q4 & fy 2017 earnings resultss21.q4cdn.com/612895086/files/.../q4/...final-(1).pdf · and...

Q4&FY2017EarningsResults

October 19, 2017

Historical financial and operating data in this presentation reflect the consolidated results of WD-40 Company, its subsidiaries and its legal entities. WD-40 Company markets maintenance products (“MP”) under the WD-40®, 3-IN-ONE® and GT85® 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. WD-40 Company markets the following homecare and cleaning (”HCCP”) brands: X-14® mildew stain remover and 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.

Except for the historical information contained herein, this presentation 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; 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; 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,” “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, 2017 which the Company expects to file with the SEC on October 23, 2017.

All forward-looking statements included in this presentation should be considered in the context of these risks. All forward-looking statements speak only as of October 19, 2017 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.

Forward-LookingStatements

2

3

UpdatedStrategicInitiatives

1. Grow WD-40 Multi-Use Product Maximize the product line through innovation, geographic expansion and increased market penetration. More places, more people, more uses, more frequently.

Grow WD-40 Multi-Use Product to $530 million in net sales by the end of 2025

2. Grow the WD-40 Specialist Product LineLeverage the WD-40 Specialist line to create growth through continued geographic expansion as well as by developing new products and product categories within identified platforms.

Grow WD-40 Specialist to $100 million in net sales by the end of 2025

3. Broaden Product and Revenue Base Leverage the recognized strengths of WD-40 Company to deriverevenue from existing brands as well as from new sources and products.

Continue to nurture, develop or acquire products that fit well with our unique multi-

channel distribution network and grow to $70 million in net sales by the end of 2025

4. Attract, Develop and Retain Outstanding Tribe MembersSucceed as a tribe while excelling as individuals. Grow employee engagement to greater than

95 percent

5. Operational ExcellenceContinuous improvement by optimizing resources, systems and processes as well as applying rigorous commitment to quality assurance, regulatory compliance, and intellectual property protection.

Execute the 55/30/25 business model while safeguarding the “Power of the Shield”

StrategicInitiativesTarget

4

Long-TermRevenueGrowthTargets

FY 2007Reported Revenue

$308M

Revenue Generated by Strategic Initiative #1

1) Growth targets for revenue are projected by the end of FY2025 and are based on the Company's expectations, beliefs and forecasts. They are expressed in good faith and are believed by the Company to have a reasonable basis, but there can be no assurance that they will be achieved or accomplished. Note: Historical revenue numbers reflect net sales as reported and have not been adjusted for changes in foreign currency exchange rates.

5

FY 2017Reported Revenue

$381M

FY 2025Revenue Target

~$700M

$106M

$202M $292M

$63M$26M

~$530M

~$100M

~$70M

Revenue Generated by Strategic Initiative #2 Revenue Generated by Strategic Initiative #3

6

Q4FY17Results

Q4 FY17 Q4 FY16 % Change

Net Sales $96.6 $97.2 -1%

Gross Profit (%) 56.0% 57.4% -140 bp

Operating Income $19.9 $17.6 13%

Net Income $14.4 $14.2 1%

EPS (Diluted) $1.01 $0.99 2%

Q4FY17Results

• Top-line sales growth was slightly impacted by foreign currency exchange rates in Q4 FY17

• When you take both translation (or “constant currency”) and transaction exposure into consideration, the impacts of foreign currency exchange rates increased our total net sales by approximately $0.2 million.

7

($ in millions; except EPS, gross profit and % change)

Functional currencyMain currency in which subsidiaries conduct

business; typically the same as that of the country in which the subsidiary is

headquartered

Transaction currencyCurrency in which sales,

costs, expenses are transacted; typically the

same as that of the country in which the sales transaction

takes place

Reporting currencyAs a U.S. based company the reporting currency of WD-40 Company is the

U.S. dollar Conversionfrom

transaction currency to

subsidiaries’ functional currency

Translation from

functional currency to

WD-40 Company’s

reporting currency

ForeignCurrencyImpact

Translation Impact

Transaction Impact

Subsidiary (Functional Currency)

UK – GBPCANADA- CAD

AUSTRALIA- AUDCHINA- CNY

Subsidiary(Non-Functional Currency)

UK – USD & EUR

8

Q4 FY17 net sales at Q4 FY17 FX rates Q4 FY17 net sales at Q4 FY16 FX rates Q4 FY17 net sales at Q4 FY16 FX rates

