Valvoline(US:VVV)2022-02-09 21:52Financial Data and Key Metrics Changes - Valvoline reported a 31% growth in total sales for Q1 2022, with adjusted EBITDA increasing by 5% and adjusted EPS growing by 12% [8][9][24] - The company expects a revenue CAGR of 14% and an adjusted EBITDA CAGR of 13% since 2019 [10] Business Line Data and Key Metrics Changes - Retail Services segment achieved a 36% sales growth year-over-year, with nearly 25% same-store sales growth [11][12] - Global Products sales increased by 28% year-over-year, with a solid contribution across regions despite supply chain challenges [16][22] Market Data and Key Metrics Changes - Retail Services saw system-wide store sales grow by 31% over the last year, driven by same-store sales and unit growth [11] - Global Products experienced a 32% sales increase compared to the pre-pandemic period of fiscal Q1 2020 [16] Company Strategy and Development Direction - The company is pursuing a separation of its Global Products and Retail Services businesses to enhance operational focus and shareholder value [30][31] - Valvoline is piloting an electric vehicle service package to cater to the growing EV market, indicating a strategic shift towards new service offerings [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in recovering cost increases through pricing actions, despite ongoing inflationary pressures [20][49] - The company remains optimistic about its growth trajectory, citing strong demand for its products and services [32][86] Other Important Information - Valvoline plans to continue its share repurchase strategy, having returned $54 million to shareholders in Q1 [27][33] - The company anticipates total sales growth of roughly 20% for the fiscal year, driven by volume growth and pricing strategies [28] Q&A Session Summary Question: Can you separate price and volume for North America sales? - Management indicated that the volume benefit in the Global Products business was about $28 million, while the price cost lag impact was approximately negative $30 million [38] Question: Who owns the IP to the Valvoline brand post-separation? - Both segments will have access to the Valvoline brand, and a long-term supply contract will be established between Retail Services and Global Products [40] Question: What is the outlook for gross margins? - Management noted a sequential gross margin decline due to inflationary pressures across various raw materials, but they are optimistic about recovering costs through pricing adjustments [46][49] Question: How is the retail services business performing quarter to date? - Management reported good momentum in the second quarter, overcoming initial disruptions from Omicron and focusing on staffing stability [78] Question: Will the separation of businesses occur this year? - Management expects to complete the separation within the fiscal year, emphasizing a disciplined approach to ensure shareholder value [70]