Valvoline Inc. · NYSE:VVV
Valvoline — Investor Presentation (September 2017)
24 slides from Valvoline's investor presentation, Sep 7, 2017
Slide 1: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, contained in th
Slide 2: Today's Presenters
Today's Presenters Name Title Industry Experience Selected Experience Sam Mitchell Chief Executive Officer 20 o Joined Ashland in 1997 as Director of Marketing for Valvoline's brand management group; became President of Valvoline in 2002 o Held brand and category management leadership positions at T
Slide 3: Our Mission Statement
Our Mission Statement We are building the world's leading engine and automotive maintenance business by bringing "Hands on Expertise" for the benefit of customers every day. 4
Slide 4: A Proven Track Record of Earnings Growth
A Proven Track Record of Earnings Growth Drivers of Strong Profit Mix shift towards premium products: ~45% in 2016 from ~31% in 2011(1) 10 consecutive years of system-wide SSS growth in VIOC stores(2) Consistent volume and profit growth in international markets Proactive product pricing and raw mate
Slide 5: Our Brand Sells Across Uniquely Diverse Routes to Market
Our Brand Sells Across Uniquely Diverse Routes to Market Core North America Quick Lubes International Do-It-Yourself (DIY) Do-It-For-Me (DIFM) Commercial and Industrial (C&I) VIOC Express Care Commercial and Industrial (C&I) JVs OEMs LTM 3Q17 Financial Information (Millions) Sales EBITDA(1) EBITDA M
Slide 6: Leveraging Capabilities Across Segments
Leveraging Capabilities Across Segments QUICK LUBES Retail Operations Customer Experience Data Analytics INTERNATIONAL Heavy Duty Insights OEM Relationships New Markets CORE NORTH AMERICA Category Insights Distribution Network Product Development BRAND SUPPLY CHAIN MARKETING TECHNOLOGY CUSTOMER CARE
Slide 7: Quick Lubes Growth Opportunities
Quick Lubes Growth Opportunities
Slide 8: Quick Lube Market
Quick Lube Market ~450MM(1) Total U.S. DIFM Oil Changes ~100MM(1) Oil Changes in quick lubes market ~16MM(2) VVV Oil Changes Strong Share Gain Opportunity for Valvoline 1. Company estimates based on industry data for total DIFM or quick lubes oil changes in 2015 in North America. 2. Valvoline Quick
Slide 9: Quick Lubes: Overview
Quick Lubes: Overview Company-Owned Franchise Express Care Independent Operators Value Prop o "Hands-on" insights o Proving ground for toolbox o Generates leadership talent o Turnkey management system o Proprietary tools o Dedicated support o Premium sign package o Field training resources o Marketi
Slide 10: Quick Lubes Overview: New Unit Economics
Quick Lubes Overview: New Unit Economics EBITDA Contribution Ranges 8x Platform Term (Years) Oil Changes Per Day (OCPD) Cash Investment ($,000) Cash IRR (%) roduct Sales VIOC Company N / A 35-55 ~1,300(1) Mid- Teens Servic2esx Income VIOC Franchising 15 30-50 130-160 30%+ Product Sales x Express Car
Slide 11: Quick Lubes Overview: Double-digit EBITDA Growth
Quick Lubes Overview: Double-digit EBITDA Growth Fiscal Year Ended September 30th (Millions) 160 135 110 $85 $94 $111 $134 $148 32.0% 30.0% 28.0% 85 60 26.0% 35 24.0% 10 (15) 2013 2014 2015 2016 LTM 3Q17 Quick Lubes Segment EBITDA 22.0% Quick Lubes Growth Strategy Continue Same-Store Sales Growth Ac
Slide 12: Proven VIOC Business Model
Proven VIOC Business Model Operating Stores Strengthens Business Model Performance Superior Talent Our Sales Per Store Has Grown Steadily Preferred Customer Experience LTM Q3'17 $916 Digital Marketing Platforms $550 $579 $613 $649 $672 $713 Proprietary Tools 2007 2008 2009 2010 2011 2012 2013 2014 2
Slide 13: Driving Sustainable Same-Store Sales Growth
Driving Sustainable Same-Store Sales Growth 12% 10% 8% 10% 7% 10 Years of Same-Store Sales Growth(1) 8% 7% 8% 8% 10 Year Average of System-Wide SSS 4.9% 6% 6% 4% 4% 2% 3% 3% 0% 4% 4% 2% 2% 6% 8% 6% 2% 5% 2% YTD Q3'17 System-Wide SSS 6.9% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Company-Owne
