Valvoline Inc. · NYSE:VVV
Valvoline — Q3 2023 Earnings Presentation
29 slides from Valvoline's earnings presentation, Aug 9, 2023
Slide 1: Third Quarter Fiscal 2023 Earnings
Third Quarter Fiscal 2023 Earnings Sam Mitchell, CEO Lori Flees, President, Retail Services Mary Meixelsperger, CFO Elizabeth Russell, Investor Relations 08.09.2023 1
Slide 2: Safe Harbor: Forward-Looking Statements
SAFE HARBOR Forward-Looking Statements Certain statements herein, other than statements of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include, without limitation, benefits and synergi
Slide 3: Agenda
AGENDA Update on Return of Proceeds 3Q Highlights Operational Highlights Results / Guidance Wrap Up / Q&A 08.09.23 || Third Quarter Fiscal 2023 Earnings 3
Slide 4: 08.09.23 || Third Quarter Fiscal 2023 Earnings
08.09.23 || Third Quarter Fiscal 2023 Earnings 4
Slide 5: Update on Return of Proceeds
UPDATE ON RETURN OF PROCEEDS YTD1 ~$1.4 Billion Returned to Shareholders and 37.9M shares repurchased New Valvoline is…. Successfully repurchased ~$1B Tender Completed in Q3 of shares $1.6B Share Repurchase $340M Remaining on Current Authorization Authorization Fast Growth, High Margin, High ROIC, E
Slide 6: 3Q Highlights
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Slide 7: 3Q23 Key Highlights
3Q23 KEY HIGHLIGHTS1 $719.6M $376.2M 1,804 System-wide Store Sales2 Adjusted1 Net Revenue Company-operated and Franchised locations 17.9% 19.0% 6.7% 12.5% $110.4M 52% System-wide Same Store Sales2 Growth Franchise operated Adjusted1 EBITDA 39 Franchise 12.1% Company SSS2 27.8% Units3 vs PY 12.8% Fra
Slide 8: Confidence in Continued Growth
CONFIDENCE IN CONTINUED GROWTH System-wide Unit Count1 System-wide SSS1 Growth 1,845 - 1,875 1,715 1,594 21.2% 1,385 1,462 975 - 995 875 925 866 878 13.7% 10.1% 8% - 12% 719 790 870 - 880 519 584 2.3% 2019 2020 2021 2022 2023E Company Franchise 2019 2020 2021 2022 2023E System-wide Store Sales1 Adju
Slide 9: Operational Highlights
OPERATIONAL HIGHLIGHTS 08.09.23 || Third Quarter Fiscal 2023 Earnings 9
Slide 10: Margin Performance
MARGIN PERFORMANCE Adjusted EBITDA Margin1 FY23 Sequential 3Q YOY • Sequential improvement from increased efficiency in labor and store operations 29.3% 29.3% 27.3% - EBITDA margins +400bps vs 2Q23 25.3% 22.0% • YoY improvement largely driven by SG&A leverage - EBITDA margins +200bps vs PY - Waste o
Slide 11: Same Store Sales Drivers
SAME STORE SALES DRIVERS System SSS1 Growth 12.5% 11.8% • Strong same store sales continues • Healthy demand and balance across ticket drivers • Beginning to lap material pricing actions 3Q LTM FY23 VSPD Ticket 1. Refer to the Appendix for further information regarding management’s use of key busine
Slide 12: New Unit Update
NEW UNIT UPDATE Net1 New Unit Additions 35 31 • On track to meet guidance for system unit 23 additions for the year • Franchise new units slipped from 3Q due to permitting and construction delays • Anticipating a strong Q4 from both Company and Franchise to close out the full year Q1 Q2 Q3 2023 2023
Slide 13: 3Q Results
—\il 3Q RESULTS
Slide 14: Third Quarter Results - Adjusted
THIRD QUARTER RESULTS - ADJUSTED1 YoY YoY Changes in Adjusted1 EBITDA (Millions) 3Q23 (Millions) Net revenues $376.2 19.0% Operating income $88.8 29.1% Operating margin 23.6% 180 bps Income from continuing $69.1 80.9% operations EBITDA $110.4 27.8% EBITDA margin 29.3% 200 bps EPS $0.43 105% 1. For r
Slide 15: 3Q23 Reporting Highlights
3Q23 REPORTING HIGHLIGHTS Balance Sheet Highlights • Continue to target net leverage ratio1 of 2.5x – 3.5x; timing impacted by anticipated share repurchases, tax payments (Millions) 3Q23 and debt repayment Cash & Cash Equivalents $526.7 Short Term Investments $424.1 • Expect to make an offer to repu
Slide 16: Updating FY2023 Continuing Operations Guidance
UPDATING FY2023 CONTINUING OPERATIONS GUIDANCE Previous Updated Adjusted1 EBITDA $370M – $390M $375M – $385M Adjusted1 Net Income $160M – $180M $185M - $200M • Narrowing range for adjusted EBITDA for full year • Increasing guidance for adjusted Net Income, largely driven by interest income earned on
