WD-40 Company

Today, and welcome to the WD-40 Company Third 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 to ask 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 your conference you need to reach an operator, please press star zero on your telephone keypad. I'd now like to turn the presentation over to the host for today's call. It's Wendy Keller, Director of Investor 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 Rumboltz, 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 May 31, 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, July 7th, 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. 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. In the third quarter, we experienced unprecedented demand for our maintenance products, and today we reported net sales of $136.4 million for the third quarter of fiscal year 2021, up 39% compared to the third quarter of last year, and a new all-time record quarter. The pandemic has created both headwinds and tailwinds for our business. In the third quarter of last fiscal year, we experienced a strong headwind and our sales results were negatively impacted by disruptions related to COVID-19 pandemic. Over the last year, we have experienced a myriad of lockdown measures, various disruptions in our US supply chain and increasingly higher costs. However, these challenges have been more than offset by significant tailwinds. Due to the shift in consumer spending and the isolation renovation trends that we have associated with the pandemic, millions of end users have been introduced to our brands for the very first time. In addition, our robust tribal culture and increased focus on our must-win battles have enabled us to mitigate many of the adverse impacts COVID-19 has had on our business. The tribe's efforts have enabled us to meet most of the very high demands we experience for our maintenance products. As a result, we experienced a 45% increase in sales of maintenance products during the third quarter compared to the same period last year. In addition, translation of our foreign subsidiaries' results from their functional currencies to the US dollar had a favourable impact on sales in the third quarter. On a constant currency basis, sales would have been 128.7 million, up 31% compared to the third quarter of last year. Steve will talk to you in a few minutes about the sales trends we experienced in the quarter in each of our trading blocks. But first, I'm going to share an update with you on our strategic initiatives. When the pandemic began, like many other companies, we were uncertain what impacts it would have on our business. We knew that we were going to face some challenging times. However, we also knew that we had a strong tribe who was dedicated to our brands and to our end users. And we had a famous brand that people trust, which could bring certainty to both our customers and our end users in uncertain times. We had a strategy with supporting tactics, also known as our must-win battles, that focused us on driving long-term sustainable growth. We knew that there would be some choppy waters ahead, but we were well positioned to navigate them. I always say a smooth sea never made a skilled sailor. Our tribe has learned a tremendous amount from operating under this environment. We have been thrust into in the last year and a half. We know that the consumer spending patterns, or what we refer to as isolation renovation, will not last forever. As things get back to normal from the post-pandemic, consumer spending patterns will change and our sales volumes will most likely return to more normal growth patterns. However, we do believe that the shift in consumer spending patterns associated with the pandemic will benefit us over the long term. We know that new end users have been introduced to our variants for the very first time and history tells us that our brand is a sticky brand. This means a high possibility that the buying behaviours we have been experiencing during the pandemic have created permanent users of our maintenance products. Having said all that, we continue to think that our 2025 targets are just as probably wrong and just as roughly right as before we went into the pandemic. However, We will be up against sizable, comparable periods in the next few quarters. In addition, the currency tailwinds we're currently experiencing will likely turn into headwinds at some point in the future. Taking those additional factors into consideration, we are adjusting our 2025 revenue targets today to a range of between $650 and $700 million. We believe we can successfully bring these targets within the reach by the end of fiscal year 2025, and we will strive to do so while following our 55-30-25 business model. Now I'd like to turn to an update on our strategic initiatives. 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, the little red top, available to more people in more places who will find more uses more often. In the third quarter, sales of WD-40 multi-use product increased 45% globally to $104.1 million compared to the third quarter of last year. Strategic initiative number two is to grow the WD-40 specialist product line. Our goal under this initiative is to leverage our most iconic asset, the blue and yellow can with little red top, and grow the WD-40 specialist product line through continued geographic expansion as well as by developing new products and product categories. In the third quarter, sales of WD-40 specialists increased 24% globally to $11.2 million compared to the third quarter of last year. Strategic initiative number three is to broaden product and revenue base. Our goal under this initiative is to leverage the recognised strengths of WD-40 companies to derive revenue from existing brands as well as from new sources and products. Strategic initiative number three includes well-known brands such as 3-in-1, WD-40 Bike, GT85, 1001, SpotShot, Solvol, Lava and Novick. In the third quarter, sales of products included under this initiative increased 32% globally to 18.6 million compared to the third quarter of last year. Strategic initiative number four, 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%. I'm often asked, why we call our company employees tribe members at WB40 Company. We define tribe as a community with a shared purpose that help feed and defend each other. This definition has remained consistently true for us throughout the duration of the pandemic. It is our culture that empowered our tribe to successfully navigate some extremely challenging times. We cultivate a culture at WD40 Company that has been the cornerstone to our success for decades. In good times, that culture gives us a tribal family to celebrate with. In not so good times, that tribal culture gives us a global tribal family to fight for and support. And strategic initiative number five is operational excellence. Our goal under this initiative is to strive for continuous improvement by optimizing resources, systems, and processes. Operational excellence also means making sustainable business decisions that create and protect long-term stakeholder value. We consider our stakeholders to be any group without whose support the business would not exist. Our commitment to operational excellence continues to be an enormous asset for us as we 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. I'll now pass the call to Steve, who will share an overview of our sales and an update on our must-win battles.