Slide 14: Accelerate Company-Owned Store Growth
Accelerate Company-Owned Store Growth New Builds - Existing Markets Core markets underpenetrated - New Markets under development Acquisitions - Targeting high quality regional operators 10 - 30+ stores - Engaging local operators within VIOC markets 5 - 10 store systems - Opportunistic single store u
Slide 15: Accelerating Franchise Store Growth
Accelerating Franchise Store Growth Market Level Development Agreements Strengthening Development Support (black circle) Predictive analytics for real estate modeling (black circle) 50/50 Approach: high analytics + local market intel (black circle) Eight agreements signed, 160+ stores over next six
Slide 16: Proven Success in Strategic Acquisitions
Proven Success in Strategic Acquisitions Company Acquires Competitor Company Acquires Franchisee Oil Can Henry's: o 13th largest U.S. quick-lube network o 89 centers in OR, WA, CA, AZ, ID, CO with 47 Company and 42 Franchise o Completed February 2016 Oil Can Henry's Henley Bluewater Henley Bluewater
Slide 17: VIOC Store Growth Targets
VIOC Store Growth Targets Working to Build the Largest Quick Lube System in North America 2023(1) 2023 2018+ Total Additions Potential Store Count Company 20 - 25 150+ ~600 Franchised 25 - 35 180+ ~900 Express Care 25 - 35 180+ ~500 Total Organic 70 - 95 510+ ~2000 Acquisitions Expected to Supplemen
Slide 18: Successful Execution of Our Strategy Drives Strong EBITDA Growth
Successful Execution of Our Strategy Drives Strong EBITDA Growth Continue Same-Store Sales Growth Accelerate Company Store Growth Accelerate Franchisee and Express Care Growth Potential Incremental EBITDA Contribution(1) ~$50 million ~$40 million ~$20 million Our Strategy Has the Potential to Delive
Slide 19: Bright Future for Valvoline!
Bright Future for Valvoline! Strong Brand-driven, Multi-channel Model Designed to Deliver Consistent, Predictable Results (black circle) Solid performance in FY17 despite: - Raw material cost increases Base oil posted prices up ~20% calendar YTD through June '17 - Increased SG&A investment Accelerat
Slide 20: Bright Future for Valvoline!
Bright Future for Valvoline! Solid performance in FY17 despite Strong Brand-driven, Multi-channel — Raw material cost increases Model Designed to Deliver Consistent, = Base oil posted prices up ~20% calendar Predictable Results YTD through June "17 — Increased SG&Ainvestment Mid-single digit VIOC SS
Slide 21: Historical EBITDA and Adj. EBITDA Reconciliation
Historical EBITDA and Adj. EBITDA Reconciliation FY Ended September 30, 9M Ended June 30, LTM 3Q ($ in Millions) 2011 2012 2013 2014 2015 2016 2016 2017 2017 Net income $110 $114 $246 $173 $196 $273 $208 $199 $264 Income tax expense 52 58 135 91 101 148 104 114 158 Net interest and other financing e
Slide 22: Historical EBITDA Reconciliation - Segments
Historical EBITDA Reconciliation - Segments ($ in Millions) FY Ended September 30, 9M Ended June 30, LTM 3Q 2016 2016 2017 2017 Core North America Sales $979 $740 $748 $987 Operating income 212 170 156 198 Depreciation and amortization 16 12 10 14 EBITDA $228 $182 $166 $212 Quick Lubes Sales $457 $3
Slide 23: Historical EBITDA Reconciliation - Quick Lubes Segment
Historical EBITDA Reconciliation - Quick Lubes Segment FY Ended September 30, 9M Ende d June 30, LTM 3Q ($ in Millions) 2013 2014 2015 2016 2016 2017 2017 Operating income $70 $79 $95 $117 $84 $94 $127 Depreciation and amortization 15 15 16 17 12 16 21 EBITDA $85 $94 $111 $134 $96 $110 $148 24
Slide 24: Historical EBITDA Reconciliation - Quick Lubes Segment
Historical EBITDA Reconciliation— Quick Lubes Segment Operating income $70 $79 $950 S117 $84 $a4 0 $127 Depreciation and amortization 8 8 16 7 12 16 2 24 Valvoline.