Valvoline Inc. · NYSE:VVV
Valvoline — CAGNY Conference 2018
39 slides from Valvoline's conference presentation, Feb 22, 2018
Slide 1: Accelerating into the Future – CAGNY Conference 2018
ACCELERATING INTO THE FUTURE CAGNY Conference 2018 Valvoline.
Slide 2: Forward-Looking Statements; Regulation G: Adjusted Results
Forward-Looking Statements Certain statements in this presentation, other than statements of historical fact, including estimates, projections, statements related to our business plans and operating results are forward-looking statements within the meaning of the Private Securities Litigation Reform
Slide 3: Agenda
Agenda • Who We Are • Our Segments • Evolving Technology • Financials • Wrap Up 3
Slide 4: Who We Are
Click to edit Master title style Who We Are 4
Slide 5: Our Brand is Driving a Growing Global Platform
Our Brand is Driving a Growing Global Platform ~$2.1B Top 3 Over 140 In Annual Sales Premium Motor Oil Brand(1) Countries With Valvoline Sales Our Sales Are Diversified Across 3 Segments 48% 26% 26% Core North America Quick Lubes International Commercial Commercial Do-It-Yourself Do-It-For-Me and In
Slide 6: A Proven Track Record of Earnings Growth
A Proven Track Record of Earnings Growth Fiscal Year Ended September 30th (Millions) $480 - $500 $440 $447 $412 $359 $331 2013 2014 2015 2016 2017 2018 Outlook (1) Adjusted EBITDA Mix Shift Toward 11 Consecutive Consistent Product Pricing Premium Years of SSS Volume Growth in and Raw Material Produc
Slide 7: Large Market with Solid Fundamentals
Large Market with Solid Fundamentals 6.4B Gallons, ~$50B Global Transportation Lubricants Market(1) Global volume(2) <1% Consumer Commercial Light Duty Heavy Duty Premium(2) volume ~6% Emerging Markets Driving Overall Volume Growth Mature Markets Driving Strong Need for Routine, Preventative Mainten
Slide 8: Valvoline Is Well-positioned to Capture Market Opportunities
Valvoline Is Well-positioned to Capture Market Opportunities Competitive Advantages A Market Leader in North America • Independent, Consumer-focused, Marketing-driven with Solid and Growing Share Position in Premium • Focused on Routine Automotive, Engine Maintenance • One Brand – Premium Products,
Slide 9: Our Strategy
Our Strategy Building Significant Competitive Advantage in Each Channel with Products, Services and Technology that Drive Customer Value DIY RETAILERS INSTALLERS OEM HEAVY DUTY QUICK LUBES 9
Slide 10: Our Segments
Our Segments 10
Slide 11: Core North America Overview
Core North America Overview Fiscal Year Ended September 30th 45.8% (Percent of U.S branded volume) 41.4% 36.6% 33.7% 30.0% -1.0% 2013 2014 2015 2016 2017 Core NA Premium Mix(1) Targeted, Digital Marketing Products & Packaging Enhanced Services 1. As a percentage of branded U.S. volume. 11
Slide 12: Product and Packaging Innovation
Product and Packaging Innovation New Easy Pour Bottle New Products for Today’s Engines EasyGDITM product line Modern Engine Full Synthetic Faster. Cleaner. Proven.TM for DIFM channels motor oil for DIY Designed to help fight carbon buildup in Now available in 18k+ DIY locations vehicles 2012 and new
Slide 13: Enhanced Digital Services Simplify Installer Interactions
Enhanced Digital Services Simplify Installer Interactions DASH Customer Portal E-Commerce Platform 13
Slide 14: Quick Lubes Overview
Quick Lubes Overview Fiscal Year Ended September 30th (000s) $947 11 Years of Same-store Sales Growth(1) $882 $824 $774 $738 $713 $649 $672 $613 $579 $550 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Valvoline Instant Oil Change System-wide Average Sales per Store Customer Experience Marke
Slide 15: Driving Sustainable Same-store Sales Growth
Driving Sustainable Same-store Sales Growth 15
Slide 16: Our Quick Lube Models
Our Quick Lube Models Company-owned Franchise Express Care Product Sales + Service Sales Product Sales + Royalties Product Sales 1. Total estimated additions by 2023 based on 2018 growth rates. 2. Acquisitions expected to supplement VIOC store growth. 16
Slide 17: Accelerating Store Growth
Accelerating Store Growth Company-owned Franchise Express Care Total Organic(2) 2018 Q1 442 697 320 1459 Store Count 2023 Total 150+ 180+ 180+ 500+ Estimated Additions(1) 2023 Potential ~600 ~900 ~500 ~2000 Store Count 1. Total estimated additions by 2023 based on 2018 growth rates. 2. Acquisitions
Slide 18: Large International Market Opportunity
Large International Market Opportunity 6.4B Gallons, ~$50B South Global Transportation America Lubricants Market(1) Asia Pacific - Other Middle East & North America most developed Africa market - shares in low to mid- double digits in light duty Europe Single digit shares in most other China regions
Slide 19: International Overview
International Overview 120.0 Fiscal Year Ended September 30th (Millions of lubricant gallons) 85.3 94.7 95.0 80.1 75.3 77.8 70.0 45.0 20.0 (5.0) 2013 2014 2015 2016 2017 International Segment Volume Reported Unconsolidated JV Volume(1) Channel Development Brand Awareness New Market Segments 1. Joint
