Valvoline Inc. has reported financial results for its third fiscal quarter ended June 30, 2021. All comparisons in this press release are made to the same prior-year period; however, comparisons to 2019 have also been included to normalize for the impacts of COVID-19.

“The strength of our team, brand and business model drove exceptional results this quarter, with operating income growing 28% and adjusted EBITDA growing 35% versus Q3 2019,” said Sam Mitchell, CEO. “Our strategic transformation to a service-driven business continues to accelerate our growth, margins and earnings. In addition, secular growth of key industry drivers, such as vehicles in operation, miles driven and age of vehicles, continue to drive global demand for Valvoline’s products and preventive maintenance services.”

The Retail Services segment delivered much of the year-over-year growth this quarter with over 40% system-wide SSS growth and 10% system-wide unit growth while profitability more than doubled. Retail Services is forecasted to deliver 6 to 8% normalized SSS growth and 5 to 7% unit growth annually across the system over the Company’s long-range plan through 2024.

Mitchell continued, “System-wide same-store sales increased 27% versus Q3 2019. We continue to gain share and expand average ticket, including ongoing growth in non-oil change revenue, highlighting the broad array of preventive maintenance services performed at our nearly 1,600 stores.”

The Global Products segment delivered year-over-year sales growth of 46%, exceeding volume growth of 37%, demonstrating the pricing power of the business. Sales and volume grew 15% and 9%, respectively, versus Q3 2019. Operating income and adjusted EBITDA grew 16% and 17% year-over-year, respectively, and grew 6% and 3% versus 2019. Slower growth in profitability reflects the near-term impacts of rising raw material costs that the Company expects to recover over time.

“We expect our Global Products segment to deliver $200 million of discretionary free cash flow this fiscal year, highlighting the resilience of the business,” said Mitchell. “Global Products is a strong cash generator for Valvoline with a strategic focus on driving market share growth globally by leveraging our 150-year-old brand and technology.”

Balance Sheet and Cash Flow

• Total debt of approximately $1.7 billion and net debt of approximately $1.5 billion
• Year-to-date cash flow from operations of $296 million; discretionary free cash flow of $275 million; and free cash flow of $190 million

Outlook

“Our transformation is accelerating,” Mitchell added. “Our cash generation is funding our continued shift to services, which we believe leads to sustainable shareholder value creation. We have invested nearly $330 million in acquisitions and capex so far this fiscal year to drive store growth, which we expect will generate strong returns. We are tightening the guidance that we announced at our recent business update call for adjusted EBITDA to $620 million to $640 million.”

“Additionally, we expect to continue returning excess cash to shareholders via dividends and share repurchases using our recently announced $300 million share repurchase authorization.”