WD-40 Company Reports Third Quarter 2021 Financial Results

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WD-40 Company (NASDAQ:WDFC) reported a strong financial performance for the third fiscal quarter ending May 31, 2021. Total net sales surged by 39% to $136.4 million, while year-to-date sales reached $372.9 million, a 26% increase year-over-year. The net income for the quarter grew by 45% to $21.0 million, with diluted EPS rising to $1.52. Despite increased selling, general, and administrative expenses, the company anticipates full-year sales between $475 million and $490 million, reflecting a potential growth of 16% to 20%.

Positive

• Third quarter net sales increased by 39% to $136.4 million.
• Year-to-date net sales rose 26% to $372.9 million.
• Net income for the quarter was $21.0 million, up 45% year-over-year.
• Diluted EPS rose to $1.52 from $1.06 in the prior year quarter.
• Management raised full-year net sales guidance to $475 million-$490 million, indicating 16%-20% growth.

Negative

• Gross margin decreased from 54.0% to 53.1% in the third quarter.
• Selling, general and administrative expenses increased 37% to $38.1 million.

SAN DIEGO, July 7, 2021 /PRNewswire/ -- WD-40 Company (NASDAQ:WDFC), a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories and homes around the world, today reported financial results for its third fiscal quarter ended May 31, 2021.

Third Fiscal Quarter Financial Highlights

• Total net sales for the third quarter were $136.4 million, an increase of 39 percent compared to the prior year fiscal quarter. Year-to-date total net sales were $372.9 million, an increase of 26 percent compared to the prior year fiscal period.
• Translation of the Company's foreign subsidiary results to U.S. dollars had a favorable impact on sales for the current quarter and year-to-date. On a constant currency basis, total net sales would have been $128.7 million for the third quarter and $359.7 million year-to-date.
• Net income for the third quarter was $21.0 million, an increase of 45 percent compared to the prior year fiscal quarter. Year-to-date net income was $61.8 million, an increase of 51 percent from the prior year fiscal period.
• Diluted earnings per share were $1.52 in the third quarter, compared to $1.06 per share for the prior year fiscal quarter. Year-to-date diluted earnings per share were $4.48 compared to $2.98 in the prior year fiscal period.
• Gross margin was 53.1 percent in the third quarter compared to 54.0 percent in the prior year fiscal quarter. Year-to-date gross margin was 54.9 percent compared to 54.0 percent in the prior year fiscal period.
• Selling, general and administrative expenses were up 37 percent in the third quarter to $38.1 million when compared to the prior year fiscal quarter. Year-to-date selling, general and administrative expenses were up 21 percent to $109.6 million compared to the prior year fiscal period.
• Advertising and sales promotion expenses were up 39 percent in the third quarter to $6.6 million when compared to the prior year fiscal quarter. Year-to-date advertising and sales promotion expenses were up 16 percent to $17.7 million compared to the prior year fiscal period.

"Our tribe continues to work together through the challenges and opportunities associated with the COVID-19 pandemic," said Garry Ridge, WD-40 Company's chairman and chief executive officer. In the third quarter we experienced unprecedented demand for our maintenance products and today we are reporting record net sales of $136.4 million, up 39 percent compared to the third quarter of last year." 

"The post-pandemic era is coming. We do not expect to see sales growth of this magnitude over the long-term, however, we believe that the new end users who have interacted with our products during the pandemic will become permanent users of our maintenance products."  

"To reflect the strong sales results we experienced in the third quarter, we've increased our revenue expectations and believe that net sales are likely to be in a range of between $475 million to $490 million for the full fiscal year which reflects year-over-year sales growth of between 16 and 20 percent.  As things get back to normal post the pandemic, consumer spending patterns will change again, and we expect consolidated net sales to grow in the mid to high single digits," Ridge concluded.

Net Sales by Segment (in thousands):
	Three Months Ended May 31,									Nine Months Ended May 31,
	2021			2020			Change			2021			2020			Change
Americas	$	60,046		$	50,094			20%		$	160,390		$	143,672			12%
EMEA		58,587			32,521			80%			163,150			113,519			44%
Asia-Pacific		17,772			15,632			14%			49,329			39,661			24%
Total	$	136,405		$	98,247			39%		$	372,869		$	296,852			26%

 

