WD-40 Company

Good day and welcome to WD-40 Company's fourth quarter and full fiscal year 2026 earnings conference call. Today's call is being recorded. All participants are currently in listen-only mode. Following the prepared remarks, we will open the call for questions. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now turn the call over to Wendy Kelley, Vice President, Stakeholder and Investor Engagement. Please go ahead.

Thank you. Good afternoon and thank you for joining us today. On our call today are WD-40 Company's President and Chief Executive Officer Steve Brass, Vice President and Chief Financial Officer Sara Hyzer, and Vice President Global Finance and Incoming Chief Financial Officer Keith Stauffer. In addition to today's discussion, we encourage investors to review our earnings presentation, press release, and Form 10-K for the period ending August 31, 2026. Available on our investor relations website at investor.wd40company.com. A replay and transcript of today's call will also be posted shortly. We will discuss certain non-GAAP measures today. Reconciliations to GAAP results are available in our SEC filings and earnings materials. Today's call also includes forward-looking statements. Actual results may differ materially. Please refer to the risk factors and our SEC filings for more information. Finally, please note that all information presented is current as of October 21st, 2026, and we undertake no obligation to update forward-looking statements. With that, I'll turn the call over to Steve.

Thanks, Wendy, and thanks to everyone for joining us today. I'd like to welcome Keith Stauffer to his first WD-40 Company earnings call. As previously announced, Keith joined the company in September and will assume the role of Chief Financial Officer on November 2nd. At that time, Sara will transition to her new role as Division President of the Americas. Sara is joining us today for her final earnings call as CFO as we close out fiscal year 26. I'd like to thank Sara for her outstanding leadership as Chief Financial Officer and for her partnership in supporting this transition. I'll begin with an overview of our fourth quarter and fiscal year results, including progress against our 4x4 strategic framework. Sara will then review our financial performance, Keith will discuss our outlook for fiscal year 27, and we'll conclude with your questions. At WD-40 Company, resilience is rooted in the strength of our business model. Our iconic global brand, disciplined execution, flexible global supply chain and strong financial foundation provide the durability to navigate changing market conditions while continuing to deliver growth. Throughout fiscal year 26, we maintained a strong focus on executing our strategy and advancing our priorities, even amid geopolitical and economic uncertainty. Today we reported consolidated net sales of $176.8 million for the fourth quarter and $688 million for the fourth fiscal year, up 8% and 11% respectively versus the prior year. As a long-term value creator, we focus less on any single quarter and more on our ability to deliver durable, compounding growth over time. That's why we measure our performance against our long-term maintenance product sales target of 5% to 9% growth in constant currency. In the fourth quarter, maintenance product sales increased 9% to $170.5 million, bringing full-year maintenance product sales to $665.9 million, up 13% versus the prior year. On a constant currency basis, maintenance product sales increased 8% to $168.8 million in the fourth quarter and 9% to $644.7 million for the full year, in line with our long-term growth expectations. Let's turn to gross margin. While fourth quarter gross margin of 52.8% reflected the temporary cost pressure we discussed last quarter, full year gross margin remained resilient at 55.3%. An increase of 20 basis points versus fiscal 25 and in line with our guidance. Protecting gross margin remains a key priority and we continue to take pricing and cost actions to offset cost inflation and preserve the strength of our business model. Based on what we know today, we believe the fourth quarter marked the low point for gross margin and we expect sequential improvement starting in the first quarter of fiscal 2027. For the full fiscal year 2027, we're targeting gross margin of 54% to 55.5%, generally in line with our enduring business model. Now let's review fourth quarter sales results by trade block. Unless otherwise noted, I'll discuss net sales on a reported basis compared to the fourth quarter of fiscal 25. Sales in the Americas increased 5% year-over-year to $81.3 million, driven by a 5% increase in maintenance products to $77.8 million. This growth is driven primarily by increased sales of D-40 multi-use product in Latin America, where sales increased by $2.7 million, reflecting strong performance across distributor markets, including Argentina and Ecuador, supported by enhanced inventory sourcing and distribution capabilities. In the Americas, W-40 specialist sales increased 7%, driven primarily by higher US volumes, reflecting