WD-40 Company Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Sales Overview: Third quarter net sales $156.9 million, record sales quarter. Adjusting for foreign currency, net sales up 2%. Maintenance products net sales $150.4 million, up 2% Y/Y, YTD up 6%.
• Must-Win Battles:
  • Lead geographic expansion: WD-40 Multi-Use Product YTD sales up 6%, strong growth in key markets.
  • Accelerating premiumization: WD-40 Smart Straw and EZ-REACH combined sales up 7% YTD, targeting CAGR >10% for premiumized products.
  • Drive WD-40 Specialist growth: YTD sales $59.8 million, up 11%, targeting CAGR >15%.
  • Turbocharge digital commerce: E-commerce sales up 11% YTD, digital as tool for brand awareness.
• Strategic Enablers:
  • People-first mindset: Average employee tenure at WD-40 is 8 years, double the US median.
  • Enduring business for future: New citizenship framework with pillars training, preparation, restoration; e.g., training the trades program.

Segment Performance

• Americas: Sales increased 4% in Q3 to $78.2 million, adjusting for foreign currency impact, net sales would have increased 7%. Maintenance products sales rose 4% to $75 million, making up 50% of global business. Higher sales in US offset by lower sales in Canada.
• EIMEA: Total sales declined 5% to $56.7 million, 36% of global business. Maintenance products sales decreased 3% to $55.6 million. However, strong sales trends in direct markets like France, DACH, Iberia, and UK. WD-40 Specialist sales up 15%.
• Asia Pacific: Sales increased 7% to $22 million, 14% of global business. Maintenance products sales rose 9% to $19.8 million, driven by growth in China and Asia distributor markets. WD-40 Specialist sales up 6%.

Guidance

• Net sales growth from pro forma 2024 results narrowed to 6%-9%, net sales $600M-$620M after foreign currency adjustment.
• Full year gross margin expected 55%-56%.
• Operating income $96M-$101M (7%-12% growth over pro forma 2024).
• Diluted EPS $5.30-$5.60 (12%-18% growth over pro forma 2024).

Risks

• Cost volatility, tariffs, timing of supply chain cost initiatives, and progress on asset divestitures.
• Unpredictability in emerging markets like Turkey and Middle East due to market fluctuations and supply chain transitions.

Q: Daniel Rizzo asked about the wide Q4 guidance and potential risks to the low end, and why the guidance is wide.

A: Steve Brass and Sara Hyzer responded that guidance is narrowed based on clearer view near year-end, with fourth quarter being a tough comparable. Promotional activity and timing of orders in marketing distributor markets can cause variability.

Q: Mike Baker asked about changes in top line guidance, profitability increase, promotional activity vs sales as a percent, FX impact, and tariffs.

A: Steve Brass and Sara Hyzer explained that guidance narrowing is due to clearer year-end view, profitability increase due to margin and currency impacts, promotional activity is part of brand building, FX expected to be a positive in fourth quarter for Europe but Mexican and Brazilian currencies remain headwinds, and tariffs have minimal impact on customer order trends.