VVV - Earnings call transcript Q3 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Carol, and I will be your operator today. At this time, I would like to welcome everyone to Valvoline’s Third Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, we will have a question-and-answer session. instructions] [Operator

I’d Financial the go Officer. time, Mary over ahead. to Chief Meixelsperger, Ms. like this call turn to At Meixelsperger, please

Mary Meixelsperger

conference at July June used on release, that XX, Good quarter at should approximately released with to results be welcome Form investors.valvoline.com. furnished a a Commission. X-K. Eastern on website XXXX, this of the Investor for call copy Time been file the earnings presentation XX-Q release P.M. the of news XXXX remarks Exchange These available yesterday, results preliminary ended morning, Form our we is with and Valvoline until and A and are copy in quarter Valvoline’s SEC the conjunction X to has Relations webcast. XX, which and our fiscal third and Securities

Valvoline’s With Executive today Chief Officer, Sam me call on the is Mitchell.

statements. that not based that historical date As fact and uncertainties our certain remarks of by as to shown today of statements. any forward-looking assumes forward-looking obligation subject X, cause the of the differ this on statements to from risks Valvoline no and results of any law. such current assumptions These unless statements, are required forward-looking are update statements Slide are on materially actual are presentation to may

are basis, In approach our ongoing or this non-operational this adjusted Adjusted understanding our otherwise of unless presentation We items, unusual, an and nature. in on noted. which our excludes remarks, the discussing we will business. restructuring results be enhances believe results in key

companies. a may comparable views by provided non-GAAP The discussion results our our non-GAAP used other adjusted to information management used to measures our management earnings reported of in amounts GAAP of and by measures be reconciliation and release. under similar not A was is included of

to X, results we the reported As financial our let’s for review Slide turn quarter.

from operating EPS delivered operating third $X.XX. Year-to-date fiscal the Valvoline million flow and million, cash quarter, $XXX million. of of income $XXX $XX income reported activities of was For net

Beginning standard accounting of new adopted year, income certain revenue of impact sales this essentially this cost is reclassification impacting the SG&A. Valvoline and of recognition fiscal sales, primarily in the a statement, standard. The items

the QX, profitability. Core expense, roughly impacting amounted after-tax million $X America’s For changes North a to

In QX key there were three year, this items.

last expenses announced petrochemical Texas in business to March temporarily we associated quarter, major in our was As facility pension terminal. this nearby $X a the announced was related was The third-party $X tied Park, third income we Restructuring was April quarter million blending and at Deer after-tax. and the year OPEB million $X non-service and after-tax earlier a interruption shutdown fire cost after-tax. program and to due million

expense QX after-tax included after-tax of of million of XXXX, OPEB costs expense after-tax of and an due $X acquisition-related foreign separation-related $X fiscal to $X items exchange loss. million income, for key million and and legacy pension In

as Now move results. X, we our Slide to let’s adjusted review

Our $XXX million, was operating was and income adjusted $XXX EPS adjusted $X.XX. million was adjusted EBITDA

segment best-in-class trajectory. continued its growth Lubes strong Quick Our

each grew foreign our headwinds EPS digits, and EBITDA In Core double International, performance improved softness results. North exchange and showed respectively. continued. volume XX% XX%, Overall, adjusted and adjusted America’s

to Sam segment turn me to let Now, our over it results. review

Sam Mitchell

Thanks, Mary.

in quarter growth are was EPS best-in-class Lubes. to results and of generated continue under EBITDA the Most retail growth demonstrate that We our pleased These Quick QX. another by same-store sales growth in with our quarter. System-wide clearly in model. overall strong was results services adjusted just of XX% in

and of is along as XXX net system unit in profit. We steady momentum last since drive overall sales, additions, pace These the our with added same-store ongoing. to growth continue stores sales new year to

comparisons improved versus our saw In in Core quarters. year-over-year North recent performance we America,

market dynamics and branded in due category. volume sales lower the to the still retail by channel primarily volume were ongoing However, DIY driven down, in

lap and early year to drive initial challenges, also beginning of of the to continue improved the success earlier implemented of show are this signs DIY help onset adjusted some actions we the performance, we market While flat EBITDA. including

growth by soft volume markets. joint other grew in international, offset but X%. ongoing remains in unconsolidated Including was Europe, volumes In volume ventures, strong

impact exchange Foreign modestly. adjusted and sales profitability, grew continues but to negatively EBITDA basis, an on

Investor basic At we North our recent and Day, strategies of Quick developing Core our America Lubes, presented growing segment maintaining International.

quarter these would we third of successfully plans the against over in performance results type time. execute when we Our demonstrate expect the

Lubes and Quick same-store to transaction results. non-oil-change growing stores premium mix Let’s take these company growth a balanced average from sales benefits continue QX X.X% increases drive XX%. X.X% performance look impressive The slide. grew at and ticket system-wide, pricing average closer was on stores ticket sales next Strong revenue and drove grew in growth. in the franchise same-store and

same-store at competitive performance five past Looking the are the evident. sales years, over clearly our advantages

Our delivering superior is retail people, industry our in marketing investments best-in-class model, driven technology, our and by results.

