measures” section below. Also refer to the “Continuing operations EBITDA and Adjusted EBITDA” section within “Results of Operations” below for a reconciliation of income from continuing operations to Adjusted EBITDA for each fiscal year presented.

(b)Includes the effects of certain unusual, infrequent or non-operational activity not directly attributable to the underlying business, which management believes impacts the comparability of operational results between periods (“key items,” as further described below).

Net revenues and Adjusted EBITDA trends have continued to increase over the past five fiscal years largely driven by strong system-wide same-store sales (“SSS”) growth, which benefited from higher average ticket, continued non-oil change penetration and increased transactions, in addition to acquisitions and overall store expansion. Income from continuing operations has also followed an upward trend due to strong top-line performance, with the exception of fiscal 2022, 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.

Results for Fiscal 2024 compared to Fiscal 2023

For comparisons of Valvoline's consolidated results of operations and cash flows for the fiscal years ended September 30, 2024 to September 30, 2023, refer to Item 7 of Part II of the Annual Report on Form 10-K for the fiscal year ended September 30, 2024, filed with the Securities and Exchange Commission on November 22, 2024.

Use of Non-GAAP Measures

To aid in the understanding of Valvoline’s ongoing business performance, certain items within this document are presented on an adjusted, non-GAAP basis. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, or more meaningful than, the financial statements presented in accordance with U.S. GAAP. The financial results presented in accordance with U.S. GAAP and reconciliations of non-GAAP measures included within this Annual Report on Form 10-K should be carefully evaluated.

The following are the non-GAAP measures management has included and how management defines them:

•EBITDA - net income/loss, plus income tax expense/benefit, net interest and other financing expenses, and depreciation and amortization;

•Adjusted EBITDA - EBITDA adjusted for the impacts of certain unusual, infrequent or non-operational activity not directly attributable to the underlying business, which management believes impacts the comparability of operational results between periods ("key items," as further described below);

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

•Free cash flow - cash flows from operating activities less total capital expenditures, comprised of growth and maintenance, further described below; and

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•Free cash flow excluding growth capital expenditures - cash flows from operating activities less maintenance capital expenditures.

Non-GAAP measures include adjustments from results based on U.S. GAAP that management believes enables comparison of certain financial trends and results between periods and provides a useful supplemental presentation of Valvoline's operating performance that allows for transparency with respect to key metrics used by management in operating the business and measuring performance. The manner used to compute non-GAAP information used by management may differ from the methods used by other companies, and may not be comparable. For a reconciliation of the most comparable U.S. GAAP measures to the non-GAAP measures, refer to the “Results of Operations” and “Financial Position, Liquidity and Capital Resources” sections below.

Management believes EBITDA measures provide a meaningful supplemental presentation of Valvoline’s operating performance between periods on a comparable basis due to the depreciable assets associated with the nature of the Company’s operations as well as income tax and interest costs related to Valvoline’s tax and capital structures, respectively. Adjusted EBITDA measures enable comparison of financial trends and results between periods where certain items may not be reflective of the Company’s underlying and ongoing operations performance or vary independent of business performance.

Management uses free cash flow and free cash flow excluding growth capital expenditures as additional non-GAAP metrics of cash flow generation. By including capital 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. Free cash flow excluding growth capital expenditures includes maintenance capital expenditures, which are uses of cash that are necessary to maintain the Company's existing 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 before investments in growth capital, which expand future business operations, including the opening or expansion of retail service center stores and service capabilities. Free cash flow and free cash flow excluding growth capital expenditures have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash 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.

Details with respect to the description and composition of key items recognized during the r

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