~ Third quarter consolidated net sales grew by
15 percent compared to the prior year fiscal quarter ~
~ Foreign currency exchange headwinds continue
to negatively impact reported results ~
~ Board of directors approves new 50 million
share buyback plan to replace expiring plan ~
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
third fiscal quarter ended May 31, 2023.
Financial Highlights and Summary
- Total net sales for the third quarter were $141.7 million, an
increase of 15 percent compared to the prior year fiscal quarter.
Year-to-date total net sales were $396.8 million, an increase of 2
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 an unfavorable
impact on sales for the current quarter and year-to-date. On a
non-GAAP constant currency basis, total net sales would have been
$145.6 million for the third quarter and $415.7 million year to
date.
- Net income for the third quarter was $18.9 million, an increase
of 30 percent from the prior year fiscal quarter. Year-to-date net
income was $49.4 million, a decrease of 6 percent from the prior
year fiscal period.
- Translation of the Company’s foreign subsidiaries’ results from
their functional currencies to U.S. dollars had an unfavorable
impact on net income for the current quarter and year to date. On a
non-GAAP constant currency basis, net income would have been $19.5
million for the third quarter and $52.2 million year to date.
- Diluted earnings per share were $1.38 in the third quarter
compared to $1.07 in the prior year fiscal quarter. Year-to-date
diluted earnings per share were $3.62 compared to $3.82 for the
prior year fiscal period.
- Gross margin was 50.6 percent in the third quarter compared to
47.7 percent in the prior year fiscal quarter. Year-to-date gross
margin was 50.9 percent compared to 49.7 percent in the prior year
fiscal period.
- Selling, general, and administrative expenses were up 14
percent in the third quarter to $38.2 million compared to the prior
year fiscal quarter. Year-to-date selling, general, and
administrative expenses were up 8 percent to $115.9 million
compared to the prior year fiscal period.
- Advertising and sales promotion expenses were up 27 percent in
the third quarter to $7.7 million compared to the prior year fiscal
quarter. Year-to-date advertising and sales promotion expenses were
up 10 percent to $19.0 million compared to the prior year fiscal
period.
“I am happy to share with you that after two quarters of
flat-to-down sales, we have returned to solid top line growth in
the third fiscal quarter,” said Steve Brass, WD-40 Company’s
president and chief executive officer. “As a global company with
more than half of our revenue generated in currencies other than
the U.S. dollar, we are exposed to the effects of changing foreign
currency exchange rates. The impacts of changing foreign currency
exchange rates have had a significant negative impact on our
reported results in both the third quarter and year to date. On a
constant currency basis, global sales were up 18 percent in the
third quarter and 7 percent year to date. We target a compound
annual growth rate for maintenance product revenue in the
mid-to-high single digits on a constant currency basis. Achieving
year to date growth of 7 percent in constant currency is in-line
with our long-term objectives,” Brass concluded.
Net Sales by Segment (in
thousands):
Three Months Ended May
31,
Nine Months Ended May
31,
2023
2022
Dollars
Change
2023
2022
Dollars
Change
Americas
$
71,130
$
61,453
$
9,677
16
%
$
192,034
$
172,238
$
19,796
11
%
EMEA
52,524
49,450
3,074
6
%
140,105
161,068
(20,963
)
(13
)%
Asia-Pacific
18,063
12,764
5,299
42
%
64,664
55,093
9,571
17
%
Total
$
141,717
$
123,667
$
18,050
15
%
$
396,803
$
388,399
$
8,404
2
%
- Net sales by segment as a percentage of total net sales for the
third quarter were as follows: for the Americas, 50 percent; for
EMEA, 37 percent; for Asia-Pacific, 13 percent.
- Net sales in the Americas increased 16 percent in the third
quarter due primarily to higher sales of maintenance products in
the United States, which increased 21 percent compared to the prior
year fiscal quarter. Increased maintenance product sales were
driven primarily by the impact of price increases, which was
partially offset by slightly lower demand which resulted in
decreased sales volume. In Latin America, maintenance product sales
increased 18 percent compared to the prior year fiscal quarter.
Increased maintenance product sales were driven primarily by
wholesale customers purchasing a higher level of product in advance
of planned price increases. Sales were also favorably impacted in
the Company’s direct market in Mexico because of price increases as
well as favorable impacts of foreign currency exchange rates.
Higher sales in the United States and Latin America were partially
offset by lower sales of maintenance products in Canada.
Maintenance product sales in Canada decreased 23 percent compared
to the prior year fiscal quarter due to weaker economic conditions
in certain regions that resulted in lower levels of demand. In the
comparable period of last fiscal year, we experienced a higher
level of demand in the industrial channel of Western Canada because
of increased activity levels of end users in the oil industry due
to market conditions within the industry at that time.
