Valvoline Inc. · NYSE:VVV
Valvoline — Investor Day (May 2019)
101 slides from Valvoline's investor day presentation, May 16, 2019
Slide 1: Investor Day May 2019
Exhibit 99.1 INVESTOR DAY May 2019
Slide 2: Safe Harbor Forward-Looking Statements
Safe Harbor Forward-Looking Statements Certain statements in this presentation, other than statements of historical fact, including estimates, projections, statements related to Valvoline’s business plans and operating results are forward-looking statements within the meaning of the Private Securiti
Slide 3: Agenda
Agenda • Roadmap to Drive Shareholder Value Sam Mitchell, CEO • Quick Lubes Review Tony Puckett, SVP & Rob Stravitz, VP Marketing • Core North America Review Tom Gerrald, SVP & Tim Ferrell, VP Marketing • International Review Jamal Muashsher, SVP • Break • Financial Review Mary Meixelsperger, CFO •
Slide 4: Sam Mitchell, Chief Executive Officer
Sam Mitchell Chief executive officer 4
Slide 5: Accomplishments Since IPO
Accomplishments Since IPO • 385 net new stores since 2015 through acquisition, greenfield and Accelerated Quick franchise expansion Lubes Growth • 1,327 total locations as of Q2 19 with target of 100 new locations a year through a mix of greenfield, franchise expansion and acquisitions • Strengthene
Slide 6: Performance Versus IPO Expectations
Performance Versus IPO Expectations Quick Lubes Core North America International Outperform Underperform In Line Consumer shift to Evolving DIY category Varying results by convenience dynamics region accelerating Raw material cost Raw material cost Systemwide store inflation inflation growth increas
Slide 7: Trends Behind our Strategy
Trends Behind our Strategy More Vehicles on the Road U.S. Light Vehicles in Operations1 (M) Consumer Demand for Convenience 300 290 280 270 2018 2019 2020 2021 2022 2023 Global Heavy-duty Growth Lubricant Volume2 (B gallons) 2.70 2.65 2.60 2.55 2.50 2.45 2.40 2018 2019 2020 2021 2022 2023 1 Source:
Slide 8: Valvoline 2022: Service-driven Company with Captive Distribution
Valvoline 2022: Service-driven Company with Captive Distribution Benefits • Higher margins with attractive tailwinds • Increased stability through expanded captive distribution of product portfolio with end-to-end control and lower sensitivity to raw material inflation • Platform for expanded servic
Slide 9: Opportunity to Deploy Cash Flows and Generate Attractive Returns
Opportunity to Deploy Cash Flows and Generate Attractive Returns Core North America Quick Lubes & Other Solid EBITDA Margins High-Return Strong Cash Flow Projects at ~2x Generation Low Maintenance Capital Cost of Capital ROIC consistently above 20% 9
Slide 10: Industry-leading Retail Sales Growth is Accelerating
Industry-leading Retail Sales Growth is Accelerating Total System Store Sales ($ Millions) ~1,400 1,161 1,024 880 761 687 592 636 544 570 505 448 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Outlook Company Franchise IPO 10
Slide 11: Roadmap to Drive Shareholder Value
Roadmap to Drive Shareholder Value 1 2 3 Grow Maintain Develop Quick Lubes Core North America International Win in Retail Services Strengthen foundation and Capture market share drive efficiency EBITDA Growth Target: EBITDA Growth Target: EBITDA Growth Target: Low to Mid Double Digit Flat to Modest
Slide 12: Shareholder Value Proposition