XX We Canada steady seven company stores Oil franchise which with we’ve XX continued and and the our in are acquisitions XXX adding those of last the through transitions. the In franchise than units added Great Changers, new our stores in Change in their pace performing stores Oil stores. more quarter, of well both months, of system adding XXX across Canadian

count franchise from store both the a the since During in celebrated of store QX, opening remarkable separation XX% XXXth XXXth XXXX. important we our in company growth roughly of store, Ashland announcement and milestones

a year-to-date to we continued in the growth guidance on sales to significant QX are lapping in largely anticipate due We performance, same-store X% Based raising some implemented full-year last we our strong modest sales pricing slowdown actions to year. XX%. our same-store late

next the to turn Let’s slide.

business model. in our retail learn and improve We continued our best-in-class Lubes Quick to

invest to experience. a superior drive customer to aggressively continued we Importantly,

technology our over that the breakthrough enabled we more we’ve of the will made convenience year-and-a-half an development have the a app even investments customers. example, past As drive feel for

even offers maintenance to able and consumers value vehicles, service for directly For add stores helping convenient devices the to more on anticipate wait services. see delivering their to We being including preventive the able first effective their their be most non-oil-change at choice times educate time, will on customers make by nearby to vehicles. and

We’ve markets. phase company roll app full the in to pilot our moved recently starting out from the a of

drive the adoption on company-owned time. of then roll focus do to and a near-term app within broader over franchisees stores Our our our out to the is

Let’s for in we improved were X% lag. a lapping North QX cost flat. the Core North on America’s Core X%, due in adjusted was basis EBITDA and Performance declined year review are but slide. a QX sales to down America next quarters, results significant year-over-year on to Volume the price compared recent weaker prior

declined the sales and Great proceedings, in have of channel. would the in impact volume retail reorganization the from lower and the Lubes Canadian X%, excluding Adjusted the of key to decrease branded grown, revenue would by volume the excluding due Quick to shift a Canadian Overall the volume product in have Great EBITDA transfer primarily accounts recognition.

However, this was essentially volume versus QX. flat

I’m encouraged retail by channel. affecting these results dynamics the as ongoing market progress towards they DIY addressing showed

to install also are plan shared our the executing we channel our at Day. Investor We recent that

We’re our making solid program. progress, our ongoing guarantee adding of approach new tools the rooftops like execution value-selling using from

safety are seeing dealer referring our with needed Recall Awareness where car services. success customers We for partners Oil early our Valvoline Change Program, also our Instant recall to we are

the in our from QX. expect actions full we increases and current These due the raw QX cost quarter cost of offsetting quarter. until moderate forward, being pricing not in Looking to lag impacts are late material fully price effect effective

from results. grew Volume the channel at our X% look benefiting development. to International slide next turn ongoing Europe, Let’s in to

Soft sluggish in by offset volumes gains. manufacturing in driven China, including a other regions, sector, a aftermarket these slower heavy-duty

the impact JVs, adjusted Including our along negative EBITDA improved helped and JV performance, to of growth volume offset grew exchange. in X%. with margins, contributed foreign

Asian One to through the our grassroots supporting Week. local person countries was multiple We mechanics and conduct Mechanic’s in engagement. training expertise. in highlight our online hands-on strong during media with This with unique commitment quarter mechanics social effort demonstrates to Valvoline’s brand-building connected

to in markets. our Our all most grow is international goal share

success. We to the of channels, our platforms are position for working and brand reinvigorate to us long-term growth building model, implementation the

We in launch events behind acquisition. Eastern business volume as our QX previously America, in and Latin expect announced volumes from European well improve related incremental promotional the as to product

plant. are that lubricants a We closed and of on business now acquisition small

modest is enhance integration in expected supply to to In addition some the chain our volume, anticipate capabilities this impact Central Eastern profitability incremental access and QX. We related to adding to markets. and European cost investment

pass it results. financial review our Mary me to let Now to back

Mary Meixelsperger

Thanks, Sam.

for on recognition offset results and increased sales favorable were mix Reported primary X%, nearly with organic a increases. XX. are adjusted impacts revenue sales Slide the headwind. of Pricing Our drivers QX exchange summarized by foreign

and and zone the in the expenses. changes. Our primarily SG&A points, flat income increased and benefits fee, Quick trade equity gross XXX margin recognition X%, which by other roughly and a impact segment advertising termination basis rate was The would in from driven incentives on by recorded adjusted international. was by quarter an free in was higher in recorded contract Lubes increase revenue excluding of marketing to due the grown have basis

Adjusted higher SG&A improvements XX% revenue million recognition impact year-to-date of $X offsetting impact mix, and and income $X the revenue overall income than with million was was FX. in unfavorable EBITDA unfavorable of recognition The increased in QX net to and benefits the margin more other unfavorable.

corporate Slide move to Let’s discuss XX items. to

tax was XX.X%. effective effective for for reported Adjusted tax rate Our the key quarter XX.X%. was rate items, our

XX% to continue expect to rate adjusted For full-year, to the be our we XX%.

$X.X capital Net quarter Year-to-date to free $XXX to from $XX debt flow million. operating flat cash expenditures flow was of at million. was Year-to-date $XXX activities leading was cash million, last billion.

some benefits that next recur Let’s QX. slide. turn the included won’t to QX in

the in expenses primarily due adjusted performance, match. to expect raw price for to strong range in to on material quarter narrowing and our higher EPS third Additionally, we lag EBITDA guidance now to our from QX, announced the anticipate million, impacts are Based QX. some previous $XXX cost increases $XXX million adjusted narrowing of high-end we

which same-store more to We growth the XX% basis XX%. X% by sales would than for stacked to guidance generate our are of full a points XXX year, raising two-year

good million program end $XX generate program, pre-tax America also to to expected annualized to to We’re and savings the approximately the restructuring by make North next ongoing dynamics our fiscal Core gives $XX This in which us year. impacting and address opportunities. growth invest million progress of on continuing is flexibility cost-savings market more in to

wrap turn to to Sam me Now, let over it up. back

Sam Mitchell

our we share Thanks, in encouraging. and focused business. its North continued results investing In were company. continue the brand International, market Core capabilities. the improved, stabilizing we’re driving as Lubes results by growth America’s excellent toward performance, work developing challenges Mary. Quick expected growth on QX but to are for

in we in supported At our QX our growth, took progress service-driven shift step value. XXXX. long-term to model to further strategy another make and shareholder by We to accelerating in presented drive expect maintain and our develop Day, direction Investor we this a recent

With for operator to line hand it I’ll that, Q&A. to the open back the

Operator

first Morgan ahead. Stanley. line from of Gutman phone Thank Instructions] on question comes the Please you. Simeon Our [Operator line the go from

Simeon Gutman

Thanks. Good morning, everyone. My first question….