new distribution gains, strong placement with large retailers, and growth in online sales. For the full fiscal year, maintenance product sales in the Americas increased 13% to $313.7 million, or 12% in constant currency, exceeding our long-term growth target for the segment. Turning to IMEA, sales in the fourth quarter increased 10% year-over-year to $69.2 million, driven by a 14% increase in maintenance products. Growth was supported by higher sales volumes across both direct and distributor markets, while foreign currency had no meaningful impact on results. In our IMEA direct markets, maintenance product sales increased $2.3 million, driven primarily by strong sales of W-40 specialists, Growth was led by Southern Europe, where W-40 brand sales increased by 3.9 million, supported by strong commercial execution, promotional activity, and merchandising. In RMA, our distributor market sales increased 6.2 million, driven by strong W-40 multi-use product sales and higher volumes across key markets. India and the Middle East contributed the strongest growth, with 2.4 million and 1.2 million of growth, respectively. Across IMEA, W-40 specialist sales increased 27%, driven by strong growth in France, Italy, and Iberia, supported by effective marketing programs, successful new product introductions, and strong commercial execution. As a reminder, fourth quarter sales comparisons were impacted by the divestiture of the UK home care and cleaning portfolio in fiscal 25, which reduced reported sales by 2 million. We believe this strategic decision enhances the quality of our revenue base by increasing our focus on faster growing higher margin maintenance products. For the full fiscal year, maintenance product sales in IMEA increased 13% to $259.3 million. On a constant currency basis, sales grew 6% despite a dynamic geopolitical and economic environment, reflecting the resilience of our business model and the strength of our global supply chain. In Asia Pacific, sales in the fourth quarter increased 13% year-over-year to $26.3 million and were up 9% on a constant currency basis, reflecting broad-based growth across the region, led by China, where sales increased by $1.8 million. In China, growth was driven by higher sales volumes, reflecting the successful execution of promotional marketing programs and expanded distribution across traditional and e-commerce channels. Growth also benefited from some customer purchases ahead of a planned price increase. Australia also delivered a strong quarter, with sales increasing just under $1 million year-over-year. In Asia Pacific, W-40 specialist sales increased 23%, driven primarily by strong growth in China. Higher sales volumes reflected the successful execution of promotional and marketing programs, expanded distribution, and continued growth across e-commerce channels. For the full fiscal year, maintenance product sales in Asia Pacific increased 11% to $92.9 million, or 8% in constant currency. Now let's turn to the strategic progress we made in fiscal year 26 against our 4x4 strategic framework. Designed to drive profitable growth and long-term value creation, the framework is built around four must-win battles and four strategic enablers. Our must-win battles focus on the initiatives that drive sales growth and profitability. Given their long-term nature, I'll focus on full-year results. Starting with must-win battle number one, lead geographic expansion, global sales of our flagship product in fiscal year 26 were $533 million, representing growth of 11% over prior year and 8% on a constant currency basis. Sales of WD-40 multi-use product increased across all three trade blocks, growing 13% in the Americas, 10% in IMEA, and 8% in Asia Pacific. On a constant currency basis, growth was 11%, 4%, and 6%, respectively. We made significant progress across many of our key priority markets this year, with sales increasing $21.6 million in the United States, $5.3 million in China, 5.2 million in India, 3.1 million in France, and 2.5 million in Mexico. What's most important to emphasize is that we still have significant room to grow. Building on the success of our direct market transitions in Mexico and Brazil, we recently made Japan our newest direct market, expanding our presence in one of the world's largest economies. Japan is a compelling long-term growth opportunity. It's a mature highly competitive market where building scale takes time and competing there will make us stronger. The capabilities we build in Japan will support our long-term growth strategy. WD-40 multi-use product remains the foundation of our growth strategy. Our path forward is clear. Expand availability across more channels and geographies, build brand awareness, and put more cans into the hands of targeted end users. Benchmarked against France, our highest penetration market, we estimate the global attainable market at approximately $2.2 billion. Having achieved only 24% of that potential, we see a remaining growth opportunity of about $1.7 billion and a long runway for durable growth. The updated benchmark reflects higher penetration