Valvoline Inc. · NYSE:VVV
Valvoline — Q1 2023 Earnings Presentation
28 slides from Valvoline's earnings presentation, Feb 7, 2023
Slide 1: First Quarter Fiscal 2023 Earnings
First Quarter Fiscal 2023 Earnings February 7, 2023 Sam Mitchell, CEO Lori Flees, President, Retail Services Mary Meixelsperger, CFO Elizabeth Russell, 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: Agenda
AGENDA Update on Transaction 1Q Highlights Operational Insight Results/Guidance Wrap Up/Q&A 3
Slide 4: Update on Transaction
UPDATE ON TRANSACTION Valvoline. 4m
Slide 5: Sale of Global Products on Track
SALE OF GLOBAL PRODUCTS ON TRACK • Purchase price of $2.65B in cash Structure and • Aramco obtains global rights to Valvoline brand related to Global Products sales Consideration • Valvoline Retail Services maintains global rights to Valvoline brand related to service sales1 • Long term product agre
Slide 6: Separation Unlocks Value of Retail Services
SEPARATION UNLOCKS VALUE OF RETAIL SERVICES New1 Valvoline Takeaways for Shareholders Fast Growth, High Margin, High ROIC Sales CAGR1 14 - 16% Accelerated Growth Adj. EBITDA CAGR1,2 16 - 18% 30+% Cash on Cash Returns3 Focused Capital Allocation 55% Franchise Mix1 Enhanced Capital Structure Targeting
Slide 7: 1Q Highlights
1Q HIGHLIGHTS Valvoline. 7m
Slide 8: 1Q23 Key Highlights
1Q23 KEY HIGHLIGHTS1 $644M $332.6M 1,746 System-wide Store Sales Adjusted1 Net Revenue Company-operated and 16.9% 17.3% Franchised locations 6.8% 11.9% $73.3M 53% System-wide Same Store Sales2 Franchise operated Growth Adjusted1 EBITDA 42 Franchise 13% Company SSS2 1% Units3 vs PY 11% Franchise SSS2
Slide 9: Confidence in Double-Digit Topline Growth
CONFIDENCE IN DOUBLE-DIGIT TOPLINE GROWTH (Millions, except store count) 1Q23 YoY System-Wide Store Sales2 (Millions) $2,730 - Adjusted1 Net revenues $332.6 17.3% $2,850 System-wide Store Sales2 $644.0 16.9% $2,360 $1,970 System-wide SSS2 N/A 11.9% $1,419 $1,520 Store Count2 1,746 6.8% Adjusted1 EBI
Slide 10: 1Q Seasonality as Expected
1Q SEASONALITY AS EXPECTED 2021 & 2022 Performance1 • Retail Services performance tracks with seasonal driving patterns • Anticipate stronger volume and profit in remaining quarters • 1Q23 modestly lower than internal expectations Q1 Q2 Q3 Q4 EBITDA VSPD 1. Amounts represent average of FY21 & FY22.
Slide 11: Operational Highlights
Valvoline. OPERATIONAL HIGHLIGHTS 110
Slide 12: Full-Year Outlook and 1Q23 Margin
FULL-YEAR OUTLOOK AND 1Q23 MARGIN EBITDA Margin1 26.7% 25.5 - 26.5% 25.5% 1Q Year-over-year 22.8% • 1Q23 EBITDA margins down 350 bps - Largely anticipated and driven by business mix and cost passthrough Year-to-go margins • Seasonality drives margin improvements in back half of the year • Higher ope
Slide 13: Confidence in Same Store Sales Growth
CONFIDENCE IN SAME STORE SALES GROWTH System-wide Same Store Sales1 NOCR Growth by Quartile 21.2% 13.7% 11.9% 10.1% 2.3% 2019 2020 2021 2022 1Q23 Bottom Quartile Top Quartile 1Q22 1Q23 • Strong performance in 1Q driven by pricing • Growth across performance quartiles with higher actions in prior yea
Slide 14: Confidence in Projected 7-9% Unit Growth
CONFIDENCE IN PROJECTED 7-9% UNIT GROWTH Market Site Purchase Site Opening Prioritization Approval Agreement / Construction Expect to deliver >220 internally >90 sites with >3,500 Units approved sites1 executed agreements or in construction1 31 new units delivered in 1Q23 On track for 130-160 new un
Slide 15: 1Q Results & Guidance
Valvoline. 1Q RESULTS & GUIDANCE 15
Slide 16: First Quarter Results - Adjusted
FIRST QUARTER RESULTS- ADJUSTED1 YoY Changes in Adjusted1 EBITDA (Millions) (Millions) 1Q23 YoY Net revenues $332.6 17.3% Operating income $54.8 (1.3)% Operating income margin 16.5% (309 bps) EBITDA $73.3 1.2% EBITDA margin 22% (350 bps) Net income 28.4 (5.0)% 1. Results provided are for continuing
Slide 17: Reiterating FY2023 Guidance
REITERATING FY2023 GUIDANCE Continuing Operations1 Same Store Sales Growth % 8% – 12% System-Wide Sales Growth 16% – 20% System-Wide Unit Additions 130 – 160 Company 80 – 90 Franchise 50 – 70 Net Revenues $1.4B – $1.5B Net Revenues Growth 14% – 18% Adjusted2 EBITDA $370M – $390M Capital Expenditures
Slide 18: Long Term Value Drivers Intact
LONG TERM VALUE DRIVERS INTACT Customer trends are strong and FY2023 full year outlook remains on track Transaction expected to close in early calendar 2023 Expect to return $1.6B to shareholders within 18 months following close 18
Slide 19: Appendix
Valvoline. APPENDIX 19m
Slide 20: Retail Services - Q1 System Results
RETAIL SERVICES – Q1 SYSTEM RESULTS a) Measures include 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. stores, with new stores, including franchised conversi
Slide 21: Retail Services - Store Information
RETAIL SERVICES- STORE INFORMATION a) Measures include Valvoline franchisees, which are independent legal entities. Valvoline does not consolidate the results of operations of its franchisees. 21
Slide 22: Reconciliation of Non-GAAP Data - Net Revenues & Operating Income
RECONCILIATION OF NON-GAAP DATA – NET REVENUES & OPERATING INCOME 22
Slide 23: Reconciliation of Non-GAAP Data - Net Income
RECONCILIATION OF NON-GAAP DATA – NET INCOME a) The Company recognized $24.4 million of expense within Net legacy and separation-related expenses in the Statement of Consolidated Income, in addition to an income tax benefit of $26.5 million during the three months ended December 31, 2022 to reflect
Slide 24: Reconciliation of Non-GAAP Data - Q1 Adjusted EBITDA
RECONCILIATION OF NON-GAAP DATA – Q1 ADJUSTED EBITDA a) EBITDA from continuing operations is defined as income from continuing operations, plus income tax (benefit) expense, net interest and other financing expenses, and depreciation and amortization attributable to continuing operations. Adjusted E
Slide 25: Reconciliation of Non-GAAP Data - Free Cash Flow
RECONCILIATION OF NON-GAAP DATA - FREE CASH FLOW a) Free cash flow from continuing operations is defined as operating cash flows from continuing operations less capital expenditures of the continuing operations and certain other adjustments attributable to continuing operations, as applicable. b) Di
Slide 26: GAAP Results - Total Company
GAAP RESULTS- TOTAL COMPANY 26
Slide 27: 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 28: 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; vehicles served, and system-wide store sales. Management believes these measures are useful to evaluating