VVV - Earnings call transcript Q4 2020

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

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Valvoline Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Sean Cornett, Head of Investor Relations of Valvoline. Thank you. Please go ahead.

Sean Cornett

Tenia. Thanks, welcome Quarter and Call XXXX Valvoline's Webcast. and to morning, Fiscal Fourth Conference Good for ended the at results released Valvoline quarter p.m. approximately September X:XX XXXX, XX, Eastern and this in XX, with Time be conjunction release. should viewed presentation earnings that yesterday, October remarks and on available investors.valvoline.com. Investor Relations is which website of our Copy at XX-K results These Form preliminary and Securities we until the are Exchange our file with Commission. release the SEC Form X-K. A to copy on furnished of has been the news a Chief call the Mitchell; today are Officer. Executive Chief Sam Meixelsperger, on Valvoline's and Officer, Mary me Financial With

a by measures in our an and ongoing management our similar amounts noted. enhances exclude understanding may are our of the GAAP and differ items, risks which this information As of forward-looking our based reconciliation to A not nonrecurring update forward-looking shown are and Adjusted discussion nonoperational to be this non-GAAP we materially of any We obligation assumes the today remarks discussing basis, otherwise or forward-looking is statements. any and to on presentation companies. of are presentation as key subject included unusual, remarks, results uncertainties on by Slide of used by historical approach used X, under in to certain the no that Valvoline be are of results adjusted this presentation nature. management's and unless results date of on that statements such may statements. law. business. non-GAAP statements to will current measures assumptions unless is use provided adjusted our results are from required of statements fact our appendix. believe In in cause The actual other not comparable reported These

slide year. As X, the and financial quarter review the for let's we our results to turn

fourth $XXX income For of of quarter, million, and operating income million reported Valvoline of $XXX fiscal delivered EPS the net $X.XX.

and to EPS net $XXX items several resulting netted Other cash year key of was fiscal flow million in recovery, the of operating and onetime $X.XX. after pension activities income. offset income were to items from restructuring Tax-related which leave, income items following fourth $XXX delivered For There income of benefit. operating million key Full the year, million $X largely these million, tax QX business an of OPEB tax expense. the million. fiscal $XXX remeasurements, related million quarter, In policy and impact tax nonservice primarily after to of these items, impact. totaled of $XX mark-to-market legacy of $XX pretax after-tax of paid The related expense We pension were and income. of change $XX resulted key $X in XXXX, largest and had interruption $XX Including a after related million after including which of related to key income. tax a approval $X OPEB related benefits of assets to which tax after and million combined income. in in to resulted those million tax in tax million of

$XXX of $X.XX. results for quarter EPS of current Excluding included income adjusted operating million million, of adjusted and key items, the EBITDA adjusted $XXX

For Full fiscal $XXX $X.XX. income year of free EBITDA flow XXXX, adjusted and of Valvoline EPS generated was of $XXX $XXX million. million, million adjusted cash adjusted operating

detail. to turn results our we as to operations me to and Now call discuss Slide Sam let turn more the X, over in

Samuel Mitchell

changes the most reflect truly of that XXXX, on career fiscal year. and be families remaining your a my Thank a and doing abrupt Sean. moments challenging to many year and Valvoline, and profitability. ways, the to with reflected a in also it caused drove growth take My of to was the our well in at I strength outstanding team came model and fashion deliver safe. hope business that year-over-year the from continues unique the Valvoline. record just our tremendous the the one few At recovery impacts, of you are The you, team. our results. Valvoline results starts the in In to durability ending in COVID-XX demonstrated that healthy want years pandemic through rapid It people, wide-ranging the all COVID-XX helping of with depths

We year inflection for the begin have we strong point XXXX, we momentum and fiscal company. next as see an as

double-digit shift adjusted will a drive next in year. future, including to and business is faster accelerating EBITDA service-driven Our growth the growth expected

steady on closer remains QX a and slide. fiscal take Valvoline's maintenance, economic is on look product next preventive at cycles. the business 'XX focused Let's across which service and

in, by of we customer-centric all our advantages driven is segment businesses. Lubes Quick growth the in that and competitive approach across invest Our our hands-on continue to a

EPS quarter and the strong Our sales all mid-teens exceeded both results performance year, results all driven EBITDA X Overall, QX that exceptionally XX% was improved our by and segments. strong improvements across for margins QX. These in sequential versus increased in and adjusted XX% from improved EBITDA grew in Adjusted segments. generated in expectations. last happened by our

with Quick larger the performance year, and lifting North impacts in COVID-XX roughly international. Lubes America, adjusted EBITDA in grew overcoming flat core strong For the full X%, results in

We May are we delivering our shared on plan XXXX Investor the Day. at

in margin, than growth Quick As accelerate. positioned adjusted we're half fiscal a to more of expected generate XXXX. result, EBITDA growth our opportunity Lubes, highest well fastest With see to our

