WD-40 Company

Q1 2022 Earnings Conference Call


spk_0: what company third quarter of fiscal year two thousand twenty two earnings conference call could a college being recorded at the time off of been claimed the lives and only mode at the end of the prepared remarks we will conduct a question and answer session to magic cure and to ask a question that any time during this call leaves bronze star one on your parlophone back make sure you have you had function is turns off to allow your signal to niche our equipment if at any time during the conference you need to reach an operator please press ties you know ah know how the phone keypad i did not like attend the presentation over to the host for today's call nice when be county vice president of p colder at adventure engagement please proceed they feel good afternoon and thanks to everyone for joining us today what are called today or deputy for the company's chairman and chief executive officer very rich vice president and chief financial officer che rambo and president and chief operating officer came bath in addition to the financial information presented on today call the encouraging that years to review our earnings presentation earnings personally and form can kill for the period ending november thirtieth twenty twenty one eight documents are available on our investor relations website at investor got that he had a forty company dot com
spk_1: a weekday and transcript to date call often the and and available at that location shortly after the call entre call the lot because certain non doubt measures the description and reconciliation for these non gaap net which are available in our ftp piling as well as are earning a location
spk_0: as a reminder on to date call we will talk about certain forward looking statements about our expectations for the company future performance
spk_1: of course actual without could differ materially the company's expectation of a lead and projections are expressed in good faith that can be no assurance that they will be achieved or cop please refer to the risk factors detailed in rsvp balance or for the discussion
spk_0: finally for anyone listening to what catch replay of reviewing of it and trenchcoat the big call please note that all information presented is currently only as the today's date january six two thousand twenty two accompany disclaimed any their the your obligation to update any organ donation weather as a result the new information future events or otherwise with that and now have to turn the call over the gary
spk_2: i can johnny got his confiscating alternate files or hundred and thirty eight point seven billion for the first quarter is could your twenty twenty two which was an increase of eight percent compared to last year we are pleased with these top line results however this is a different game and were playing now extreme keep our talk and challenge to bomb at first quarter or smart i mean one person your significant cost inflation as good income for the first quarter with eighteen point six million compared to twenty three point six million the first quarter of last fiscal year a decrease of twenty one percent jamie talking creepy time with a few minds about what has your pack ice imagine what we're doing to restore it to start levels the first stop with the discussion about our strategic initiatives as strategic initiatives are continuing to plan we have in place to achieve the company's long term aspirations as most of you will recall we recently decided to refresh ya strategic initiatives that a more accurately and holistically the top our conversation as strategically should support our term revenue growth aspirations which is to drive net sales to between six hundred and fifty and seven hundred million by the end of his could you twenty twenty five we strive to do so while following and fifty five thirty twenty five doesn't smile strategically should eat number one is to build a business for the future our call under this initiative is to build an enduring business and will be proud to pass onto the next generation the desired outcome for the strategic initiative is to fear that indeed infinite my decisions into amp business and to fully integrate now he is g initiatives into the heart of a strategic planning process we recently completed an eternal diversity equity exclusion in belonging survive in support of both our he gm foods as well as strategic she'd number two which is to attract develop and engage upstanding troughton him it's we believe that by building in the chain exclusive and diverse that the street and learning and teaching organization and tribe members will succeed together like showing as individuals one of and five i attribute as belonging we believe that belonging is the psychological feeling of acceptance connectedness security support conclusion and identity
spk_3: i'm happy to share with you that ninety two percent of our tribe in his experience a sense of belonging and eighty eight disintegrated wd forty the de quincey place to work although these results a positive and workers not done we are exploring new ways to create an even more diverse equitable any currency workplace