Sam Mitchell

morning. Good

Simeon Gutman

or enacted you’ve Should changed? occurred for did that such America related three accelerate rate reinvestment this the to North of talk in the doesn’t as is it to – the out safe about EBITDA. believe quarter the savings the Actually, it Core look going reinvestment next as does model it you quarter? and so rate? …is that Can forward, good this that cost your EBITDA level improvement we or

Sam Mitchell

midst Simeon. look we at our good Core in continue plans America our consider, Simeon, partners. I we putting prepare and in in in promotion And guidance we’re provided had to DIY. it the Thanks, each we progress as to, the quarter. liner year. our some as progress one results of unit see of the margins, we’re North at we’re we for XXXX, Yes. plans we make look this And with that together merchandising, seeing we views earlier business When that, in what do retail major for

exploring. a with strategies like we some been merchandising new new some we achieve we But to savings with, created that retailers some dynamics us put that of our operating to these plan the really $XX-million address place, the $XX-million are together been for flexibility other have where that cost-savings to XXXX strong expect that program feel to we’ve There dynamics. we’ve for range, dealing in in put

stabilize to American will to exactly I’m be. to rate our in and flexibility able confident Core both business, the that business. the early say But we too little that of be what reinvestment the a to business have that long-term DIY growth invest North work It’s

consumer November, merchandising marketing that do this But So made implementing the quarter, we’re when we’ll future going improvements QX, in to stable in we get earnings for feel we’ve full the to expectations the be out more clearly results North making XXXX. and changes our to lay in able in for that plans changes are been the with I call Core to more on that those we’ve that side America. our lead

Simeon Gutman

that. you fourth you’re you that was? within versus the – mentioned but break the mentioned you traffic? fourth And And ticket think what this quarter, the affect for well? that changes. thanks you – that for some my follow-up in business. pricing quarter, Can it Okay. is to can And Lubes I only you Did Quick lap on does quarter the out quantify – going subsequent as not affect And quarters does the

Sam Mitchell

The of oil sales well-balanced performance. was transaction obviously, same-store Quick split changes we really growth, business, really strong call, per Lubes between day. quarter another what The

We’re still seeing has a pricing non-oil-change year. and premium there good mix of benefit solid been on The this mix with side. side revenue ticket a growth some nice has the and ticket been

It’s XXXX, improved same-store when lapped and pretty take that But increases benefited the less We – really front. still – is a momentum QX our have little year some feeling is, might too. price throughout is did on in last that, aggressive bit sales that throughout growth significant we business. the we see quite that it us action just we benefiting with

as laid same-store Day, So we Investor into sales XXXX. strong very guidance out growth still we’re long-term expecting on

Simeon Gutman

Sam. Thanks, Great.

Sam Mitchell

You bet.

Operator

Our Please ahead. Bank. go Deutsche from Faiza Alwy with next question comes

Faiza Alwy

Yes. Hi, good morning.

Sam Mitchell

Good morning.

Faiza Alwy

this in could be least pricing the sort give that taking XQ if love America, of North question you’re oil state you’re how at So your at installer have my think some on to take would side? point? us Sam, But thinking about stabilized. cost the these on first Core is, there, I So within of like play just prices It I’d seems helpful? get the environment just you

Sam Mitchell

Sure.

As our we QX. increase base that call, was we a implemented oil shared last have at in did

QX. actions impacted side effect a the the position has of market, feel that been does for And again, on although, it pricing part the DIY into improved the both market, of includes well We’ll us positive going also won’t the market So, increases installer the results But but until on take latter side – of of QX. effect But in the on effect the those pricing full full has the stability in that note, Valvoline. moving margin QX. on it as XXXX.

Faiza Alwy

XXXX, XXXX? planning in through this the Day? are bit of fiscal just point long-term what about? of I like perspective know know that your your preview more things at in are takes you’re the with are we’ll cost you savings And I and Okay. laid think from year. then on should of that line sort Should algorithm think to about, on a But little are more obviously process we and out algorithm in some you coming What are I that the was Investor November. next thinking your a get fiscal for some hoping there there’s hear – of we puts about that

Sam Mitchell

Yes.

and to I call. right we we get think is what give on in when XXXX, a now, our performing, November take our to out Day expect lot that at obvious. the going a back is more Quick we can to we is right Investor you segments best now, business business the different laid And it look momentum do will how momentum. become in guidance and specific the when Lubes The continue earnings

growth the example new app that can Just drive there. and our technology rolling market investment improved share the just we’re another help of example is out in marketing of that consumer

growing have business, The not a is but within Investor really share segment. strong total key insight Lubes that Day our market great capabilities, but share, that and growing they we within the just digital not shared just at experience Quick were we DIFM consumer-customer

but delivering stores. in also that both in growth, transactions, we’re consumer need store as very to growth, continuing franchise stores our the for with invest continued both with really on and well And bodes company well, our

in. So on that part we’re we’re and bullish of going the business, invest to very obviously to continue