the severe Let's results through the premium growth our March sales the at and ticket year we fiscal QX and 'XX. full fiscal XX for that the on This Lubes new for in-store most a and Total X.X% sales QX an progress continued as build growth franchise sales primarily building the operational recovery XXXX XXXX, acquiring strategic stores, markets operating and continued roughly X%, take quarter also last will our we started a outlook system company and from consecutive of company-owned we XX same-store for line driven impacts, grow mix. added Same-store marketing new ramping each in annual same-store We're in and from from those customer expected testament slide. to We those X the of in Normalizing quarter, of Kansas, June. and presence the will continue our fit XXXX. the our net base, significant since decline store in look and continuing stores in This COVID-XX X% can longer-term outstanding in X.X%. and be improvement in the stores, a helped in impact geographic sales sales sales same-store XXth in unit Transaction expanding and by target. the X-year basis QX Lubes by XXXX, great grew XX pandemic us substantial and fiscal XXXX. again and growth newly put in pre XXX offset were our grew by XX and our average. base on stores grew operations We're growth. acquisitions sales in comp mid-teens beyond. new teens this next slide. our positioning new to increase with points System-wide grow announced X% including driven versus growth beginning year, company are still demonstrating services pricing. in but late performance recently store book performance and part in The pipeline, growing of with digital driven Texas in Overall, adding in this net non-oil-change our unit of We leverage. results for sales and was impacts maturity driven our to stores, saw fiscal System-wide in QX, combination same-store by start the have give we Quick matched middle in us accounting marks strong programs driven the the same-store to in sales in added transactions. for discuss both Pacific COVID-XX next our This growth 'XX Quick for year growth, in XXXX miles system line driven year closer of by mix, would execution. once contributing EBITDA count to Ticket XXXX. reflects on was in area. adjacent low stores. built growth XXXX Northwest. May same-store in significant Comp company ending a in QX to We most the same-store to our QX,

drove While and the impacts, modest deleverage keep staffed efforts sales open and XXXX. in to COVID-XX stores our same-store

continued improvement continues to be in line, business. in #X We this in store profitability expect driver XXXX. store Bottom the performance profit level level

midpoint the XXXX, for of with Slide planned As we X, you to strong system. growth growth at guidance. XX% from can the added expect across expansion on unit This stores or come XXX in is year a our see very

First, agreements, based stores. should our franchisees development new on our XX XX add to

anticipate we to contribution of year, When a EBITDA. goal coming expect years, this stores. reaching opened built previous we newly the in and we've combined significant stores Second, the built with company opening our three XX

have acquisitions Lastly, and place, we've the the with adding stores. XX we nearly already announced in we pipeline anticipate acquired

newly see We firmly levers. long-term in growth line XXXX new the driven and the weak Let's transaction turn growth stores, to in which growth partly significant growth lapping including in to in franchise the Quick and growth, top built sales growth each to range services is acquisition be Lubes slide. change meeting nonoil power. impacts. drivers: company by opportunity mid-XX% COVID-XX same-store place the expected premium and Same-store ticket XXXX, growth are from The unit results from resulting mix, pricing sales, are and the acquisitions next of expected the EBITDA for mid-XXs, to be QX due customer

acquiring We penetration building also increase our more by opportunities stores. household to and substantial have

term, in of to the contributing. drivers the we with low line bottom range Over long top growth mid-teens the each and growth anticipate

on the North slide. results next Let's review core America's

in the due A effectiveness was progress in in full QX merchandising modestly America's of for part North cost benefits to grew behind nearly gross channel majority and material channel, was flat address driven strategies the higher-than-anticipated sign category XX% in of and our efforts a product continuing margins. volume For and year. the strong Retail the a DIY good retail lower in to channel raw performance our and year-over-year increase The lag ongoing improvement from costs. continued price challenging mix grew margin promotional favorable DIY. of saw adjusted by We dynamics. EBITDA in QX

costs almost during of impacted by quarter. Improved savings Favorable also significantly and expense mix, offset savings was from in our XX% benefited cost installer to expansion. full the We material from implemented lower the early also channel margin channel margins, the product installer lower unit channel stages broad-based drove combined with the up build initiative raw our reductions year and from COVID-XX. benefits channel we installer during continues pandemic, QX. the of with volume. QX Recovery volumes The impact the initiatives

Core fiscal segment. take to to volume fairly next retail expected are look volumes in down modestly and stable a flat. The to is DIY North at Synthetic outlook X% the category expected growth XXXX. to America's the is be volume roughly North Let's America's anticipated be with increase slide. continued channel in on Valvoline's relatively

We expected have are label retailers steady. across in impact key is pandemic private growth price plans the place significant from in merchandising and channel the due XXXX. volumes Segment to to solid rebounding installer be primarily gaps to

extending XXXX these customers. cost costs A anticipated lag continue drivers approach. increases favorable to securing renewed and of margins, of benefits, recent the value-added is low a to the lapping winning our normalizing margins be XXXX selling XXXX, a number in improved to double-digit to our modest the savings decline customers new ahead in we expect portion with expect the margins are to $X we range accounts, be price the in low structurally installer material of with the higher well addition, a cost to upcoming at with along are primary mix our installer of to national recently gave base headwind $X.XX year. in our Day remain over channel benefits in in the important period. EBITDA double-digit the Investor May from raw the key results, we relationships We've XXXX. expected In anticipated have as Despite $X.XX from the EBITDA initiative the headwinds targets that for Unit XXXX solid, range near

contribution quarter, next and International Volume results International's including top in performance in on segment the substantial slide. China pre-pandemic nearly from last Let's the coupled to sequential across delivered ventures, The solid regions levels was improvement bottom back all QX. had with line look QX, QX strong versus growth, joint in COVID impacts volume and in year, at of overall drove increased quarter. in overall offset well the parts ventures by growth higher-margin as other increase India, Latin geographies X% America, and continued joint EBITDA. the volume in segment and An Asia. Australia driving as in was performance from margins This year-over-year a declines improved EMEA

For anticipate digits, significant impacts double plant in in lower volume excluding especially and our XXXX related to We new each and in growth low with venture. joint fiscal India China Latin EBITDA. China and XXXX, in from sales to the the and to led volume, top sales COVID-XX America the increasing decline line

levels activity across broad-based this of uneven on recovery, is Although expected be depending geographies, could growth across COVID-XX regions.