Q4FY17ForeignCurrencyExchangeImpact

In total changes in FX rates increased

net sales by ~$0.2M in Q4FY17

$96.6 $98.5

$96.4

Reported Net Sales Translation Impact Transaction Impact

Translation Impact(Functional Currency)

Translation and Transaction Impact

Reporting Currency

Q4 FY17 Net Sales(In millions)

(constant currency) (constant currency plus transaction impacts)(as reported)

$1.9 $2.1

9

$41.3 $44.3

$6.7$7.3

Q4 FY17 Q4 FY16

Americas Net Sales(in millions)

Maintenance Products Homecare and Cleaning Products

AmericasSegment

Americas – Q4 FY17 vs. Q4 FY16

$48.0$51.6 • Total reported segment sales ▼ 7%

• Segment makes up 50% of global sales

• Maintenance product sales ▼ 7%• WD-40 Specialist sales ▲ 8%

• HCCP sales ▼ 8%

• Maintenance Product (MP) sales: • U.S. MP sales ▼ 11%• Latin America MP sales ▲ 24%

• Canadian MP sales ▲ 5%

10

$34.5 $33.1

$1.5 $1.5

Q4 FY17 Q4 FY16

EMEA Net Sales(in millions)


EMEASegmentEMEA – Q4 FY17 vs. Q4 FY16

$34.6$36.0

• Total reported segment sales ▲ 4%• Segment makes up 37% of global sales

• Changes in foreign currency exchange rates had an immaterial favorable impact on net sales

• Maintenance product sales ▲ 4%• WD-40 Specialist sales ▲ 29%


• EMEA direct market sales ▲ 7%

• 66% of segment sales came from direct markets

• In GBP-based markets sales ▲ 7% in GBP• In EUR-based markets sales ▲ 6% in EUR

• EMEA distributor market sales ▼ 2%• 34% of segment sales came from distributor

markets

11

$10.8$9.2

$1.9

$1.8

Q4 FY17 Q4 FY16

Asia-Pacific Net Sales(in millions)


Asia-PacificSegmentAsia-Pacific – Q4 FY17 vs. Q4 FY16

$11.0

$12.7

• Total reported Asia-Pacific sales ▲ 15%• Segment makes up 13% of global sales


• HCCP sales ▲ 8%

• Australia sales ▲ 6%• In functional currency (AUD) sales ▲ 1%

• China sales ▲ 13%• In functional currency (RMB) sales ▲ 16%

• Asia distributor market sales ▲ 39%

12

13

FY17Results

FY17 FY16 % Change

Net Sales $380.5 $380.7 0%

Gross Profit (%) 56.2% 56.3% -10 bps


Net Income $52.9 $52.6 1%

EPS (Diluted) $3.72 $3.64 2%

FY17Results

• Top-line sales growth was slightly impacted by foreign currency exchange rates in FY17

• When you take both translation (or “constant currency”) and transaction exposure into consideration, the impacts of foreign currency exchange rates reduced our total net sales by approximately $5.8 million

14


FY17 Net Sales at FY17 FX Rates FY17 Net Sales at FY16 FX Rates FY17 Net Sales at FY16 FX Rates

FY17ForeignCurrencyExchangeImpact

In total changes in FX rates reduced net sales by ~$5.8M in

FY17

$380.5

$399.6

$386.3

Reported Net Sales Translation Impact Transaction Impact

Translation Impact(Functional Currency)

Translation and Transaction Impact

Reporting Currency

FY17 Net Sales(In millions)

(constant currency) (constant currency plus transaction impacts)(as reported)

$19.1 $13.3

15

$159.1 $163.7

$25.8 $27.7

FY17 FY16

Americas Net Sales(in millions)


AmericasSegment

Americas – FY17 vs. FY16

$184.9 $191.4

• Total reported segment sales ▼ 3%• Segment makes up 49% of global sales

• Maintenance product sales ▼ 3%• WD-40 Specialist sales ▲ 13%


• Maintenance Product (MP) sales: • U.S. MP sales ▼ 5%• Latin America MP sales ▲ 4%

• Canadian MP sales ▲ 10%

16

$131.6 $129.2

$5.2 $6.0

FY17 FY16

EMEA Net Sales(in millions)


