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 28, 2023.
Financial Highlights and Summary
"While sales volumes in the second quarter were lighter than we anticipated, we continue to believe that most of our growth this fiscal year will be weighted toward the second half of the year," said Steve Brass, WD-40 Company's president and chief executive officer. "I am pleased to report that we have now made it through most of the price increase related disruptions and the prospects for revenue growth in the back half of the fiscal year are looking optimistic. I am happy to report that it's looking like the month of March, though not yet fully finalized from an accounting perspective, will be a new record sales month for the company."
"In the second fiscal quarter, while we saw double digit sales growth in our Americas segment which has already moved through price-increase related disruptions. Our EMEA and Asia-Pacific segments reported sales that were softer than we would like to see. The disruptions we have been experiencing in EMEA are due primarily to recent price-increase actions coupled with our loss of sales in Russia and Belarus. In our Asia-Pacific segment, we experienced some weaker economic conditions and pricing disruptions in our distributor markets. However, we are expecting a strong comeback in both EMEA and Asia-Pacific in the second half of the fiscal year."
"Although gross margin in the second quarter improved compared to the same period last year, there continues to be pressure on gross margin. Progress is seldom linear, and many factors are currently impacting gross margin. The good news is that we are beginning to see input costs stabilize and inventory levels come down. We are hopeful that this trend will persist, but it continues to be a dynamic environment. We remain confident that our plans to rebuild gross margin will enable us to restore our gross margin to 55 percent or higher," Brass concluded.
Net Sales by Segment (in thousands): |
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Three Months Ended February 28, |
|
Six Months Ended February 28, |
||||||||||||||||||||||||
|
2023 |
|
2022 |
|
Dollars |
|
Change |
|
2023 |
|
2022 |
|
Dollars |
|
Change |
||||||||||||
Americas |
$ |
62,890 |
|
$ |
54,497 |
|
$ |
8,393 |
|
|
|
15 |
% |
|
$ |
120,904 |
|
$ |
110,785 |
|
$ |
10,119 |
|
|
|
9 |
% |
EMEA |
|
46,809 |
|
|
54,063 |
|
|
(7,254 |
) |
|
|
(13 |
)% |
|
|
87,581 |
|
|
111,618 |
|
|
(24,037 |
) |
|
|
(22 |
)% |
Asia-Pacific |
|
20,494 |
|
|
21,426 |
|
|
(932 |
) |
|
|
(4 |
)% |
|
|
46,601 |
|
|
42,329 |
|
|
4,272 |
|
|
|
10 |
% |
Total |
$ |
130,193 |
|
$ |
129,986 |
|
$ |
207 |
|
|
|
- |
|
|
$ |
255,086 |
|
$ |
264,732 |
|
$ |
(9,646 |
) |
|
|
(4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales by Product Group (in thousands): |
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Three Months Ended February 28, |
|
Six Months Ended February 28, |
||||||||||||||||||||||
|
2023 |
|
2022 |
|
Dollars |
|
Change |
|
2023 |
|
2022 |
|
Dollars |
|
Change |
||||||||||
Maintenance products |
$ |
122,104 |
|
$ |
121,901 |
|
$ |
203 |
|
|
- |
|
$ |
238,416 |
|
$ |
247,931 |
|
$ |
(9,515 |
) |
|
|
(4 |
)% |
HCCP (1) |
|
8,089 |
|
|
8,085 |
|
|
4 |
|
|
- |
|
|
16,670 |
|
|
16,801 |
|
|
(131 |
) |
|
|
(1 |
)% |
Total |
$ |
130,193 |
|
$ |
129,986 |
|
$ |
207 |
|
|
- |
|
$ |
255,086 |
|
$ |
264,732 |
|
$ |
(9,646 |
) |
|
|
(4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
(1) Homecare and cleaning products ("HCCP") |
Dividend and Share Repurchase Update
As previously announced, WD-40 Company's board of directors declared on March 21, 2023, a regular quarterly dividend of $0.83 per share payable on April 28, 2023 to stockholders of record at the close of business on April 14, 2023.