- Net sales in EMEA increased 6 percent in the third quarter
primarily due to price increases across all direct and distributor
markets implemented over the last twelve months. Changes in foreign
currency exchange rates had an unfavorable impact on sales for the
EMEA segment in the third quarter compared to the prior year fiscal
quarter. On a non-GAAP constant currency basis, EMEA sales for the
third quarter would have increased by 13 percent compared to the
prior year fiscal quarter. Direct market sales increased 2 percent
compared to the prior year fiscal quarter as a result of price
increases, which were partially offset by reduced demand driven by
weaker market conditions as well as a lower level of customer
orders and promotional programs. Higher EMEA distributor market
sales, which increased 16 percent compared to the prior year fiscal
quarter, were driven by price increases and the timing of customer
orders. In addition, this is the first time in four quarters that
the Company’s decision to suspend sales in Russia and Belarus did
not negatively impact sales on a year over year basis.
- Net sales in Asia-Pacific increased 42 percent in the third
quarter primarily due to higher sales of maintenance products in
the Asia distributor markets and China, which increased 151 percent
and 39 percent, respectively, compared to the prior year fiscal
quarter. Products sold in these markets are sourced from a
third-party manufacturer located in Shanghai, China. In the
comparable period of last year, both markets were negatively
impacted by the Company being severely restricted from shipping
products due to severe supply chain disruptions caused by lockdown
measures instituted in Shanghai linked to the COVID-19 pandemic.
China and all regions in the Asia distributor markets experienced
higher sales in the third quarter of this year because such
disruptions did not occur this year. In addition, sales in the Asia
distributor markets and China were positively impacted by sales
price increases from period to period. Higher sales in the Asia
distributor markets and China were partially offset by lower sales
in Australia. Sales in Australia decreased 14 percent in the third
quarter primarily due to a decrease in sales volume of homecare and
cleaning products and WD-40® Multi-Use Product, which were driven
by weaker market and economic conditions, as well as unfavorable
changes in foreign currency exchange rates, and the impact of sales
price increases. On a non-GAAP constant currency basis,
Asia-Pacific net sales would have increased by 48 percent compared
to the prior year fiscal quarter.
Net Sales by Product Group (in
thousands):
Three Months Ended May
31,
Nine Months Ended May
31,
2023
2022
Dollars
Change
2023
2022
Dollars
Change
Maintenance products
$
133,325
$
115,494
$
17,831
15
%
$
371,741
$
363,425
$
8,316
2
%
HCCP (1)
8,392
8,173
219
3
%
25,062
24,974
88
—
%
Total
$
141,717
$
123,667
$
18,050
15
%
$
396,803
$
388,399
$
8,404
2
%
(1) Homecare and cleaning products
(“HCCP”)
- Net sales of maintenance products, which are considered the
primary growth focus for the Company, increased 15 percent in the
third quarter when compared to the prior year fiscal quarter. This
is primarily due to increased sales of WD-40® Multi-Use Product in
the United States and the Company’s Asia distributor markets from
period to period.
- Net sales of homecare and cleaning increased 3 percent in the
third quarter compared to the prior year fiscal quarter. This is
primarily due to increased sales of 1001® in the United Kingdom.
The homecare and cleaning products, particularly those in the
United States, are considered harvest brands providing healthy
profit returns to the Company and are becoming a smaller part of
the business as net sales of maintenance products grow in alignment
with the Company’s strategic initiatives.
Dividend and Share Repurchase Update
As previously announced, WD-40 Company’s board of directors
declared on June 20, 2023, a regular quarterly dividend of $0.83
per share payable on July 31, 2023 to stockholders of record at the
close of business on July 14, 2023.
On October 12, 2021, the Company’s board of directors approved a
share repurchase 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. During
the period from November 1, 2021 through May 31, 2023, the Company
repurchased 180,232 shares at a total cost of $36.6 million under
this $75.0 million plan. During the third quarter, the Company
repurchased 10,000 shares at a total cost of $1.8 million under
this $75.0 million plan.
On June 19, 2023, the Company’s board approved a new share
repurchase plan. Under this new plan, which will become effective
on September 1, 2023, the Company is authorized to acquire up to
$50.0 million of its outstanding shares through August 31, 2025.
The timing and amount of repurchases under either 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 to be able to continue to return capital to our
stockholders through regular buy-backs and dividends,” said Sara
Hyzer, WD-40 Company’s vice president and chief financial officer.
“In addition, I am happy to see we have returned to solid top line
growth in the third fiscal quarter. While we are reiterating our
guidance today, we do continue to operate in a volatile
environment, and we will likely come in at the lower end of our
guidance range.”
Reiterated Fiscal Year 2023 Guidance
The Company reiterated the following guidance for fiscal year
2023:
- Net sales growth is projected to be between 3.5 and 7.5 percent
with net sales expected to be between $535 million and $560
million.
- Gross margin for the full year is expected to be between 51 and
52 percent.
- Advertising and promotion investments are projected to be
between 5.0 and 5.5 percent of net sales.
- The provision for income tax is expected to be around 21
percent.
- Net income is projected to be between $64.5 million and $68.5
million.
- Diluted earnings per share is expected to be between $4.80 and
$5.00 based on an estimated 13.6 million weighted average shares
outstanding.
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 non-GAAP 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;
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 July 10, 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 May 31, 2023, which the Company
expects to file with the SEC on July 10, 2023.