On growth the still looked back been slower at we’ve past liked than we year. we’re have our and and International feel are front, And quite growth step our we – internationally significant. would they this a taken opportunities has

supply up that both we’re We’re on side. capabilities, making chain in the with right sure investments our – and just showing the making building

made be that part in out to we key service going that these – – improving too, are our noted, will also have the growth that very in to that the we markets. long-term International think and in is that expectations the going be are Day we business. Investor in and good improve And the Europe improve our to and improve But our in brand International acquisition achievable a the I we As China, in customer XXXX. But just margins. Eastern for help as plans International I of we investing development, enter think can they’re laid position

Coming progress the approach this installer some selling sure to Core we for with we’ve business that’s on We’ve business. and that make helps back solid is us seen good we North the to our solid. America our keep to margin bring value thought that that critical then, installers stabilize so that front how value-added

the non-lubricant that good A chemical side coolants the lot some and to business. in of sales business, sales and We’ve drive our installer of the had opportunity too. improving side on heavy-duty success of

a strategy. part about our feeling that. of I’m that’s So good key

for is gap price retailers past that the side have where with year that keep work XXXX. developing is a And the private growth most on label critical eye business, an of we as in that’s the the with plans DIY now we saw the then of volatility on. shared, mid-tier this we’ve the as we on to brand. time And replacing And the

in and what XXXX preparation view call, a each line have get process retail fiscal of better with like. we much as as And review looks rigorous through for the go a towards pretty of year we’ll partners. to we our our So end November

feel the retailer the dealing put the of cost-savings to in challenges we in plans, place, unsettled what very some being much side that that, plans a consider better right that the both those in merchandising brand place, of of with I the strengthen I’d aggressive consumer again, I understanding market like feel messaging. dynamics we’re progress. we necessary our the DIY good – and address on but our we’ve also want about the But we’ve And consumer in program the to flexibility dynamics with. And have to reiterate that and with we’re putting ourselves now. feel the I given

again, to the guidelines go – expectations just laid you. back That’s long-term we to and that right for one back we’ll Investor to the each the provide go to place fall call. Thank the in more sharper best and then Day in So reiterate, business. now out our guidance of start

Faiza Alwy

you Very Thank Perfect. very helpful. much.

Operator

question English Please next ahead. Our Sachs. go Goldman from comes Jason from

Cody Ross

the Hi. expected, This Jason Thank America is North and quick Two actually for Cody Quick on questions. the better. one this for morning. on volumes were lubricant on Core than Lubes. America but in taking our came you On volumes you, North organic questions weaker for one America, North core front we

X quarter, business. this What this organic disclosed that with minus implies drove it normalized based gallons sales had growth gallons million GCOC did a X% step-up you quarter? your previously But gallons on about the XXX,XXX You’d quarter. the XXX,XXX from that this GCOC

Mary Meixelsperger

part the over the XXX,XXX sale, to we GCOC to last XXX,XXX terms business was GCOC and in gallons. the between Cody, transferred related the volume of quarter, of Lubes year in Quick that as

But the GCOC in the that will for that range. Now transferred terms in Lubes, QX, change of year-over-year XXX,XXX impact over that gallons QX we’re in smaller Quick to was QX, that than so business lapping substantially and was XXX,XXX to that. be

Cody Ross

did year, for that’s to this for XXX,XXX you’re or And last gallons? saying year you XXX,XXX

Mary Meixelsperger

when for Quick And year, Core Core that segment. this GCOC – now volume course, reported earlier last America volume year, Lubes year acquired last North – was America we year all of the the late North – sold. is That last in

Cody Ross

in then increased would this So have about gallons volume? a like you gain XXX,XXX of quarter,

Mary Meixelsperger

to is way gallons in XXX,XXX the to Quick Lubes shifted In they would XXX,XXX America, way over that the think quarter. Quick XXX,XXX – – to gallons about XXX,XXX the for if Core it Lubes, right if I lost we North – to

Cody Ross

your holding to outperform well. your continues growth also, expectations, quite you to store investment And and you. on And Quick to and us accelerate year greater believe What per making growth quickly, Lubes is update And growth back Okay. then this? store your then same-store what us growth? opportunity from Thank what’s long-term your moving sales our remind is? you is can expectations as frankly, on store you what driving

Sam Mitchell

that handful down. Okay. That was of a questions I’ll break and

on transaction Just executing seen pretty yes, performance, results both we’ve well about are excited opportunity growth and sales really the the on we’ve because opportunity. that the ticket the we been same-store

on our We’ve To retention also things transaction reiterate laid our from opportunity, Lubes, been stronger customer the been attracting on driving from but of customers our Investor we’re key also new of DIFM and customers a Day has growth attracting only out have some the where not market. competitor count customers. it that of broader and Quick the

look just partner. And have more our really that service other for to and grow is that partner to or our even them provider, that more that we for the who can experts how that you where recall They’re on convenience and installer for includes the see overcharged. to mentioned oil partners owner they Valvoline trust in and don’t car vision services They’re sold not business well helping we And you referral having program to our be operator. with And than vehicle. for our is dealer the as but trusted for be car services. customers to done, also care continues the messaging our an such more our need car really that change trust referring their serviced really going service they looking and around playing customer can