On October 12, 2021, the Company's board of directors approved a share buy-back plan that became effective on November 1, 2021. Under the plan, the Company is authorized to acquire up to $75.0 million of its outstanding shares through August 31, 2023. The timing and amount of repurchases will be based on terms and conditions acceptable to the Company and in compliance with applicable laws and regulations. During the period from November 1, 2021 through February 28, 2023, the Company repurchased 170,232 shares at a total cost of $34.8 million under this $75.0 million plan. During the second quarter, the Company repurchased 9,250 shares at a total cost of $1.6 million under this $75.0 million plan.
Updated Fiscal Year 2023 Guidance
The Company updated the following guidance for fiscal year 2023:
This guidance is expressed in good faith and is based on management's current view of anticipated results.
Net sales guidance was calculated using recent foreign currency exchange rates. In constant currency, sales growth projection would be approximately 6.5 to 11.5 percent. This guidance does not include any future acquisitions or divestitures. Unanticipated inflationary headwinds, changes in foreign currency exchange rates, and other unforeseen events may further affect the Company's financial results.
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 $518.8 million in fiscal year 2022 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," "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: 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; the length and severity of the current COVID-19 pandemic and its impact on the global economy and our financial results; changes in the political conditions or relations between the United States and other nations; the impacts from inflationary trends and supply chain constraints; 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 6, 2023. 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, 2022 which the company filed with the SEC on October 24, 2022, and in the Company's Quarterly Report on Form 10-Q for the period ended February 28, 2023, which the Company expects to file with the SEC on April 6, 2023.
Table Notes and General Definition
(1) |
The Company markets maintenance products under the WD-40®, GT85® and 3-IN-ONE® brand names. Currently included in the WD-40 brand are the WD-40® Multi-Use Product, WD-40 Specialist® and WD-40 BIKE® product lines. |
|
(2) |
The Company markets the following homecare and cleaning brands: X-14® automatic toilet bowl cleaners, 2000 Flushes® automatic toilet bowl cleaners, Carpet Fresh® and no vac® rug and room deodorizers, Spot Shot® aerosol and liquid carpet stain removers, 1001® household cleaners and rug and room deodorizers and Lava® and Solvol® heavy-duty hand cleaners. |
|
(3) |
The Americas segment consists of the U.S., Canada, and Latin America. |
|
(4) |
The EMEA segment consists of countries in Europe, the Middle East, Africa and India. |
|
(5) |
The Asia-Pacific segment consists of Australia, China and other countries in the Asia region. |
|
(6) |
Constant currency represents the translation of the current quarter results from the functional currencies of the Company's subsidiaries to U.S. dollars using the exchange rate 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. |
WD-40 COMPANY |
|||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||
(Unaudited and in thousands, except share and per share amounts) |
|||||||
|
|