spk_2: nice were all trying them be it's a sense of belonging strategic it issued number three is strive for operational excellence at all under this initiative is the foster a couch or continuous improvement in which operational excellence is the responsibility every time in the the world is full of volatility uncertainty complexity in ambiguity more so now than we've ever seen in our lifetime almost every think we buy has traveled alone some of the millions of miles of networks that make up the world's supply chains like many other companies we've been unable to fully lead increase country demand graham products in some markets due to the current state of the global supply chain the spirit of making a better place today we are proactively increasing the capacity in the resilience of our supply and it work in our markets can the united states we will double the number of the party manufacturers' be partner with but this fiscal year while in the extra capacity is very important it's equally important that we maintain our high quality standards throughout this process i tried them as a woodland diligently to maintain consistently high product quality as we move through this project to onboard unit of factors strategic out before his to i'm pretty fortunate to use a called out of this initiative is to make blue and yellow came with were read talk about him or places to more people who find more uses more often we'll buy them up i'll be forty multi use pipeline through continued geographic and digital expansion increase market in attraction educating in uses about uses and through the development of new and unique as if we didn't that make the product easy to use and the first quarter south of deputy forty mathews park increase flooding percent likely to one hundred and seven point one million the desired outcome for the strategic initiatives to grow sales of deputy forty not to use product to approximately five hundred and twenty five million by twenty twenty five strategically he'd number five is to grow the deputy forty specialist for account under this initiative is to leverage the wd forty brain by developing new product and categories which beloved reinforce the cold brand positioning and create growth through continue geographic and digital expansion in the first quarter sales of that the forty space was decreased by person gladly to twelve point five million stable speak speaking a few moments about the causes of these declines you also she has some very positive news on how to be forty specialist the city some new exciting benchmarks the desired outcome for wd forty specialist in this initiative is to grow sales to approximately one hundred and twenty five million by twenty twenty five ugh strategically stick number six is to expand and support portfolio opportunities that old us grow according to this initiative is to expand and support brains the provide us protection and help us grow brands and that this initiative include three and a gg eighty fine as well as our home care and cleaning products brains in the first quarter sales of products included under this initiative decrease twelve percent gladly to fifteen point one you now how they're greedy facts were up against a very strong comparable period as identified it from increase the man as a result of the pandemic last year in addition we've been unable to fully make consumer demand for anthrax due to the challenge exploited environment the design outcome for the strategic it each team will be sales in this category of approximately fifty million by twenty twenty five to reach that number we expect sales growth of brands like three and one gtx five thousand a month and nothing nothing about avenue q and cleaning product of brains will know as likely to declining sales but will continue to contribute healthy returns
spk_4: supporting our strategic initiatives are a must win battles these are focused action plans that supports the strategic initiatives
spk_5: now like to pass the cold steve to share an overview of ourselves results an update on the i must win battles
spk_2: thanks carrying an athlete when he left a good shape do that and use it in any for our products continue to be exceptionally strong and ten lower the second largest thousand and in the company's history today i'm happy to report total global sales growth quoted eight the same for the quarter comeback the double digit growth experience for most the fiscal year twenty twenty one of our results have softened it but remember we did not guide the level of cells growth that we saw last year
spk_5: what is important to better to appreciate it at the watermark is higher now despite are comparable period being very strong be continue to experience strong demand for our products and believe that many of the new and users have interacted with them during a pandemic have become permanent uses of our brains
spk_2: let's take a closer look at what's happening and outright blog starting the the americas
spk_5: and thousand americans which includes the united states latin america and canada up four percent in the first quarter to fifty six point three million thousand maintenance parks increase seven percent in the americas due to increase sales in latin america of forty two percent increase increases due to i had failed in many markets in the region including our newest direct lock it in mexico
spk_2: we continue to see momentum in mexico from the shipley made in fiscal year twenty twenty from a distributor model to a direct market and addition enough in american distributor markets be so strong sales due to successful promotional programs and increase product to dial ability as what are the timing of customer orders the in creating maintenance or thousand and latin america but mostly upset by decrease hidden thousand both the united states and canada it fails and maintenance products in the united states to create one percent compared to last year big fan and strongly new to demand in the united states resulting in a five percent increase in sales activity for the monkeys product unfortunately this was completely upset by decline themselves to be putting specialist and three and one which declined twenty eight percent and thirty percent respectively while we continue to experience very strong and you that demand for oil mean he's products we were unable to fully meet the demands it a capacity constraints us supply chain