• Net sales by segment as a percent of total net sales for the third quarter were as follows: for the Americas, 44 percent; for EMEA, 43 percent; and for Asia-Pacific, 13 percent.
• Net sales in the Americas increased 20 percent in the third quarter primarily due to higher sales of WD-40 Multi-Use Product in the United States, Latin America and Canada which increased 24 percent,138 percent and 74 percent, respectively. The increase in sales in the United States and Canada was driven by increased demand linked to renovation trends associated with the pandemic. In addition, sales in the corresponding period of the prior fiscal year were negatively impacted by disruptions and lockdowns related to the early stages of the COVID-19 pandemic. The increase in sales in Latin America was primarily due to higher maintenance product sales in Mexico driven by a successful shift to a direct distribution model that the company began late in the third quarter of the prior fiscal year. In addition, sales in Latin America in the corresponding period of the prior fiscal year were negatively impacted by disruptions and lockdowns related to the early stages of the COVID-19 pandemic.
• Net sales in EMEA increased 80 percent in the third quarter primarily due to higher sales of maintenance products in both the EMEA direct and distributor markets, which increased 85 percent and 70 percent, respectively. Higher sales of maintenance products in the EMEA direct markets were primarily due to increased sales of WD-40 Multi-Use Product driven by increased demand linked to renovation trends associated with the pandemic, increased sales through the ecommerce channel and increased promotional activities. In addition, sales in the corresponding period of the prior fiscal year were negatively impacted by disruptions and lockdowns related to the early stages of the COVID-19 pandemic. Higher sales of maintenance products in the EMEA distributor markets were primarily attributable to improved economic conditions as a result of reductions in COVID-19 related movement restrictions. Changes in foreign currency exchange rates had a favorable impact on sales for the EMEA segment from period to period. On a constant currency basis, EMEA sales for the third quarter would have increased by 63 percent compared to the prior fiscal year quarter.
• Net sales in Asia-Pacific increased 14 percent in the third quarter. Changes in foreign currency exchange rates had a favorable impact on sales for the Asia-Pacific segment. On a constant currency basis, Asia-Pacific would have increased by 5 percent compared to the prior year fiscal quarter primarily due to higher sales of maintenance products in the Asia-Pacific distributor markets and Australia which increased 26 percent and 14 percent, respectively. Higher sales of maintenance products in the Asia-Pacific distributor markets were primarily attributable to improved economic conditions as a result of reductions in COVID-19 related movement restrictions. Higher sales of maintenance products in the Australia were primarily attributable to increased sales of 3-IN-ONE and WD-40 Specialist driven by increased demand linked to renovation trends associated with the pandemic. Partially offsetting these sales increases were lower sales of WD-40 Multi-Use Product in China which decreased 12 percent compared to the prior year fiscal quarter primarily due to a higher level of sales in the third quarter of fiscal year 2020 associated with the timing of COVID-19 restrictions and shipping activities during that period.

 

Net Sales by Product Group (in thousands):
	Three Months Ended May 31,									Nine Months Ended May 31,
	2021			2020			Change			2021			2020			Change
Maintenance products	$	127,374		$	87,859			45%		$	344,446		$	268,676			28%
Homecare and cleaning products		9,031			10,388			(13)%			28,423			28,176			1%
Total	$	136,405		$	98,247			39%		$	372,869		$	296,852			26%

 

• Net sales of maintenance products, which are considered the primary growth focus for the Company, increased 45 percent in the third quarter when compared to the prior year fiscal quarter. This sales increase was primarily attributable to increased sales of WD-40 Multi-Use Product in all three segments driven by increased demand linked to renovation trends associated with the pandemic, improved market conditions due to a reduction of COVID-19 lockdown measures, and increased sales through the ecommerce channel.
• Net sales of homecare and cleaning products decreased 13 percent in the third quarter when compared to the prior year fiscal quarter. The Company started to experience an increase in sales of its homecare and cleaning products beginning in the third quarter of fiscal year 2020 due to increased demand for such products as a result of the COVID-19 pandemic. However, sales of homecare and cleaning products have returned to more normal levels due to improvements in public health and safety restrictions related to the pandemic in many regions. The homecare and cleaning products, particularly those in the U.S., are considered harvest brands providing healthy profit returns to the Company and are becoming a smaller part of the business as net sales of multi-purpose maintenance products grow per the execution of the Company's strategic initiatives.

Dividend Information
As previously announced, WD-40 Company's board of directors declared on Tuesday, June 15, 2021 a regular quarterly dividend of $0.72 per share payable on July 30, 2021 to stockholders of record at the close of business on July 16, 2021.

Webcast Information
As previously announced, WD-40 Company management will host a live webcast at approximately 5:00 p.m. ET / 2:00 p.m. PT today to discuss these results. Other forward-looking and material information may also be discussed during this call including management's current view of the business in light of the COVID-19 pandemic.  Please visit http://investor.wd40company.com for more information and to view supporting materials.