|
|
|
|
||
|
February 28, |
|
August 31, |
||||
|
2023 |
2022 |
|||||
Assets |
|
||||||
Current assets: |
|
||||||
Cash and cash equivalents |
$ |
37,992 |
|
|
$ |
37,843 |
|
Trade and other accounts receivable, net |
|
100,430 |
|
|
|
89,930 |
|
Inventories |
|
108,565 |
|
|
|
104,101 |
|
Other current assets |
|
16,442 |
|
|
|
17,766 |
|
Total current assets |
|
263,429 |
|
|
|
249,640 |
|
Property and equipment, net |
|
65,791 |
|
|
|
65,977 |
|
Goodwill |
|
95,279 |
|
|
|
95,180 |
|
Other intangible assets, net |
|
5,113 |
|
|
|
5,588 |
|
Operating lease right-of-use assets |
|
8,095 |
|
|
|
7,559 |
|
Deferred tax assets, net |
|
646 |
|
|
|
679 |
|
Other assets |
|
11,984 |
|
|
|
9,672 |
|
Total assets |
$ |
450,337 |
|
|
$ |
434,295 |
|
|
|
|
|
|
|
||
Liabilities and Stockholders' Equity |
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
||
Accounts payable |
$ |
28,534 |
|
|
$ |
32,852 |
|
Accrued liabilities |
|
28,427 |
|
|
|
27,161 |
|
Accrued payroll and related expenses |
|
11,912 |
|
|
|
11,583 |
|
Short-term borrowings |
|
47,477 |
|
|
|
39,173 |
|
Income taxes payable |
|
246 |
|
|
|
51 |
|
Total current liabilities |
|
116,596 |
|
|
|
110,820 |
|
Long-term borrowings |
|
108,309 |
|
|
|
107,139 |
|
Deferred tax liabilities, net |
|
10,447 |
|
|
|
10,528 |
|
Long-term operating lease liabilities |
|
6,381 |
|
|
|
5,999 |
|
Other long-term liabilities |
|
11,332 |
|
|
|
11,185 |
|
Total liabilities |
|
253,065 |
|
|
|
245,671 |
|
|
|
|
|
|
|
||
Commitments and Contingencies |
|
|
|
|
|
||
|
|
|
|
|
|
||
Stockholders' equity: |
|
|
|
|
|
||
Common stock ? authorized 36,000,000 shares, $0.001 par value; |
|
|
|
|
|
||
19,896,477 and 19,888,807 shares issued at February 28, 2023 and |
|
|
|
|
|
||
August 31, 2022, respectively; and 13,578,346 and 13,602,346 shares |
|
|
|
|
|
||
outstanding at February 28, 2023 and August 31, 2022, respectively |
|
20 |
|
|
|
20 |
|
Additional paid-in capital |
|
170,353 |
|
|
|
165,973 |
|
Retained earnings |
|
464,641 |
|
|
|
456,076 |
|
Accumulated other comprehensive loss |
|
(34,865 |
) |
|
|
(36,209 |
) |
Common stock held in treasury, at cost ? 6,318,131 and 6,286,461 |
|
|
|
|
|
||
shares at February 28, 2023 and August 31, 2022, respectively |
|
(402,877 |
) |
|
|
(397,236 |
) |
Total stockholders' equity |
|
197,272 |
|
|
|
188,624 |
|
Total liabilities and stockholders' equity |
$ |
450,337 |
|
|
$ |
434,295 |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
WD-40 COMPANY |
|||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||||||
(Unaudited and in thousands, except per share amounts) |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Three Months Ended February 28, |
|
Six Months Ended February 28, |
||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
$ |
130,193 |
|
|
$ |
129,986 |
|
|
$ |
255,086 |
|
|
$ |
264,732 |
|
Cost of products sold |
|
64,115 |
|
|
|
64,468 |
|
|
|
124,753 |
|
|
|
130,744 |
|
Gross profit |
|
66,078 |
|
|
|
65,518 |
|
|
|
130,333 |
|
|
|
133,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
37,690 |
|
|
|
34,819 |
|
|
|
77,674 |
|
|
|
73,242 |
|
Advertising and sales promotion |
|
5,985 |
|
|
|
5,596 |
|
|
|
11,324 |
|
|
|
11,220 |
|
Amortization of definite-lived intangible assets |
|
250 |
|
|
|
360 |
|
|
|
503 |
|
|
|
723 |
|
Total operating expenses |
|
43,925 |
|
|
|
40,775 |
|
|
|
89,501 |
|
|
|
85,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from operations |
|
22,153 |
|
|
|
24,743 |
|
|
|
40,832 |
|