us also because non-oil-change drive and how the grow, opportunities the the, deliver our to to for changes, synthetic the what and on trust. to as opportunities we expectations The to convenience of in really better side strong understand opportunities real continue there trust grow remain to better have ticket oil on services, which and of really us provide not that’s going just for on And execution we well-positioned customers have – it’s equation. is consumer we’re do of ticket increase and call, So front. that that’s and the and that more more revenue those we because improve because

able ticket and So a grow led really strong both performance. improve to that accounts to customer powerful for being the combination formula sales driving of same-store

is, And – expectation continue good next be a year. position we so in to our we’ll really for

where stores investing in a We our capabilities. than we’re XX accelerating team that With regard we’re better store XX went at the going from those when towards in-house, to we’re organic you Ashland our growth, zero in really the pushing if now all, store back separation that we really growth go making we investments range store to and the building for new building to be – stores, doing the of first in and brought much were ground and XX-plus and to XXXX, capabilities growth year build. to from

good a with making big franchisees plans for – is growth largest with acquisition their our agreements of our opportunities That us store confidence with to still much franchisees. too. And gives in also drive plans we’re company development store part growth. But plan, their our in franchise development our progress our then on place

that the to going of and a time, for expectations bigger improve a to each to short We increased fact, put store feel in year the would stores when So significant and growth XXX our continue much is ways always we to haven’t looking we we’re period adding that, be because we, of shared have that footprint for day us. on then end. a for that opportunity target as in

XX a very do more we’ll have is stores, Instant – where in out expectation U.S. runway and the long us So and our what while we both laid haven’t in it to we Oil from exactly years Canada. many now, is be feel where for Change Valvoline

Cody Ross

you Great. Thank much. very

Sam Mitchell

bet. You

Operator

Our of Securities. Seaport go comes question line Mike Global Please from next the ahead. with Harrison

Mike Harrison

Hi. Good morning.

Sam Mitchell

morning, Good Mike.

Mike Harrison

terms you mentioned steady Core Just in was the North sequentially. volume of the – America in branded

seasonal see typically in quarter. would we June a uptick mean, I wondering, the expect to Just

that So is in, adjusting lost that or are that you day for impact? the guys you share seasonal

Sam Mitchell

season, years, seasonal when last tend you – even to big March QX difference of our between look you have in have months, the leading a into number the if volume a you spring the too. over strong QX And to and a really starts winter can tend QX. There’s at Yes. not look there’s – and we very

effect the then we quarter, the a and only our seasonal quarter a quarter, really where So December tend strong first pickup bit see then is see and where lower QX, we to in volume in QX that’s, in QX QX, volumes to we’re fact, our year. solid and all stabilization another, pretty QX That consistent. pretty there. being this QX one are seeing And good to what going and be little close

Mike Harrison

Okay.

volume? a that comfortable number sequential then, you’re So is good that that is Okay

Sam Mitchell

Yes.

Mike Harrison

you’re addressing going you these more the of some the if is that then partners? I changing. as might be What I activity focus season? question And color other go through with that You mentioned is key is, review merchandising have was line a little bit issues something your line promotional just retail wondering you reviews this can on and provide into your

Sam Mitchell

the synthetic this year there changes segment. has been lubricants to were that, last shift To took in significant place a Sure. was One from twofold. that the conventional reiterate, significant our

rate So conventional lubricants aggressively. a for been growing of have years have dropping at quite really the and synthetics double-digit couple been last

but conventional The synthetic rates, upper been has the news single-digit to shift of to growth the real kind mid from significant High synthetic. Mileage segment is

involves shifts So that, those reflected shelf. being the what that on is

for retailers factor. for sell too, it’s and as very change it’s profitable and good more been are one been so And a we that major making, margins, our key retailers that’s synthetics. That’s

label the this towards been shift brands. factor private from mid-tier other The has

have it on impact that’s and It Valvoline. and Super mid-tier accounts like grown take a impact Private Mobil the even has And year, negative is significantly at to had business brands of certainly negative major some private that share label. over where so the our to that that, of had past to most year-and-a-half, beyond distribution volume lost some competitors. expand and label our going on

sure making that our dynamics to And are they that so that our right, points strong. something is tactics in keep right, that promotion we’ve brands our shift and been adjusting are price

terms profitability. retailers the their in and to want have their big a So the manage in this they traffic category role to of optimize how

so higher-margin and to in probably they’re people And pricing, time, that sharper their at margin. the label that whereas on they’re been has the category make there up their capturing that profits the and competition synthetics ability to retailers between move trying same sure products private

oil motor very retailer. the The for is category profitable

have And for really dynamics through to. So navigating we with there successfully this. us are retail is are these the key relationship that that adjusting retailers our partners

So these our in and as place plan XXXX that a the private Synthetic as of factors stabilization we leads that growth of plan growth greater label us to put adjusted we the segment. it’s that

Mike Harrison

I All there. the Sam. appreciate right. Thanks, color

Sam Mitchell

Sure.

