Valvoline Inc. · NYSE:VVV
Valvoline — Q3 2022 Earnings Presentation
29 slides from Valvoline's earnings presentation, Aug 4, 2022
Slide 1: Third-Quarter Fiscal 2022 Earnings
Third-Quarter Fiscal 2022 Earnings August 4, 2022 Sam Mitchell, CEO Mary Meixelsperger, CFO Sean Cornett, Investor Relations 1
Slide 2: Safe Harbor: Forward-Looking Statements
SAFE HARBOR Forward-Looking Statements Certain statements in this presentation, 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, statem
Slide 3: Next Step in Our Transformation
Next Step in Our Transformation Valvoline. 3m
Slide 4: Sale of Global Products – Transaction Summary
SALE OF GLOBAL PRODUCTS – TRANSACTION SUMMARY • Purchase price of $2.65B in cash • Expected use of proceeds: majority for shareholder returns, remainder for debt reduction, Structure and including 2030 bonds, and reinvestment Consideration • Aramco obtains global rights to Valvoline brand related to
Slide 5: Use of Proceeds to Drive Shareholder Value
USE OF PROCEEDS TO DRIVE SHAREHOLDER VALUE • Retail Services expected to receive ~$2.25B of net proceeds • Return majority of net proceeds to shareholders via share repurchases to right-size capital structure • Expect to repay certain debt including 2030 Senior Notes and AR securitization facility U
Slide 6: Pro Forma Financial Modeling Assumptions
PRO FORMA1 FINANCIAL MODELING ASSUMPTIONS Long-term Adjusted EBITDA2 Margin Targets Long-term Targets 30% - 32% 27% - 29% Sales Growth 12 – 14% ~3% EBITDA2 Margin 23 – 26% 23% - 26% 3% - 4% Tax Rate 25 – 27% Leverage Ratio 2.5 – 3.5x EPS Growth3 ~20%+ 50% Allocation of Standalone Retail Services Ret
Slide 7: Fiscal Q3 Earnings
Fiscal Q3 Earnings Valvoline. 7m
Slide 8: 3Q22 Key Operating Highlights
3Q22 KEY OPERATING HIGHLIGHTS VVV Retail Services Global Products 21% 9.9% 24% Growth in total sales Growth in system-wide SSS1 Growth in sales 2% Growth in reported net income 8% 9% 4% Growth in system-wide units1 Growth in volume1 Growth in adjusted1 EBITDA 4% Growth in reported EPS 1% $59M 5% Gro
Slide 9: Retail Services: SSS, Unit Growth Continue Driving Topline Performance
RETAIL SERVICES SSS, UNIT GROWTH CONTINUE DRIVING TOPLINE PERFORMANCE System-Wide Store Sales1 (Millions, except store count) 3Q22 YoY (Millions) $2,273 $1,970 Segment Sales $384 16% $1,419 $1,520 SSS1 Growth (system-wide) N/A 9.9% Store Count1 (system-wide) 1,690 8% Adjusted2 EBITDA $113 1% 2019 20
Slide 10: Retail Services EBITDA Margin Trend
RETAIL SERVICES EBITDA MARGIN TREND Retail Services Segment Adjusted1 EBITDA Margin 33.9% • 3Q21 – Higher rate due to lower labor costs from understaffing • 2Q22 – Challenged by inflationary pressures 29.8% 29.4% • 3Q22 – Returning to segment target 28.3% 27.1% Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 We are c
Slide 11: Global Products Driving Share Gains and Steady Cash Generation
GLOBAL PRODUCTS DRIVING SHARE GAINS AND STEADY CASH GENERATION Discretionary FCF2 (Millions) 3Q22 YoY (Millions) $202 $213 $208 $190 $197 Segment Sales $573 24% Volume1 (gallons) 45.4 9% Adjusted2 EBITDA $87 7% 2018 2019 2020 2021 2022 LTM Discretionary FCF2 $59 11% Volume1,2 Sales by Region (Gallon
Slide 12: Valvoline.