|
|
48,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
51 |
|
|
|
21 |
|
|
|
95 |
|
|
|
46 |
|
Interest expense |
|
(1,502 |
) |
|
|
(613 |
) |
|
|
(2,671 |
) |
|
|
(1,233 |
) |
Other income (expense), net |
|
165 |
|
|
|
252 |
|
|
|
315 |
|
|
|
(77 |
) |
Income before income taxes |
|
20,867 |
|
|
|
24,403 |
|
|
|
38,571 |
|
|
|
47,539 |
|
Provision for income taxes |
|
4,341 |
|
|
|
4,895 |
|
|
|
8,048 |
|
|
|
9,476 |
|
Net income |
$ |
16,526 |
|
|
$ |
19,508 |
|
|
$ |
30,523 |
|
|
$ |
38,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
$ |
1.21 |
|
|
$ |
1.41 |
|
|
$ |
2.24 |
|
|
$ |
2.76 |
|
Diluted |
$ |
1.21 |
|
|
$ |
1.41 |
|
|
$ |
2.23 |
|
|
$ |
2.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Shares used in per share calculations: |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
13,583 |
|
|
|
13,679 |
|
|
|
13,586 |
|
|
|
13,773 |
|
Diluted |
|
13,608 |
|
|
|
13,704 |
|
|
|
13,608 |
|
|
|
13,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
WD-40 COMPANY |
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
(Unaudited and in thousands) |
|||||||
|
|
|
|
|
|
||
|
Six Months Ended February 28, |
||||||
|
2023 |
|
2022 |
||||
Operating activities: |
|
|
|
|
|
||
Net income |
$ |
30,523 |
|
|
$ |
38,063 |
|
Adjustments to reconcile net income to net cash provided by |
|
|
|
|
|
||
operating activities: |
|
|
|
|
|
||
Depreciation and amortization |
|
3,864 |
|
|
|
4,082 |
|
Net losses (gains) on sales and disposals of property and equipment |
|
83 |
|
|
|
(123 |
) |
Deferred income taxes |
|
(224 |
) |
|
|
367 |
|
Stock-based compensation |
|
4,980 |
|
|
|
4,776 |
|
Unrealized foreign currency exchange gains |
|
(1,820 |
) |
|
|
(110 |
) |
Provision for credit losses |
|
53 |
|
|
|
(55 |
) |
Impairment of inventories |
|
568 |
|
|
|
113 |
|
Changes in assets and liabilities: |
|
|
|
|
|
||
Trade and other accounts receivable |
|
(9,689 |
) |
|
|
(15,178 |
) |
Inventories |
|
(4,159 |
) |
|
|
(20,482 |
) |
Other assets |
|
(780 |
) |
|
|
(4,328 |
) |
Operating lease assets and liabilities, net |
|
60 |
|
|
|
1 |
|
Accounts payable and accrued liabilities |
|
(3,059 |
) |
|
|
9,624 |
|
Accrued payroll and related expenses |
|
260 |
|
|
|
(12,356 |
) |
Other long-term liabilities and income taxes payable |
|
287 |
|
|
|
(311 |
) |
Net cash provided by operating activities |
|
20,947 |
|
|
|
4,083 |
|
|
|
|
|
|
|
||
Investing activities: |
|
|
|
|
|
||
Purchases of property and equipment |
|
(3,571 |
) |
|
|
(3,860 |
) |
Proceeds from sales of property and equipment |
|
290 |
|
|
|
289 |
|
Net cash used in investing activities |
|
(3,281 |
) |
|
|
(3,571 |
) |
|
|||||||
Financing activities: |
|
|
|
|
|
||
Treasury stock purchases |
|
(5,641 |
) |
|
|
(18,165 |
) |
Dividends paid |
|
(21,958 |
) |
|
|
(20,619 |
) |
Repayments of long-term senior notes |
|
(400 |
) |
|
|
(400 |
) |
Net proceeds (repayments) from revolving credit facility |
|
8,305 |
|
|
|
1,238 |
|
Shares withheld to cover taxes upon conversions of equity awards |
|
(600 |
) |
|
|
(4,321 |
) |
Net cash used in financing activities |
|
(20,294 |
) |
|
|
(42,267 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
2,777 |
|
|
|
(884 |
) |
Net increase (decrease) in cash and cash equivalents |
|
149 |
|
|
|
(42,639 |
) |
Cash and cash equivalents at beginning of period |
|
37,843 |
|
|
|
85,961 |
|
Cash and cash equivalents at end of period |
$ |
37,992 |
|
|
$ |
43,322 |
|
|
|
|
|
|
|
These press releases may also interest you
|