in facility under QX. phase began new budget China recently initial Our construction testing the completed lubricants and in

long of elimination the essentially anticipated end logistics savings. of come the the online our to meaningful third-party the by all XXXX. fees term, the In and market end for the drive by calendar tolling expect to of plant and the volume be We of cost lubricant fiscal producing efficiencies year China is

move football our market, approach capturing are and partnership growth. the standing parts for profitable continue our volume and in with with building building. to opportunities The and brand ongoing partnership key While Cummins equity future brand motor and growth. global for in-house our creating investing plan our club original and generate campaign, channel We production oil of enhances to to platform awareness to growth development new the through opportunities global volume

XXXX investments the target. line China Investor expected up range, moderate cost are our and still EBITDA plant Continued Day single-digit ramp SG&A to in in the XXXX with but growth to high to

turn me detail. review financial Let more guidance Mary to it over in results our now to and

Mary Meixelsperger

Thanks, Sam.

driven adjusted for QX, performance top on In the are shown year results by quarter Lubes. line increased X% Our the primarily strong Quick the in flat and Slide XX. sales volume, on

partially initiative core our XXX incentive this to SG&A as and in margins benefits gross and price/cost benefited For XXXX. compensation QX return by year in driven the earlier point basis particularly savings growth and for leading by declines more was adjusted performance lag incentive full full in were leading America, significant lag Full the we improvement margin compensation from in by began year, the Favorable broadly the quarter. in to last offset advertising growth mix primarily by implemented in COVID-XX we COVID-XX, margin higher increase offset to the were and for significant a in an impacts, gross XXXX. along drove SG&A, and SG&A international higher the EBITDA primarily driven year, reductions Overall, margin modest and mix, improved impacts were price/cost improvements SG&A expenses. marketing QX from Higher cost increase began rate Lubes in with North expand of sales and and for volume QX. and benefits QX of Quick expense year.

bonds Let's treated the as our a the XXXX in review other on for key Net calling the which early, slide. and cost key corporate associated item million items $XX interest QX. expenses full next primarily related to increased year, with financing we

with was net pension Total performance tax reflecting by higher of open a cash $XX declined Full a our effective flow million grew modestly, year higher our strong and up as taxes. stores to China new year-over-year in adjusted plant driven cash cash expectations. $XX rate pension free in plans. obligations in well increase million flow, primarily risk and consistent earnings Our in operating CapEx investments million as increase the offset due by $XX management

of remains equivalents and over $X.X available cash with sheet million on hand. billion, total balance $XXX in including Our strong liquidity just cash

shareholders $XXX XXXX. to returned fiscal we million of in Importantly, capital

expect the benefit and XXXX, cost additions to Fiscal is fiscal decrease both quarter of store quarter-by-quarter material sales, we given impacts results saw combined strong X% we $XX be XX% Roughly given QX, growth This In we severe million the adjusted we and growth growth to million of likely XXXX international. should of in XXXX. $XX is with XXXX. especially new sales $XXX significantly $XX results our the XX% that we repeat mid-teens on and joint QX we begin anticipate growth. venture, We top raw impacts Overall, declining when the relatively of And $X unfavorable this lower volumes Let's to China pass-through X-year in strongest Lubes of XXX in last and of which EBITDA adjusted -- are EBITDA year-over-year slide. the comping bottom midpoint, seasonally price/cost in due we to year-over-year, costs expect benefiting to the in 'XX impacts year-over-year of guidance, normal increases, be adjusted raw a return at to anticipate material year-over-year. a the roughly growth ahead growth a growth million QX. EBITDA COVID-XX to recent sales but in attributable China review In to guidance as performance our same-store expect with a incentive Investor our fiscal flat CAGR to to top Quick QX pattern. we plant EBITDA lag we $XXX won't X% basis set compensation from expect just the to line delivered, targets next sequentially fiscal return in are 'XX to from we growing from year. year. million vary of and year-over-year at adjusting more see million to and the We impressive QX million our or Day line anticipate

rate and effective between be XX% our expect tax to to continue XX%. We adjusted

in EPS the Given our investments, expense $X.XX anticipate in our and to from the growth increase amortization depreciation adjusted range. $X.XX and we growth EBITDA ongoing

$XXX with capital leading a fiscal and increase COVID-XX, regional million. factors 'XX, closely. in million in external significantly guidance growth is by dependent state, from earnings, in XXXX to Lubes and unit cash on million changes we $XX-plus miles largely of I current impacted free continue which expectations, Expected the surrounding emphasize flow increases expenditures. fiscal which will want newly do moderate significant or to carryover that to pretax cash be $XXX acquired we in restrictions capital the incremental to along monitor offset in as built Quick could taxes stores, providing such are driven, country-specific With of higher expect we significant

up. wrap turn Sam let back things me Now to to over

Samuel Mitchell

been the pandemic. focused Thanks, Mary. we've COVID customer took year to safety and the in new challenges We're ongoing actions together needs the We decisive our from meeting way pleased this with and unique through to adapted able and on manage team ways. working

Our business model. performance over benefits the our demonstrates the of maintenance X last preventive years

and multiple channels market EBITDA have and raw product offerings margins challenges, and material diverse and changes the service Our face macro geographies durable including across now pandemic. solid global increases in adjusted driven cost a DIY growth of

flow, Over $XXX we've the years, in averaging $X.X cash annually. X past free million billion generated

As XXXX, we while did again making growth investments. in significant

capital consistently return XX%. have invested on generated We above

with We our invest roughly capital. continue returns to in cost high-return projects Xx of

the invested benefits accelerates. strong, on investments, return is these to of As capital our expected we remain growth while realize

to to XXXX next an We trajectory. inflection slide. Let's the be turn our anticipate point in growth

We in acquisitions for company improving building positioned significant making Lubes have new Most and performance importantly, investments progress growth and North well in America, in the we've stores, Quick international. made working. operational made are we're core by

segment's profile. growth We This year. half Lubes of our the to adjusted next given high-margin expect more significant Quick is EBITDA and be than

we open a We and Sean of a for phase enter expect service-driven it I'll a for to as faster business. back be the Q&A. to accelerate that, turn XXXX growth shift line Valvoline to a the to more over year With strong