EMEASegmentEMEA – FY17 vs. FY16

$135.2$136.8

• Total reported segment sales ▲ 1%• Segment makes up 36% of global sales

• Changes in foreign currency exchange rates had an unfavorable impact on sales

• Maintenance product sales ▲ 2%• WD-40 Specialist sales ▲ 31%• HCCP sales ▼ 13%

• EMEA direct market sales ▲ 1%

• 65% of segment sales came from direct markets

• In GBP-based markets sales ▲ 4% in GBP

• In EUR-based markets sales ▲ 6% in EUR

• EMEA distributor market sales up ▲ 1% • 35% of segment sales came from distributor

markets

17

$51.6 $47.1

$7.2 $6.9

FY17 FY16

Asia-Pacific Net Sales(in millions)


Asia-PacificSegmentAsia-Pacific – FY17 vs. FY16

$54.0$58.8

• Total reported Asia-Pacific sales ▲ 9%• Segment makes up 15% of global sales


• HCCP sales ▲ 4%

• Australia sales ▲ 6%• In functional currency (AUD) sales ▲ 2%

• China sales ▲ 11%• In functional currency (RMB) sales ▲ 16%

• Asia distributor market sales ▲ 9%

18

19

55/30/25BusinessModel

GrossMargin

Gross margin can be impacted positively and negatively by things not under the Company’s control like changes in foreign currency exchange rates and input costs

20

Gross Margin – 57.4% Q4 FY16 vs. 56.0% Q4 FY17 (-1.4pp)• Changes in petroleum-based specialty chemicals and aerosol cans (-1.7pp)• Sales mix and miscellaneous (-0.9pp)• Warehousing and in-bound freight costs (-0.1pp)• Changes in foreign currency exchange rates in EMEA (+0.8pp)• Lower advertising and promotional discounts (+0.4pp)• Price increases in EMEA (+0.1pp)

Gross Margin – 56.3% FY16 vs. 56.2% FY17 (-0.1pp)• Changes in petroleum-based specialty chemicals and aerosol cans (-1.0%)• Sales mix and miscellaneous (-0.4pp)• Warehousing and in-bound freight costs (-0.1pp)• Changes in foreign currency exchange rates in EMEA (+1.3pp)• Price increases in EMEA (+0.1pp)

FY1755/30/25Results

* See appendix for descriptions and reconciliations of these non-GAAP measures.Note: Percentages may not aggregate to EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on the Company’s consolidated statement of operations are not included as an adjustment to earnings in the Company’s EBITDA calculation.

21

55/30/25 Business Model Target FY17 Actuals

FY16 Actuals

FY15 Actuals

Gross Margin 55% 56% 56% 53%Cost of Doing Business 30% 35% 36% 34%EBITDA 25% 22% 21% 19%

22

Guidance

Diluted EPS

Net Income

A&P Investment

Gross Margin

Net Sales

Sales Growth

*As of 10/19/17. This guidance does not include any future acquisitions or divestitures and assumes that foreign currency exchange rates and crude oil prices will remain close to current levels for the remainder of fiscal year 2018.