spk_5: and canada next how the maintenance products decreased two percent primarily because we were up against a very strong here are the egg abu period as a reminder all maintenance products exclude our home care and cleaning brands salvador i'm karen cleaning products in the americas decrease twenty four percent compared fear largely due to low thousand spots or two thousand plus pluses and fourteen
spk_2: in total are america's segment made a forty two about global business in the first quarter a long term anticipate cells within that segment for grow between five to eight percent annually now i'm thinking man thousand email which includes europe the middle east africa and india or up five percent in the first quarter to fifty seven point five million changes in foreign currency exchange rate had a favorable impact on sales for the email statement from period period at a constant currency buys it says would have increased by one percent compared to last year seldom late and and products increase by six percent in the man to to increase sale in both are in their direct and are in they it is ready to markets which increased four percent and nine percent respectively in our he may i direct market which spirit the four percent increase in sales about the the forty mode he's product and to the forty specialist we feel particularly strong failed and italy france and spain like sales were up seventeen two thousand nine percent and eighteen percent respectively the failed increases were primarily to to new distribution and successful promotional programs and the first quarter next out knowing that got wrecked markets accounted for sixty three percent of the region sales in our in their distributed market which is a ten percent increase in sales had to be forty multi use product we saw particularly strong thousand poland russia and india but thousand sixty eight percent fifteen percent and thirty percent respectively they fell the increase his were primarily due to new distribution successful promotional programs available change it in foreign currency exchange rates we continue to experience very strong and use a demand for our products in the in these regions blue unable to meet some of the fun and you to shipping container and transportation thought it is related to the cody stay to the global supply chain and the first quarter net thousand or in their distributed markets accounted for thirty seven percent of the region sales and code or am i a segment that of forty three percent of our global business in the first quarter of the long term anticipate sales with it segment will grow between eight to eleven percent annually they want the asia pacific detailed in asia pacific which includes australia china and other countries in the a that region or before percent in the first quarter to twenty point nine million changes in foreign currency exchange rates had a favorable impact themselves for the asia pacific segment from period it on a constant currency basis as would have increased by thirty one percent compared to last year in china net sales for six million in the first quarter of sixty nine percent compared to last year driven primarily by successful promotional programs that were the timing of customer orders
spk_4: we remain optimistic about a long ten opportunities in china they expect volatility level the way to key economic and health related and thanks for covering nineteen accounting a promotional programs that building a distribution shit and economic patterns and bearing industrial activities
spk_2: it are asia distributed markets net thousand nine point three million in the first quarter of thirty six percent compared to last year
spk_5: they sell the increases his primarily driven by improved economic conditions as a result of reduce lockdown that has to in the first quarter which resulted in increase demand and higher health particularly in indonesia malaysia taiwan and hong kong
spk_4: an australian thousand five point five million in the first quarter of seven percent compared to last year to primarily to increase sales to be forty specialist which are forty five percent compared to last year
spk_3: and the code or asia pacific segment made a fifteen percent of our global business in the first quarter a long term anticipate cells and in this segment local between ten to thirty
spk_5: the
spk_2: i'll bring put that another muslim vandals or muslim by those are the primary years of action that will enable us to deliver again fell revenue growth aspirations to drive net sales to between six hundred and fifty and seven hundred million by the end of his twenty twenty five the height of focused action support the ball strategy and other key
spk_6: a drivers of revenue growth
spk_2: a largest growth opportunity and our first been badly the geographic expansion of the blue and yellow can literate top we continue to experience impressive growth drop like a brand with global sales at the default he know he is product of the fourteen percent compared to last year we recently made from significant investment in brand building and awareness a what we refer to internally as making the end user aware and eight investment for paying off be seen significant growth in property market like china mexico india and russia are in the first quarter thousand with the blue and yellow can the the little red top increased by seventy nine percent fifty eight percent thirty percent and forty eighteen percent respectively and fiscal year twenty twenty two will continue to invest in building our flagship friend with a news is around the world affleck unless when battle is a premium migration that the before the monkeys product pretty my nation creates opportunities for the bread new growth postmodern expansion and most importantly a delight or users
spk_5: and the first quarter thousand deputy forties not strong easy reach when combined with forty eight point three million up ten percent compared to last year