Shareholder Value Proposition Organic Earnings Capital Allocation Value Proposition MSD Revenue Growth ~2% Target Dividend1 Yield 6% – 8% Compelling Total EBITDA Growth Shareholder Return Share Repurchase and/or Acquisitions HSD EPS Growth 1 Future quarterly dividend declarations are subject to appr
Slide 13: Tony Puckett and Rob Stravitz, Quick Lubes
Tony Puckett Rob Stravitz Senior vice president, Vice president, and president, Quick Lubes Quick Lubes marketing
Slide 14: Valvoline Instant Oil Change (VIOC)
Valvoline Instant Oil Change (VIOC) 1 Grow • Entered Quick Lubes business in 1985 • Preventive maintenance model - “Replace Fluids and Parts, No Repair” • Stay in Your Car Drive Thru Service • No appointment needed • Serving ~18M customer visits1 per year • #2 in US, #3 in Canada2 - VIOC and Great C
Slide 15: Most Asked Questions About Quick Lubes Business
Most Asked Questions About Quick Lubes Business 1 Grow Can VIOC continue strong same store sales growth trends? How fast can VIOC grow store count? 15
Slide 16: Growth Through Same Store Sales
Growth Through Same Store Sales 1 Grow System-wide Same Store Sales 2007 – 2019 YTD 10.3% 8.3% 7.7% 7.5% 7.4% 6.8% 5.8% 5.2% Avg: 4.4% 4.5% +5.8% 2.7% 2.6% 2.1% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Last 3 Quarters Same Store Sales Comps Q3 CY 2018 Q4 CY 2018 Q1 CY 201
Slide 17: Growth Through Accelerating System Store Count
Growth Through Accelerating System Store Count 1 Grow 1,327 1,242 1,127 1,068 942 899 922 862 864 866 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 YTD Company Franchise Total 1 Since Ashland announced separation September 22, 2015 17
Slide 18: VIOC is Taking Share Within the Quick Lube Industry
VIOC is Taking Share Within the Quick Lube Industry 1 Grow Transactions Per Day1 50 45 40 35 30 25 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Company Franchise Quick Lubes Industry2 1 Transactions represent oil changes 2 Sourced from National Oil and Lube News (NOLN) industry data excluding V
Slide 19: Significant Share Growth Opportunity Beyond Quick Lubes
Significant Share Growth Opportunity Beyond Quick Lubes 1 Grow 1 Company estimates based on industry data for total DIFM in U.S. (Passenger Car & Light Truck) 2 VIOC U.S. oil changes estimate for fiscal year 2019 19
Slide 20: Significant Share Growth Opportunity Beyond Quick Lubes
Significant Share Growth Opportunity Beyond Quick Lubes 1 Grow Source of New Customers TTM3 DIY, 15% Quick Lubes Other 31% Installer, 14% ASC/Tire Store, 13% Car Dealer, 27% 1 Company estimates based on industry data for total DIFM in U.S. (Passenger Car & Light Truck) 2 VIOC U.S. oil changes estima
Slide 21: Significant Share Growth Opportunity Beyond Quick Lubes
Significant Share Growth Opportunity Beyond Quick Lubes 1 Grow Source of New Customers TTM3 DIY, 15% Quick Lubes Other 31% Installer 14% ASC/Tire Store 13% Car Dealer 27% 1 Company estimates based on industry data for total DIFM in U.S. (Passenger Car & Light Truck) 2 VIOC U.S. oil changes estimate
Slide 22: Significant Share Growth Opportunity Beyond Quick Lubes
Significant Share Growth Opportunity Beyond Quick Lubes 1 Grow Source of New Customers TTM3 DIY 15% Quick Lubes Other 31% Installer 14% ASC/Tire Store 13% Car Dealer 27% 1 Company estimates based on industry data for total DIFM in U.S. (Passenger Car & Light Truck) 2 VIOC U.S. oil changes estimate f
Slide 23: VIOC Business Model is Winning With...
