Valvoline Inc. · NYSE:VVV
Valvoline — Goldman Sachs 26th Annual Global Retailing Conference 2019
33 slides from Valvoline's conference presentation, Sep 5, 2019
Slide 1: Goldman Sachs Global Retailing Conference
Goldman Sachs Global Retailing Conference September 2019
Slide 2: Safe Harbor
Safe Harbor Forward-Looking Statements Certain statements in this presentation, other than statements of historical fact, including estimates, projections and statements related to Valvoline’s business plans and operating results, are forward-looking statements within the meaning of the Private Secu
Slide 3: Agenda
Agenda • Roadmap to Drive Shareholder Value……………………………………………………….………………...Sam Mitchell, CEO • Quick Lubes Review……………………………………………………………………………………………...Tony Puckett, SVP • Closing Remarks……………………………………………………………...………………………………….Sam Mitchell, CEO • Q&A 3
Slide 4: Sam Mitchell, Chief executive officer
Sam Mitchell Chief executive officer 4
Slide 5: Company Overview
Company Overview ~$2.3B ~20% Top 3 Over 140 In Fiscal 2018 Sales In Fiscal 2018 Adjusted EBITDA1 Premium Motor Oil Brand2 Countries With Valvoline Sales Percent of Sales Fiscal 2018 Segment Mix Sales Adjusted1 EBITDA Int’l Int’l Core Core North North America America Quick Quick Lubes Lubes 1 For rec
Slide 6: Roadmap to Drive Shareholder Value
Roadmap to Drive Shareholder Value 1 2 3 Grow Maintain Develop Quick Lubes Core North America International Win in Retail Services Strengthen foundation and Capture market share drive efficiency See Valvoline’s Investor Day Presentation1 1 Available on Valvoline’s website at http://investors.valvoli
Slide 7: Opportunity to Deploy Cash Flows and Generate Attractive Returns
Opportunity to Deploy Cash Flows and Generate Attractive Returns Core North America Quick Lubes & Other Solid EBITDA Margins High-Return Strong Cash Flow Projects at ~2x Generation Low Maintenance Capital Cost of Capital ROIC consistently above 20% 7
Slide 8: Industry-leading Retail Sales Growth is Accelerating
Industry-leading Retail Sales Growth is Accelerating Total System Store Sales ($ 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 8
Slide 9: Focus on Growth in Retail Services Is the Right Move
Focus on Growth in Retail Services Is the Right Move • Best-in-class same-store-sales 1 Clear Competitive Advantage performance • Superior business model • Organic & inorganic unit growth 2 Significant Expansion Opportunity • Share gains opportunity beyond quick lubes market • Vertical integration 3
Slide 10: Tony Puckett, Senior vice president, and president, Quick Lubes
Tony Puckett Senior vice president, and president, Quick Lubes
Slide 11: Valvoline Instant Oil Change (VIOC)
Valvoline Instant Oil Change (VIOC) • 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 Canadian
Slide 12: Clear Competitive Advantages Driven by …
Clear Competitive Advantages Driven by … • Strong • Superior • Best-in-class Culture Technology Marketing Operating Stores Strengthens Business Model 12
Slide 13: Growth Through Same Store Sales
Growth Through Same Store Sales System-wide Same Store Sales Fiscal 2015 – 2019 YTD 10.1% 8.3% • On-track for 13th consecutive year of 7.7% 7.5% 7.4% positive same store sales growth • 2007 – 2019 YTD average annual same store sales growth of ~6% 2015 2016 2017 2018 2019 YTD
Slide 14: Growth Through Same Store Sales
Growth Through Same Store Sales System-wide Same Store Sales Fiscal 2015 – 2019 YTD 10.1% 8.3% • On-track for 13th consecutive year of 7.7% 7.5% 7.4% positive same store sales growth • 2007 – 2019 YTD average annual same store sales growth of ~6% 2015 2016 2017 2018 2019 YTD Last 3 Quarters Same Sto
Slide 15: Growth Through Same Store Sales
Growth Through Same Store Sales System-wide Same Store Sales Fiscal 2015 – 2019 YTD 10.1% 8.3% • On-track for 13th consecutive year of 7.7% 7.5% 7.4% positive same store sales growth • 2007 – 2019 YTD average annual same store sales growth of ~6% 2015 2016 2017 2018 2019 YTD Last 3 Quarters Same Sto
Slide 16: Strong Culture – Winning With Employees
Strong Culture – Winning With Employees 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
Slide 17: Superior Technology – Proprietary Point-of-Service Technology
Superior Technology – Proprietary Point-of-Service Technology OEM Recommends: 1st Service after 100,000 miles 17
Slide 18: Superior Technology – Industry Leader Addressing Key Dissatisfiers
Superior Technology – Industry Leader Addressing Key Dissatisfiers Consumer App Industry Leading Technology Driving Transparency and Trust And Enabling Further Advances to Improve Customer Experience and Retention 18
Slide 19: Best-in-Class Marketing
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 Post Exposure 1 VIOC 2018 Adverti
Slide 20: Share Gain Beyond Quick Lubes Committed to Unit Growth
Significant Expansion Opportunity Share Gain Beyond Quick Lubes Committed to Unit Growth 20
Slide 21: Significant Share Growth Opportunity Beyond Quick Lubes
Significant Share Growth Opportunity Beyond Quick Lubes Source of New VIOC Customers3 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 for fis
Slide 22: Growth Through Accelerating System Store Count
Growth Through Accelerating System Store Count 1352 1,242 1,127 1,068 922 942 899 862 864 866 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 YTD Company Franchise Total 1 Since Ashland announced separation September 22, 2015 22
Slide 23: Strong Unit Economics for New Stores
Strong Unit Economics for New Stores EBITDA Contribution Ranges1 EBITDA Ramp ~4x $350k - $400k Product Sales Product Sales Services Income Royalties x Company Franchise Year 1 Year 2 Year 3 Franchise Company 1 Based on internal estimates at maturity and assumes land is leased 23
Slide 24: Significant New Market Opportunities for Store Growth
Significant New Market Opportunities for Store Growth Organic Expansion Opportunities in existing and new markets • Existing markets account for ~60% of U.S. households • Expansion markets account for ~30% of U.S. households Team in place to leverage opportunities for organic growth • Data driven, h
Slide 25: Significant Acquisition Opportunities for Store Growth
Significant Acquisition Opportunities for Store Growth Consolidation opportunity in fragmented market ~9,000 Quick Lube Locations (65% Independent Operators) • Company and Franchise are anticipated to accelerate growth with inorganic opportunities ~1,500 VIOC Model Prospects • Approximately 1,500 po
Slide 26: Targeted VIOC Store Growth ~100 VIOC Stores Per Year
Targeted VIOC Store Growth ~100 VIOC Stores Per Year Forecasted Store Count Projected annual store growth mix - Company: ~60, including acquisitions ~1,700 - Franchise: ~40 ~1,350 Franchisees committed to an additional ~220 units by 2024, driven by top 8 operators Larger acquisitions to provide pote
Slide 27: Key Takeaways – Quick Lubes
Key Takeaways – Quick Lubes 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% same store
Slide 28: 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 28
Slide 29: We Have Built a World-class Retail Services Business
We Have Built a World-class Retail Services Business Operational Expertise Vertical Integration Faster Store Growth Same Store Sale Growth Products Locations Control the Value Chain Superior growth, high margins, strong returns 29
Slide 30: 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 30
Slide 31: 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 32: Q&A
Q&A 32
Slide 33: Thank You!
Thank You! 33
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