spk_2: a small store next generation delivery system is currently being rolled out in canada and the united states and the expect it will be made available in europe later this fiscal year it's not for next generation supports are expected to grow premium delivery system penetration to greater than sixty percent of a deputy for the multi use products house but twenty twenty five
spk_5: upper atmosphere battle to grow to be fully specialists and gary mentioned earlier global sales activity forty specialists were down five percent compared to last year
spk_2: before solid thousand to the forty specialist in the mail and asia pacific by sales were up four percent and twenty one percent with a are these increases were entirely up to that but lowest have united states to continue to experience very strong wrong and use a demand for the be forty specialists in the united states we are unable to fully meet the demand to a capacity constraints us supply chain they are beginning to see improvement but we didn't expect to be able to fully neat man that the be forty specialist in the americas until the second half with the clear twenty twenty two
spk_5: they believe that for the focused we get to be forty specialists will grow at the the towards restoring our supply chain and reap the benefits of on new packaging and brenda take him because he very positive result in a weekend or we have rolled out the new packaging such as in australia is setting a new benchmark with fell to do before
spk_2: especially picking thirty six percent to be forty multi use product failed in the country a point on the phone battle it takes to comments i think additional comments a to engage we are annoyed have been channel agnostic a critical factor not success has always been a distribute our products and other sixty two unique trade channels around the world which makes and easy to buy weather and users to suppose
spk_5: it's o'brien's online or in physical stores the aim to provide a seamless online and offline experience with a driving digital engagement of our brand the key accelerator the growth going forward
spk_7: that being said in the first quarter within a rebalancing of sell toward brick and mortar locations that the economy thousand and twenty two percent compared to last year
spk_2: for the full fiscal year we continue to expect strong digital comments growth
spk_3: get picked on the i will now turn the to jay or provide you a financial update on the that
spk_8: thank you steve we delivered solid result in our first quarter mil by strong and user demand in the face of the volatile and shell out our fifty five thirty twenty five business model
spk_3: long term targets used to guide our business
spk_2: that's gross margin the tweet
spk_9: target to be at fifty five percent of net sales the thirty
spk_8: represent their cost of doing business which is or total operate
spk_2: extensive excluding depreciation and amortization our goal is to a represents our long term target
spk_8: for either
spk_3: first the fifty five or gross margin
spk_2: and that
spk_3: the point eight percent compared to thirty six point four percent last year
spk_2: misrepresented decline of five hundred sixty basis points of the last four quarters needs been a consistent tagline and goes
spk_8: and the challenges
spk_3: there's were experiencing funny
spk_2: location cause as well as increased costs from our third party manufacturers or opportunity distance go year is to reverse this
spk_3: in fact up to start globe
spk_2: are changes in specialty chemical
spk_3: both were the primary driver of this decline and negatively impacted our gross margin by three hundred and ninety basis points
spk_2: higher were how the distribution and freight cars primarily from supply chain and strengthen the americas been a new year
spk_3: negatively impact impacted are gross margin by a hundred and four pretty base
spk_2: because margin was also negatively impacted by eighty days
spk_3: six points due to foreign currency exchange rates and service fees paid to third party contract manufacturers primarily in the americans these factors were partially offset by a benefit of a hundred and twenty basis points themselves pay increases we've implemented over the last
spk_2: twelve months
spk_3: the impact and gross margin linked to for or currency exchange rates is due to fluctuations in exchange rates for the euro and the us dollar against the pound sterling intermediate segment
spk_2: this is because gonna be the majority of our finished goods are searched and pound sterling well approximately seventy percent of revenues are generated currencies other than pound sterling
spk_8: to ask that these declines in gross margin price increases are being implemented across all of our markets and geography please
spk_2: however tactical price increases like those we recently implemented take time to the bed their way into are reported results and we have yet to see the full benefit and the price increases the implemented this quarter this operating environment is different than anything we've been in a long time historically we've implemented price increases when necessary to offset rising and put costs this is usually resulted in price increases be made a very infrequent basis
spk_3: but this is a different game
