VALVOLINE INC

The following summarizes the results of the Company’s continuing operations for the periods ended December 31:

(a)Refer to the “Use of Non-GAAP Measures” and “Continuing operations EBITDA and Adjusted EBITDA” for management’s definitions of the metrics presented above and reconciliation to the corresponding GAAP measures, where applicable.

Net revenues

Net revenues increased $47.5 million, or 11.5% for the three months ended December 31, 2025 compared to the same prior year period, primarily driven by network expansion of 335 net new system-wide stores, led by the Breeze acquisition, along with favorable improvements in service mix and pricing. System-wide SSS also increased 5.8% driven by higher average ticket, reflecting ongoing premiumization, net pricing benefits, and favorable transaction trends. These gains were partially offset by lower net revenues as a result of disposition activity. The following reconciles the year-over-year change in net revenues:

Gross profit

Gross profit increased $19.6 million, or 12.8%, for the three months ended December 31, 2025 compared to the prior year period. The increase was largely attributable to volume, cost efficiencies and pricing, as well as contributions from acquired stores. These benefits were partially offset by higher expenses associated with continued network expansion, including depreciation from new stores. The following reconciles the year-over-year change in gross profit:

Gross profit margin improved in the three months ended December 31, 2025 compared to the prior year period. The increase was primarily a result of improved costs from a decline in product costs and labor efficiency through enhanced demand planning and improved scheduling practices. These benefits were partially offset by higher store operating expenses, including increased depreciation from investments in store growth and the impact of the recent dispositions.

Net operating expenses

Details of the components of net operating expenses are summarized below for the periods ended December 31:

Selling, general and administrative expenses increased by $26.4 million for the three months ended December 31, 2025 compared to the prior year period. The increase reflects continued investments to scale the business and support long-term growth. The primary contributors were outside services including technology along with talent and advertising, which combined to increase expense by $11.8 million. Additionally, investment and divestiture activity increased Selling, general and administrative expenses by $14.3 million, primarily related to consulting fees and professional services to support legal, regulatory, diligence and integration efforts.

Net legacy and separation-related expenses increased $4.8 million for the three months ended December 31, 2025 compared to the prior year primarily due to an increase in estimated reserves related to certain obligations assumed from the Company’s former parent company.

Other loss (income), net was unfavorable by $113.9 million compared to the prior year in large part due to the $57.9 million loss recognized on the required sale of 45 stores following the Breeze acquisition. In addition, the change reflects a lower gain as a result the sale of 10 company stores for a $14.8 million gain in the current year compared to 39 stores with a $73.9 million gain in the prior year.

Net pension and other postretirement plan activity

Net pension and other postretirement plan activity was favorable compared to the prior year by $0.3 million, primarily due to lower-than-expected returns on plan assets, which more than offset the favorable impact of higher discount rates.

Net interest and other financing expenses

Net interest and other financing expenses increased $8.0 million for the three months ended December 31, 2025 compared to the prior year period. The increase in expense was largely attributable to $4.7 million of fees incurred to maintain access to the Term Loan B and related financing in advance of the Breeze acquisition closing, at which time the Term Loan B became effective. Interest expense also increased $3.7 million incurred for the Term Loan B following the close of the Breeze acquisition.

Income tax provision

The following table summarizes the income tax provision and the effective tax rate for the current and prior year periods:

The reduction in income tax expense and effective tax rate year-over-year for the three months ended December 31, 2025 were principally driven by the loss before income taxes in the current period and differences between the book and tax treatment of certain items associated with the Breeze acquisition. Specifically, certain transaction costs became non-deductible for income taxes in connection with the transaction close, which increased income tax expense by $5.6 million for the three months ended December 31, 2025. Further, the net assets of the required Breeze divestiture had a carry-over tax basis which increased income tax expense by $22.6 million for the three months ended December 31, 2025.

Loss from discontinued operations, net of tax

The following summarizes Loss from discontinued operations, net of tax for the current and prior year periods:

Loss from discontinued operations, net of tax decreased $1.7 million in the three months ended December 31, 2025 compared to the prior year period primarily due to lower costs associated with the separation of processes and systems related to the sale of the former Global Products reportable segment.

Continuing operations EBITDA and Adjusted EBITDA

The following table reconciles (Loss) income from continuing operations to EBITDA and Adjusted EBITDA for the current and prior year periods:

Adjusted EBITDA from continuing operations increased $14.6 million in the three months ended December 31, 2025 compared to the prior year. The improvement was primarily driven by gross profit expansion resulting from strong operational performance, including higher volumes and contributions from network growth, improved pricing and cost efficiencies. These benefits more than offset the impacts of refranchising and increased selling, general and administrative investments to support growth.