Sean Cornett

Tenia, up Instructions]. With please line. Sam. [Operator open Thanks, that, the

Operator

with first JPMorgan. question And of your comes the Instructions]. from Zekauskas line [Operator Jeff

Jeff Zekauskas

prices Or Is the next in of you from refinery and at? your have risen months, base disruptions area in the XX they've they're down that come hurricane-related and because that levels the course of probably different a approach general the oil view? to outages they'll that do

Samuel Mitchell

hurricanes since And increases market. have base an oil impact had Yes, summer. two the oil base Jeff, you're on really, The last were there right.

modest us The was crude and tied as to overall to then we would the go increase that say, QX, more second, increase tied will hurricanes. market, into the impact first a I the in

this change we as expectations But into terms builds could built recent far see decreases change, we've future round following the of counting possible base that significant It of on As really back and year. in this we're no as guidance oil we our capacity for what built not increases. plan. how is that up no our is later

Jeff Zekauskas

on can talk EBITDA And investment your fact or that in about that 'XX, matures. XXXX, have you the operating China income will as 'XX expansion

Mary Meixelsperger

So getting benefits we're actually with associated our have through Jeff, to on have China. the plant the we expect of we going start-up, venture China in fiscal business for that potential appropriate some of we the processes approvals XX, plant, the offsetting have, through onetime some the China joint the headwinds for OEM the

So the -- a our And to just be do the double-digit of the over the We modest $XX fiscal as budget, headwind will continue capital came relatively range. plant. to return we China neutral under in invested low on terms of to overall. long-term a invested in 'XX plant million a we project result that under have expect in

of business. we longer So China. benefits to expect flow that with benefits I see into gains China to our within see that better control expect supply And volume of the chain term, the includes those do

Jeff Zekauskas

you capital target? that number So return hit in on your XXXX,

Mary Meixelsperger

we longer-term going build the phase. -- the it's investment of to production, horizon plant's of the look in as that be time think the over I at we'll see in benefits over out terms

not over going see fiscal to we've seen relates are time. on I'm that specific to give but guidance return as planned we the it 'XX, So to beyond well-positioned investment

Operator

from Your the of question comes Simeon line with Morgan Gutman next Stanley.

Simeon Gutman

-- share? an North of mentioned, America, and next can driving And the you lower typical for pricing in inputs? assumptions Can stable for about that was X% talk usage about way is said think you is the My then or that from decline some And first that label you sounds anything atypical outlook Or business part guidance I a is talk retail that, the I year. normal expect? year, think, private I you Nice like just pretty for typical slightly. some talk you about the think market It is about oil? flat the channel that but -- there results. you'd down that question Can you of you gave is that the think with of of Sam, there? just

Samuel Mitchell

Yes. Yes.

talk first performance then plans and expected. Let's category, Valvoline we'll talk and

the As category longer we've to the be far term, at seen X%, about as X.X% goes, category clip. a declining

we And don't that the It's really period. dramatically maybe weaker to impact. see the so But down has next fact quite from be there different. do time did COVID with DIY year, in -- performance know, X%, during the we're recover the projecting quickly you that as to it April just that that was category segment March, and

as severe, installer the it wasn't so as of the say side And business.

down next category Valvoline performance year, to do flat X%. expect to down We So solid. be

course mentioned we 'XX. fiscal volume flat we the in As the DIY over had of presentation that

growth that of with little a in bit and QX. pleased real even So

going have so And plans into 'XX. with fiscal we some momentum our good

see private each place, One of most we talked factors XXXX for we that expect versus important key label. the as the plan expanding don't of price we've private that with and predicted and the developed a stabilization about merchandising plans our our into have and accounts, would XXXX gap versus in this gap we we that of solid label had

that's performance to a seen of seen. solid gap contraction that In label, we've nice actions some that we've and private the plans, versus taken fact, with of the contributing we've actually that our

growing with in We're marketing towards trade efforts, our promotion, segment. the growth consumer in category there's DIY, the efforts, share synthetic synthetic on our nice the about So geared some features our focused it very with advertising much promotion, that. segment all the continued in

benefited impact solid the think we another nonetheless, of that I into step But QX, we expecting a course, that for effect the more where so prices XXXX, nice QX, it modest benefit that the up and we overall business had of at in price/cost performance some as that that to dramatic that we're short-term America. year, DIY North year up, presentation represents did expecting and overall have has core move and that. core with base including and headwind, in from we're able that you prices in to an that crude But Volume pointed we will lag XXXX reduction going We 'XX and to very we're look overall out, in we as what we on in turned point so had fiscal next into in deliver America. And back the North when that unit you to compare performance. margins out. solid overall were those be profitability a oil when

Simeon Gutman

And Okay. just my take growth be And core time X% batteries? your it? it need you seems in then that push -- with Quick can do the built doing Or to are do to normalized you since is you with The anything follow-up X% on And for side. Lubes expecting, the well? where you're to business there you that test?

