Valvoline Inc. · NYSE:VVV
Valvoline — Q4 2020 Earnings Presentation
31 slides from Valvoline's earnings presentation, Oct 29, 2020
Slide 1: Fourth-Quarter Fiscal 2020 Earnings
Fourth-Quarter Fiscal 2020 Earnings October 29, 2020 Sam Mitchell, CEO Mary Meixelsperger, CFO Sean Cornett, Investor Relations
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: Fourth-Quarter & FY20 Results
Fourth-Quarter & FY20 Results Reported Results Key items1 in Q4 (in millions, except per-share data) Q4 FY20 • Net pension and OPEB impacts, including mark-to-market Operating income $176 $485 remeasurements: $24 million after-tax income $122 $317 • Benefits policy change (compensated absences): $9
Slide 4: Strong FY20; Momentum into FY21
Strong FY20; Momentum into FY21 • Fiscal 2020 – YoY growth in profitability, despite COVID-19 impacts (in millions, except per- share data) Q1 Q2 Q3 Q4 FY20 FY20 YoY Revenue $607 $578 $516 $652 $2,353 (2%) Adjusted1 $120 $134 $106 $150 $510 7% EBITDA Adjusted1 EPS $0.35 $0.39 $0.28 $0.46 $1.48 6% •
Slide 5: Overview
Overview Resilient business model Results exceeded expectations FY20 results & FY21 Outlook • Substantial sequential • Adjusted EBITDA • Portfolio drove growth in FY20, improvements in profitability despite COVID-19 challenges − Q4 up 16%; FY20 up 7% across all segments in Q4 • Positioned for accele
Slide 6: Quick Lubes – Q4 and FY20
Quick Lubes – Q4 and FY20 System-wide SSS1 Unit Growth 8.2% 8.3% 8.3% • 30 net new units added in Q4 • 22 newly built company-owned stores 0.7% • FY20 ending store count 1,462 • 6% YoY increase in units • 36 newly built company-owned stores -8.0% FY15 - FY19 1Q20 2Q20 3Q20 4Q20 • Recent acquisition
Slide 7: Quick Lubes – FY21 Outlook: SSS and Leverage
Quick Lubes – FY21 Outlook: SSS and Leverage Continued System-wide SSS1 Growth SSS1 Leverage in Core Stores 330 319 39.0% • FY21 System-wide SSS growth: 12 - 14% 314 310 38.0% − Normalized2 SSS growth of 6-8% +430 bps 287 37.6% 290 37.0% − ~100 bps contribution to normalized SSS from 264 36.7% 37.0%
Slide 8: Quick Lubes – FY21 Outlook: Unit Growth
Continued Quick LubesNetwork Expansion – FY21 Outlook: Unit Growth • FY21 unit additions: 140 – 160 − Company-owned stores: ~50 newly built − Franchise: 30 – 40 additions − Acquisitions: 26 announced, 30 – 40 incremental • Newly built stores expected to drive substantial EBITDA growth Cumulative EBI
Slide 9: Quick Lubes Growth Levers for FY21 and Beyond
Quick Lubes Growth Levers for FY21 and Beyond Multiple levers for long-term growth Projected Drivers of YoY Adjusted EBITDA Growth • System-wide SSS1 • New stores – company and franchise • Acquisitions FY 2020 SSS2 New Stores3 Acquisitions FY 2021E Substantial top- and bottom-line growth from multip
Slide 10: Core North America – Q4 and FY20
Core North America – Q4 and FY20 • Volume performance ‒ Retail Channel • YoY volume up modestly in Q4 • FY20 volume flat ‒ Installer Channel • Substantial sequential improvement in Q4 • COVID-19 recovery continues to build • Margin improvement ‒ Favorable channel, product mix ‒ Price cost lag benefi
Slide 11: Core North America – FY21 Outlook
Core North America – FY21 Outlook Retail channel Installer channel • Expect ~flat volume YoY • Expect YoY volume growth - Solid merchandising and promotional plans in - Continued recovery from COVID-19 place - Winning new customers with value- • Macro DIY category expected to be added selling approa
Slide 12: International – Q4 and FY20
International – Q4 and FY20 Volume Including JVs1 Adjusted EBITDA • Q4 performance: • Q4 YoY growth: − Strong sequential improvement in all regions − Favorable geographic mix − YoY declines in Latin America, EMEA, India − Improved margins and contribution from JVs − YoY growth in China and Australia
Slide 13: International – FY21 Outlook
International – FY21 Outlook Focus on reigniting profitable growth Expect volume1 growth China plant Investing for future growth across regions • Significant YoY improvement • Online by December, fully • Channel development – field operational by end of FY21 salesforce and service platforms • Linger
Slide 14: Fourth-Quarter & FY20 Financials
Fourth-Quarter & FY20 Financials ($ in millions, except per-share data) Fiscal Fourth Quarter Fiscal Year Preliminary and unaudited Three months ended Sept. 30, Twelve months ended Sept. 30, 1 Adjusted P&L Results and Ratios 2020 2019 Change 2020 2019 Change Lubricant gallons (in millions) 46.2 46.4
Slide 15: Corporate Items