in France and a modest foreign currency impact. Next is Muslim battle number two, accelerating premiumization. Premiumization remains an important driver of our growth strategy. Products such as SmartStraw and EasyReach reflect our focus on developing differentiated solutions that address end-user needs. This approach strengthens brand loyalty, supports premium pricing, and contributes to gross margin expansion. Combined global sales of SmartStraw and EasyReach in fiscal year 26 were $277.1 million, an increase of 17% over the prior year. With premiumized products representing 52% of W-40 multi-use product sales and 41% of units sold, we believe significant opportunity remains to further increase penetration. Over the last five years, we've achieved a compound annual growth rate for net sales of premiumized products of 8.9%. Supported by continued innovation, increased consumer adoption, and expanded manufacturing capacity, we are targeting a compound annual growth rate for premiumized product sales of greater than 10% over the long term. Our third must-win battle is driving W-40 Specialist growth. W-40 Specialist extends our iconic brand into adjacent categories, serving professional and industrial end-users, and opening new avenues for profitable growth. In fiscal 26, global sales grew 21% to $99 million, or 17% in constant currency. Growth was double-digit in all three trade blocks. The Americas were up 15%, Ameya 25%, and Asia-Pacific 26%. Innovation remains a key driver. In fiscal 26, we launched a D-40 specialist biolubricant multi-use, our first biobased lubricant, across eight European markets. Early results met our expectations and the product earned the 2026 Glee New Product Award in the UK. We plan to launch it in the Americas in fiscal 27. France is also our benchmark market on W-40 Specialists. Their specialist sales reach 43% of multi-use product sales and several other markets are getting close, including Australia at 38% and Italy at 34%. We estimate the global attainable market for W-40 specialists at approximately $962 million. With only 10% realized to date, we see a remaining opportunity of about $863 million. Over the last five years, we've achieved a compound annual growth rate for net sales of W-40 specialists of 18.4%. That gives us confidence we can grow W-40 specialists at a compound annual growth rate of more than 10% over the long term. Our fourth must-win battle is to turbocharge digital commerce. In fiscal 26, global pure-play e-commerce sales increased 19% to 66.7 million, with double-digit growth in all three trade blocks. Pure-play e-commerce now accounts for 13% of global direct market maintenance product sales. While we are pleased with this growth, we view digital commerce as more than a sales channel. It is a strategic capability that enables us to reach consumers wherever they choose to shop, strengthen engagement with end users, and accelerate the execution of our must-win battles around the world. Looking ahead, we believe artificial intelligence will play an increasingly important role in how consumers discover, evaluate, and purchase brands. As AI-powered search and recommendation tools continue to evolve, one of our key priorities in fiscal 27 will be ensuring our brands are easy to find, they remain trusted and relevant across digital commerce, search, and AI-driven platforms. Over the last five years, we've achieved a compound annual growth rate for net sales in the pure play e-commerce channel of 13.1%. We expect e-commerce to remain one of our fastest growing channels in fiscal 27 and beyond, and we're targeting long-term compound annual growth rate of more than 10%. More broadly, we view digital commerce as a strategic capability that drives engagement with end users online and accelerates progress across each of our must-win battles. Turning to our strategic enablers, while our must-win battles drive top-line growth, our strategic enablers strengthen the capabilities that make that growth more durable over time. They support operational excellence, enhance the resilience of our business, and provide the foundation for long-term value creation. Strategic enabler number one is ensuring a people-first mindset. Our 753 employees across 19 countries are one of our most durable competitive advantages. Their ability to learn, adapt, and innovate drives our strategy. This year, despite a dynamic operating environment, our team strengthened cost discipline and used our decentralized supply chain to navigate disruption, serve customers, and support profitable growth. Earlier this year, we announced several leadership transitions designed to build on our strong foundation and support continued growth. In addition to the CFO transition I mentioned earlier, Patricia Olsem will become Chief Strategy and Innovation Officer, and Claudia Fensker will take on the newly created role of Chief Brand and Marketing Officer. These changes reflect our commitment to developing talent from within. They also strengthen alignment Accelerate innovation and expand our ability to leverage AI and digital technologies.