WD-40 Company

Ladies and gentlemen, thank you for standing by. Good day and welcome to the WD-40 Company second quarter fiscal year 2021 earnings conference call. Today's call is being recorded. At this time, all participants are in a listen-only mode. At the end of the prepared remarks, we will conduct a question and answer session. To register a question at any time during this call, please press star 1 on your telephone keypad. Please make sure your mute function is turned off to allow your signal to reach our equipment. If at any time during the conference you need to reach an operator, please press star zero on your telephone keypad. I will now turn the presentation over to your host today, Mrs. Wendy Kelly, Director of Industrial Relations and Corporate Communications. Please proceed.

Thank you. Good afternoon, and thanks to everyone for joining us today. On our call today are WD-40 Company's Chairman and Chief Executive Officer, Gary Ridge, Vice President and Chief Financial Officer, Jay Remboldt, and President and Chief Operating Officer, Steve Brass. In addition to the financial information presented on today's call, we encourage investors to review our earnings presentation, earnings press release, and Form 10-Q for the period ending February 28, 2021. These documents are available on our investor relations website at investor.wd40company.com. A replay and transcript of today's call will also be made available at that location shortly after this call. On today's call, we will discuss certain non-GAAP measures. The descriptions and reconciliations of these non-GAAP measures are available in our SEC filings as well as our earnings presentation. As a reminder, today's call includes forward-looking statements about our expectations for the company's future performance. Of course, actual results could differ materially. The company's expectations, beliefs, and projections are expressed in good faith, but there can be no assurance that they will be achieved or accomplished. Please refer to the risk factors detailed in our SEC filings for further discussion. Finally, for anyone listening to a webcast replay or reviewing a written transcript of this call, please note that all information presented is current only as of today's date, April 8, 2021. The company disclaims any duty or obligation to update any forward-looking information, whether as a result of new information, future events, or otherwise. With that, I'd now like to turn the call over to Gary.

Thank you, Wendy. G'day and thanks for joining us for today's conference call. Jay, Steve, Wendy and I are once again dialing in from our respective homes. We hope that you and your families are staying safe and healthy. Our tribe continues to work together through the challenges and opportunities associated with the COVID-19 pandemic. We continue to experience very high demand for our maintenance products due to the renovation trends associated with the pandemic, or what we call isolation renovation. As a result, today we reported net sales of $111.9 million for the second quarter of fiscal year 2021, up 12% compared to the second quarter of last year. Translation of our foreign subsidiaries' results from their functional currencies to the US dollar had a favorable impact on sales in the second quarter. On a constant currency basis, sales would have been $109.2 million, up 9% compared to the second quarter of last year. Net income for the second quarter was $17.2 million compared to $14.3 million last year. Diluted earnings per share for the second quarter was $1.24 compared to $1.04 for the same period last year. I do want to caution investors that due to the uncertainty the health crisis continues to present, it is very difficult for us to estimate how our business will be impacted by the pandemic over the short to medium term. We offer a variety of maintenance products that have been in very high demand due to renovation trends associated with the pandemic. However, the pandemic has also caused some disruptions and constraints to our supply chain, primarily in the United States. Steve will share these puts and takes with you in greater detail in a moment. But first, I'm going to share a quick update with you on our strategic initiatives. As you know, our growth aspirations are to drive consolidated net sales to approximately 700 million and to do so while following our 55-30-25 business model. Strategic initiative number one is to grow WD-40 multi-use product. Our goal under this initiative is to make the blue and yellow can with a little red top available to more people in more places who will find more uses more often. In the second quarter, sales of WD-40 multi-use product were 86.4 million, up 14% compared to last year. This increase was driven primarily by increased sales in EMA and Asia Pacific, which increased 22% and 34% respectively. The increase in WD-40 multi-use product sales in EMA was driven primarily by increased end-user demand linked to isolation innovation trends throughout the trading block. In Asia Pacific, we experienced significantly improved market conditions in China compared to the second quarter of last year. You will recall our China market was materially impacted during the second quarter of fiscal 2020 due to the COVID-19 outbreak in the country. Our long-term growth aspirations for this strategic initiative is to grow WD-40 multi-use product to approximately $530 million over the long term. Strategic initiative number two is to grow the WD-40 specialist product lines. In the second quarter, sales of WD-40 specialists increased 4% globally to $9.2 million compared to the second quarter of last year. This growth was driven by strong e-commerce sales as well as increased demand linked to renovation trends associated with the pandemic. These trends led to increased sales in EMA and Asia-Pacific of 30% and 102% respectively, but were partially offset by a 36% sales decline in the Americas linked entirely to the pandemic-related supply chain disruptions in the United States. End-user demand for WD-40 specialist products remains exceptionally high in all three trading blocks. Therefore, we are optimistic about the long-term opportunities for WD-40 specialists and believe we can grow the product line to approximately $100 million in revenue over the long term. Strategic initiative number three is to broaden product and revenue base. Strategic initiative number three includes 3-in-1, WD-40 bike, GT85, 1001, Spot Shot, Solvol, Lava and Novak. Global sales of the products included under this initiative were $13.7 million in the second quarter, up 7% compared to last year. Global sales of WD-40 bike remained particularly strong in the second quarter, up nearly 34% compared to last year, as people are buying, fixing and riding bicycles more often due to the pandemic. We believe we are on track to reach a combined revenue for these products of approximately $70 million over the longer term. Strategic initiative number four is attract, develop and retain outstanding tribe members. Our goal under this initiative is to attract, develop and retain talented tribe members and to grow our tribe member engagement to greater than 95%. We had last measured tribe member engagement levels immediately before the pandemic began. At that time, our overall global employee engagement score was 93%. I am not sure we would have thrived during the pandemic had we had not entered it with a highly engaged workforce. As we approached the one-year anniversary of the pandemic, we decided to conduct a brief tribal check-in to measure the engagement level of our tribe one year into being in an almost entirely virtual work environment. I'm happy to share with you that the results from that survey were very positive and we have been able to maintain our employee engagement levels. In addition, we've learned from the survey that 98% of our tribe is excited about WD40 Company's future direction. This metric improved four percentage points since our last survey, which I believe has to do with trust. Our tribe is more confident about our future because together we successfully navigated a very turbulent year and we are emerging from it stronger and a more intact tribe than ever before. I want to take a moment to thank the tribe for their hard work and for their dedication during these challenging times. You have reinforced something to me that I have already knew. Purpose-driven, passionate people guided by values create amazing outcomes. Strategic initiative number five is operational excellence. Our goal under this initiative is best summarized by one of our core values here at WD-40 Company, make it better than it is today. Our commitment to operational excellence continues to be an enormous asset as we continue to navigate the challenges associated with the pandemic. Using our 55-30-25 business model as a framework, we measure ourselves against this operational excellence initiative. That's it for my update. I will now pass the call to Steve, who will share an overview of our sales results with you and discuss some other developments.