Valvoline Inc. · NYSE:VVV
Valvoline — Q4 2021 Earnings Presentation
38 slides from Valvoline's earnings presentation, Nov 4, 2021
Slide 1: Fourth-Quarter Fiscal 2021 Earnings
Fourth-Quarter Fiscal 2021 Earnings November 4, 2021 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: 2021 Key Operating Highlights
2021 KEY OPERATING HIGHLIGHTS 27% 32% 36% Growth in total sales Growth in reported net income Growth in reported EPS 21% 28% 28% Growth in system-wide SSS1 Growth in adjusted1 EBITDA ROIC2 9% 16% 54% Growth in system-wide units1 Volume1 growth in Global Retail Services contribution to Products total
Slide 4: Growth Is Accelerating
GROWTH IS ACCELERATING Revenue Adjusted1 EBITDA (Millions) (Millions) $2,981 $634 $2,285 $2,390 $2,353 $478 $495 $473 2018 2019 2020 2021 2018 2019 2020 2021 Transformation to a service-driven business has accelerated growth 1. For reconciliation of adjusted amounts to amounts reported under GAAP, p
Slide 5: Valvoline
Vv Valvoline.
Slide 6: Retail Services Is Driving Significant Growth
RETAIL SERVICES IS DRIVING SIGNIFICANT GROWTH Revenue Adjusted1 EBITDA (Millions) (Millions) $1,221 $382 $822 $883 $239 $247 $660 $202 2018 2019 2020 2021 2018 2019 2020 2021 Expect 6 – 8% SSS growth and 5 – 7% unit growth annually through FY24 1. For a discussion of management’s use of Key Business
Slide 7: Retail Services 15 Consecutive Years of SSS Growth
RETAIL SERVICES 15 CONSECUTIVE YEARS OF SSS GROWTH System-Wide Store Sales2 Growth vs. (Millions) (Millions, except store count) FY21 YoY FY19 $1,970 Segment Sales $1,221 38% 49% $1,419 $1,520 SSS2 Growth (system- N/A 21.2% 21.9%3 $1,161 wide) Store Count2 (system- 1,594 9% 15% wide) Adjusted1 EBITD
Slide 8: Global Products Delivering Profitable Share Growth
GLOBAL PRODUCTS DELIVERING PROFITABLE SHARE GROWTH Revenue Adjusted1 EBITDA (Millions) (Millions) ~flat CAGR $1,760 $330 $1,625 $327 $1,568 $296 $309 $1,470 2018 2019 2020 2021 2018 2019 2020 2021 Expect ~$200+ million in discretionary free cash flow annually through 2024 1. For a reconciliation of
Slide 9: Global Products Driving Share Gains and Steady Cash Generation
GLOBAL PRODUCTS DRIVING SHARE GAINS AND STEADY CASH GENERATION Growth vs. Discretionary FCF2 (Millions, except store count) FY21 YoY (Millions) FY19 $202 $213 $190 $197 Segment Sales $1,760 20% 12% Volume1 (gallons) 160.9 16% 7% Adjusted2 EBITDA $327 6% 10% 2018 2019 2020 2021 Discretionary FCF2 $21
Slide 10: Q4 & FY21 Earnings
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Slide 11: Fourth Quarter Results
FOURTH QUARTER RESULTS Growth (Millions, except per-share data) 4Q21 YoY vs. 4Q19 Sales $835 28% 33% Gross Profit $246 (5)% 13% YoY Changes in Adjusted1 EBITDA (Millions) Adjusted1 Gross Profit $261 4% 20% Operating Income $142 (19)% 26% Adjusted1 Operating Income $131 2% 18% Net Income $168 38% 522
Slide 12: Fourth Quarter Results – Adjusted EBITDA Margins
FOURTH QUARTER RESULTS – ADJUSTED EBITDA MARGINS Retail Services Growth Key Takeaways (Millions) 4Q21 YoY (Decline) vs. 4Q19 • Incremental labor investment, raw material cost Segment Sales $352 39% 59% pressures impact short-term margins • Adjusted EBITDA up 36% YoY and 59% vs Adjusted1 EBITDA $105
Slide 13: Fiscal Year Results
FISCAL YEAR RESULTS Growth (Millions, except per-share data) FY21 YoY vs. FY19 Sales $2,981 27% 25% Gross Profit $980 14% 21% YoY Changes in Adjusted1 EBITDA (Millions) Adjusted1 Gross Profit $1,021 21% 25% Operating Income $528 9% 33% Adjusted1 Operating Income $542 26% 30% Net Income $420 32% 102%
Slide 14: Capital Light Model Drives Significant Free Cash Flow
CAPITAL LIGHT MODEL DRIVES SIGNIFICANT FREE CASH FLOW (Millions) FY21 Cash Flow from Operating Activities $404 Less: Maintenance Capital Expenditures $36 Discretionary Free Cash Flow $368 Less: Growth Capital Expenditures $108 Free Cash Flow $260 Maintenance Capital Expenditures % of Sales 1.2% Free
Slide 15: 2022 Guidance
2022 GUIDANCE FY22 Outlook Operating Items Total company sales growth 19 – 21% Retail Services1 store additions 110 – 130 (7 – 8%) Retail Services1 SSS growth 9 – 12% Adjusted2 EBITDA $675 – $700 million Retail Services $440 – $455 million Global Products $315 – $330 million Corporate Items Adjusted
Slide 16: Separation of Retail Services and Global Products
Separation of Retail Services and Global Products Vatvatine 16m
Slide 17: Success of Strategic Transformation
SUCCESS OF STRATEGIC TRANSFORMATION Global Products Retail Services EBITDA1 CONTRIBUTION Global Products Retail Services Global Products Retail Services FY21 FY21 34% ~$1.8B 46% ~$1.2B Segment sales 20172 2021 54% Segment sales 66% $327M $382M Adjusted2 EBITDA Adjusted2 EBITDA 1. EBITDA contribution
Slide 18: Compelling Rationale for Separation