VIOC Business Model is Winning With… 1 Grow • Employees • Customers • Franchisees Operating Stores Strengthens Business Model 23
Slide 24: Winning With Employees
Winning With Employees 1 Grow Talent + Culture = Engagement & Execution Association for Talent Development Ranked #2 Training Platform 24
Slide 25: Winning With Employees
Winning With Employees 1 Grow 1) Attract Internal - Highly selective talent acquisition VIOC Role Hire - Less than 10% of 60,000+ candidates VP Operations 100% 2) Develop - +200 hours of training on average per employee Director Operations 100% annually - Service Center Managers ~650 hours of traini
Slide 26: Winning With Employees: 2018 Oilympics Champions
Winning With Employees 1 Grow 2018 Oilympics Champions 26
Slide 27: Winning With Customers
Winning With Customers 1 Grow Quick. Easy. Trusted. Preferred Customer Experience Drives Same Store Sales Growth 27
Slide 28: Winning With Customers: Proprietary POS
Winning With Customers 1 Grow OEM Recommends: 1st Service Proprietary POS after 100,000 miles • Directly linked to Super-Pro Management Process • Enables consistent customer experience • Seek to educate customers versus upsell • Captures customer data and service preferences Actual POS customer pres
Slide 29: Industry Leading Technology to Drive Transparency and Trust
Winning With Customers 1 Grow Industry Leading Technology to Drive Transparency and Trust 29
Slide 30: Transparency brand positioning is driving customer trust
Winning With Customers 1 Grow Transparency brand positioning is driving customer trust Customer Trust1 Same Store Customer Base +600 bps Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY16 FY17 FY17 FY17 FY17 FY18 FY18 FY18 FY18 FY15 FY16 FY17 FY18 FY19 YTD 1 Based on Service Management Group post visit consumer survey
Slide 31: Leveraging Bay Tracker technology
Winning With Customers 1 Grow Leveraging Bay Tracker technology to address key dissatisfiers… Satisfaction vs Wait Time1 74% 73% 68% 67% Bay Tracker Impact 58% 59% 45% 41% Service Time: 14% < 5 minutes 5-10 minutes 10-15 minutes > 15 minutes Wait Time: 15% Overall Satisfaction Return Next Oil Change
Slide 32: Consumer App and Customer Retention
Winning With Customers 1 Grow …And drive increased customer retention Consumer App App & Customer Retention1 +1,100 bps Non Users App Users 1 VIOC 2019 Company Store App Pilot 32
Slide 33: Best in Class Marketing
Winning With Customers 1 Grow Best in Class Marketing • Data enables analytics that drive return on marketing investment • Differentiated customer experience and technology enable effective advertising Advertising Impact on Brand Preference1 7.0 6.1 6.0 5.0 4.5 4.0 3.0 2.0 1.0 0.0 Initial Rating Pos
Slide 34: Transparency Brand Positioning
Winning With Customers 1 Grow “Transparency” Brand Positioning 34
Slide 35: Winning With Franchisees
Winning With Franchisees 1 Grow Committed to Business Model VIOC Ranked #34 Overall Consistent Customer Experience 35
Slide 36: Franchise System Overview
Winning With Franchisees 1 Grow Franchise System Overview VIOC Store System 1 FY19 YTD 743 stores and 66 operators in U.S. - Recently added 103 franchise stores in Canada Represents 64% of total system 1 Company Top 8 operators have 136 years combined VIOC 36% experience Franchise 64% Top 8 operator
Slide 37: Average Net Sales Per Store
Winning With Franchisees 1 Grow Average Net Sales Per Store • Company stores help us win with Franchise Same Stores ($ 000s) Company stores provide proven platforms franchisees by proving platforms for franchisees 1,012 933 868 807 761 • Strong model means strong unit Establishedeconomics… SSS growt
Slide 38: Strength of Business Model Driving Store Growth Investment
Strength of Business Model Driving Store Growth Investment 1 Grow Strong Store Unit Economics Committed to Unit Growth 38
Slide 39: Quick Lube Platforms Driving Results and Primed for Growth
Quick Lube Platforms Driving Results and Primed for Growth 1 Grow EBITDA Contribution Ranges1 Platform Cash Investment Cash IRR ($ 000s) (%) 4x Mid to High VIOC Company ~1,5001 Product Sales Teens VIOC Franchising 130-160 30%+ Product Sales Services IncomeRoyalties x Company Franchise Strong return
Slide 40: Significant New Market Opportunities for Store Growth
Significant New Market Opportunities for Store Growth 1 Grow Organic Expansion Opportunities in existing and new markets • Existing markets accounting for ~60% of U.S. households • Expansion markets accounting for ~30% of U.S. households Team in place to leverage opportunities for organic growth • D
Slide 41: Significant Acquisition Opportunities for Store Growth
Significant Acquisition Opportunities for Store Growth 1 Grow U.S. Quick Lube Landscape 500+ Potential Stores VIOC Non-Affiliated ~1,500 VIOC Model Jiffy Lube Prospects Grease Monkey/Speedee Take 5 ~9,000 Quick Lube Locations ExpressExpress OilOil ChangeChgChange (65% Independent Operators) Consolid
