WD-40 Company Reports Second Quarter 2024 Financial Results

SAN DIEGO--(BUSINESS WIRE)--WD-40 Company (NASDAQ:WDFC), a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories and homes around the world, today reported financial results for its second fiscal quarter ended February 29, 2024.

Second Quarter Highlights and Summary:

• Total net sales for the second quarter were $139.1 million, an increase of 7 percent compared to the prior year fiscal quarter. Year-to-date total net sales were $279.5 million, an increase of 10 percent compared to the prior year fiscal period.
• Translation of the Company's foreign subsidiaries' results from their functional currencies to U.S. dollars had a favorable impact on net sales for the current quarter and year-to-date. On a non-GAAP constant currency basis, total net sales in the second quarter would have increased 5 percent to $136.3 million compared to the prior year fiscal quarter and would have increased 7 percent to $272.7 million compared to the prior year fiscal period.
• Gross margin was 52.4 percent in the second quarter compared to 50.8 percent in the prior year fiscal quarter. Year-to-date gross margin was 53.1 percent compared to 51.1 percent in the prior year fiscal period.
• Selling, general, and administrative expenses were up 19 percent in the second quarter to $45.0 million compared to the prior year fiscal quarter. Year-to-date selling, general and administrative expenses were up 15 percent to $89.2 million compared to the prior year fiscal period.
• Advertising and sales promotion expenses were up 12 percent in the second quarter to $6.7 million compared to the prior year fiscal quarter. Year-to-date advertising and sales promotion expenses were up 21 percent to $13.7 million compared to the prior year fiscal period.
• Net income for the second quarter was $15.5 million, a decrease of 6 percent from the prior year fiscal quarter. Year-to-date net income was $33.0 million, an increase of 8 percent from the prior year fiscal period.
• Diluted earnings per share were $1.14 in the second quarter compared to $1.21 in the prior year fiscal quarter. Year-to-date diluted earnings per share were $2.42 compared to $2.23 for the prior year fiscal period.

"We have made significant progress against our Four-by-Four strategic framework including the recent announcement of the acquisition of our Brazilian marketing distributor. Today, we are also announcing the decision to pursue a sale of our U.S. and U.K. Homecare and Cleaning Products portfolio, allowing us to focus on our core, higher-margin maintenance products while also creating headspace for future innovation," said Steve Brass, WD-40 Company's president and chief executive officer.

"For the second quarter, global net sales were up 7 percent over the prior year with growth across all trade blocs. We also continue to expand gross margin, which improved 160 basis points over the prior year. Overall, we are incredibly pleased with our performance and are confident in achieving our long-term targets to drive sustainable, profitable growth," concluded Brass.

Net Sales by Segment (in thousands):

	Three Months Ended February 29/28,															Six Months Ended February 29/28,
	2024				2023				Dollars				Change			2024				2023				Dollars				Change
Americas (1)	$	63,507			$	62,890			$	617			1	%		$	127,582			$	120,904			$	6,678			6	%
EIMEA (2)		54,313				46,809				7,504			16	%			103,067				87,581				15,486			18	%
Asia-Pacific (3)		21,285				20,494				791			4	%			48,872				46,601				2,271			5	%
Total	$	139,105			$	130,193			$	8,912			7	%		$	279,521			$	255,086			$	24,435			10	%

Second Quarter Highlights by Segment:

Americas

• The Americas segment represented 46 percent of total net sales in the second quarter.
• Net sales in the Americas increased 1 percent in the second quarter compared to the prior year fiscal quarter. The increase was primarily due to net sales growth of WD-40_® Multi-Use Product of $0.6 million, or 1 percent, primarily due to increases in Latin America and the U.S. of $1.1 million and $0.7 million, or 12 percent and 2 percent, respectively.
• The increased sales in Latin America were primarily due to higher volumes in Mexico as a result of the timing of customer orders and favorable impacts of changes in foreign exchange rates.

EIMEA

• The EIMEA segment represented 39 percent of total net sales in the second quarter.
• Net sales in EIMEA increased 16 percent in the second quarter compared to the prior year fiscal quarter primarily due to an increase in net sales of WD-40_® Multi-Use Product of 17 percent. WD-40_® Multi-Use Product sales increased most significantly in France, India, and Iberia, which were up $1.0 million, $0.9 million, and $0.6 million, respectively.
• WD-40 Specialist_® and other maintenance product sales increased 23 percent and 17 percent, respectively, primarily due to the combined impact of higher sales volume and the favorable impact of price increases across the regions.
• Translation of the Company's foreign subsidiaries' results from their functional currencies to U.S. dollars had a favorable impact on sales in EIMEA for the current quarter. On a non-GAAP constant currency basis, net sales in EIMEA would have been $51.9 million for the second quarter.