COMPELLING RATIONALE FOR SEPARATION Best positions each business strategically to evolve their business models to effectively and 1 sustainably compete in an evolving powertrain environment Strong financial and operational performance with scale in both segments – drives a solid 2 foundation for two
Slide 19: Retail Services: An Auto-Aftermarket Powerhouse
RETAIL SERVICES: AN AUTO-AFTERMARKET POWERHOUSE Industry Dynamics Retail Services Strategy • Auto aftermarket services is a $300 billion, • Utilize best in class operating model to fragmented, and growing total addressable continue taking market share market • Execute three-pronged growth strategy o
Slide 20: Retail Services: A Compelling Value Proposition
RETAIL SERVICES: A COMPELLING VALUE PROPOSITION Valvoline Retail Services Auto Aftermarket Service Peers (median)1,2 2020 – 2021E Same Store Sales Stack 23.5% 2.8% 2018– 2021E Revenue CAGR 22.8% 9.2 % 2018 – 2021E EBITDA CAGR 23.7% 23.8 % 2021E EBITDA Margin 31.3% 19.9 % 2021E EV / EBITDA Multiple 1
Slide 21: Global Products: A Leading Automotive Solutions Provider
GLOBAL PRODUCTS: A LEADING AUTOMOTIVE SOLUTIONS PROVIDER Industry Dynamics Global Products Strategy • Growing international car parc and miles • Drive market share gains in key international driven creates lubricant demand markets by leveraging VVV brand • International lubricant market is 3.5x U.S.
Slide 22: Global Products: A Compelling Value Proposition
GLOBAL PRODUCTS: A COMPELLING VALUE PROPOSITION Valvoline Global Products Global Products Peers (median)1,2 2018 – 2021E 2.7% 2.8 % Revenue CAGR 2018 – 2021E Flat 0.7 % EBITDA CAGR 2021E 18.6% 15.6 % EBITDA Margin 2021E EV / EBITDA Multiple 12.1 x 2022E EV / EBITDA Multiple 11.0 x Source: Capital IQ
Slide 23: Key Decisions and Next Steps
KEY DECISIONS AND NEXT STEPS Product Supply and Transaction Pro Forma Capital Brand Agreements Structure Structures Commercially beneficial Multiple transaction structures Analysis to include debt, credit arrangements for both Global under consideration ratings and other considerations Products and
Slide 24: Summary
SUMMARY • Record results in FY21 • Solid FY22 Plan • 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 • Continue to focus on execution • Working to set u
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Slide 26: Reconciliation of Recast Adjusted EBITDA
RECONCILIATION OF RECAST1 ADJUSTED EBITDA 1. Valvoline realigned its global operations and related reporting during the third quarter of fiscal 2021. Prior period amounts have been recast to conform to the current presentation consistent with the realignment of Valvoline’s global operations. These c
Slide 27: Pre- and Post Realignment Adjusted EBITDA
PRE- AND POST REALIGNMENT1 ADJUSTED EBITDA 1. Valvoline realigned its global operations and related reporting during the third quarter of fiscal 2021. Prior period amounts have been recast to conform to the current presentation consistent with the realignment of Valvoline’s global operations. These
Slide 28: Retail Services – Q4 and Fiscal Year Results
RETAIL SERVICES – Q4 AND FISCAL YEAR RESULTS a) Measure includes Valvoline franchisees, which are independent legal entities. Valvoline does not consolidate the results of operations of its franchisees. b) Beginning in fiscal 2021, Valvoline determines SSS growth as sales by U.S. Retail Services sto
Slide 29: 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. b) As of September 30, 2020, one franchised service center s
Slide 30: Global Products – Q4 and Fiscal Year Results
GLOBAL PRODUCTS – Q4 AND FISCAL YEAR 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 ad
Slide 31: Non-GAAP Operating Segment Financial Results Reconciliation
NON-GAAP OPERATING SEGMENT FINANCIAL RESULTS RECONCILIATION a) Segment adjusted operating income is segment operating income adjusted for key items impacting comparability. Segment adjusted operating income is further adjusted for depreciation and amortization to determine segment adjusted EBITDA. V
Slide 32: Key Items Affecting Income
KEY ITEMS AFFECTING INCOME 32
Slide 33: Reconciliation of Non-GAAP Data – Gross Profit and Operating Income
RECONCILIATION OF NON-GAAP DATA – GROSS PROFIT AND OPERATING INCOME 33
Slide 34: 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 appen
Slide 35: 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) Income tax adjustments relate to the discrete impacts associated with tax legislation changes in U.S. and India in fiscal 2020 and in Kentucky in fiscal 2019. (b) Adjusted net income is defined as net income adjusted for
Slide 36: 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 37: 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 38: 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