WD-40 Company

Ladies and gentlemen, thank you for standing by. Good day, and welcome to the WD-40 Company fourth quarter and full fiscal year 2025 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, then the number one 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 would like to turn the presentation over to our host for today's call, Wendy Kelly, Vice President, stakeholder and investor engagement. Please proceed.

Thank you. Good afternoon, and thanks to everyone for joining us today. On our call today are WD40 Company's President and Chief Executive Officer, Steve Brass, and Vice President and Chief Financial Officer, Sarah Heiser. 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-K for the period ending August 31st, 2025. These documents will be made available on our investor relations website at investor.wd40company.com. A replay and transcript of today's call will also be made available 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 the earnings documents posted on our investor relations website. As a reminder, today's call includes forward-looking statements about our expectations for the company's future performance. 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, October 22nd, 2025. The company disclaims any duty or obligation to update any forward-looking information as a result of new information, future events, or otherwise. With that, I'd now like to turn the call over to Steve

Thank you, Wendy, and thanks to all of you for joining us this afternoon. Fiscal year 2025 was marked by complexity and resilience, a tale of navigating global headwinds while making strategic progress. Despite challenges ranging from geopolitical tensions to shifting economic policies, 50-40 companies seized opportunities and continued to build on the strong foundation that has supported our success for more than 72 years. Today I'll start with an overview of our sales results for the fourth quarter and full fiscal year 2025, and then provide an update on the progress we've made against our 4x4 strategic framework. Then Sarah will dive deeper into our financial performance, review our business model, give an update on the divestiture of our home care and cleaning businesses, and share our outlook for fiscal year 2026. After that, we'll open the floor for your questions. Today, we reported consolidated net sales of $163 million for the fourth quarter and $620 million for the full fiscal year, each reflecting approximately 5% growth compared to the prior year. This performance represented a record quarter for the company and underscores the continued strength of our brand and the resilience of our business. As you know, maintenance products remain our primary strategic focus, accounting for approximately 95% of total net sales in both the full quarter and the full fiscal year. Net sales for these products reached $156 million in Q4 and $591 million for the year, each reflecting a 6% year-over-year increase. This performance is consistent with our long-term growth target of mid to high single digits and reinforces the strength of our core business. In addition, I'm pleased to report that our gross margin continues to improve and has now surpassed our target of 55%. For the full fiscal year, we delivered a gross margin of 55.1%. Gross margin would have been 55.6% if we removed the financial impact of the assets held for sale. For the fourth quarter, we delivered a gross margin of 54.7%, an impressive 730 basis point improvement from the fourth quarter of fiscal year 2021 when we hit our inflection point and our long-term gross margin recovery plan began to take hold. Sarah will share more details about gross margin in just a few minutes. Now let's talk about fourth quarter sales results in dollars by segment, starting with the Americas. Unless otherwise noted, I will discuss net sales on a reported basis compared to the fourth quarter of last fiscal year. Sales in the Americas, which includes the United States, Latin America, and Canada, decreased 2% or 1.7 million to 77 million compared to last year. In reported currency, sales of maintenance products decreased 2% from 1.2 million to 74 million compared to last year. The decline was primarily driven by lower sales in Latin America, influenced by the impacts of foreign currency exchange fluctuations, the timing of customer orders, and broader macroeconomic challenges, especially in Mexico. Sales of maintenance products in the United States and Canada were also down slightly, primarily due to the timing of customer orders, and in Canada, broader macroeconomic challenges. In the Americas, sales of W40 specialists remained constant compared to the same period last year. Home care and cleaning product sales declined $600,000 compared to last year, reflecting our strategic shift toward higher margin maintenance products in alignment with our 4x4 strategic framework. In total, our America segment made up 47% of our global business in the fourth quarter. For the full fiscal year, maintenance product sales in the Americas totaled $277 million, reflecting a 4% increase compared to the prior year. Although this growth was slightly below our long-term target of 5% to 8% annual growth for the region, we remain confident in the trade block's long-term growth potential. Now let's take a look at sales in IMEA, which includes Europe, India, the Middle East, and Africa. Total sales grew 7% or $4.1 million to $63 million compared to last year. After adjusting for the impact of foreign currency translation, IMEA net sales were unchanged in the same quarter last year. In reported currency, sales of maintenance products increased 8% or $4.6 million to $60.7 million compared to last year. The strong growth is driven most significantly by higher sales volumes of Liberty 40 multi-use products in our direct markets. Sales increased most significantly in DAC, France, and Benelux, which were up 20%, 19%, and 23% respectively. Strong sales in our direct markets were offset by softer performance in our EMEA