Valvoline Inc. · NYSE:VVV
Valvoline — Q1 2022 Earnings Presentation
31 slides from Valvoline's earnings presentation, Feb 9, 2022
Slide 1: First-Quarter Fiscal 2022 Earnings
First-Quarter Fiscal 2022 Earnings February 9, 2022 Sam Mitchell, CEO Mary Meixelsperger, CFO Sean Cornett, Investor Relations 1
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: 1Q22 Key Operating Highlights
1Q22 KEY OPERATING HIGHLIGHTS VVV Retail Services Global Products 31% 24.7% 28% Growth in total sales Growth in system-wide SSS1 Growth in sales flat Growth in reported net income 7% 13% 5% Growth in system-wide units1 Growth in volume1 Growth in adjusted1 EBITDA 2% Growth in reported EPS 40% $52M 1
Slide 4: Growth Is Accelerating
GROWTH IS ACCELERATING Sales Adjusted1 EBITDA (Millions) (Millions) $3,550 - $3,600 $675 - $700 $2,981 $634 $2,390 $2,353 $478 $495 2019 2020 2021 2022E 2019 2020 2021 2022E Outstanding double-digit top- and bottom-line growth 1. For reconciliation of adjusted amounts to amounts reported under GAAP,
Slide 5: Valvoline
‘“ Valvoline
Slide 6: Retail Services: Consecutive Years of SSS Growth
RETAIL SERVICES 15 CONSECUTIVE YEARS OF SSS GROWTH System-Wide Store Sales1 (Millions, except store count) 1Q22 YoY vs. 1Q20 (Millions) $2,100 $1,970 Segment Sales $346 36% 59% $1,419 $1,520 SSS1 Growth (system- N/A 24.7% 28.8%3 wide) Store Count1 (system- 1,635 7% 16% wide) Adjusted2 EBITDA $98 40%
Slide 7: Retail Services: Drivers of Share Gains
RETAIL SERVICES DRIVERS OF SHARE GAINS System-Wide Transactions1 Key Takeaways (Millions) • Continued shift in consumer preference for 22 convenience and extending vehicle life • Data-driven digital marketing capabilities to 18 18 drive customer acquisition 15 • High satisfaction with superior in-st
Slide 8: Retail Services: EV Services Offering
RETAIL SERVICES EV SERVICES OFFERING Key Takeaways • Pilot for EV services under way, to be expanded in Summer 2022 • Key services focused on inspection and maintenance: • Tire rotation, cabin air filter, wiper replacement, 12V battery replacement, key FOB battery replacement, state safety inspectio
Slide 9: Global Products: Driving Share Gains and Steady Cash Generation
GLOBAL PRODUCTS DRIVING SHARE GAINS AND STEADY CASH GENERATION Discretionary FCF2 (Millions, except store count) 1Q22 YoY vs. 1Q20 (Millions) $202 $213 $202 $197 Segment Sales $512 28% 32% Volume1 (gallons) 43.1 13% 19% Adjusted2 EBITDA $77 (18)% -% 2019 2020 2021 2022 LTM Discretionary FCF2 $52 (17
Slide 10: Global Products: Macro Factors & Outlook on Margins
GLOBAL PRODUCTS MACRO FACTORS & OUTLOOK ON MARGINS North America Sales per Gallon 1Q11 – 1Q22 (LTM by Quarter) Raw materials $11.00 $9.00 • Short-term pressure: Primarily base oil & additive cost increases $10.00 $8.00 • VVV Action: Continued pass-through pricing $9.00 $7.00 Supply-chain challenges
Slide 11: Global Products: Drivers of Share Gains
GLOBAL PRODUCTS DRIVERS OF SHARE GAINS VVV Global Market Share1 Key Takeaways 4.2% • Growth in international markets • Developing and optimizing channels 4.0% • Expanding our platform offerings • Building the Valvoline brand 3.8% 3.6% • Strength in DIY • New distribution at top retailers & sub-chann
Slide 12: Valvoline
Valvoline. 120
Slide 13: First Quarter Results
FIRST QUARTER RESULTS (Millions, except per-share data) 1Q22 YoY 1Q20 Sales $858 31% 41% YoY Changes in Adjusted1 EBITDA (Millions) Gross Profit $244 7% 16% Adjusted1 Gross Profit $250 8% 19% Operating Income $121 (2)% 16% Adjusted1 Operating Income $131 2% 27% Net Income $87 -% 19% Adjusted1 EBITDA
Slide 14: First Quarter Results – Adjusted EBITDA Margins
FIRST QUARTER RESULTS – ADJUSTED EBITDA MARGINS Retail Services Key Takeaways (Millions) 1Q22 YoY vs. 1Q20 • Mature stores leveraging topline growth offset Segment Sales $346 36% 59% by new store ramp Adjusted1 EBITDA $98 40% 72% • Raw material cost pass-through impacting short-term margins Adjusted
Slide 15: Capital Light Model Drives Significant Free Cash Flow
CAPITAL LIGHT MODEL DRIVES SIGNIFICANT FREE CASH FLOW (Millions) 1Q22 Cash Flow from Operating Activities $32 Less: Maintenance Capital Expenditures $6 Discretionary Free Cash Flow $26 Less: Growth Capital Expenditures $29 Free Cash Flow $(3) Maintenance Capital Expenditures % of Sales 0.7% Note: Di
Slide 16: 2022 Guidance
2022 GUIDANCE Prior Outlook Current Outlook Operating Items Total company sales growth 19 – 21% No change Retail Services store additions1 110 – 130 (7 – 8%) No change Retail Services SSS1 growth 9 – 12% No change Adjusted2 EBITDA $675 – $700 million No change Retail Services $440 – $455 million No
Slide 17: 170
170
Slide 18: Separation Update
SEPARATION UPDATE Robust demand signals in both businesses provide confidence for future performance Market share gains expected to accelerate driven by differentiated value proposition Substantial progress on groundwork for smooth separation Opportunity to create significant shareholder value throu
Slide 19: Summary
SUMMARY • Great start to FY22 • Strong FY22 outlook • Continue strong SSS performance and unit additions for Retail Services • Topline growth in Global Products, building cost recovery • Investments in organic growth, acquisitions and share buybacks • Solid progress on separation related work 19
Slide 20: Appendix
< fi Appendix — % is 2 = ¥ a —= 7 \ 20m
Slide 21: Reconciliation of Adjusted EBITDA
RECONCILIATION OF ADJUSTED EBITDA 21
Slide 22: Retail Services – Q1 Results
RETAIL SERVICES – Q1 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 23: 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. 23
Slide 24: Global Products – Q1 Results
GLOBAL PRODUCTS – Q1 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 25: Key Items Affecting Income
KEY ITEMS AFFECTING INCOME 25
Slide 26: Reconciliation of Non-GAAP Data – Gross Profit and Operating Income
RECONCILIATION OF NON-GAAP DATA – GROSS PROFIT AND OPERATING INCOME 26
Slide 27: 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 28: 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 29: 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 30: 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 press release 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 31: 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