Corporate Items • Net interest and other financing expense of $20 million in Q4, up $2 million YoY • Net interest and other financing expense of $93 million in FY20, up $20 million YoY • Effective tax rate of 35.1% in Q4; adjusted1 effective tax rate of 24.1% • Full-year effective tax rate of 29.7%;
Slide 16: Fiscal 2021 Guidance
Fiscal 2021 Guidance 2021 • Low double-digit adjusted1 Outlook EBITDA growth Operating Segments • Sales growth 14 - 16% • Quick Lubes momentum • New Quick Lube stores (includes company-owned, franchise and 140 - 160 expected to continue acquisitions) • Quick Lubes system-wide SSS1 growth 12 - 14% •
Slide 17: Summary – FY20 Performance
Summary – FY20 Performance • FY20 results demonstrated accelerating growth in a challenging environment - Diversified product and service offerings drive durable growth - 20% or higher adjusted EBITDA margins - ROIC consistently above 20% Adjusted1 EBITDA and Margin ($ millions, % sales) 550 45% 510
Slide 18: Summary – FY21 and Beyond
Summary – FY21 and Beyond Expect FY21 to be an inflection point Adjusted1 EBITDA ($ millions) 600 560 - 580 • Quick Lubes becomes 50+% of total 550 510 adjusted EBITDA mix 500 478 450 • Core NA fundamentals strengthening 400 350 2019 2020 2021E2 • International returns to growth FY16 Adjusted1 FY21E
Slide 19: Appendix
Click to edit Master title style Appendix
Slide 20: Segment Results Summary
Segment Results Summary Quick Lubes Core North America International Q4 FY20 Q4 FY20 Q4 FY20 (YoY change) (YoY change) (YoY change) SSS1 (system-wide) 8.3% 2.3% Total Volume -3% -8% Volume -2% -6% Sales +14% +7% Sales -3% -5% Volume with JVs1 -1% -7% Net new stores2 30 77 58.9%, 58.0%, (company/fran
Slide 21: Key Items Affecting Income
Key Items1 Affecting Income ($ in millions, except per-share data) Fourth-Quarter Impact Preliminary and unaudited Total Operating Earnings Fiscal 2020 Income Pre-tax After-tax per Share Net Pension & OPEB expense $ - $ 32 $ 24 $ 0.13 Legacy and separation-related costs, net $ 30 $ 30 $ - $ - Compen
Slide 22: Quick Lubes
Quick Lubes ($ in millions) Fiscal Fourth Quarter Fiscal Year Preliminary and unaudited Three months ended Sept. 30, Twelve months ended Sept. 30, 2020 2019 Change 2020 2019 Change Lubricant gallons (in millions) 8.3 7.4 12 % 28.9 28.1 3 % Sales $ 254 $ 222 14 % $ 883 $ 822 7 % 1 $ 169 $ 178 (5) % A
Slide 23: Core North America
Core North America ($ in millions) Fiscal Fourth Quarter Fiscal Year Preliminary an unaudited Twelve months ended Sept. 30, Three months ended Sept. 30, 2020 2019 Change 2020 2019 Change Lubricant gallons (in millions) 23.1 23.9 (3) % 84.4 92.1 (8) % Sales $ 252 $ 259 (3) % $ 945 $ 994 (5) % 1 $ 202
Slide 24: International
International ($ in millions) Fiscal Fourth Quarter Fiscal Year Preliminary and unaudited Three months ended Sept. 30, Twelve months ended Sept. 30, 2020 2019 Change 2020 2019 Change Lubricant gallons (in millions) 14.8 15.1 (2) % 54.7 58.2 (6) % Sales $ 146 $ 148 (1) % $ 525 $ 574 (9) % 1 $ 73 $ 83
Slide 25: Reconciliation of Valvoline Historical EBITDA
Reconciliation of Valvoline Historical EBITDA 25
Slide 26: Reconciliation of Non-GAAP Data – Net Income and EPS
Reconciliation of Non-GAAP Data – Net Income and EPS (a) Business interruption expenses incurred in fiscal 2019 and $5 million of the compensated absences policy change adjustment in fiscal 2020 were included in Cost of sales within the Statements of Consolidated Income. Reported and adjusted consol
Slide 27: Reconciliation of Non-GAAP Data - Adjusted EBITDA FY20
Reconciliation of Non-GAAP Data - Adjusted EBITDA FY20 (a) Key items were recorded in operating segment results and Unallocated and other. The tables above reconcile consolidated reported net income to EBITDA and adjusted EBITDA, as well as operating segment reported operating income to adjusted ope
Slide 28: 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. 28
Slide 29: Use of Non-GAAP Measures
Use of Non-GAAP Measures To aid in the understanding of Valvoline’s ongoing business performance, certain items within this presentation are presented on an adjusted, non-GAAP basis. These non-GAAP measures are not defined within accounting principles generally accepted in the United States of Ameri
Slide 30: Key Business Measures
Key Business Measures Valvoline tracks its operating performance and manages its business using certain key measures, including system-wide, company-owned and franchised store counts and same-store sales; Express Care store counts; lubricant volumes sold by unconsolidated joint ventures; and total l
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