Valvoline Inc. reported financial results for its first fiscal quarter ended Dec. 31, 2021.
“Demand for Valvoline’s products and services remains robust, as we continue to gain share in both segments,” said Sam Mitchell, CEO. “Our team has done an outstanding job of helping to drive growth and meet demand, despite significant supply chain challenges.
“Topline growth in both segments was impressive with a 36% increase in sales for Retail Services and a 28% increase in sales for Global Products, highlighting a strong start to the fiscal year and a reflection of the health of both businesses. Retail Services operating income and adjusted EBITDA increased 45% and 40%, respectively, driven by topline growth and margin expansion. Global Products delivered strong volume growth of 13% and ongoing progress in price pass-through of raw material cost increases. Price-cost lag impacted profitability, which declined year-over-year. As we have done in the past, we expect to continue to pass-through pricing to recover our costs.
“Our results this quarter demonstrate that our business continues to perform well and highlight the independent strengths of both segments, as we make progress on the separation of these two strong businesses.”
Operating Segment Results
| (In millions) | ||
| Retail Services | Q1 results | YoY growth |
| Segment sales | $ 346 | 36 % |
| System-wide store sales (a) | $ 551 | 31 % |
| Operating income | $ 81 | 45 % |
| Adjusted EBITDA (a) | $ 98 | 40 % |
| YoY growth | ||
| System-wide SSS (a) growth | 24.7% | |
| Global Products | Q1 results | YoY growth (decline) |
| Lubricant sales (gallons) (a) | 43.1 | 13 % |
| Segment sales | $ 512 | 28 % |
| Operating income | $ 70 | (20) % |
| Adjusted EBITDA (a) | $ 77 | (18) % |
| Discretionary free cash flow (a) | $ 52 | (17) % |
| (a) | Refer to Key Business Measures, Use of Non-GAAP Measures, and Tables 4 and 5, Information by Operating Segment, for a description of the metrics presented above. |
Balance Sheet and Cash Flow
- Total debt of approximately $1.7 billion and net debt of approximately $1.5 billion
- Cash flow from operations of $32 million and free cash flow of $(3) million
- Returned $31 million of cash to shareholders via share repurchases and $23 million via dividends
Outlook
“We are making good progress on separation-related work, and we remain focused on the performance of the business and delivering results,” Mitchell said. “We are reaffirming our guidance, including exceptional topline growth and solid improvement in adjusted EBITDA. We continue to be pleased with strong demand in Global Products, as we navigate short-term supply-chain challenges. Retail Services topline performance remains strong as our algorithm of same-store sales growth and unit additions continues to deliver. We do expect our same-store sales to moderate as we compare against strong comps in the prior year.
“As we did in Q1, we will continue to return cash to shareholders through dividends and share repurchases. We believe that the separation of our two businesses will enhance value for all of our stakeholders and expect to have more information to share in the coming months.”
Information regarding the Company’s outlook for fiscal 2022 is provided in the table below:
| Updated Outlook | Prior Outlook | |||||
| Operating Items | ||||||
| Sales growth | no change | 19 | — | 21% | ||
| Retail Services system-wide store additions | no change | 110 | — | 130 | ||
| Retail Services system-wide SSS growth | no change | 9 | — | 12% | ||
| Adjusted EBITDA | no change | $675 | — | $700 million | ||
| Corporate Items | ||||||
| Adjusted effective tax rate | 24 | 25% | 25 | — | 26% | |
| Adjusted EPS | $2.07 | — | $2.20 | $2.06 | — | $2.18 |
| Capital expenditures | no change | $180 | — | $200 million | ||
| Free cash flow | no change | $260 | — | $300 million |
Valvoline’s says its outlook for adjusted EBITDA, adjusted EPS and the adjusted effective tax rate are non-GAAP financial measures that are expected to be adjusted for items impacting comparability. Valvoline is unable to reconcile these forward-looking non-GAAP financial measures to the comparable GAAP measures estimated for fiscal 2022 without unreasonable efforts, as the company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact these GAAP measures in fiscal 2022 but would not impact non-GAAP adjusted results.