Slide 42: Targeted VIOC Store Growth
Targeted VIOC Store Growth ~100 VIOC Stores Per Year 1 Grow Forecasted Store Count Future annual store growth mix - Company: ~60 ~1,700 - Franchise: ~40 ~1,350 Franchisees committed to an additional ~220 units by 2024 Larger acquisitions to provide upside to planned VIOC store unit growth FY19 YTD F
Slide 43: Key Takeaways – Quick Lubes
Key Takeaways – Quick Lubes 1 Grow Proprietary Talent, Tools Company & Franchise Industry Leading Retail & Technology Platforms Systems Positioned for Service Model Drive Execution & Accelerated Store Same Store Sales Growth Quick, easy and trusted customer experience expected to fuel: • 6% - 8% sam
Slide 44: Tom Gerrald and Tim Ferrell, Core North America
Tom Gerrald Tim Ferrell Senior vice president, Vice president, Core North America brand equity and consumer marketing
Slide 45: Core North America – U.S. Market Overview
Core North America – U.S. Market Overview 2 Maintain U.S. Transportation Lubricant Volume U.S. Passenger Car Oil Changes (~1B gallons) (~600M) DIY Heavy Duty (20%) (34%) Passenger DIFM Car (80%) (66%) Source: IHS Markit 2018 and internal company estimates 45
Slide 46: Balanced Split Between Installer and Retail
Core North America – Balanced Split Between Installer and Retail 2 Maintain FY18 Volume by Channel Retail Branded Installer Passenger Car Retail Non- Installer Heavy branded Duty Other Retail: DIY (auto parts & mass merchandise) and warehouse-distributor accounts Installer: DIFM outlets and heavy-du
Slide 47: DIY Market Dynamics Impacting Valvoline Performance
DIY Market Dynamics Impacting Valvoline Performance 2 Maintain Category Growth of Growth of Increased Decline Private Label Synthetic Category Promotional Intensity 47
Slide 48: Growth of Private Label on the Shelf
Growth of Private Label on the Shelf 2 Maintain Private Label vs. Branded Growth of Brand vs. Private Label Price Gaps 2015 Shelf PRIVATE BRANDED LABEL 87% 13% 2018 Shelf PRIVATE BRANDED LABEL 79% 21% Price gap to value offering increased as mid-tier brands lost distribution Source: Share of Shelf,
Slide 49: DIY Shelf Mix Expansion in Synthetics
DIY Shelf Mix Expansion in Synthetics 2 Maintain Synthetic vs. Conventional Car Parc Requiring Synthetics 2015 Shelf 30% 28% HIGH MILEAGE/ 25% CONVENTIONAL SYNTHETIC FULL SYNTHETIC 43% BLEND 35% 21% 22% 20% 15% 2018 Shelf 10% HIGH MILEAGE/ 5% CONVENTIONAL SYNTHETIC FULL SYNTHETIC 25% BLEND 53% 0% 22
Slide 50: Total Weeks on Promotion at Big Retail Auto Parts Increased
Total Weeks on Promotion at Big 3 Retail Auto Parts Increased 2 Maintain 700 644 599 600 566 500 428 408 400 377 321 300 Weeks onWeeks Promotion 200 170 100 0 Castrol Pennzoil Valvoline Private Label 2016 2018 Increased intensity has led to less promotional lift in volume 50
Slide 51: Actions Designed to Address Shifting DIY Market Dynamics
Actions Designed to Address Shifting DIY Market Dynamics 2 Maintain #1 Optimize Position vs Value Offers #2 Win in Synthetics #3 Strengthen Consumer Messaging 51
Slide 52: Action #1: Optimize Position vs Value Offers
Action #1: Optimize Position vs Value Offers 2 Maintain Reduced promoted price points • Narrowed price gaps $3 - $4 • Moved below critical price point Retail promotion improvements drove 15% stronger sales in last 2 months vs higher price points in Q3 2018 - Q1 2019 52
Slide 53: Action #1: You Saved What?
Action #1: You Saved What? Quality of Valvoline vs Private Label 2 Maintain BRAND SPOT PLACEHOLDER 53
Slide 54: Action #2: Win in Synthetics with our Retailer Customers
Action #2: Win in Synthetics with our Retailer Customers 2 Maintain • Consumers want choices in the growing synthetic category • Drive sales $ and traffic to store • Larger market basket than private label • Deliver product innovation and education - Retail employees and consumers Valvoline has cons
Slide 55: Action #2: Win in Synthetics with Innovation
Action #2: Win in Synthetics with Innovation 2 Maintain Valvoline continues to innovate in the rapidly growing synthetic category 55
Slide 56: Action #3: Strengthen Messaging to Targeted Consumers
Action #3: Strengthen Messaging to Targeted Consumers Confident Aficionados Validation Seekers Acculturated Hispanics • Value quality over price • Inexperienced info seekers • Nearly 4x more likely to be • Brand loyal / high rejection who want to be seen as DIYers of private label and gas knowledgea
Slide 57: Action #3: Focus on Quality and Trust
Action #3: Strengthen Consumer Messaging – Focus on Quality and Trust TESTED. PROVEN. TRUSTED. The Value of Quality • More than 70% cite product quality as primary reason for purchase of motor oil • Trusted brands are perceived as higher quality The Value of Trust • More than 90% are likely to purch
Slide 58: Action #3: Tested. Proven. Trusted.