Operator

the comes question ahead. Chris next go line of from Please Research. Bottiglieri Our Wolfe from

Chris Bottiglieri

taking Thanks Hi. the for question.

correctly. you QX? I of I there what if is kind that and or it if in I I’m sure you think those missed you elaborate are one-time some Did Sorry how I about benefits QX you in not this. don’t that, it? just heard can But think anticipate mentioned maybe hear

Mary Meixelsperger

Yes.

termination business. driven we business other heard that that our last And in then QX versus things it about we In QX. trade fee two expect and and in was had You to free incentive a International had our benefited increase income, don’t a our saw that zone benefited we Quick recur we – correctly, a by Lubes those contract Chris. $X year, million

deceleration see lag some some expecting integration And with of think Europe. in We QX. about talked to additional business costs things in did cost modest associated in QX. those acquisition we Eastern addition are some performance then we in the the from modest that, combination we our will And price

Chris Bottiglieri

on can like you just substitution not. seeing you know about expect comp challenging. But seems little retailers a you’re there’s And bit private to seeing? that’s – label environment mentioned be pressure very mix Very the if or help aftermarket I’m even retail the sure in price just then what America, that or if talk branded and to that’s a it ad not I Gotcha. North from just are you helpful. it category. from winner maybe

category on maintenance? maybe thoughts whole the – kind macro track seeing, be there maybe is you points helpful? deferred seeing in now any is that that issue, that could there the you that category something Is any now to you’re an either else But right DIY that or going on is would think data of

Sam Mitchell

flat, over so we the encouraging where sharper signs a good X.X% environment. are X%, ago, is seen the motor Whereas years think down there. DIY, stability just to overall if you has We’ve stability seeing of showing in couple declines I some category demand, for for oil pretty changes, for macroenvironment back closer more past year. DIY of oil, demand in go signs been the category

dealing I don’t are any of think of with issues the retailers deferred maintenance.

reporting some their We’re seeing retail solid results sales. pretty comp the out the of they’re channel that with results and come

been side which to the – So the private motor it’s of course, oil motor of that business the the explained. with issues on towards dealing are with and dynamic with we’ve versus brands, this shift unique mid-tier we’re new oil synthetic label then,

year ago, it. have and the much it. a were and to better versus some respond today these are to Today, we where to of new we of about different exactly where that were year were impact what’s the we how a understanding that. were of best dynamics adjusting we is They new new dynamics ago Now

think I XXXX beyond. place as in better So we prepare for a and we’re

Chris Bottiglieri

helpful. That’s Thank you.

Operator

go comes line Research. question ahead. next Please the Dmitry Our Silversteyn of Buckingham from from

Dmitry Silversteyn

you to morning. your like International my bit I’d a little in for call. taking going business. on explore what’s Good Thank

was not impressive. you’re there doing pretty it you’re you’re geography, can known strongly provide First and I that what in to of you color doing was be how some so all, a wondering growing growth that successful? And Europe particularly is X% if

and company-specific And look there revisiting well? areas market talk of terms what Can in inflecting you’re positively last you seeing should America. start sort about secondly, for business Latin of you’re with of or headwinds? to when China them the then we and positive that how as And dealing

Sam Mitchell

Okay.

into distributors We’ve countries and distributor taking strengthening customer the our order Europe product look service, a each really the and from focused improving getting and times developing different regions distribution on at reducing our lead with network. our Europe So first. your our network been partnership to into of in our

that’s for performance. us improving in our so key And been

Eastern purchased that plant and we of opportunity Europe, we Europe. of business behind the in really in Our Europe tend and growth Eastern and region. – in nice that’s see parts then in strengths Europe the the us And a be for part Northern Serbia to rationale

So access help improved Northern those us seen Europe, we’ve that in network and upgrades some better really that’s we are results. But believe going to markets. our those some progress with good additions driving to distributor

feel we about good So Europe.

America We’ve disappointing year. We’ve It’s shining International last of couple past stars one areas. of over to And been different focus growth Brazilian in of our had this decade. about the Latin moving to been our our our The Latin had a has business licensee risk in our effects. really tremendous portfolio. this America business in not model Brazil. yet one That’s a reduce we’ve year, talked

in and had with comes some our couple regions. when those to couple plans significant in But it some just issues a where growth had areas we’ve we a other distributors growth, hiccups

distributor we progress feel had America I we’re year a see and been we a region change. be And expect QX to us. to growth in made For for some expect there. we strong continue that good where for Latin make example, to an where Latin in Mexico underperforming was one a XXXX. But progress needing America has see to will

to the good, moving has good on market is China. passenger Then side. made the both feel side China progress, growth heavy-duty a car potential very for have long-term we region It’s on we where us. us profitable a a for and that strong solid,

but side the a our also investment of on heavy-duty business, network, distribution in investing our and have both again the Cummins with good developing brand We where beginning increase to partnership the there development on side. is we’re

just is International through is customers. more say the not our as now expect strategy would I from, poll across business with And we theme to having our marketing a that, and do consumer invest this we in go but more installer the driving in efforts marketplace, a the distribution

economic year. In business past there. the we prospects growth all heavy-duty this the So side the business, of about felt our pretty certainly, feel particularly very slower in on conditions, market the impact of good internationally. about China, share But we’re longer-term, our still we

product is totally tools Valvoline that doing, does deliver by to strong It’s we’ve This market sales. grown improve we a markets, service the but and key our the – of profitability the our is our in we’re bringing in how part what how we’re dependent our U.S., for not beyond building business too. proposition support the overall just those capabilities value into international partners and on

the that, investing some business growth the we back a recognizing Day in expecting total. growth mid little again, to markets. make developing expectation, performance big we business picture sure And solid international we’re we’re International reflects that that shared on single-digit what our different on brand going modest bit in the and and international our more Investor is So, to do in need

of kind business, that you overview we year, the a internationally. I’d where good stand this good softer to one a that where too. have business, I guess, strong has gives is Australia the So a address other like market past of things region bit been mature

making a we’re have for XXXX. strong team. performance as get drag So, we share right adjustments on Long-term, that’s bit the of our a good strong Australia in think business a very we XXXX. I with And and ready again, been a in real

Dmitry Silversteyn

Okay, on that’s may If follow-up helpful. the opportunity. China I

provide may quarters, China of Having couple sort learn for small, quarters do-it-for-me they can an what of bought have what had a to bit in or may plans and of was that update can of your a couple what region? do model chain be, or you of it in little that for C-type see ago you kind think a region developing I terms changed a that. in how you can that VR guys you the a in of on