spk_2: you were using a different playbook we expect the upper environment to remain challenging and volatile and we expect to continue to do the current inflationary environment we will be implementing multiple price increases this fiscal year we're confident that are plans to rebuild margin coupled with the advancement of our margin a creative must win battles will enable us to deliver on our long term gross margin and sales goals on a take a few quarters we will take the necessary or gyms to thirty five or higher and to continue to drive sales girl to the mid to high single digits now i'll address the thirty or or cost of doing business in the first quarter or cost of doing business with approximately thirty two percent of net sales flat compared to last year although as teenage pence increased by two and a half million dollars compared to last year or cost of doing business as a percentage remained flat due to the increase in revenue the court increase in as gnh fence in the corridor was primarily due to changes in foreign currency exchange rate's higher track
spk_3: public meeting expenses along with higher freight costs for the first quarter seventy nine percent of our cost of doing business escape from three areas people costs or the it gets into making a
spk_2: since we make in marketing advertising and promotion as a percentage of sales are a p investment was four point two percent in the first quarter and finally the freight costs to get our products to our customers
spk_3: our long term the all it's a driver cost of doing business towards thirty percent of net sales
spk_2: and this brings us to even the last about fifty five thirty twenty five measures give it a was ninety percent of sales for the first quarter which is down significantly compared to last year primarily due to lower gross margins we report respect to return to historic
spk_3: a level as we rebuild our gross margin
spk_2: well that completes the discussion on our business model now let's discuss some of the items that fall below the either a provision for income taxes was nineteen point eight percent this year compared to fifteen point seven percent last steer the increase in the effective income tax rate is primarily due to an increase and undetectable performance based compensation expenses we expect that are a effective tax rate will be approximately twenty one to twenty two percent for the full fiscal year twenty twenty two net income for this quarter was eighteen point six million compared to twenty three point six million last year and the literary for carbon chair to the quarter with a dollar thirty four compared to a dollar seventy two for the same period
spk_10: now a word about our balance sheet and our capital allocation strategy
spk_3: the company's financial condition and liquidity remained strong or capital allocation strategy includes a comprehensive approach to balance investing in long term growth of providing strong returns to our shareholders he continued to return capital to shareholders do regular dividends and sherry repurchase
spk_2: does on december the thirteenth or board of directors to the quarterly cash dividend and and the eight cents per share with like the an increase of more than eight percent over the previous quarters dividend and last quarter i shared with you that are board of directors had approved a new seventy five million dollar sherry purchase plan which became effect of november first during the first quarterly repurchase thirty two thousand shares of our stock and tom cost a fraction of least seven point four million dollars under the under this plan kim fiscal year twenty twenty two you expect you invest approximately fourteen million in capital projects the majority of which will be used to complete the procurement of the machinery and equipment were using to manufacture or next generation smarts drug delivery system one item that i would like to call your attention is the recent increases in our inventory levels as we improve the resilience of our us supply chain we had increased the number of components and finished goods that we have an inventory to improve our ability to meet them market demand
spk_3: now let's turn do fiscal twenty twenty two guidance well our net income rage remains the same we have updated our guidance to reflect higher sales as well as higher costs associated with the inflationary pressures that continue to impact or gross margin
spk_2: is that we expect net sales growth jackie to be between seven and twelve percent with net sales between five hundred and twenty two million dollars and five hundred and forty seven million dollars plus margin for the full fiscal year expect you to be between fifty two hundred people then advertising and promotion investment is projected to be between five and a half to six percent of net sales and the provision for income tax is expected be between twenty one and twenty two percent net income is projected to be between seventy one point seven million dollars and seventy three point six million dollars to deluded earnings per share expect you to be between five dollars and twenty four sense and five dollars and thirty eight cents based on an estimated thirteen point seven million weighted average shares outstanding we want to remind everyone that their dynamics outside of our control that may impact or fiscal year twenty point two result including the impact of fluctuating foreign currency exchange rates and anticipated inflationary headwinds and other unforeseen events is guidance does not include any future acquisition and or the best pitchers that completes the financial with you now alternate back to gary ha in summary what did you hear from us on this cold today you heard that we are operating in an environment that his father tom and certain complex an ambiguous and that this is a different game applying now you heard the title net sales were up i said in a scooter you're headed south of deputy for the not use product were up for the person the first quarter
spk_0: you're headed south in asia pacific were up thirty four percent in the first corner you had that we continue to return capital to invest as through regular dividends and we raised our dividend by more than eight the said last month you heard that that we have been experiencing pressure on votes margin we have a restoration plan in place that will take some time to execute you had and that we've adjusted have gardens of his could be you twenty twenty two and we believe that net sales will cry between seven and to same if i think i like to share a quite would you on said garden