Samuel Mitchell

Yes, the business strong. is the Quick core for really Lube Thanks. Yes. segment

strong across October momentum performance. looking saw good transactions sales and regions restored see solid it same-store to at QX the sales ticket. both we in we just And -- saw very is into The so nice in And here, or growth our we of performance, QX performance, excellent and combination continued our performance strong June. increased a We recovery a makeup start investment going same-store growth our back marketing in really. of of

our a definitely customers really that And And we the share is the one that of more this that battery in tells is program, ticket been to a see going new strong that what ticket opportunities. time, So continuing as has growth our also this you for to case market new our to win 'XX. we're years. to during contributor fiscal continuing but attract to mentioned, be stores. number us It's great

stores rolling will close our calendar company in of we're too. calendar of roll all by the to all across franchise of then that end XXXX, will our be completed markets, that it So across year out this year. And

batteries selling for testing that And and aren't right supply we've time, with level felt nearly with the so the that for some to right equipment familiar could we the not but those it, been we chain. with

And are that made off. investments to starting so some we've pay really there

rolled And early seeing where before. that the were so versus we out, increases markets we're sales of in doubling our the batteries

It ticket, go really would when program. lot have non-oil with So And we -- growth to that will service to But softer our driven miles to because there's one, while want mix is increase it the the battery sales deliver. otherwise continue have performance our as upside continued opportunities you how changes. continues people of we two, the XXXX we're taking change continue to be expect. share. these power same-store nice a beyond than that we into and ticket because, growth, understand And of some the strong then to we of premium we delivery in pricing comes oil number revenue, number

the position new in And a will impact -- fiscal impact an we've as really profitability the Lubes. the to is in driver I -- it's in it's that start in, So haven't been in 'XX, that levers be beyond. of beginning Quick an you grows us for those then improvement driving number the years, last have and building, in kick add had the again and of that couple that one to presentation, in but because, fiscal in are they stores mentioned stores that 'XX our great as operational the to

Operator

with of the Citi. Your next line Nicholson question Wendy comes from

Wendy Nicholson

question that to the gained. do market with have has My may you of kind

of had because Over shut guys more during stores shops, down months of competitors the great a are you you have summer who few the some your open, maybe last temporarily. the more mom-and-pop brand,

that changed Or for And you first oil the to for July, X you everybody the as done wondering, got think side, of need And September? feel I'm Quick trips, have part just -- benefited that and from in that number on do that Is go thinking obviously. COVID? quarter, like, months. summer is But more great in the crazy? credible it so I into now the is another hey, lower so that this don't the guidance during thinking? also Lube you their just thinking fall, I off? August, And the road Do was of is I'm one, we also mean,

Samuel Mitchell

impact you But I of it of during sales to to depth that in period. open market growth. by momentum time on comes about feel correct when we the May QX share in we we keeping it gained most how in same-store stores is Wendy, March, terms the right of need April, the how back have our and that

even impact. kept was we big our that that decision That So same decisions. worked we made with made so pretty they a negative saw franchisees stores our as a We we the open.

recover us helped QX. our engaged definitely that open with compensation for keeping our being higher in and paid faster, the particularly store us, that teams during so employees, It we level saw at some off And really period.

So year, car standard sales our market have our of programs same-store put think in of the model. with momentum about to just marketing to we confident the place and continuing next when share continue grow because that you very and we're that in success that the we

really resonate work with car this model environment. owners car to standard it's in with the of But customer continues that easy, just our aspects trusted delivery safety customers customers, the today. continued well for that quick, of experience the think I

did -- so leveled was of from, kind in And benefit still I off road know driven The that it's there that models XX% more and where back summer. a range. it's any April. were the summer into we in now from right March trips this minus lot recover don't going say, But

miles to to still a I driven. into that growing market we But next soft. tailwinds going bit believe growth, mentioned share question, we're the further that's a pandemic assumptions be would opportunities recovery continues that And us drive haven't for We so earlier to be forecasted us. a would that be built model in for impacts be from nice And into driven even the as we continued as we think help or we ticket the have mean, sales I sales miles given that next answering our year, same-store also that these in case. year, same-store performance. we that going hope

about them. So dynamics helps how hopefully, you we're that understand and the thinking

Mary Meixelsperger

really Sam, our strong the to going the clear, about be we start drive competitive continuing pent-up demand. clear, to performance to We really will really just QX. in just performance continue mentioned our Wendy, And QX And be Sam think that with performance to don't of see advantages model -- forward. to was we're we crystal everything think our

a certainly don't what seeing experienced a we we new we onetime really QX, of So thing are it think the was terms in to in start strong fiscal year.

Wendy Nicholson

Fantastic. Fantastic.

are a Okay. I not right time COVID. terms acquisitions, mean be thinking during M&A operators it's to what M&A more you your opening some time there who own seeing but of just maybe tougher again, be environment, may to in And be then just making out the the rather the on environment, had that there stores.

do lot, can you how think but more market mean, room a or have the generally, much I -- bandwidth much how XX to Just months over you more? XX to been even next consolidate you doing obviously, more comment you've the

Samuel Mitchell

certainly, market think it We operators, less operators, market. for has right now, tough very is attractive been sophisticated the but M&A a smaller

that growth couple And years build to and sell been to to, see to business company through your moving doing we with, a great accelerate reputation we've continued last our XXXX. M&A so work of work into the as over opportunities the a

hard and pipeline. relationships So reputation develop that we've that build to and worked

for strong acquisitions that's XXXX. we're aggressive for store So on our very the growth us. with pretty builds, forecast store and return new why Both, investment generate

is marketplace. market to So share. they're share execute as for us the overall our quite in a small market important to do-it-for-me both just really reminder, levers our build to against well And continue still

about Quick in While X/X Quick Quick Lubes. new course, most of Lubes, of customer is we a coming Lube outside channel, good from market comes from outside have of growth the share, our

the build something increase we of as X% stores, than marketplace DIFM going share so more from to our bigger that. we're much And to roughly

And so acquisitions, and growth our continued new through really us stores making building build out both the to for runway for network. store key

Operator

from line Global of Harrison with Securities. And Mike comes our Seaport next the question

Sean Cornett

Mike. Mike, maybe are back there? Or to come you

Go you. ahead. Okay. Got

Michael Harrison

Sorry.