Sam Mitchell

have it type partners specifically one talk joint stores and that put a into Yes. that just model up they of pilot in there with Quick be months To early to really more now running. was in are too of longer-term because Lubes our venture four we to specific was a It’s results, formed a operation. place, on China. are We about couple what

and that in model Quick are about growth consumer, excited the we’re on be in to in choices maintenance But car we look and Lubes potential in tremendous might we’re China China. that the a begin in what type that be the solution for like consumers feel piloting learning and China of good that So do could ownership with services around type model that China. have

to be mode in are we now. and pilot other to forward than little So It’s in that the right just look we’re pilot stores early how future to reporting too share a performing on quarters. excited bit optimistic

Dmitry Silversteyn

I’m for good. the Thanks update.

Sam Mitchell

Sure.

Operator

Tong from of ahead. Merrill next Please Our line from go of Olivia question comes America Lynch. Bank the

Olivia Tong

coming have Good on the quite a asked DIY the that to Thanks. get It I That But expectations. – better Quick well of wanted my of point. been morning. been business. seems Most sales questions performing sense well. has business at ahead Lubes keep obviously in this

ticket? of So love to understanding contribution traffic, and you’re terms doing a you’re to from Thanks. a that going And how the terms of drive there about be is drive the two forward, to I’d further to change these thinking things you’re of in items? – get breakdown better in things a a doing as breakdown traffic go we comes

Sam Mitchell

from traffic to Yes. expect in to news traffic And that The good and of front, ticket. delivering we’re the consistently One on that. see – is contributors balanced that, experience feel our continue key a couple both to there’s stores. we we is the contributions the

Our teams our care are taking job customers. great just doing a of

services sure efficiently our too. And in that oil cars, focused word-of-mouth changes efficient our also keep drives how strong. operations is builds measure to customers service it’s when key. in our wait the way how But really the in our to the teams stores, with a do and it that I the in is drives retention. technology growing done trust stores, in we really it on measure come that success And is our we providing fast to put place key in our and the that are and service make times, think brand,

the when service know drop down, times times pretty increase, wait slow that customer too. quickly, or satisfaction scores We our

our And so to is that that focus and dynamic just of – understanding that success. key

marketing our driving improvements in and that we’re efforts. are transactions. you so strong add key Those then to continued our going in And to keep

our impact This our as shared I know wait much it business. use consumers it the new they come excited on the call gets that they before have that app our for I’m pilot retention to And on and even begin – very is the stronger because today, is the app it times understanding can from stores download about we in.

moves there’s from store moving to how visit, of the Obviously, of times typical busiest day continue it which far to as not that have consumer store but their too and grow that’s the to might where times a wait. time, possibly volume, a or benefit volume. of benefits they it has it manage And extended the less might the also we’re to they busy from less we

drives in – continued it cars. efficiency manage drives So it our how the actually growth in we

then the I think and that on we’re and expectation manage trend their that these the And lastly, they things convenience their for drive into. all car leaning can heavily are just consumer device,

a of car know we’ll of tire Lubes, we It’s repair. growth dealerships, that competitor drive Again, our car a to balanced Quick continue Day, break confidence transactions customers, down we me gives us. just growth on it’s coming opportunity growth this really we for new kind and shared stores. so of it the And when and in Investor from

then referral we we And program. interesting shared programs, lastly, some what call our

Oil potentially our be can service, installer in We’re working terms There customers work, someday, work, partners of Valvoline more synergies too. for recall closely Change whether here it’s our repair sale referring some partners. a with Instant our real independent to tire

customers partners benefit efficient because those have would from oil they the We like place at oil those us to changes, time do to a can changes completed. our to the and relationship, more we’re refer that where same

longer-term growth for in the business feel just we growth after not in terms Lubes and Lubes as the themselves. volume Quick broader DIFM Quick share opening we business within like market overall So get the oil of changes up we’re

has process teams of much services performing the with you do of to strength so ticket front, our stores the customers. explain ticket on the them on and And to to that in the your give

it’s measure our really invest as to our our of to services, us how and in we for and nice training we to stores continue programs continue those better even so teams, their uncovered in get And in delivery there. opportunities

for a consistently those to have we make additional continue long pushing those improvements services side, by that offer. onto presenting sales ticket by And we on feel explaining and customers, but not runway so we still the us better again to

into because these of growth then you other service-driven So about Lubes why and are model. in this of a business the the aspects reasons we’re about how and build business service mentality excited Quick some more is we talk Valvoline why of becoming service more that our and business

Olivia Tong

Got Thanks, really helpful. details it. Sam. The

Sam Mitchell

Good.

Operator

from of the question next line from Jefferies. Please comes Laurence go Alexander Our ahead.

Adam Bubes

if in the going could see to Quick Hi. today. percent five the you what give This is guys was wondering next that do Lubes where synthetic years? any regarding Adam Laurence Bubes Alexander three us And I you indication on over of customers for oil? use higher-priced

Sam Mitchell

premium oil first in transactions. our overall call we low of of is mix what now our XX% at change all, Adam, the

Mary Meixelsperger

XX%.

Sam Mitchell

XX% now.

mid-XXs. it call I’ll So

the cars to And But more we’re more than oil for profit the tend little positive to intervals synthetic is the the seeing bit The oil for incremental a benefits drain that. changes. makes on that, longer be will synthetic it So opportunity up be requiring continue factor a expectation changes. of us.

synthetic years, growth being oil. today is few us. produced the requiring for that the over a factor So cars you towards synthetics majority real next of But when look positive out are the new

that Is I think it’s roughly right, about Mary? XX%.

