On July 10, 2024, WD-40 Co (WDFC, Financial) released its 8-K filing reporting financial results for its third fiscal quarter ended May 31, 2024. WD-40 Co, a global marketing organization known for its lubricants and cleaning products, demonstrated strong performance with significant growth in net sales and improved gross margins.
Company Overview
WD-40 Co manufactures and sells lubricants and cleaning products. The firm's product categories include maintenance and cleaning products. Maintenance products include the WD-40 signature brand aerosol spray lubricant as well as degreasers, rust removers, and bicycle maintenance products. Cleaning products include toilet cleaners, carpet stain removers and deodorizers, and heavy-duty hand soaps used to clean grease. The company organizes itself into three segments based on geography: Americas, Europe/Middle East/Africa (EMEA), and Asia-Pacific. Around half of the company's revenue comes from the Americas segment, which includes the United States, Canada, and Latin America.
Performance Highlights
WD-40 Co reported total net sales of $155.0 million for the third quarter, marking a 9% increase compared to the prior year fiscal quarter. Excluding the favorable impact of foreign currency exchange rates, net sales would have increased by 8% to $153.5 million. The company's maintenance product sales were particularly strong, totaling $147.2 million, a 10% increase from the previous year.
Gross margin improved to 53.1%, up from 50.6% in the prior year fiscal quarter. However, selling, general, and administrative expenses rose by 19% to $45.6 million, and advertising and sales promotion expenses increased by 22% to $9.3 million.
Financial Achievements
WD-40 Co's net income for the quarter was $19.8 million, a 5% increase from the prior year fiscal quarter. Diluted earnings per share were $1.46, surpassing the analyst estimate of $1.27. This performance underscores the company's ability to drive profitable growth despite rising expenses.
“We delivered another strong quarter with record sales driven by robust volume growth across all three of our trade blocs," said Steve Brass, WD-40 Company’s president and chief executive officer. "Our maintenance product sales achieved impressive growth of over 10 percent for both the third quarter and year-to-date, aligning with our established long-term growth objectives."
Segment Performance
| Segment | Q3 2024 Net Sales ($000) | Q3 2023 Net Sales ($000) | Change (%) |
|---|---|---|---|
| Americas | 75,103 | 71,130 | 6% |
| EMEA | 59,399 | 52,524 | 13% |
| Asia-Pacific | 20,543 | 18,063 | 14% |
The Americas segment, representing 49% of total net sales, saw a 6% increase primarily due to a 7% rise in WD-40® Multi-Use Product sales. The EMEA segment, accounting for 38% of total net sales, experienced a 13% increase driven by a 17% rise in WD-40® Multi-Use Product sales. The Asia-Pacific segment, representing 13% of total net sales, reported a 14% increase, with significant growth in China and the Asia distributor markets.
Income Statement and Balance Sheet
WD-40 Co's income statement highlights include:
- Net sales: $155.0 million
- Gross profit: $82.4 million
- Operating expenses: $55.2 million
- Net income: $19.8 million
The balance sheet shows total assets of $443.6 million, with current assets of $248.8 million. The company maintains a strong liquidity position with cash and cash equivalents of $45.3 million. Total liabilities stand at $221.4 million, with stockholders' equity at $222.2 million.
Cash Flow and Shareholder Returns
WD-40 Co generated $64.8 million in net cash from operating activities for the nine months ended May 31, 2024. The company also declared a regular quarterly dividend of $0.88 per share and repurchased 34,250 shares at a total cost of $8.1 million under its $50.0 million share repurchase plan.
Analysis and Outlook
WD-40 Co's strong performance in Q3 2024, characterized by robust sales growth and improved margins, positions the company well for continued success. The company's focus on its core maintenance products and strategic geographic segments has yielded positive results. However, rising operating expenses and the ongoing divestiture of its homecare and cleaning product portfolios in the U.S. and U.K. present challenges that management will need to navigate carefully.
Overall, WD-40 Co's financial health and strategic initiatives suggest a positive outlook, with management reiterating its fiscal year 2024 guidance and projecting net sales growth between 6% and 12%.
Explore the complete 8-K earnings release (here) from WD-40 Co for further details.