Table Notes and General
Definitions
(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)
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)
May 31, 2023
August 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
38,403
$
37,843
Trade and other accounts receivable,
net
100,556
89,930
Inventories
95,326
104,101
Other current assets
15,575
17,766
Total current assets
249,860
249,640
Property and equipment, net
66,636
65,977
Goodwill
95,410
95,180
Other intangible assets, net
4,898
5,588
Operating lease right-of-use assets
7,981
7,559
Deferred tax assets, net
647
679
Other assets
12,618
9,672
Total assets
$
438,050
$
434,295
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
26,780
$
32,852
Accrued liabilities
27,142
27,161
Accrued payroll and related expenses
13,217
11,583
Short-term borrowings
27,256
39,173
Income taxes payable
914
51
Total current liabilities
95,309
110,820
Long-term borrowings
108,893
107,139
Deferred tax liabilities, net
10,531
10,528
Long-term operating lease liabilities
6,200
5,999
Other long-term liabilities
11,290
11,185
Total liabilities
232,223
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 May 31, 2023 and August 31, 2022, respectively; and 13,568,346
and 13,602,346 shares outstanding at May 31, 2023 and August 31,
2022, respectively
20
20
Additional paid-in capital
171,166
165,973
Retained earnings
472,221
456,076
Accumulated other comprehensive loss
(32,910
)
(36,209
)
Common stock held in treasury, at cost —
6,328,131 and 6,286,461 shares at May 31, 2023 and August 31, 2022,
respectively
(404,670
)
(397,236
)
Total stockholders’ equity
205,827
188,624
Total liabilities and stockholders’
equity
$
438,050
$
434,295
WD-40 COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited and in thousands,
except per share amounts)
Three Months Ended May
31,
Nine Months Ended May
31,
2023
2022
2023
2022
Net sales
$
141,717
$
123,667
$
396,803
$
388,399
Cost of products sold
69,955
64,682
194,708
195,426
Gross profit
71,762
58,985
202,095
192,973
Operating expenses:
Selling, general and administrative
38,195
33,621
115,869
106,863
Advertising and sales promotion
7,660
6,022
18,984
17,242
Amortization of definite-lived intangible
assets
250
358
753
1,081
Total operating expenses
46,105
40,001
135,606
125,186
Income from operations
25,657
18,984
66,489
67,787
Other income (expense):
Interest income
69
27
164
73
Interest expense
(1,597
)
(669
)
(4,268
)
(1,902
)
Other income (expense), net
243
(42
)
558
(119
)
Income before income taxes
24,372
18,300
62,943
65,839
Provision for income taxes
5,477
3,820
13,525
13,296
Net income
$
18,895
$
14,480
$
49,418
$
52,543
Earnings per common share:
Basic
$
1.39
$
1.07
$
3.62
$
3.83
Diluted
$
1.38
$
1.07
$
3.62
$
3.82
Shares used in per share calculations:
Basic
13,573
13,656
13,582
13,683
Diluted
13,600
13,680
13,606
13,712
WD-40 COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited and in
thousands)
Nine Months Ended May
31,
2023
2022
Operating activities:
Net income
$
49,418
$
52,543
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
5,939
6,140
Net losses (gains) on sales and disposals
of property and equipment
20
(162
)
Deferred income taxes
(376
)
165
Stock-based compensation
5,793
5,751
Unrealized foreign currency exchange
(gains) losses
(1,780
)
261
Provision for credit losses
18
115
Write-off of inventories
693
456
Changes in assets and liabilities:
Trade and other accounts receivable
(9,015
)
(6,932
)
Inventories
9,826
(42,767
)
Other assets
(326
)
(5,213
)
Operating lease assets and liabilities,
net
55
(2
)
Accounts payable and accrued
liabilities
(7,086
)
9,899
Accrued payroll and related expenses
1,470
(12,085
)
Other long-term liabilities and income
taxes payable
944
(513
)
Net cash provided by operating
activities
55,593
7,656
Investing activities:
Purchases of property and equipment
(4,650
)
(7,115
)
Proceeds from sales of property and
equipment
437
377
Net cash used in investing activities
(4,213
)
(6,738
)
Financing activities:
Treasury stock purchases
(7,434
)
(22,390
)
Dividends paid
(33,273
)
(31,316
)
Repayments of long-term senior notes
(800
)
(800
)
Net (repayments) proceeds from revolving
credit facility
(11,917
)
15,576
Shares withheld to cover taxes upon
conversions of equity awards
(600
)
(4,329
)
Net cash used in financing activities
(54,024
)
(43,259
)
Effect of exchange rate changes on cash
and cash equivalents
3,204
(2,821
)
Net increase (decrease) in cash and cash
equivalents
560
(45,162
)
Cash and cash equivalents at beginning of
period
37,843
85,961
Cash and cash equivalents at end of
period
$
38,403
$
40,799
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230710222075/en/
Media and Investor Contact: Wendy Kelley Vice President,
Stakeholder and Investor Engagement investorrelations@wd40.com
+1-619-275-9304
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