Mary Meixelsperger

right. That’s

Sam Mitchell

as in going tailwind us the a synthetic population, within those nice for Lubes Quick cars driving growth to So that’s come chain. be our car park new into

Adam Bubes

wondering Perfect. outside helpful. the to America? more how on I And North last touch then And Lubes was Quick differ? on possibly you could of if do opportunity question. expand very That’s those markets one

Sam Mitchell

it in Yes. still talking first market us. the for of out a region Canada of And a closest America, new move while terms us. U.S. is to we’re was new in for The North still

the opportunity And Quick in opportunity for there’s – in we an underdeveloped so believe when Canada Canada. that Lubes, and is we general, there, studied

per and looked solid tools without have the we we oil that really of good system. that adding day solid good changes opportunities trends acquisition any The at, in our

there business our in and So tools, model, addition point building our Canada. capabilities we’re of what and as into can do stores more developing we about marketing sales Canada the excited in to bring we

It’s So that the go easy be close of to consumer in about being about say and convenient could the and pilot we that fast optimistic expensive, like high-quality China. see But to we early China. nice dynamics the in or too consumer I the the high-quality garage, convenient one there, in we’re dealer the be encouraged, with offering what is it’s similar. because participate how being to some great play looks a based to talked in for earlier pilot very local Valvoline that of for and need there less on a a going in think because alternative. dynamics between car

us. to interesting So China is really

In obviously plate don’t And China, – our opportunity like those how the other have some the we Canada markets around that terms Lubes of dynamics The mature of the on that different are dynamics just see Quick are just as because we’re we’re of pilot what in markets U.S. planning we being cars world, closer and opportunity. in the now we going consumer on exploring that not in not part and aggressive of growth right have and the different Australia in Europe where maintained. the reflects and and

now, a have there given here the right priority could just but model, opportunities around type Lubes in America. markets not developing Quick we list that other in world, our right North the be In for it’s opportunities

Adam Bubes

a lot. Great. Thanks

Operator

Stephanie comes Please go ahead. Benjamin from next SunTrust. from the Our question of line

Stephanie Benjamin

markets? Hi. app. Lubes more Good performs app a can that of commentary provide quantified would the a just be in go about made That how new could back spike see you traffic interesting. wanted little on you Is be very bit Quick the morning. the performance? there test Sam, to the I their actually to sort to in total segment anyway compared you color Did

Meaning, at know looking how XQ, that was standpoint, discussed we then before of XQ? to improvement that I an we of close it Thanks from kind are a calendar And Core full-year, that the margin it America, correctly? the or compare expectations? look can how we think And that about expecting how to kind promotional in North XXX year, so does at unit last full-year much. can does in look for so those then

Sam Mitchell

Okay. to it’s the be of going a app, Yes, retention. to regard with really driver

at going us owner much this app word-of-mouth going or it’s least initially. on so our that in an hopefully, new to store. attract the to not that it’s the us we is effort what So But car in visits have download help that I while them summer customers, stores can mean, consumer they’re regard. when have the in

It us gives have the you now, might it’s an stay to in place for in so talk let’s incentive them, we benefits their in use hey, this our So effort nice and about, teams you because create interact the by customer really recall, our some with to to to going download as an car. opportunity consumers this to future.

times, your own convenient. that when you you it’s So especially come can manage can wait

the when consumer downloaded the substantially increased to began So time and that app the pretty that showed pilot customer market benefit. retention use wait our

I grow will can’t think time, that help counts at obviously put car this point. our over us ultimately on it – so and number I but a that

some more And reminder services might be in cards texting, to that even in the other consumers and with of us when begin it’s allows mail. present the more think, the due for to than efficient presentation much they to other prior is stores. the it e-mails, I benefit to, mentioned that we the communicate graphically that, But via just the via earlier app I even coming

our great all way the and in to be to efforts improve are communicated communicate marketing with. want they an for we the as consumer benefits these to So that a us opportunity for consumer

investments really store-level because to system roll take out some made in we’re whole this have excited side, the of and obviously, of level. and loaded But the across will the the us It company rolling technology locked it out we’re time the on at aggressively year. the So, about be that program. franchise to

we’ll certainly, good to we’ll that. have share, progress. see a we lot more as to And be do of willing data So

North for feeling that, may QX, we in business call, the Core a margins expectations and to I perspective, think slightly be that from but Turning in volume over the consistent to down volume side the DIY America, a that volume we’re on it we of mentioned couple year-over-year the quarters. the of basis, when the seen on comes last it we’ve performance fairly earlier

given in range. the QX a words, on basis, impact to should our margin margins be perspective, between out similar In again guidance the at margin we fire the we adjusted of From on in when the you and XXX. XXX ITC a lower-end that an had we performance expect, factor QX, that QX had other

Mary Meixelsperger

And on add one the with I It’s in thing promotional the question is – just calendar promotional our your with retail would quite quarter, of one our other modestly fourth in that, addressing similar calendar, accounts. the event just I retail softer. there’s less think is

comparable quarter. year it’s last to fourth So the fairly for

Stephanie Benjamin

Awesome. for Well, much the thanks so color.

Operator

Simeon, today’s This Please today – for line from may concludes everyone line event, attending thank comes the Morgan is to disconnect. Gutman from go question ahead. now would of Simeon next you Our and open. like today. your Stanley. We

Valvoline (VVV) 4 Aug 192019 Q3 Earnings call transcript