FiscalYear2018Guidance*

23

Between 4% and 6%

Between $396 and $403 million

Near 56%

Near 6.0% of net sales

Between $52.9 and $53.8 million

Between $3.81 and $3.87 based on 13.9 million shares outstanding

24

Appendix

Q4 FY17 CC* Q4 FY16 % Change

Net Sales $98.5 $97.2 1%


Net Income $14.7 $14.2 3%

EPS (Diluted) $1.04 $0.99 21%

Q4 FY17 Q4 FY16 % Change

Net Sales $96.6 $97.2 -1%

Gross Profit (%) 56.0% 57.4% -140 bp


Net Income $14.4 $14.2 1%

EPS (Diluted) $1.01 $0.99 2%

ForeignCurrencyTranslationImpactor“ConstantCurrency”– Q4FY17

Financial ResultsAs reported

Financial ResultsConstant currency basis

*Q4 FY17 results translated at Q4 FY16 foreign currency exchange rates


25

FY17 FY16 % Change

Net Sales $380.5 $380.7 0%

Gross Profit (%) 56.2% 56.3% -10 bps


Net Income $52.9 $52.6 1%

EPS (Diluted) $3.72 $3.64 2%

FY17 CC* FY16 % Change

Net Sales $399.6 $380.7 5%


Net Income $56.4 $52.6 24%

EPS (Diluted) $3.97 $3.64 9%

ForeignCurrencyTranslationImpactor“ConstantCurrency”– FY17

Financial ResultsAs reported

Financial ResultsConstant currency basis

*FY17 results translated at FY16 foreign currency exchange rates


26

(1) This presentation contains certain non-GAAP (accounting principles generally accepted in the United States of America) measures, that ourmanagement believes provide our stockholders with additional insights into WD-40 Company’s results of operations and how it runs its business. Ourmanagement uses these non-GAAP financial measures in order to establish financial goals and to gain an understanding of the comparative performanceof the Company from year to year or quarter to quarter. The non-GAAP measures referenced in this presentation, which include EBITDA (earnings beforeinterest, income taxes, depreciation and amortization) and the cost of doing business, are supplemental in nature and should not be considered in isolationor as alternatives to net income, income from operations or other financial information prepared in accordance with GAAP as indicators of the Company’sperformance or operations. Reconciliations of these non-GAAP financial measures to the WD-40 Company financials as prepared under GAAP are asfollows:

Non-GAAPReconciliation– Q4FY17

Note: Percentages may not aggregate to EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on the Company’s consolidated statement of operations are not included as an adjustment to earnings in the Company’s EBITDA calculation.

27

Total operating expenses - GAAP $ 34,178 $ 38,159 Amortization of definite-lived intangible assets (723) (734) Depreciation (in operating departments) (712) (696)

Cost of doing business $ 32,743 $ 36,729 Net sales $ 96,561 $ 36,729 Cost of doing business as a percentage

of net sales - non-GAAP 34% 38%

EBITDA:

Net income - GAAP $ 14,368 $ 14,232 Provision for income taxes 5,166 5,073 Interest income (116) (166) Interest expense 760 481 Amortization of definite-lived intangible assets 723 734 Depreciation 1,041 838

EBITDA $ 21,942 $ 21,192 Net sales $ 96,561 $ 97,152 EBITDA as a percentage of net sales - non-GAAP 23% 22%

Three Months Ended September 30,

2017 2016

2017 2016

Three Months Ended September 30,

(1) This presentation contains certain non-GAAP (accounting principles generally accepted in the United States of America) measures, that ourmanagement believes provide our stockholders with additional insights into WD-40 Company’s results of operations and how it runs its business. Ourmanagement uses these non-GAAP financial measures in order to establish financial goals and to gain an understanding of the comparative performanceof the Company from year to year or quarter to quarter. The non-GAAP measures referenced in this presentation, which include EBITDA (earnings beforeinterest, income taxes, depreciation and amortization) and the cost of doing business, are supplemental in nature and should not be considered in isolationor as alternatives to net income, income from operations or other financial information prepared in accordance with GAAP as indicators of the Company’sperformance or operations. Reconciliations of these non-GAAP financial measures to the WD-40 Company financials as prepared under GAAP are asfollows:

Non-GAAPReconciliation– FY17

Note: Percentages may not aggregate to EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on the Company’s consolidated statement of operations are not included as an adjustment to earnings in the Company’s EBITDA calculation.

28

Total operating expenses - GAAP $ 137,976 $ 143,021 $ 134,788 Amortization of definite-lived intangible assets (2,879) (2,976) (3,039) Depreciation (in operating departments) (2,789) (2,744) (2,664)

Cost of doing business $ 132,308 $ 137,301 $ 129,085 Net sales $ 380,506 $ 380,670 $ 378,150 Cost of doing business as a percentage of net sales - non-GAAP 35% 36% 34%

EBITDA:

Net income - GAAP $ 52,930 $ 52,628 $ 44,807 Provision for income taxes 21,692 20,161 18,303 Interest income (508) (683) (584) Interest expense 2,582 1,703 1,205 Amortization of definite-lived

intangible assets 2,879 2,976 3,039 Depreciation 3,890 3,489 3,425

EBITDA $ 83,465 $ 80,274 $ 70,195 Net sales $ 380,506 $ 380,670 $ 378,150 EBITDA as a percentage of net sales - non-GAAP 22% 21% 19%

Fiscal Year Ended August 31,2017

2016 20152017Fiscal Year Ended August 31,

2016 2015

q4 & fy 2017 earnings resultss21.q4cdn.com/612895086/files/.../q4/...final-(1).pdf · and...

Documents