distributor markets, driven by the timing of customer orders and ongoing instability in certain regions. In IMEA, sales of W3 specialists increased 18% compared to last year, driven primarily by increased demand and higher volumes across several direct markets, especially in DAC and France, where targeted promotional activity for key customers proved highly effective. Home care and cleaning product sales declined approximately 500,000 compared to the same period last year. In the fourth quarter, we completed the divestiture of our UK home care and cleaning product businesses to Supreme Imports Limited. This strategic move allows us to sharpen our focus on higher growth, higher margin maintenance products, and reinforces our commitment to growing the blue and yellow brand with a little red top. In total, our MA segment made up 38% of our global business in the fourth quarter. For the full fiscal year, maintenance product sales in IMEA totaled $230 million, a 9% increase compared to the prior year. This growth aligns with our long-term target of 8% to 11% annual growth. Now turning to Asia Pacific. Sales in Asia Pacific, which includes Australia, China, and other countries in the Asia region, grew 28% or $5.1 million to $23 million compared to last year. Foreign currency translation had no material impact on our fourth quarter results. Sales and maintenance products increased 30% to 4.8 million to 21 million compared to last year. This growth was primarily driven by a 44% increase in sales under the 40 multi-use product in our Asia distributor markets, where we saw strong demand across nearly all countries, particularly in Indonesia, Malaysia, Singapore, and the Philippines. fueled by geographic expansion, broader distribution, and the timing of customer orders. Sales of maintenance products also grew in Australia and China, increasing by 12% and 6%, respectively, compared to the same period last year. In Asia-Pacific, sales of W40 specialists increased 38% compared to last year due to higher sales volume from successful promotions and marketing efforts in our Asia distributor markets in China. Sales of home care and cleaning products, our Novak carpet cleaners and sold-on-hand cleaners sold in Australia, increased 15% for approximately $300,000 compared to the same period last year. Our home care portfolio in Australia benefits from strong brand recognition, a solid competitive position, and meaningful growth opportunities. In total, our Asia-Pacific segment made up 15% of our global business in the fourth quarter. For the full fiscal year, maintenance product sales in Asia Pacific totaled $84 million, a 6% increase compared to the prior year. While this growth falls short of our long-term target of 10% to 13% annual growth for the region, we remain confident in the strong fundamentals of this high-growth trade block. Now let's take a look at the strategic progress we made in fiscal year 2025 against our 4x4 strategic framework. As you recall, this framework was designed to drive profitable growth and sustainable value creation, and is built around our four Muslim battles and four strategic enablers. Our Muslim battles focus on what we do to increase sales and profitability, and three, our long-term growth drivers will focus on full-year results. Starting with Muslim battle number one, the geographic expansion. Global sales of W40 multi-use products in fiscal year 25 were $478 million, representing growth of 6% over the prior year. We experienced solid sales of our signature multi-use product brand in all three trade blocks with 8% growth in IMEA, 4% growth in the Americas, and 6% growth in Asia-Pacific. We saw solid sales growth this year, 12% in Latin America, 10% in China, 14% in France, and 20% in India. But what's most important to emphasize is that we still have significant room to grow. Geographic expansion is our most significant long-term growth opportunity. Over the last five years, we've achieved a compound annual growth rate for net sales of W40 multi-use product at 9.4%. Our path forward is clear. We're expanding availability across more channels and geographies, while deepening product penetration by increasing brand awareness through sampling and putting more cans in the hands of end users around the world. We estimate the global attainable market for W4D multi-use product to be approximately $1.9 billion, based on our updated benchmark sales potential. And to date, we've achieved only 25% of our benchmark growth potential, leaving a growth opportunity of approximately $1.4 billion. Our second Muslim battle is accelerating premiumization. Innovation is at the core of this strategy. We develop products like SmartStraw and EasyReach with our end users at the center of every decision. Their needs drive our product development efforts, enabling us to deliver high-performance solutions that solve real-world problems. This end-user-focused innovation fosters brand loyalty and contributes to gross margin expansion and differentiated offerings. In fiscal year 25, global sales of SmartStraw and EasyReach when combined were up 7% over the prior year. Premiumized products currently account for approximately 50% of W40 multi-use product sales and 40% of units sold, leaving considerable room for continued growth. Over the last five years, we've achieved a compound annual growth rate for net sales of premiumized products at 9.4%. On a go-forward basis, we'll be targeting a compound annual growth rate for net sales of premium format products at greater than 10%. Our third Muslim battle is to drive growth in W40 Specialist. This product line is a strategic extension of our trusted core brand, designed to meet the evolving needs of professionals and industrial users. When we introduced W40 Specialist alongside the W40 multi-use product, we're not just adding variety, we're strengthening our brand, capturing new segments, and offering end users more choice without diluting what makes our core brand iconic. by leveraging the strength of the W40 brand for