WD-40 Company Q2 FY2026 earnings call

Must-Win Battles - Lead geographic expansion: Year-to-date sales of W40 multi-use products up 6% y-t-d. Strong performance in Americas and EMEA, with growth in key markets. - Accelerating premiumization: Year-to-date combined sales of W40 SmartStraw and EasyReach up 9% y-t-d. Premiumized products represent ~50% of W40 multi-use product sales. - Drive W40 specialist growth: Year-to-date sales of W40 specialist up 19% y-t-d. Launch of bio-based multi-use lubricant in European markets in second half of fiscal year. - Turbocharge digital commerce: Year-to-date e-commerce sales up 23% y-t-d, driven by strong momentum in U.S. and China. ### Strategic Enablers - Operational excellence in the supply chain: Global on time in full performance of 96% in second quarter. Decentralized global supply chain provides resilience and agility. Added new manufacturing partner in IMEA. - Drive productivity through enhanced systems: Deploying AI-enabled platforms like Microsoft Dynamics 365, Salesforce, and Atlas for supply chain. Making progress in ERP implementation, with new system live in Canada covering ~half of global revenue.

Consolidated net sales were 161.7 million, up 11% y-o-y. Maintenance products accounted for ~97% of total net sales, with net sales of 156.8 million, up 13% y-o-y (6% on constant currency). Americas: Sales 71.8 million, up 10% y-o-y. Maintenance products sales 69.1 million, up 11% y-o-y. U.S. maintenance products sales up 15%, W40 multi-use products in U.S. up 15%. Latin America had modest sales growth, Canada had softer sales. Home care and cleaning product sales declined 13%. IMEA: Sales 64.9 million, up 9% y-o-y (down 3% on constant currency). Direct markets sales up 12%, distributor markets sales up 1%. Divestiture of UK home care and cleaning portfolio negatively impacted sales by 1.5 million. Asia Pacific: Sales 25 million, up 19% y-o-y (16% on constant currency). Driven by higher sales in China and Asia distributor market. W40 multi-use products and W40 specialists had strong growth.

Reaffirming full year 2026 guidance. Expect net sales after adjusting for foreign currency impacts between 630-655 million (5-9% growth from pro forma 2025 results). In reported currency, revenues between 650-680 million. Gross margin expected to be between 55.5-56.5%. Advertising and promotion investment projected to be around 6% of net sales. Operating income expected to be between 103-110 million. Provision for income tax expected to be between 22.5-23.5%. Diluted earnings per share expected to be between 5.75-6.15. Assumptions include crude oil prices between 95-115 per barrel and average Euro to US dollar exchange rate of ~1.15 for back half of year.

Geopolitical developments in the Middle East have led to increased cost of certain petroleum-based specialty chemicals and other input costs. There is a delay of 90-120 days for changes in raw material costs to impact cost of products sold. Sales to the region directly affected by current geopolitical tensions represented ~3% of global sales in fiscal year 2025. Potential impact on working capital due to inventory building.

Q: Michael Baker asked about the change in guidance regarding margins and profitability.

A: They are maintaining revenue growth expectation in mid to high single digits. Given growth margins and mitigation actions, they believe they're within the range but not necessarily mid to high end for other metrics.

Q: Michael Baker asked about the change in oil price expectation.

A: Previously was 65-85, now 95-115, which starts to impact in fourth quarter.

Q: David Shaikno asked about drivers of Asia Pacific specialist growth.

A: New distribution, promotions, innovation and new products across the region.

Q: David Shaikno asked about premiumized products.

A: No change in outlook, they see continued growth with long runway.

Q: Daniel Rizzo asked about mitigation efforts and impact on P&L.

A: Impact in fourth quarter, elevated inventories have already affected working capital.

Q: Daniel Rizzo asked about bio-based product.

A: Launching in seven or eight European countries this quarter, plans to roll out globally, reduces dependence on oil over time.

Q: Aaron Reed asked about key assumptions underpinning guidance.

A: Fair amount of inventory, strong basis in U.S., Europe coming back, China delivering solid growth, but some downside risk in Asia.

Q: Aaron Reed asked about performance in Asia and sustainability.

A: Driven by China's continuous strong results, Asia distributors rebounding, Australia set for good growth.

Q: Aaron Reed asked about European business recovery.

A: Direct markets in Europe up ~4%, one distributor issue was the main drag, expect stronger growth in second half.

Q: Aaron Reed asked about earnings miss perception.

A: They think the headline was due to pulling the wrong non-GAAP EPS number from last year.