data that's bit of Quick seem X% that sales kind be mentioned miles in go the it's around really on a you an driven, driving pricing but you number, to show Yet ticket, underlying activity. some wanted same-store business, you range. this an minus understanding average little bucking to this Lubes XX% revisit of discussion of I back So and leveled off this in

strength you in So is as seeing are -- should people some just even approaching maintenance pure less? we how are they as share vehicle driving other that Or appear changes view market gain? to be

Samuel Mitchell

maintenance there know that how the how And focused I we drive marketing they really owners life. changes, growing some and when mean, reputation to strength that have of are service or at behavior, is driving in we Overall, some and stores. oil-change look oil where our behavior it are just we car indicator many our miles the attention we deliver markets Yes. pay between their on programs

towards making us weekend, of It's focused that drag that we It's their they're And or that Thanksgiving, year. even that services. services, those example, the before you the Day car as the Some road. people just for And is bit that's have more sure for ready continued average, to they've timing And stores not this geared little maintenance on when oil very maintain are holidays. preventive are the holidays maintenance people Labor the are is in though change. Christmas our seen for more big time a busy before less. the that the because see for have driving, we on see

efficiently there's, people way we're we I much get builds But value that would with deliver continuing and behaviors market our the very we relationship how those a that our places in the confident and visiting we're stores. our that most convenient of us for that they maintenance some as than in perceive share that other that they customers. we so benefit the with fact part, terms that traditional our from changes the preventive say, seeing And So that services. small we customers think are have grow to and more trust discover for it very we're

really success on for. XXXX So in looking what based model is the consumers well-positioned for continued are

Michael Harrison

high All that the in Quick margin showing I you're of providing Lube Lube then X, to XXs we that see think improvement suggests ramp? right. get set through the on the or over margin you're the as Does time of that even new work segment core toward should that leverage And new that kind Quick Slide stores. the better level show data eventually there over that store back EBITDA for time you

Mary Meixelsperger

company Mike, EBITDA other are Quick There stores. do in Lubes see margins that impacted, the and of leverage some and in to including factors Yes, mix our XXXX we expect beyond. and franchise

they higher relative overall, and mix, sale with stores to accelerate return store a company company acquisition higher the a bit have building little do -- franchise on company. we new bit have through little as So stores a

sales will of same-store so seeing we're some with leverage the moderate growth. And that the pure

stream that The on margin stores is new do we about some ramp the curve. see deleveraging business year as well. talked And other go moving in we with impact as stores thing we've the going forward new forward. as start we leverage that expect coming see in have But to Lube a moderate we that that new Quick level XX should operating range, stores do in past out up they X-year --

Operator

line of of with comes Olivia Your Tong the Bank question from next America.

Olivia Tong

bit potentially M&A a environment XXX this doing thinking longer-term they're they year little Quick given base and start And moms-and-pops store favorable want you're doing. Great. versus I just given how can continue to more company-owned near-term questions revisit how talked to We much about your franchise versus the And plans some the already the Lubes. this plans you think to or about just on nicely year? of you about around versus lot far expand what so is if acquiring, and a pretty your want a year. how about how

Samuel Mitchell

Yes.

as in the all, first So we've for significant described, terms us, Olivia, opportunity of growth. store is of

store both our we company so to want pursue markets franchisee and in And growth our markets.

and they all their they their they strength, success so where have closely with with efforts their our capital businesses. the they markets. have with and where have have their And and desire businesses, to franchisees fortunately, the opportunities in And had position, working grow definitely development they've we're the a that

for Texas, into we're Virginia, markets So the pretty going help our South our plan, both have we're that the to moving in in and markets ground-ups, these to new both could accelerate acquisitions to that fill looking in or growth. development us aggressive, in for continue into store also continue that example, in we going but support to markets, be fit aggressively company been and

how thing to of the attractive important our work pull in and that up of ramping it's relationships that closing I those we're term, on longer growth. And stores. size And us mom-and-pops the do going work build our think the more acquisitions we the levers success that have difficult accelerate really each more us hard pleased growth to then of helped those to development with the and I'm our So has growth. near for also at given the term regional the couple our some capabilities are that of last we've for the to made developing reach corporate next in operators. into that operators. store progress might team the on of opportunity, focus the the to consolidate us just and year with more in smaller over on targeting years the team really But driving been here, hard really for new

Olivia Tong

given obviously some you've a right nice now lower driven but been basis you is under mobility on a pressure still benefit recently. year-over-year benefit obviously what's the price/mix seen Got then And the to it. as more miles that

driven underlying? miles hold as improve? on also to potentially there -- Or mix view eventually of giveback while bit your pricing that that a improving you what's is does little benefit So does there? Can the

Mary Meixelsperger

Olivia, see well are if really see tailwinds we miles improve. positioned that we to driven

of premium that So model, battery are delivery runway just only front value at further the look about of about a penetration, change through that pricing points we're tailwinds price Quick premiumization nature penetration of our The service and synthetic side levels there's and X/X significant of still you because side high business for revenues, close and in pure of of the the to the earlier. while that -- we penetration high Lubes, power we pricing. the if overall think higher are unique the that's I the Sam in business, ticket continued from XX% at the within our of our seeing service our including of non-oil program synthetic improvements the the us, the talked have

have I still to to top substantial power. think recovers on adverse time better even our as over pricing miles expect So impact line we results. an driven see it I don't that opportunity Because have

Operator

Your Goldman next Sachs. Jason of question comes the English with line from

Cody Ross

This is Jason to about this for talk morning. Cody on International. wanted I just

just was Lubes China a remind the International felt you plant you in top down as Can the significant especially Quick If accelerating for line the volumes FY on? than growth better development brand segment, why history, in segment, opportunity us growth? but 'XX, calling I look 'XX. X% growth FY X% of is comes the International growth And back in investments. and guidance in in at the investment those that only Your moderating channel it to hand using profit you dollars grew due guys

Samuel Mitchell

Yes.

