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:
"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
EIMEA
Asia-Pacific
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 |
% |
Dividend and Share Repurchase Update
"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:
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 |
|
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