spk_3: if the game is designed for you to lose
spk_2: don't play that guy by a different one
spk_3: thank you for joining us today and we would be pleased to take your questions
spk_2: for ladies and gentleman aching would like to register and question please pass by woman on your telephone keep warm
spk_3: please make sure you're new to function is turned off to allow anything signal to each our equipment if your question have been answered on my to the trunk wants trenchant please pass the pound key one moment please for the first question the first question comes from the law now the bomb while many who have a chance please please proceed with no question hi everyone thank you for taking my questions on you indicated that some sales were there's some says that sells more like asthma and a colored to supply chain kiss weeks ago i was going to be a deferred if it's just delaying the cells or something that it's really tough to get back
spk_2: thanks daniel gary and that that's not an easy question to answer i am my history has been if you lose a cellular sale
spk_3: the now having said that you know the thing that's really important is that in the code eighty percent of our revenue came from out coal product which is wd forty map and it was up forty percent in the corner and as unite daniel much of our long term growth is based on the expansion of our deputy forty maltese products out there's a lot of noise going on around the business in certain areas some areas are are significantly summer little slower supply chain or whatever but i think it's important to really was
spk_2: select on the fact that eighty percent of our business which is our core business was up this percent
spk_5: yeah okay that that's helpful and then with with the wheels the strength in china which i think was up sixty plus percent of i was wondering if that wasn't like that doesn't pull folder i know it it can be fitted lumpy from and time and it's important that works and down forty percent because of like delays i was only of dollars and he put forward here in the vision of the chinese new year or something like that
spk_2: not materially arms chinese new year is coming up on and we would expect the hopefully that the chinese he will go through in it's an all the way and we won't see any massive disruption bad were looking for i have a solid year in china
spk_3: of all markets in the world that a coded affected it seems to be the most stable right now because of it's china
spk_2: salem in a we would think that this year will be a reasonably good year and you that china market
spk_5: okay i'll and typical more on you mentioned on
spk_2: without by twenty twenty five i think you want sixty percent of mvp cells can be as a yes it and of and pieces will be smart strong of going what the percentage of now like what what is the the growth projecting there and steve would you like to address that
spk_3: chill and i don't have any
spk_2: and our first quarter sales were just an elite forty and last year we closed at fifty for the full year so we expect to be approaching at fifty percent plus and right between lobster drill and eighty retails combined okay okay i then finally you eat mentioned waiting awareness and china think when the treasury's really west china russia india like skill i was when and how you do that a user like out is it they get a ad campaign or billboards or i will i know you go into likely to like commercial first i wonder what specific stuff
spk_3: eps you take if you bloody call on that
spk_0: state would you like thick steak on then
spk_11: sure so it still me are expanding distribution for making it available in more was also making changes aware wearing a deposit
spk_12: related forty company lively assembling broken say china a lot lot of that growth that we're seeing in china now has confident investments more substantial investments be made at the end of last year and sampling an industrial end users across on a side
spk_11: sampling programs across all of our nature great potential market are very effective way of was pretty
spk_1: at a geiger you i remember you may remember dangling people last year it's the referenced we made is substantially larger marketing investment and we reference the fact that we were doing it in these markets that was see as steve said was dying to see some of those sampling programs pile okay thank you
spk_2: okay of our a question comes from the line of the i'm in the walter of be impeded some nice to feel the media question yeah same here hi happy new year are you doing
spk_13: i'll end up like great
spk_2: good arm
spk_3: well on you know be you without certainly worth around with water and you've talked about in fact that bad a core on the product was so strong so i probably did i can pretty much a hard comparison last year style can you to give a little more color on i'm like what is going on i mean anything could fish i thought
spk_2: leisure nobody should be a contender behavior is okay new you know the third the normal behavior doing more stuff around again the home or whatever
spk_3: and you think there's anything you can lead to if there's anything any of the whole thing particular related calm and proud that you think is affecting the man
spk_5: well i'm a con who knows i'm you know i think what what was the and i'll talk a little bit and they're going to pass the steve to talk about some of the the you knew it uses that we feel that we've we'd pull the and that