XX this yet, networks, really our seen had of our business, our hard the regions, our and develop quite good we of 'XX each But for had we we've opportunities distribution we And marketplace. doing 'XX, Valvoline's with capabilities is regions International international the a made each solid business in growth a So in that chain, in in some the in developed we've at feel at nonetheless, had and nice that. profit. that with progress is pressures to contributing growth, developing really the we've that And working years, been growth meaningfully you're significant. markets business looking of our last supply the over to slowed that we've our look correct when

got channel with key just team, the into nice go investments. regions. we brand that fiscal as now being we've we efforts strength our of and supplemented are And have in so because momentum development those our our of some operations focus the And 'XX

across growth softness, mentioned impacted regions. in about presentation that And as So America, and the had that's 'XX Latin solid why really, in we're beyond. the some by we it's in COVID-XX. in growth I confident particularly business International

still some we've those of there. the capabilities progress distribution our some and Even as step-ups in made in exist, that pressures

China, a We the which, fiscal along really with we fiscal expect expect rapid Latin 'XX. in in of recovery see America to be saw a that 'XX, growth nice course, to contributor in

and largest China, become China duty. actually lubricants market the market, car you both heavy world's in up the Specifically add that importance has when of passenger and

And with and car we've strengths we side, is developing We've our a inroads there. been on distribution have partnership our heavy-duty so growing with and making and network. business the to on our committed Valvoline Cummins passenger team, strong developed side, the nice

the work. India, it that India. We benefits a similar starting we're that in really a India. Having a how there, similarly OEMs, size of our X, our so and in service ago, the completed years one reputation improving margins. about the build just X us it to in we've us to And in in our that more built benefits levels, the grow, very helped plant China, closely improving with our us really working strengthened plant It's customer to benefited marketplace, see business

in longer And limiter we're and Quick so does not a We're it's term, significant, successful year in In when We way, it us. benefits in see of next headwinds to strategy that investment same have That investment, bit profitability comes capital from strategic for it's as that plant. out, the Mary using is that as China help it's But business. operational to constrained. beyond however, investment us growth grow going no of China. that laid the into away being take it build the a Lubes don't long-term we to speed our as benefits. meaningful, a to and business a

For stores, those building been and making the go great developing again, just capabilities as building which, with on made we've we can acquisitions. new hard progress as going it's also us, stores, and

a guidance about great business, we've American in where efforts from that given That's position. we've And be Quick the are store gas in for market. XXX step-up those for deliver feel to in International the going store I the range. China, we're the with North to really been. and store the continue Lube growth 'XX we're So to And a on growth with where nice the we in good

It's not more core got some International North it's of product-driven, capital-intensive a similarities bit to the American as business. That's the course. business. reminder, Just a a business,

we our invested teams and talking and adding capital good, making that then, the internationally the investing brand. single good that. in course, position better -- line that business growth pretty investments SG&A International solid digits in growth. But believe of more opportunity and market was China the out investment strong right look investment in pretty basis. we're Instead, our in so and adding markets regular major a cycle planning And so investments on that we the over on for return is not international market penetrating we really size the It's business again, top to business. we're high is The the growth, expect bottom side not a and in to that, the deliver looking be close in a in the when unique line to and of planning on International on the is the the here, any we're next and about is to when very plants capital

Mary Meixelsperger

also remind year. China as surpassed would that And the I #X Cody, lubricants market world last you U.S. in the the

marketplace. the their for to chain profit that investment, to there in improve, is we for emission market meaningful -- as to think in support we think moves we opportunity that So in meaningful standards and there's products a really it's really us going position growth. important higher us And have we that that an believe, important us regulations thought, technology growth a expanding premium supply as

Samuel Mitchell

retail now. I'd that too stores also in China And we're add piloting

long-term could for nice that growth also. a so opportunity us And be

Cody Ross

thorough the appreciate I response.

Just one quick question. housekeeping

operations, are costs there, growth. if going flat. flow roughly from guidance what's it's delta the I XX% describe Can just But about EBITDA is? Your what on cash back into you

Mary Meixelsperger

largest by had the the allowed we beyond assets. done that million our to used in which kind XXXX, taxes. deferred going 'XX, that and the had And from Cody, cash In tax borrower-to-fund tax large fiscal of NOL transaction. more increase, to tax which those we borrower-to-fund had foreign had in from we've us large is use Yes, credits up benefit cash than delta, we $XX is continued transaction up

down able years, but XXXX the cash And few to tax cash a for to we've keep back normal tax we're more been payment. last liabilities so our in

substantial taxes. largest is increase So the in the that of driver cash

Operator

Your the next of question Crespi. comes Monness line with Chris from Shaw

Chris Shaw

quarter some Just share dealers. another market that the share of I of assume sort from was question. third market

lens? customer guys you I I any I closed XQ, you quarter. part know It -- think have sense oil new know customers sense I to to them? I given metrics, want people changes stickiness think, be guess, tracked dealers the in keeping a you pretty you are well. but very were might the say, -- any quarter, the get decent customer of that soon, too that probably of that, Do gained, once

Samuel Mitchell

Yes.

You're right. remained trends new the early But in It is but more in we'll have trends we're our based to get a gained little on have in of solid, a that retention of next again, of that stronger installer terms consistent. opened that customers outlets as competing bit those very we the on very QX, up, read start the seeing quarter.

Mary Meixelsperger

excess come second door. after first rates the new in strong customers It's retention well of XX% visit in of the We very XX% in had after visit. have historically excess well the and we see when

a within -- the share what the historical combined and customer both encourage share to market we've model retention historical with be belief my So market the COVID in rates, view, well to will challenging as continue continues what seen itself. retention environment, gains as transmission that is service stay-in-your-car

those about optimistic retain very ability I'm to So our customers.