About WD-40 Company
WD-40 Company is a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories and homes around the world. The Company markets a wide range of maintenance products and homecare and cleaning products under the following well-known brands: WD-40®, 3-IN-ONE®, GT85®, X-14®, 2000 Flushes®, Carpet Fresh®, no vac®, Spot Shot®, 1001®, Lava® and Solvol®. 

Headquartered in San Diego, WD-40 Company recorded net sales of $408.5 million in fiscal year 2020 and its products are currently available in more than 176 countries and territories worldwide. WD-40 Company is traded on the NASDAQ Global Select market under the ticker symbol "WDFC." For additional information about WD-40 Company please visit http://www.wd40company.com.

Forward-Looking Statements
Except for the historical information contained herein, this press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect the Company's current expectations with respect to currently available operating, financial and economic information.  These forward-looking statements are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated in or implied by the forward-looking statements.

Our forward-looking statements include, but are not limited to, discussions about future financial and operating results, including:  growth expectations for maintenance products; expected levels of promotional and advertising spending; anticipated input costs for manufacturing and the costs associated with distribution of our products; plans for and success of product innovation; the impact of new product introductions on the growth of sales; anticipated results from product line extension sales; expected tax rates and the impact of tax legislation and regulatory action; the length and severity of the current COVID-19 pandemic and its impact on the global economy and the Company's financial results; and forecasted foreign currency exchange rates and commodity prices. Our forward-looking statements are generally identified with words such as "believe," "expect," "intend," "plan," "could," "may," "aim," "anticipate," "target," "estimate" and similar expressions.

The Company's expectations, beliefs and forecasts are expressed in good faith and are believed by the Company to have a reasonable basis, but there can be no assurance that the Company's expectations, beliefs or forecasts will be achieved or accomplished.

Actual events or results may differ materially from those projected in forward-looking statements due to various factors, including, but not limited to, those identified in Part I―Item 1A, "Risk Factors," in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2020, and in the Company's Quarterly Report on Form 10-Q for the period ended May 31, 2021 which the Company expects to file with the SEC on July 7, 2021.

All forward-looking statements included in this press release should be considered in the context of these risks. All forward-looking statements speak only as of July 7, 2021, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Investors and prospective investors are cautioned not to place undue reliance on our forward-looking statements.

Table Notes and General Definitions
(1)	The Company markets maintenance products under the WD-40®, GT85® and 3-IN-ONE® brand names. Currently included in the WD-40 brand are the WD-40 Multi-Use Product and the WD-40 Specialist® and WD-40 BIKE® product lines.
(2)	The Company markets the following homecare and cleaning brands:  X-14® automatic toilet bowl cleaners, 2000 Flushes® automatic toilet bowl cleaners, Carpet Fresh® and no vac® rug and room deodorizers, Spot Shot® aerosol and liquid carpet stain removers, 1001® household cleaners and rug and room deodorizers and Lava® and Solvol® heavy-duty hand cleaners.
(3)	The Americas segment consists of the U.S., Canada, Mexico and Latin America.
(4)	The EMEA segment consists of countries in Europe, the Middle East, Africa and India.
(5)	The Asia-Pacific segment consists of Australia, China and other countries in the Asia region.
(6)	Constant currency represents the translation of the current quarter and year-to-date results from the functional currencies of the Company's subsidiaries to U.S. dollars using the exchange rate in effect for the corresponding periods of the prior fiscal year.

 

WD-40 COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share and per share amounts)
	May 31,			August 31,
	2021			2020
Assets
Current assets:
Cash and cash equivalents	$	80,362		$	56,462
Trade and other accounts receivable, less allowance for doubtful
accounts of $620 and $362 at May 31, 2021
and August 31, 2020, respectively		104,911			80,672
Inventories		47,768			41,264
Other current assets		7,902			6,756
Total current assets		240,943			185,154
Property and equipment, net		68,968			60,759
Goodwill		96,017			95,731
Other intangible assets, net		7,665			8,633
Operating lease right-of-use assets		9,158			8,168
Deferred tax assets, net		484			464
Other assets		4,652			3,728
Total assets	$	427,887		$	362,637
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	31,307		$	21,676
Accrued liabilities		24,728			21,660
Accrued payroll and related expenses		21,485			14,767
Short-term borrowings		800			800
Income taxes payable		798			1,213
Total current liabilities		79,118			60,116
Long-term borrowings		116,498			113,098
Deferred tax liabilities, net		10,878			11,291
Long-term operating lease liabilities		7,344			6,520
Other long-term liabilities		11,417			11,299
Total liabilities		225,255			202,324
Commitments and Contingencies
Shareholders' equity:
Common stock ― authorized 36,000,000 shares, $0.001 par value;
19,855,666 and 19,812,685 shares issued at May 31, 2021 and
August 31, 2020, respectively; and 13,707,767 and 13,664,786 shares
outstanding at May 31, 2021 and August 31, 2020, respectively		20			20
Additional paid-in capital		162,240			157,850
Retained earnings		432,230			398,731
Accumulated other comprehensive loss		(23,778)			(28,208)
Common stock held in treasury, at cost ―  6,147,899 shares
at both May 31, 2021 and August 31, 2020		(368,080)			(368,080)
Total shareholders' equity		202,632			160,313
Total liabilities and shareholders' equity	$	427,887		$	362,637