Asia-Pacific

• The Asia-Pacific segment represented 15 percent of total net sales in the second quarter.
• Net sales in Asia-Pacific increased 4 percent in the second quarter compared to the prior year fiscal quarter primarily due to higher sales of WD-40_® Multi-Use Product of 3 percent. Sales in the Asia distributor markets increased 7 percent, primarily due to price increases in these markets and successful promotional programs in certain regions, as well as the timing of customer orders.
• WD-40 Specialist_® and other maintenance product sales remained relatively flat compared to the prior year.
• Homecare and cleaning product sales increased 23 percent due to higher sales volume in Australia attributable to successful promotional activities and improved packaging.
• Translation of the Company's foreign subsidiaries' results from their functional currencies to U.S. dollars had an unfavorable impact on sales in Asia-Pacific for the current quarter. On a non-GAAP constant currency basis, net sales in Asia-Pacific would have been $21.6 million for the second quarter.

Net Sales by Product Group (in thousands):

	Three Months Ended February 29/28,															Six Months Ended February 29/28,
	2024				2023				Dollars				Change			2024				2023				Dollars				Change
WD-40 Multi-Use Product	$	107,234			$	100,261			$	6,973			7	%		$	214,911			$	194,849			$	20,062			10	%
WD-40 Specialist		16,817				15,274				1,543			10	%			33,659				30,680				2,979			10	%
Other maintenance products (5)		7,188				6,569				619			9	%			14,814				12,887				1,927			15	%
Total maintenance products		131,239				122,104				9,135			7	%			263,384				238,416				24,968			10	%
HCCP (6)		7,866				8,089				(223	)		(3	)%			16,137				16,670				(533	)		(3	)%
Total	$	139,105			$	130,193			$	8,912			7	%		$	279,521			$	255,086			$	24,435			10	%

• Net sales of maintenance products, which are considered the primary growth focus for the Company, represented 94 percent of total net sales in the second quarter. Net sales of maintenance products increased 7 percent in the second quarter when compared to the prior year fiscal quarter primarily due to higher sales of WD-40_® Multi-Use Product in EIMEA.
• Net sales of homecare and cleaning products represented 6 percent of total net sales in the second quarter. Net sales of the homecare and cleaning products declined 3 percent in the second quarter when compared to the prior year fiscal quarter.

Dividend and Share Repurchase Update

• On March 19, 2024, the Company's board of directors declared a regular quarterly dividend of $0.88 per share payable on April 30, 2024 to stockholders of record at the close of business on April 19, 2024.
• On June 19, 2023, the Company's board approved a share repurchase plan that became effective on September 1, 2023. Under the plan, the Company is authorized to acquire up to $50.0 million of its outstanding shares through August 31, 2025.
• During the period from September 1, 2023 through the end of the second quarter, the Company repurchased 23,000 shares at a total cost of $5.3 million under this $50.0 million plan.
• The timing and amount of repurchases under the plan are based on terms and conditions as may be acceptable to the Company's chief executive officer and chief financial officer, subject to present loan covenants, and in compliance with all laws and regulations applicable thereto.

"We are pleased with our solid performance and progress against our Four-by-Four strategic framework. In the second quarter, we went live with the first, and most significant phase of our enterprise resource planning system, which is a key enabler to drive efficient productivity," said Sara Hyzer, WD-40 Company's vice president, finance and chief financial officer. "Based on our year-to-date performance, we are raising the low-end of our full year 2024 gross margin guidance and increasing our net income and diluted earnings per share guidance."

Updating Fiscal Year 2024 Guidance

The Company is providing the following guidance for fiscal year 2024:

• Reiterating net sales growth between 6 and 12 percent, with net sales expected to be between $570 million and $600 million on a non-GAAP constant currency basis.
• Narrowing the gross margin range to now be between 51.5 and 53 percent, compared to prior guidance of between 51 and 53 percent.
• Advertising and promotion investments are still expected to be between 5 and 6 percent of net sales.
• Lowering the provision for income tax to now be in the range of 23 and 24 percent, compared to prior guidance of between 24 and 25 percent.
• Increasing net income to now be in the range of $67.7 million and $71.8 million, compared to prior guidance of between $65 million and $70 million.
• Increasing diluted earnings per share to now be in the range of $5.00 and $5.30, compared to prior guidance of between $4.78 and $5.15.
• Diluted earnings per share guidance is based on an estimated 13.6 million weighted average shares outstanding, which is unchanged from prior guidance.

This guidance is expressed in good faith and is based on management's current view of anticipated results. Unanticipated inflationary headwinds and other unforeseen events may further affect the Company's financial results. Net sales presented on a non-GAAP constant currency basis use weighted average fiscal year 2023 foreign currency exchange rates.