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Slide 13: Third Quarter Results
THIRD QUARTER RESULTS (Millions, except per-share data) 3Q22 YoY Sales $957 21% YoY Changes in Adjusted1 EBITDA (Millions) Gross Profit $276 7% Adjusted1 Gross Profit $284 3% Operating Income $138 5% Adjusted1 Operating Income $155 4% Net Income $99 2% Adjusted1 EBITDA $180 4% Earnings per Diluted S
Slide 14: Third Quarter Results – Segment Performance
THIRD QUARTER RESULTS – SEGMENT PERFORMANCE Retail Services Retail Services Takeaways (Millions) 3Q22 YoY • Sales growth driven by ticket and transaction Segment Sales $384 16% growth Adjusted1 EBITDA $113 1% • Pricing actions drove 230 bps sequential improvement in margin Adjusted2 EBITDA Margin 29
Slide 15: 2022 Guidance
2022 GUIDANCE Current Outlook Prior Outlook Operating Items Total company sales growth No change 22 – 24% Retail Services store additions1 No change 140 – 160 (9 – 10%) Retail Services SSS1 growth No change 12 – 14% Adjusted2 EBITDA $670 – $680 million $675 - $700 million Retail Services $415 - $425
Slide 16: Roadmap to Unlock Value
ROADMAP TO UNLOCK VALUE Invest in Growth Financial flexibility to drive growth via organic capex, unit additions, M&A and Drive Focus service expansion Optimize talent and resource allocation and align incentives with growth and strong returns Expand Retail Network Add stores in key markets with inc
Slide 17: Valvoline.
a Valvoline. 170
Slide 18: Reconciliation of Adjusted EBITDA
RECONCILIATION OF ADJUSTED EBITDA 18
Slide 19: Retail Services – Q3 Results
RETAIL SERVICES – Q3 RESULTS a) Measure includes Valvoline franchisees, which are independent legal entities. Valvoline does not consolidate the results of operations of its franchisees. b) Valvoline determines SSS growth as sales by U.S. Retail Services stores, with new stores, including franchised
Slide 20: Retail Services – Historical Results
RETAIL SERVICES – HISTORICAL RESULTS a) Segment adjusted operating income is segment operating income adjusted for key items impacting comparability. Segment adjusted operating income is further adjusted for depreciation and amortization to determine segment adjusted EBITDA. Valvoline does not gener
Slide 21: Retail Services – Store Information
RETAIL SERVICES – STORE INFORMATION a) System-wide store count includes franchised service center stores. Valvoline franchises are independent legal entities, and Valvoline does not consolidate the results of operations of its franchisees. 21
Slide 22: Global Products – Q3 Results
GLOBAL PRODUCTS – Q3 RESULTS a) Valvoline includes the United States and Canada in its North America region. Mexico is included within the Latin America region. b) Segment adjusted operating income is segment operating income adjusted for key items impacting comparability. Segment adjusted operating
Slide 23: Key Items Affecting Income
KEY ITEMS AFFECTING INCOME 23
Slide 24: Reconciliation of Non-GAAP Data – Gross Profit and Operating Income
RECONCILIATION OF NON-GAAP DATA – GROSS PROFIT AND OPERATING INCOME 24
Slide 25: Reconciliation of Non-GAAP Data – Adjusted EBITDA
RECONCILIATION OF NON-GAAP DATA – ADJUSTED EBITDA (a) EBITDA is defined as net income, plus income tax expense, net interest and other financing expenses, and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for key items, as described in "Use of Non-GAAP Measures" within this press
Slide 26: Reconciliation of Non-GAAP Data – Net Income and Diluted Earnings Per Share
RECONCILIATION OF NON-GAAP DATA – NET INCOME AND DILUTED EARNINGS PER SHARE (a) Adjusted net income is defined as net income adjusted for key items. Refer to "Use of Non-GAAP Measures" in this press release for management's definition of key items. (b) Adjusted diluted earnings per share is defined
Slide 27: Reconciliation of Non-GAAP Data – Free Cash Flow
RECONCILIATION OF NON-GAAP DATA – FREE CASH FLOW (a) Free cash flow is defined as cash flows from operating activities less capital expenditures and certain other adjustments as applicable. (b) Discretionary free cash flow is defined as cash flows from operating activities less maintenance capital e
Slide 28: Use of Non-GAAP Measures
USE OF NON-GAAP MEASURES To supplement the financial measures prepared in accordance with U.S. GAAP, certain items within this presentation are presented on an adjusted basis. These non-GAAP measures, presented on both a consolidated and operating segment basis, have limitations as analytical tools
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; system-wide store sales; and lubricant volumes sold. Management believes these measures are useful to eva