 

WD-40 COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share amounts)
	Three Months Ended May 31,						Nine Months Ended May 31,
		2021			2020			2021			2020
Net sales	$	136,405		$	98,247		$	372,869		$	296,852
Cost of products sold		63,947			45,197			168,158			136,657
Gross profit		72,458			53,050			204,711			160,195
Operating expenses:
Selling, general and administrative		38,131			27,922			109,586			90,427
Advertising and sales promotion		6,642			4,764			17,673			15,211
Amortization of definite-lived intangible assets		364			552			1,084			1,856
Total operating expenses		45,137			33,238			128,343			107,494
Income from operations		27,321			19,812			76,368			52,701
Other income (expense):
Interest income		21			20			59			73
Interest expense		(615)			(778)			(1,795)			(1,813)
Other income (expense), net		183			27			513			(197)
Income before income taxes		26,910			19,081			75,145			50,764
Provision for income taxes		5,904			4,557			13,325			9,719
Net income	$	21,006		$	14,524		$	61,820		$	41,045
Earnings per common share:
Basic	$	1.53		$	1.06		$	4.50		$	2.98
Diluted	$	1.52		$	1.06		$	4.48		$	2.98
Shares used in per share calculations:
Basic		13,708			13,674			13,694			13,700
Diluted		13,746			13,700			13,727			13,727

 

WD-40 COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
	Nine Months Ended May 31,
	2021			2020
Operating activities:
Net income	$	61,820		$	41,045
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		5,266			5,980
Net gains on sales and disposals of property and equipment		(185)			(115)
Deferred income taxes		(512)			(221)
Stock-based compensation		7,885			4,609
Unrealized foreign currency exchange (gains) losses		(529)			30
Provision for bad debts		253			98
Changes in assets and liabilities:
Trade and other accounts receivable		(20,053)			(3,006)
Inventories		(5,101)			(2,433)
Other assets		(1,777)			1,443
Operating lease assets and liabilities, net		11			224
Accounts payable and accrued liabilities		11,000			(2,367)
Accrued payroll and related expenses		6,202			(5,758)
Other long-term liabilities and income taxes payable		(305)			1,227
Net cash provided by operating activities		63,975			40,756
Investing activities:
Purchases of property and equipment		(10,789)			(17,411)
Proceeds from sales of property and equipment		418			321
Net cash used in investing activities		(10,371)			(17,090)
Financing activities:
Treasury stock purchases		-			(16,825)
Dividends paid		(28,321)			(26,840)
Repayments of long-term senior notes		(800)			(800)
Net (repayments) proceeds of revolving credit facility		(50,000)			84,595
Shares withheld to cover taxes upon conversions of equity awards		(3,494)			(2,640)
Net cash used in financing activities		(30,615)			37,490
Effect of exchange rate changes on cash and cash equivalents		911			166
Net increase in cash and cash equivalents		23,900			61,322
Cash and cash equivalents at beginning of period		56,462			27,233
Cash and cash equivalents at end of period	$	80,362		$	88,555
Supplemental disclosure of noncash investing activities:
Accrued capital expenditures	$	1,700		$	454

 

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SOURCE WD-40 Company

FAQ

What were WD-40 Company's financial results for Q3 2021?

WD-40 Company reported total net sales of $136.4 million for Q3 2021, a 39% increase from the prior year.

What is the net income for WD-40 Company in Q3 2021?

The net income for Q3 2021 was $21.0 million, which is a 45% increase compared to the same quarter last year.

How did WD-40 Company's diluted EPS change in Q3 2021?

Diluted earnings per share rose to $1.52 for Q3 2021, up from $1.06 in the previous year.

What is WD-40 Company's sales guidance for the full fiscal year 2021?

The company expects full-year net sales in the range of $475 million to $490 million, reflecting 16%-20% growth.

What factors contributed to WD-40 Company's sales growth in Q3 2021?

Growth was driven by increased demand for maintenance products linked to renovation trends during the pandemic.