Slide 20: Building a Great Business in India – A Model for International Expansion
Building a Great Business in India – A Model for International Expansion Top 3 and Fastest-growing Multinational Brand(1) Developed distribution network via Cummins heavy duty partnership Expanded cross-functional capabilities of our team Entered light-duty market Expanded investment in brand awaren
Slide 21: Leveraging Partnerships to Develop New Market Segments
Leveraging Partnerships to Develop New Market Segments Global R&D and Marketing Partnership Differentiated Product >2.5x increase in drain interval to lower TCO Marketing & Supply-chain Sales Support Solution Integrated End-to-end campaigns; logistics lead generation 50+% Volume growth in China HD(1
Slide 22: Evolving Technology
Evolving Technology 22
Slide 23: Car Parc Evolves Slowly and Continues to Grow
Car Parc Evolves Slowly and Continues to Grow U.S. Car Parc(1) (millions) U.S. Car Parc is ~275MM vehicles 300 250 New vehicle sales are ~17MM annually 200 Average age is ~12 years 150 Valvoline has products designed for vehicles of all ages including Modern 100 Engine and High Mileage 50 - 2012 201
Slide 24: New Technology Is Beginning to Penetrate the Car Parc
New Technology Is Beginning to Penetrate the Car Parc U.S. Car Parc Mix(1) Internal combustion engines 2017 2030 anticipated to dominate for the foreseeable future. Regulations to reduce emissions and electric vehicle incentives expected to drive hybrid growth in the medium term. Full electric vehic
Slide 25: Vehicle Needs Will Evolve with Technology
Vehicle Needs Will Evolve with Technology Hybrid 2030 EV Hybrids generally require the Motor Oil Battery Coolants Fuel Services Fuel Cell Coolants same fluids as traditional Transmission Fluids Transmission Fluids internal combustion engines Brake Fluids Brake Fluids Conventional Coolants Charging E
Slide 26: Valvoline Well-Positioned to Continue Evolving with the Market
Valvoline Well-Positioned to Continue Evolving with the Market • Strong brand equity • Leading in innovation • Focused on preventative maintenance • Growing retail network 26
Slide 27: Financials
Financials 27
Slide 28: Recent Trends
Recent Trends(1) Volume Store Count (millions of lubricant gallons) (store count) 185 - 187 341- 180 175 347 316 351 167 308 310 328 163 158 712- 726 743 722 638 650 663 463– 272 279 342 384 465 261 2013 2014 2015 2016 2017 2018 Outlook 2013 2014 2015 2016 2017 2018 Outlook Volume VIOC Company VIOC
Slide 29: Q1 Earnings Overview
Q1 Earnings Overview Reported Results, including one-time Q1 was a good start to fiscal 2018 $75 million reduction to net income due to tax reform(1) • Adjusted(2) EBITDA consistent with expectations Q1 (in millions, except per-share data) Operating Income $88 • Sequential unit margin improvements,
Slide 30: Tax Reform
Tax Reform Valvoline is a net beneficiary(1) of tax reform $400 million voluntary contribution to U.S. pension plan • 2-cent benefit to adjusted(2) EPS in Q1 Lower effective tax rates • Lower cash taxes expected beginning in – Fiscal 2018 consolidated adjusted(2) effective tax rate of 27-28% 2019 –
Slide 31: Capital Allocation Framework
Capital Allocation Framework Balanced approach to capital allocation – growth and shareholder returns 1. Organic growth 2. Inorganic growth, primarily bolt-on quick lube acquisitions 3. Dividend growth(1) 4. Share repurchases New share repurchase authorization • $300 million through fiscal 2020 • Be
Slide 32: Shareholder Value Proposition
Shareholder Value Proposition Organic Earnings Capital Allocation Value Proposition MSD Volume and Continued Revenue Growth Dividend Growth HSD EBITDA Share Repurchase Compelling Total Growth and/or Acquisitions Shareholder Return Target Payout(1) HSD-LDD EPS Ratio of 45-60% Growth Over Time 1. Payo
Slide 33: Wrap Up
Wrap Up 33
Slide 34: Accelerating into the Future – Growth Opportunities Across the Business
Accelerating into the Future – Growth Opportunities Across the Business Current Size(1) Growth Rate Core North America ~$1B Low single-digit Quick Lubes ~$0.5B High single-digit International ~$0.5B High single-digit 1. Based on fiscal 2017 sales revenue. 34
Slide 35: Investment Thesis
Investment Thesis Recognized Brand with a History of Innovation that Fuels Competitive Advantage Multi-channel Model with Bright Future Expected for Significant Expected Growth Opportunities Valvoline and Our Investors Strong Cash Generation Expected to Fund Growth and Shareholder Returns 35
Slide 36: Thank you!
Thank you! Please join us for dinner tonight 36
Slide 37: Appendix
Appendix 37
Slide 38: Historical Adjusted EBITDA Reconciliation
Historical Adjusted EBITDA Reconciliation Fiscal Year Ended September 30th ($ in millions) 2013 2014 2015 2016 2017 Net income $246 $173 $196 $273 $304 Income tax expense 135 91 101 148 186 Net Interest and other financing expense - - - 9 42 Depreciation and amortization 36 37 38 38 42 EBITDA $416 $
Slide 39: Accelerating into the Future
ACCELERATING INTO THE FUTURE Pye Valvoline. 39