Action #3: Strengthen Consumer Messaging – Tested. Proven. Trusted. 58
Slide 59: Action #3: Digital First Approach
Action #3: Strengthen Consumer Messaging – Digital First Approach Reach more consumers SOCIAL MEDIA DIGITAL VIDEO MOBILE Precisely target Expand mix opportunities INFLUENCER DIGITAL SMART TV DISPLAY Sequence messages Increase optimization velocity The result: owners of new cars receive synthetic or
Slide 60: Valvoline Installer Channel Landscape
Valvoline Installer Channel Landscape 2 Maintain Valvoline’s Installer Channel is composed of multiple channels spread across light-duty and heavy-duty markets Automotive Service Centers Canada Direct Channel PartnersChannel Car Markets Partners National Dealerships Accounts Quick National & DirectR
Slide 61: Actions Designed to Capture Installer Opportunities
Actions Designed to Capture Installer Opportunities 2 Maintain #1 Win Customers With Stronger Value Proposition #2 Expand Value at Existing Accounts #3 Grow Share in Heavy Duty 61
Slide 62: Changing the Way We Go to Market
Changing the Way We Go to Market 2 Maintain Our differentiated value proposition creates competitive advantage Valvoline Competition 62
Slide 63: Action #1: Win Customers – Guaranteeing Results
Action #1: Win Customers – Guaranteeing Results 2 Maintain Annual Gallons 25,000 Potential Gross Profit Valvoline Brand Valvoline Brand Impact $ 11,408 Valvoline Account Incentive Programs Valvoline PFP Program $ 29,308 Valvoline Incentive Program (BDF/IIF) $ 7,032 Valvoline Promotions Valvoline Dri
Slide 64: Action #1: Win Customers – Driving Results
Action #1: Win Customers – Driving Results 2 Maintain Regional Accounts YTD FY 19 Projected customer 49% growth ~$3M new retention of new Gross Profit rate up accounts1 in FY 19 10pts over FY 18 1 – FY 18 & 19 vs FY 16 & 17 64
Slide 65: Action #2: Expand Value at Existing Accounts
Action #2: Expand Value at Existing Accounts – The Power of More 2 Maintain Operational Enhanced Process Product Support Efficiency & Diversification Automation +35% of orders 17% of Net Sales 2000+ store level now placed in new from visits in FY 19 portal non-lubricants 65
Slide 66: Action #3: Grow Share in Heavy Duty
Action #3: Grow Share in Heavy Duty 2 Maintain Product Innovation Goal: Increase speed of growth in on highway market Size of Prize: 11.5M trucks / ~300M gallons Win in Fleets (Valvoline has ~3% share) Strategy: Leverage Cummins partnerships and relationship with fleets Pilot Results: Over 100 new a
Slide 67: Key Takeaways – Core North America
Key Takeaways – Core North America 2 Maintain Retail – Taking Action to Installer – New Value- Restructuring & Cost Adjust to Changing DIY added Customer Tools Savings Program to Dynamics in Place Add Flexibility Working to stabilize the business for consistent cash flow generation 67
Slide 68: Jamal Muashsher, International
Jamal Muashsher Senior vice president, International
Slide 69: International Transport Lubricants Represent a Significant Growth Opportunity
International Transport Lubricants Represent a Significant Growth Opportunity 3 Develop North America North America Rest of World ~45% Passenger Car Motor Oil (PCMO) Rest of World ~43% Heavy Duty (HD) and Motorcycle Oil International Transport Lubricants Market: • ~3.5X North America • ~4.7B Gallons
Slide 70: Consistently Growing Share Across Markets
Consistently Growing Share Across Markets 3 Develop Valvoline market share and volume includes consolidated joint ventures Source: IHS Markit; Lubricant Demand Model; Transport Lubricants (excluding Aviation, Railroad, Marine and Tractor oils) 70
Slide 71: Focused on Winning in High Value Markets and Categories
Focused on Winning in High Value Markets and Categories 3 Develop China Latin America India Total Transport Market: 1.1B Gal Total Transport Market: 590M Gal Total Transport Market: 307M Gal 5-Year Market CAGR: 2.1% 5-Year Market CAGR: 0.9% 5-Year Market CAGR: 2.7% Valvoline Market Share: 1.6% Valvo