driving category leadership and expanding market share in adjacent segments. In fiscal year 25, global sales of W40 specialist products were 82 million, up 11% over the prior year. Once again, we saw growth of W40 specialist products across all three trade blocks with growth of 6% in the Americas, 15% in IMEA, and 12% in Asia Pacific. Over the last five years, we've achieved a compound annual growth rate for net sales of W40 specialists of 14.4%. On a go-forward basis, we'll be targeting a compound annual growth rate for net sales of W40 specialists of greater than 10%. As W40 specialists has matured and its market base has expanded, we've recalibrated our long-term growth expectations to reflect the product line's evolution within its lifecycle. We estimate the global attainable market for W40 specialists would be approximately $665 million, based on our updated benchmark sales potential. And today, we've achieved only 12% of our benchmark growth potential, leaving a growth opportunity of approximately $583 million. Our fourth and final Muslim battle is to accelerate digital commerce. Our digital commerce strategy is a catalyst for growth across the business, not merely a channel for online sales. It plays a vital role in advancing each of our Muslim battles by increasing brand visibility, improving accessibility, and driving deeper engagement with end users across global markets. In fiscal year 25, e-commerce sales increased 10%, reflecting strong momentum in our digital strategy. But digital is more than a transactional platform. It's a powerful engine for brand building and education. For example, the digital space serves as a dynamic environment for product discovery. It allows us to showcase new applications for our products while fostering peer-to-peer learning. Many of these insights originate from our end users themselves who continually uncover innovative ways to use our products, often in ways we hadn't imagined. By leveraging digital touchpoints, we're deepening engagement, enhancing product understanding, and strengthening brand affinity across the globe. Turning to the second element of our 4x4 strategic framework, our strategic enablers. Our strategic enablers focus on operational excellence, and they collectively underpin and drive the success of our Muslim battles. Strategic enabler number one is ensuring a people-first mindset. At W40 Company, our most powerful competitive advantage is the commitment of our 714 employees. We've long said we're a purpose-driven, values-guided organization. And that's not just a tagline. Our values are the foundation of our culture. They shape how we lead, how we collaborate, and how we make decisions every day. In our February 2025 Global Engagement Survey, 94% of our people reported being engaged in their work, more than four times Gallup's global average of 21%. 90% said they feel a strong sense of belonging, and 95% expressed pride in our purpose, mission, and values. This deep connection to who we are and what we stand for translates directly into growth and opportunity. Nearly 40% of our people experience career progression within their first five years at the company. To our employees, thank you for consistently showing what it means to live our purpose, to create positive, lasting memories in everything you do. What our investors and stakeholders see in our performance is a direct reflection of your commitment to doing meaningful work the right way. Strategic enablement number two is to build an enduring business for the future. A W40 company long-term value creation means operating with a clear commitment to balance in economic growth, environmental responsibility, and social impact. One of our primary objectives under this strategic enabler is to lead our category with high-performing products designed for environmental sustainability. I'm excited to share that in the upcoming fiscal year, we'll introduce a new innovation under the WD-40 specialist product line, which will be our first bio-based format of our multi-use product. Our latest maintenance product is designed to reduce our environmental impact and to have a reduced carbon footprint utilizing ISO standard 14067, while still delivering the trusted performance expected from WD-40 brand products. The product will launch in select European markets later this fiscal year, and we look forward to sharing updates with you in the quarters ahead. Strategic enablement number three is achieving operational excellence in our supply chain. Profitable growth at WD-40 company depends on a supply chain that is optimized, high-performing, and resilient. In fiscal year 25, the strategic enabler played a vital role in protecting gross margins. We delivered several million dollars in economic value through cost reduction initiatives, such as packaging enhancements, logistics efficiencies, and strategic sourcing. These efforts helped to offset the financial impact of tariffs, underscoring the importance of this enabler. Operationally in fiscal year 2025, We achieved global on-time delivery of 96.4%, above our current target, and also inventory levels of 99 days on hand, coming closer to our target of 90 days. Strategic enablement number four is to drive productivity through enhanced systems. At W40 Company, technology is a key enabler of productivity and resilience. for building a scalable digital infrastructure designed to support global growth and enhance operational agility, accelerating our strategic execution. By partnering with leading technology companies, we're investing in proven AI-enabled systems, such as D365 and Salesforce, that we believe will drive future gains in productivity. While we're taking a pragmatic approach to adopting AI across our organization, We've already identified several promising use cases that will help us to boost employee productivity, build our brand more effectively around the world, and accelerate learning and improve collaboration within our global community. With that, I'll now turn the call over to Sarah.