Chris Shaw

do retail that sort maybe -- involved acquisitions you was of financial recent of sense small of just did, of health the smaller you financial chains players? And industry, the in any have And some that you quickly, of maybe sort the bought? and any of the sort with stress

Mary Meixelsperger

that in acquisitions here the been Chris, closed operators. we've models. on pretty some got healthy good October, have done we've They've really from

And model. a We that came very we've are strong the ones the operators. operations-focused deals -- strong really from done

healthy we there, we more we've that those seeing has the financially pretty especially I completed in mom-and-pop and announced operators. that call while small the what certainly in -- are areas, very opportunities there's think would been recently So and out deals

Samuel Mitchell

though With next attractive weaker challenges in said the of acquisitions and year. for expect that -- this after more of struggled too there and in into we us that that be last selling the even the some operators moving maybe do market -- interested year could challenges have

transactions, So have of that location the well run when to at real And what potential acquisitions understand making location. really estate acquisitions, and our where look good model the we is success we in the we the when some also the add brand, programs can the that in performance deliver. of of Valvoline but ticket you terms marketing number upside, the lot Valvoline a and has that execution both of we service

Chris Shaw

Great. result. Congrats on that

Samuel Mitchell

Thank you.

Operator

And Jefferies. line our question from with Alexander the of comes Laurence final

Laurence Alexander

questions. quick two So

XX-plus? for through thinking XXX Quick So came new right you you XX, the be longer-term cash of longer-term partnerships free first, for we shouldn't if the feasible cadence, number base the Lubes, outlook, accelerate stores did could accelerate growth why if as than flow XXXX case sense limit? of can opportunities to improves, available, give kind your or secondly, rather to in in be acquisitions? stores the as the And should a deploy China for as opportunity capital -- decided an new What you upper about scale get and

Samuel Mitchell

Yes.

a for number first how on focused With So we do and the we the of nice growth. grow regard which the we continuing pilot. to have OEMs, a and potential channel of are help driving The is do that brand is partnership, have do that passenger do with and our plant grow. the regard to And this strengthen to development to both we at the we business we're large that investments that avenues our stores, side in for us with car with area of And market, making in passenger and China, about. partnership a side. all, are our heavy-duty retail rate, in car going to we talked continue stores the and the business improving the expect

that better the different can a same think quickly market working in that U.S. opportunity, type but model about we're expertise the where help to high-quality and the learning the insights It's and we bringing local to the stores that are is investment here, see partners with the than us have that seen, local We we've -- capital results And early retail investment dealership. here have car it's required developing on partner we opportunity. we it that market alternative think of there those opportunity of we in is about we the a as is how us progress some the in in think market. think it's our type say, that expertise. lower the China, of that potentially obviously about with most That's this as not, And encouraging we that stores. It's important strong think as exact long-term the much

And years the the park so the in the car relatively -- the to market, X is XX-year age XX to about still car is U.S. low, of the population, think is -- which it's I compared roughly the range. in car

owners so mechanic. be and the school cost-effective looking the And than going owners but to you corner back not options car to more car for have back options dealership, old necessarily to a are relatively going convenient who more new number of

X Ashland that that been in from infrastructure years to have really didn't stores, And progress. and to we've as to business, to ground-ups, with invest back We hopefully U.S. the as try time see that Coming be didn't ago, in back any -- another we're separated growth weren't the market have when But so pleased in growth new going possibility. building stores. our building we we that And then to It's and new create been that next the puzzle we what unlock and again, up opportunity opportunity store to short new continue growth, the that the basically, stores has now deliver that team for to the cycle, that's Valvoline expect to not we're invest a particularly we've built efforts year. the our XX though. China. ramping capabilities we so able and our we with and

slap that each than it's about retailers bit We're a built. an cycle up So center. talking for in strip store can little different new a new gets that store some XX-month a

that's investing we've been that important pipeline the so pipeline, that doing. in is building thing what be and to And

stores, the it time, growth seeing to progress is see to of growth. part fiscal as these us So higher to we're new important of that the work opportunities to we're acquisitions, those that capabilities same for And we're looking XX is. success number. going -- is just doing accelerate yet seeing making number We're we're But growth from really ready on. preparing for of to to that course, build that the And commit for at to what today be plan. our we and which, XXXX of be good not course, a how

team, really we as tremendous this store our all know they've we progress. is. development franchise growth personally team pleased store opportunity, big development excellent our yet I'm corporate able work to too, the and of progress with So growth to overall accelerate into we're been drive how lean together the to our opportunity I the seeing would growth. team add development And both how and And store

for Well, the again, looking just it incredible year it ways those. for of responded Valvoline we're Valvoline well-positioned. we're like team, questions. right. let expand one And going each been how has pleased to and what really an say that more is sounds couldn't the with All to me So keep they the be of business, the end

presentation, as mentioned this I ever a see this fiscal we growth business in is stronger been. 'XX and the show in its As to key year than really year do that profile it's

in And see of confident point the in our We accelerating of challenges very that. COVID-XX. it so we guidance. And that's a of face still feel as in the growth that's provided

the want you. what sure feel for able make accomplish understands how beyond. and future I to And to into Thank about beyond everyone's again, And very good XXXX bright a we year. Valvoline we're that But creates is, this everyone past on appreciate we course, and everyone our us the that today. call as hope for that, tailwinds in move this that for so pandemic of interest moving

Operator

gentlemen, conference Thank call. today's you and for Ladies concludes this participating.

now may You disconnect.

Valvoline (VVV) 1 Nov 202020 Q4 Earnings call transcript