Slide 72: Core Strategies to Deliver Long-Term, Profitable Share Growth
3 Core Strategies to Deliver Long-Term, Profitable Share Growth 3 Develop Established Growth Model Brand Building: Build Brand Awareness & Equity that Supports Premium Positioning Service Platforms: Expand Value to Win New Accounts and Support Premium Margins Profit Channel Development: Optimize Dis
Slide 73: Optimize Distributor and Supply Chain Network
1. Optimize Distributor and Supply Chain Network 3 Develop Mexico Distributor Coverage PC HD Developed distribution 2015 48% 29% network in PCMO / Heavy Duty Leveraging Cummins Optimize Distributors and Product Offerings 2017 68% 43% Enter New Channels and Categories 2019 80% 65% Note: Darker blue r
Slide 74: Optimize Distributor & Supply Chain Network
1. Optimize Distributor & Supply Chain Network 3 Develop Existing Plant Netherlands New Acquisition Serbia Yangtze River Delta Area • Announced acquisition of Fabrika Maziva A.D. in Serbia • New Plant in Zhangjiagang, China • Expected to close in early fiscal Q4 • Projected to be complete in early f
Slide 75: Expand Value to Win New Accounts and Support Premium Margins
2. Expand Value to Win New Accounts and Support Premium Margins 3 Develop 75M Gallon Market Opportunity Evolving China Heavy Duty Market Supports Higher Share & Margins Low Quality Spec Low Margin High Competition Emissions standards are changing the landscape in Addressable market increasing ~4X fr
Slide 76: Expand Value: Mechanic & Distributor Training
2. Expand Value to Win New Accounts and Support Premium Margins 3 Develop Mechanic & Distributor Training & Services that Support Premium Up-Sell Development and Cross-Sell 76
Slide 77: Build Brand Awareness: Cummins & Valvoline Global Partnership
3. Build Brand Awareness & Equity that Supports Premium Positioning 3 Develop Cummins & Valvoline: Global Partnership 77
Slide 78: Build Brand Awareness: Local Cummins Brand Partnership
3. Build Brand Awareness & Equity that Supports Premium Positioning 3 Develop Local Cummins Brand Partnership Activation High Targeted Impact Messaging Global Partnership 78
Slide 79: Key Takeaways – International
Key Takeaways – International 3 Develop Brand Building Channel Development Service Platforms Accelerates Share Drives Volume Growth Enable Higher Margins Growth Established market development model fuels consistent, profitable share growth 79
Slide 80: Break
Break 80
Slide 81: Mary Meixelsperger, Chief Financial Officer
Mary Meixelsperger Chief financial officer 81
Slide 82: Valvoline Targeted EBITDA Growth Rates
Valvoline Targeted EBITDA Growth Rates Combined Annual EBITDA Growth of 6 – 8%, with Quick Lubes Generating >50% of EBITDA by 2022 Grow: Maintain: Develop: Win in Retail Services Work to Stabilize Expand Int’l Market Share Quick Lubes Core North America International • Targeted SSS Growth • Volume G
Slide 83: Grow – Win in Retail Services
Grow – Win in Retail Services 1 Grow 2.5 System-wide Store Sales Key Assumptions ~$2B 2.0 1.5 Annual SSS growth: 6% – 8% 1.0 New Stores: ~100 0.5 Company 35 – 45 Franchise 35 – 45 0.0 Acquisitions 15 – 20 2019E 2022E EBITDA margin expansion: ~100 bps Forecasted Store Count ~1,700 1,600 1,400 1,200 1
Slide 84: Maintain – Core North America
Maintain – Core North America 2 Maintain Key Assumptions Core North America Volume 120 Annual volume growth: ~Flat DIY category decline 2 – 4% Installer growth 2 – 3% 100 Modest premium mix growth 80 Ongoing risk of changing market 60 dynamics in DIY category Restructuring & cost savings 40 program
Slide 85: Develop – Expand International Market Share
Develop – Expand International Market Share 3 Develop Key Assumptions Lubricant Volume Annual volume growth: 6% – 8% 120 Enhanced premium mix 100 Supply chain investments in China and Eastern Europe 80 Stable margins 60 40 20 EBITDA Growth Target: Mid to High Single Digit 0 2019E 2022E Reported JV 8