spk_2: again i think aware but were really witnessing in our business and you can see it by the different growth rates in different countries around the world and specifically now i'm talking about kv were seeing the positive resilience of having a very diversified business around
spk_11: around the world
spk_9: because you i just returned from australia the two days ago and while i was there omni con blew up in a in a massive way
spk_11: and you know where see pockets of this everywhere but because with so diversified globally and we still sore and and in europe in the past quarter very strong growth in italy as we talked about spain are areas where things open up and close down south
spk_14: i think we've we've kind of got used to maneuvering these really unusual business conditions but thank goodness we have the infrastructure the end the global awareness and distribution that we have because we're not getting hit all at once in one place that's my view
spk_8: on on katya the lead the continued learning have an effect of kobe to and only and who knows what the next one is i don't know steve your to talk about your the overall demand and have lived see and use as exception
spk_15: garrett hi linda and get a lot of the year news is that the kind of the i like in the isolation renovation phenomena gary refer to many times and the a day new users we believe will be permanent usage of our friends and that will carry forward that has been a definite reduction because many areas of the world not all
spk_16: many areas of the world and on the d i y side so are the i like channel sales of of latin somewhat but that and replaced by a switch to sydney towards professional use our industrial sailed across the globe are doing really really well so i believe our industrial sales are up make thirty percent across the
spk_8: world and that includes china and and invest in sweden able to maintain industrial sampling to industrial end users and in china said has been some such their some rebalancing either of the ecommerce rebalance towards have physical stores as well said has been some channel shit but thankfully to kill resulting in strong overall revenue
spk_7: a
spk_2: okay great i follow
spk_3: and no harm anyone looking at your gross margin are not allow the little doubt lower than we have in the corner and i guess the way we have model than we thought it might have bottomed out last corner and then because i'm not inclined to the corner and and and never been down sequentially again
spk_17: how can you think the third quarter the bottle my know it's hard to project but do you think this is tired the truck and then you have a sequence all little bit of increase maybe in the second quarter the have any deal on now
spk_8: che you una talk on that
spk_3: yeah thank you guarantee it yeah linda this surprised as well from a standpoint of where we ended up with the corridor we had
spk_11: in in it really has been a result of just continue cost increases that had come up and commanders
spk_1: then and like you said in the in the call you know we are at camp dean in and will be having a additional price increases to or
spk_2: and it into help recover that gross margin so you know the timing of which get it you know and we're mildly the today suggests that will be able to ca
spk_3: the a flat me now and with with some slight uptick in margin in the did you know in the second quarter but you know i hate the make that commitment given the fact that we continue see waves and of of cost increases but that we would expect that he the where where we're really going to see the
spk_2: the recovery of margin will be closer to the fourth quarter at the level that we were young the an historical levels are rather than kind of the in the third quarter where we had initially thought so
spk_3: we've we've been pushed out a quarter probably a little bit longer maybe
spk_2: okay thank you that's very helpful and then
spk_18: i thought you know i think they'll explain that i think i answered like a couple court it now about the specialist supply chain issues and why is different from regular wv forty years ago different factories or different like why is that there the problem with that but not so much with your regular proper
spk_3: because we chose to the prior times
spk_19: the the of the the specialist supply chain issue was mainly in the united states and that's where we had the most pressure on this aerosol manufacturing supply in the world
spk_11: so we made a choice we said we will forever protect alcohol and we will forego some dhabi the forty specialise business to ensure that that eighty percent of our businesses in the most robust supply can be now has you may have heard we are doubling the amount of manufacturers' we'd have in the us
spk_20: and progressively now those new manufacturers are coming online and primarily to support our special as product line so it was a sad day for us because you're specialist has proven and is proving to the a and he really am a really
spk_3: huge opportunity particularly since we we made the change in the trade dress he may have heard steve reference but in australia now where we've had no disruption in the specialist supply it's now thirty seven percent of our map sales and when we first came out with specialist alice
spk_2: that was we could get it to twenty five percent of our map sales so in a number of markets around the will we proven that the benchmark is high which means the long term opportunity is higher but we will recover in the us and we're slowly getting there as we bring on new supply as we have to go through stability quality checking
spk_11: as your it's not easy to turn on a supply of and and maintain a high quality standards as we must do so
spk_0: that's the reason linda it was a choice we mine the and them you know will were working through it and we'll get over it and move be back on track
spk_21: in the near term

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