Slide 17: 3Q Takeaways
3Q TAKEAWAYS $340.4M remaining on share repurchase authorization expected to be substantially complete within 12 months, subject to market conditions. Strong 3Q results with 27.8% EBITDA growth and margin improvement as expected. Continue to focus on long-term growth algorithm. 08.09.23 || Third Qua
Slide 18: Appendix
APPENDIX 18
Slide 19: Retail Services - Q3 System Results
RETAIL SERVICES – Q3 SYSTEM RESULTS Three months ended Nine months ended June 30 June 30 2023 2022 2023 2022 Sales information System-wide store sales - in millions (a) $ 719.6 $ 610.4 $ 2,023.5 $ 1,718.3 Year-over-year growth (a) 17.9 % 16.0 % 17.8 % 21.4 % Same-store sales growth (b) Company-opera
Slide 20: Retail Services - Store Information
RETAIL SERVICES – STORE INFORMATION Company-operated Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter 2023 2023 2023 2022 2022 Beginning of period 832 813 790 772 757 Opened 12 13 17 12 5 Acquired 8 6 5 3 9 Net conversions between company-operated and franchised 2 — 2 3 1 Clos
Slide 21: Reconciliation of Non-GAAP Data - Income and Diluted EPS
RECONCILIATION OF NON-GAAP DATA – INCOME FROM CONTINUING OPERATIONS & DILUTED EARNINGS PER SHARE Three months ended Nine months ended June 30 June 30 2023 2022 2023 2022 Reported income from continuing operations $ 64.5 $ 39.8 $ 124.4 $ 97.0 Adjustments: Net pension and other postretirement plan exp
Slide 22: Reconciliation of Non-GAAP Data - Q3 Adjusted EBITDA
RECONCILIATION OF NON-GAAP DATA – Q3 ADJUSTED EBITDA Three months ended Nine months ended June 30 June 30 2023 2022 2023 2022 Reported net revenues $ 376.2 $ 317.4 $ 1,053.5 $ 900.7 Adjustments: Suspended operations — (1.2) (0.2) (11.4) Adjusted net revenues (a) (b) $ 376.2 $ 316.2 $ 1,053.3 $ 889.3
Slide 23: Reconciliation of Non-GAAP Data - Adjusted Net Revenues & Operating Income
RECONCILIATION OF NON-GAAP DATA – ADJUSTED NET REVENUES & OPERATING INCOME Three months ended June 30 Net revenues Operating income (In millions - preliminary and unaudited) 2023 2022 2023 2022 Reported net revenues $ 376.2 $ 317.4 $ 86.5 $ 61.1 Adjustments: Net legacy and separation-related expense
Slide 24: Reconciliation of Non-GAAP Data - Free Cash Flows
RECONCILIATION OF NON-GAAP DATA – FREE CASH FLOWS Nine months ended June 30 Free cash flow (a) 2023 2022 Total cash flows provided by operating activities from continuing operations $ 249.9 $ 126.9 Adjustments: Additions to property, plant and equipment from continuing operations (125.9) (89.5) Free
Slide 25: GAAP Results - Total Company
GAAP RESULTS – TOTAL COMPANY Three months ended Nine months ended June 30 June 30 2023 2022 2023 2022 Net revenues $ 376.2 $ 317.4 $ 1,053.5 $ 900.7 Cost of sales 225.5 189.6 657.3 553.4 Gross profit 150.7 127.8 396.2 347.3 Selling, general and administrative expenses 65.6 59.2 194.2 182.6 Net legac
Slide 26: Updated FY2023 Guidance
UPDATED FY2023 GUIDANCE Continuing Operations1 Same Store Sales Growth1 % 8% – 12% System-Wide Sales1 Growth 16% – 20% System-Wide Unit Additions1 130 – 160 Net Revenues $1.4B – $1.5B Net Revenues Growth 14% – 18% Adjusted2 EBITDA (Updated) $375M – $385M Capital Expenditures $170M – $200M Adjusted2
Slide 27: Use of Non-GAAP Measures
USE OF NON-GAAP MEASURES This presentation includes the following non-GAAP measures: Adjusted operating income and adjusted operating margin; Adjusted net revenues; EBITDA, adjusted EBITDA, and adjusted EBITDA margin; adjusted net income and adjusted diluted earnings per share; and free cash flow an
Slide 28: Use of Non-GAAP Measures, Continued
USE OF NON-GAAP MEASURES, CONTINUED Refer to the below for descriptions of the key items that comprise the adjustments which depart from the computations in accordance with U.S. GAAP: Net pension and other postretirement plan expense (income): Includes several elements impacted by changes in plan as
Slide 29: Key Business Measures
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 SSS; and system-wide store sales. Management believes these measures are useful to evaluating and understandin