Webcast Information

As previously announced, WD-40 Company management will host a live webcast at approximately 2:00 p.m. PDT today to discuss these results. Other forward-looking and material information may also be discussed during this call. Please visit http://investor.wd40company.com for more information and to view supporting materials.

About WD-40 Company

WD-40 Company is a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories, and homes around the world. The Company owns a wide range of well-known brands that include maintenance products and homecare and cleaning products: WD-40_® Multi-Use Product, WD-40 Specialist_®, 3-IN-ONE_®, GT85_®, 2000 Flushes_®, no vac_®, 1001_®, Spot Shot_®, Lava_®, Solvol_®, X-14_®, and Carpet Fresh_®.

Headquartered in San Diego, California, USA, WD-40 Company recorded net sales of $537.3 million in fiscal year 2023 and its products are currently available in more than 176 countries and territories worldwide. WD-40 Company is traded on the NASDAQ Global Select Market under the ticker symbol "WDFC." For additional information about WD-40 Company please visit http://www.wd40company.com.

Forward-Looking Statements

Except for the historical information contained herein, this press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect the Company's current expectations with respect to currently available operating, financial and economic information. These forward-looking statements are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated in or implied by the forward-looking statements. These forward-looking statements are generally identified with words such as "believe," "expect," "intend," "plan," "project," "could," "may," "aim," "anticipate," "target," "estimate" and similar expressions.

Our forward-looking statements include, but are not limited to, discussions about future financial and operating results, including: expected benefits from the acquisition transaction; acquired business not performing as expected; assuming unexpected risks, liabilities and obligations of the acquired business; disruption to the parties' business as a result of the announcement and acquisition transaction; integration of acquired business and operations into the company; growth expectations for maintenance products; expected levels of promotional and advertising spending; anticipated input costs for manufacturing and the costs associated with distribution of our products; plans for and success of product innovation; the impact of new product introductions on the growth of sales; anticipated results from product line extension sales; expected tax rates and the impact of tax legislation and regulatory action; changes in the political conditions or relations between the United States and other nations; the impacts from inflationary trends and supply chain constraints; changes in interest rates; and forecasted foreign currency exchange rates and commodity prices.

The Company's expectations, beliefs and forecasts are expressed in good faith and are believed by the Company to have a reasonable basis, but there can be no assurance that the Company's expectations, beliefs or forecasts will be achieved or accomplished. All forward-looking statements reflect the Company's expectations as of April 9, 2024. We undertake no obligation to revise or update any forward-looking statements.

Actual events or results may differ materially from those projected in forward-looking statements due to various factors, including, but not limited to, those identified in Part I-Item 1A, "Risk Factors," in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2023 which the Company filed with the SEC on October 23, 2023, and in the Company's Quarterly Report on Form 10-Q for the period ended February 29, 2024, which the Company expects to file with the SEC on April 9, 2024.

Table Notes and General Definitions

(1)		The Americas segment consists of the U.S., Canada and Latin America.
(2)		The EIMEA segment consists of countries in Europe, India, the Middle East and Africa.
(3)		The Asia-Pacific segment consists of Australia, China and other countries in the Asia region.
(4)		The DACH region is comprised of the countries of Germany, Austria and Switzerland.
(5)		The Company markets its other maintenance products under the GT85® and 3-IN-ONE® brand names.
(6)		The Company markets its homecare and cleaning products ("HCCP") under the X-14®, 2000 Flushes®, Carpet Fresh®, no vac®, Spot Shot®, 1001®, Lava®, and Solvol® brand names.
(7)		In order to show the impact of changes in foreign currency exchange rates on our results of operations, we have included constant currency disclosures, where necessary, in this press release. Constant currency disclosures represent the translation of our current fiscal year revenues, expenses and net income from the functional currencies of our subsidiaries to U.S. dollars using the exchange rates in effect for the corresponding period of the prior fiscal year. Results on a constant currency basis are not in accordance with accounting principles generally accepted in the United States of America ("non-GAAP") and should be considered in addition to, not as a substitute for, results prepared in accordance with U.S. GAAP. We use results on a constant currency basis as one of the measures to understand our operating results and evaluate our performance in comparison to prior periods in order to enhance the visibility of the underlying business trends, excluding the impact of translation arising from foreign currency exchange rate fluctuations. Management believes this non-GAAP financial measure provides investors with additional financial information that should be considered when assessing our underlying business performance and trends. However, reference to constant currency basis should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP.

