Valvoline Inc. today reported financial results for its second fiscal quarter ended March 31, 2023.
“With the sale of the Global Products business complete, Valvoline is wholly focused on driving long-term value to shareholders through our best-in-class retail platform by growing system-wide store sales, increasing units through both company-operated and franchised additions, and evolving the service portfolio over time,” said Sam Mitchell, CEO. “Valvoline continues to see resiliency and strength in the demand for the quick, easy and trusted preventive maintenance service we provide to our customers, demonstrated by 26% adjusted EBITDA growth on 19% adjusted sales growth1 year over year for the quarter.”
“As expected, we saw EBITDA margin improvement in the second quarter, largely driven by top-line growth and improved SG&A leverage,” said Lori Flees, president, Retail Services.
“Both our store team members and franchise partners continue to deliver results demonstrated by the 13.5% system-wide same store sales growth this quarter,” continued Flees. “The strong same store sales are coming from growth in transactions, non-oil change service penetration and pricing. As we approach the summer travel season, our stores are well staffed and prepared to continue driving growth in the back half of the year.”
Balance Sheet and Cash Flow
- Cash and cash equivalents, net of debt of $737.3 million; total debt of $1.6 billion
- Year-to-date continuing operations cash flow from operations of $173.5 million and free cash flow of $94.1 million
- Returned $257.4 million in cash to shareholders year-to-date via share repurchases and $21.8 million in dividends
- Cash and cash equivalents balance of $2.3 billion with $8.3 million of interest income earned on net proceeds from the sale of Global Products
Outlook
“The second quarter results were in line with our expectations and we remain on track to meet our FY23 targets. We also expect the margin improvement we saw during Q2 to continue in the back half of the year.” said Mitchell.
“This quarter we reached the final milestone on our path to becoming a pure-play, automotive services company with closing the sale of the Global Products business. After thoughtful consideration, management and our board of directors concluded that a modified “Dutch auction” tender offer would allow us to most efficiently and expeditiously return a substantial portion of the net sale proceeds to our investors,” continued Mitchell. “We are excited to focus on driving growth of the new Valvoline. Our long-term model of generating high return on invested capital through growing the core business, expanding the network and evolving with the car parc positions us for a long runway of growth and creating significant value for shareholders.”
The company’s outlook for fiscal 2023 is unchanged. Information is provided in the table below:
| Fiscal 2023 Outlook | |||
| System-wide SSS growth | 8 | — | 12 % |
| System-wide store additions | 130 | — | 160 |
| Company-operated | 80 | — | 90 |
| Franchised | 50 | — | 70 |
| System-wide store sales growth | 16 | — | 20 % |
| Net revenues | $1.4 | — | $1.5 billion |
| Net revenues growth | 14 | — | 18 % |
| Adjusted EBITDA | $370 | — | $390 million |
| Capital expenditures | $170 | — | $200 million |
| Adjusted effective tax rate | 25.5 | — | 26.5 % |
| Adjusted net income | $160 | — | $180 million |
Valvoline’s outlook for adjusted EBITDA, adjusted net income, and the adjusted effective tax rate are non-GAAP financial measures that are expected to be impacted by items affecting comparability. Valvoline is unable to reconcile these forward-looking non-GAAP financial measures to the comparable GAAP measures estimated for fiscal 2023 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 2023 but would not impact non-GAAP adjusted results.