Slide 86: Disciplined Capital Allocation: Growth Balanced with Shareholder Return
Disciplined Capital Allocation: Growth Balanced with Shareholder Return Capital Allocation Priorities • Increase company greenfield store additions 1 Organic Growth • Supply chain investments in China and Serbia • Aggressively add quick lube stores via acquisition 2 Inorganic Growth • Smaller comple
Slide 87: Capital Allocation Strategy Will Be Funded by Strong Cash Flow
Capital Allocation Strategy Will Be Funded by Strong Cash Flow Operating Cash Flow $340M - $380M • Cash flow after maintenance capex $300M+ $300M - $315M Annual • Excess cash available for Maintenance Capital – Growth investments $30M - $40M – M&A – Dividends – Share repurchases • Target to maintain
Slide 88: Shareholder Value Proposition
Shareholder Value Proposition Organic Earnings Capital Allocation Value Proposition MSD Revenue Growth ~2% Target Dividend1 Yield 6% – 8% Compelling Total EBITDA Growth Shareholder Return Share Repurchase and/or Acquisitions HSD EPS Growth 1 Future quarterly dividend declarations are subject to appr
Slide 89: Sam Mitchell, Chief Executive Officer
Sam Mitchell Chief executive officer 89
Slide 90: Valvoline Has Built a Strong and Profitable Business
Valvoline Has Built a Strong and Profitable Business Total Gross Profit 5-year periods ($B) 3.7 2.8 1.8 The Big V Stands for Great Products AND Great Service Technology Investments Gaining Traction 2004 - 2008 2009 - 2013 2014 - 2018 90
Slide 91: World-class Retail Services Business
We Have Also Built a World-class Retail Services Business Operational Expertise Vertical Integration Faster Store Growth Same Store Sale Growth Products Locations Superior growth, high margins, strong returns 91
Slide 92: Trends Driving Our Longer-term Strategy
Trends Driving Our Longer-term Strategy Consumer demand More vehicles for convenience on the road Valvoline is uniquely positioned to benefit from broad industry and consumer trends 92
Slide 93: Driving Transformation of Our Business Model
Our Future – Driving Transformation of Our Business Model Trusted Customer Relationships More Locations, More Convenience Solutions Enabled by Technology Premium, Innovative Products 93
Slide 94: Our Future – Evolving Powertrain
Our Future – Evolving Powertrain PRODUCTS SERVICES Drive System Fluids Lights Heat Transfer Fluids Cabin Air Filters Cabin AC / Battery AC Hydraulic Fluids Wipers Brake Fluid Tire Rotation / Tread Depths We are investing in products & service development for vehicles of the future Image source: AFDD
Slide 95: Our Future – Driving Business Model Transformation
Our Future – Driving Business Model Transformation 95
Slide 96: Our Future – Driving Business Model Transformation
Our Future – Driving Business Model Transformation REFERRAL PLATFORMS OEM Recall Tires Glass Other 96
Slide 97: Our Future – Driving Business Model Transformation
Our Future – Driving Business Model Transformation REFERRAL PLATFORMS NEW SERVICE MARKETS OEM Recall Heavy Duty Services Tires Regional Fleets Glass Canada Other China 97
Slide 98: Our Future – Driving Business Model Transformation
Our Future – Driving Business Model Transformation REFERRAL PLATFORMS NEW SERVICE MARKETS OEM Recall Heavy Duty Services Tires Regional Fleets Glass Canada Other China Growth through our service-driven model built on trusted customer relationships, convenient locations and fueled by products 98
Slide 99: Roadmap to Drive Shareholder Value
Roadmap to Drive Shareholder Value 1 2 3 Grow Maintain Develop Quick Lubes Core North America International Win in Retail Services Strengthen foundation and Capture market share drive efficiency Powering the shift to services 99
Slide 100: Q&A
Q&A 100
Slide 101: Thank You!
Thank You! 101