WD-40 COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited and in thousands, except share and per share amounts)
	February 29, 2024				August 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	55,443			$	48,143
Trade and other accounts receivable, net		104,794				98,039
Inventories		78,029				86,522
Other current assets		12,248				15,821
Total current assets		250,514				248,525
Property and equipment, net		64,575				66,791
Goodwill		95,499				95,505
Other intangible assets, net		4,165				4,670
Right-of-use assets		10,968				7,820
Deferred tax assets, net		1,189				1,201
Other assets		15,111				13,454
Total assets	$	442,021			$	437,966
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	32,405			$	30,826
Accrued liabilities		31,710				30,000
Accrued payroll and related expenses		14,869				16,722
Short-term borrowings		29,790				10,800
Income taxes payable		1,657				494
Total current liabilities		110,431				88,842
Long-term borrowings		85,894				109,743
Deferred tax liabilities, net		10,987				10,305
Long-term operating lease liabilities		5,509				5,832
Other long-term liabilities		12,922				13,066
Total liabilities		225,743				227,788
Commitments and Contingencies
Stockholders' equity:
Common stock - authorized 36,000,000 shares, $0.001 par value; 19,920,049 and 19,905,815 shares issued at February 29, 2024 and August 31, 2023, respectively; and 13,554,668 and 13,563,434 shares outstanding at February 29, 2024 and August 31, 2023, respectively		20				20
Additional paid-in capital		173,263				171,546
Retained earnings		487,233				477,488
Accumulated other comprehensive loss		(31,249	)			(31,206	)
Common stock held in treasury, at cost - 6,365,381 and 6,342,381 shares at February 29, 2024 and August 31, 2023, respectively		(412,989	)			(407,670	)
Total stockholders' equity		216,278				210,178
Total liabilities and stockholders' equity	$	442,021			$	437,966

WD-40 COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited and in thousands, except per share amounts)
	Three Months Ended February 29/28,								Six Months Ended February 29/28,
	2024				2023				2024				2023
Net sales	$	139,105			$	130,193			$	279,521			$	255,086
Cost of products sold		66,164				64,115				131,027				124,753
Gross profit		72,941				66,078				148,494				130,333
Operating expenses:
Selling, general and administrative		45,023				37,690				89,158				77,674
Advertising and sales promotion		6,725				5,985				13,708				11,324
Amortization of definite-lived intangible assets		252				250				503				503
Total operating expenses		52,000				43,925				103,369				89,501
Income from operations		20,941				22,153				45,125				40,832
Other income (expense):
Interest income		66				51				140				95
Interest expense		(1,008	)			(1,502	)			(2,154	)			(2,671	)
Other (expense) income, net		(193	)			165				(233	)			315
Income before income taxes		19,806				20,867				42,878				38,571
Provision for income taxes		4,270				4,341				9,860				8,048
Net income	$	15,536			$	16,526			$	33,018			$	30,523
Earnings per common share:
Basic	$	1.14			$	1.21			$	2.43			$	2.24
Diluted	$	1.14			$	1.21			$	2.42			$	2.23
Shares used in per share calculations:
Basic		13,558				13,583				13,559				13,586
Diluted		13,583				13,608				13,583				13,608

WD-40 COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and in thousands)
	Six Months Ended February 29/28,
	2024				2023
Operating activities:
Net income	$	33,018			$	30,523
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,683				3,864
Net (gains) losses on sales and disposals of property and equipment		(108	)			83
Deferred income taxes		711				(224	)
Stock-based compensation		4,137				4,980
Amortization of implementation costs associated with cloud computing arrangements		313				150
Unrealized foreign currency exchange losses (gains)		245				(1,820	)
Provision for credit losses		122				53
Write-off of inventories		1,088				568
Changes in assets and liabilities:
Trade and other accounts receivable		(7,071	)			(9,689	)
Inventories		7,267				(4,159	)
Other assets		(2,256	)			(930	)
Operating lease assets and liabilities, net		(16	)			60
Accounts payable and accrued liabilities		3,612				(3,059	)
Accrued payroll and related expenses		(1,872	)			260
Other long-term liabilities and income taxes payable		1,019				287
Net cash provided by operating activities		44,892				20,947
Investing activities:
Purchases of property and equipment		(2,092	)			(3,571	)
Proceeds from sales of property and equipment		349				290
Net cash used in investing activities		(1,743	)			(3,281	)
Financing activities:
Treasury stock purchases		(5,319	)			(5,641	)
Dividends paid		(23,273	)			(21,958	)
Repayments of long-term senior notes		(400	)			(400	)
Net (repayments) proceeds from revolving credit facility		(4,177	)			8,305
Shares withheld to cover taxes upon conversions of equity awards		(2,420	)			(600	)
Net cash used in financing activities		(35,589	)			(20,294	)
Effect of exchange rate changes on cash and cash equivalents		(260	)			2,777
Net increase in cash and cash equivalents		7,300				149
Cash and cash equivalents at beginning of period		48,143				37,843
Cash and cash equivalents at end of period	$	55,443			$	37,992

Contacts

Media and Investor Contact:
Wendy Kelley
Vice President, Stakeholder and Investor Engagement
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