Q2 FY15 Earnings Results April 8, 2015
Q2 FY15Earnings Results
April 8, 2015
Q2 FY15 EARNINGS PRESENTATION
Forward-Looking Statements
2
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 multi-purpose maintenance products (“MPMP”) 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 BIKETM 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 multi-purpose 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, 2014, and in the Company’s Quarterly Report on Form 10-Q for the period ended February 28, 2015 which the Company expects to file
with the SEC on April 9, 2015.
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 April 8, 2015, 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.
Q2 FY15 EARNINGS PRESENTATION
Q2 FY15 Highlights
3
• Net sales for the second quarter were $97.3 million, an increase of 3
percent compared to the prior year fiscal quarter
• Net income for the second quarter was $11.3 million, an increase of 10
percent compared to the prior year fiscal quarter
• Diluted earnings per share were $0.76 in the second quarter, compared to
$0.67 per share for the prior year fiscal quarter
• Gross margin was 52.6 percent in the second quarter compared to 51.6
percent in the prior year fiscal quarter
• All repurchases under the $60 million share buy-back plan completed during
the second quarter
– From August 1, 2013 through February 28, 2015 Company repurchased 848K
shares at a total cost of $60 million
• New repurchase plan is now effective which authorizes the Company to
acquire up to $75 million of its outstanding shares through August 31, 2016
– As of February 28, 2015 no repurchases had been made under this new plan
“We are pleased
with the solid
performance of
our underlying
business this
quarter and are
more confident
than ever that our
strategic initiatives
are well
positioned to carry
us into the future.”
- Garry Ridge
Q2 FY15 EARNINGS PRESENTATION
SALESRESULTS
4
Q2 FY15 EARNINGS PRESENTATION
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
Conversion
from transaction
currency to
subsidiaries’
functional
currency
Translation
from
functional
currency to
WD-40
Company’s
reporting
currency
(U.S. dollar)
Foreign Currency Landscape
5
Q2 FY15 EARNINGS PRESENTATION
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
Conversion
from transaction
currency to
subsidiaries’
functional
currency
Translation
from
functional
currency to
WD-40
Company’s
reporting
currency
(U.S. dollar)
Translation Impacts
WD-40 Company has the
following foreign operating
subsidiaries that generate
sales and which have a
functional currency other
than the U.S. dollar:
• United Kingdom (EMEA)
• Canada (Americas)
• Australia (Asia-Pac)
• China (Asia-Pac)
• The results of all of the
Company’s foreign
subsidiaries must be
translated into U.S.
dollars
• Depending on current
foreign currency trends,
translation can have
positive or negative
impacts on reported results
• We frequently report our
results in constant
currency which means we
compare current period
results to the prior periods
results at the prior period’s
exchange rates
In Q2 FY15 the Company
experienced negative
impacts from the translation
of all of the results of its
foreign subsidiaries into the
U.S. dollar
6
Q2 FY15 EARNINGS PRESENTATION
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
Conversion
from transaction
currency to
subsidiaries’
functional
currency
Translation
from
functional
currency to
WD-40
Company’s
reporting
currency
(U.S. dollar)
Conversion Impacts
• The Company’s U.K.
subsidiary (EMEA), records
transactions in currencies
other than its functional
currency, including the
euro and the U.S. dollar
• Therefore these euro and
U.S. dollar transactions
must be converted to the
U.K. subsidiary functional
currency (pound sterling)
• Depending on current
foreign currency trends, this
conversion can have
positive or negative impacts
on pound sterling reported
results
Country/Region
of Sale
Transaction
Currency
% of EMEA
Segment Sales
Q2 FY15 Foreign
Currency
Conversion
Impact
United Kingdom
Direct Markets
Pound sterling ~20% None
European Direct
Markets
Euro ~45% Unfavorable
European Marketing
Distributors
US dollar
Pound sterling
~25%
~10%
Favorable
None
U.K. Subsidiary (EMEA) Transaction Currency Impacts - Sales
7
Q2 FY15 EARNINGS PRESENTATION
HCCP (Total) ↑ 3% ↑ 1%
Americas ↔ 0% ↓ -1%
EMEA ↑ 8% ↑ 1%
Asia-Pacific ↑ 11% ↑ 12%
Second Quarter Year-to-Date
MPMP (Total) ↑ 3% ↑ 2%
Americas ↓ -1% ↑ 1%
EMEA ↑ 1% ↓ -2%
Asia-Pacific ↑ 32% ↑ 21%
Second Quarter Year-to-Date
$21.9 $22.2
$167.8 $171.5
YTD FY14 YTD FY15
$10.4 $10.7
$83.8 $86.6
Q2 FY14 Q2 FY15
Net Sales by Product Group
8
Multi-Purpose Maintenance
Products
Homecare and Cleaning
Products
$97.3$94.2
$193.7$189.7
Multi-Purpose Maintenance Product Sales
Homecare and Cleaning Product Sales
Multi-purpose maintenance
product sales89%
Homecare and cleaning
product sales11%
Second Quarter Sales by Product Group ($M) Second Quarter Global Product Group Sales Mix
Year-to-Date Sales by Segment ($M)
Q2 FY15 EARNINGS PRESENTATION
Asia-Pacific (Total) ↑ 28% ↑ 20%
Australia ↓ -2% ↓ -1%
China ↑ 57% ↑ 12%
Asian Marketing Distributors ↑ 44% ↑ 39%
Year-to-DateSecond Quarter
EMEA (Total) ↑ 1% ↓ -2%
Direct Markets ↓ -3% ↓ -5%
Marketing Distributors ↑ 9% ↑ 2%
Year-to-DateSecond Quarter
Americas (Total) ↓ -1% ↔ 0%
United States ↓ -1% ↓ -1%
Latin America ↓ -6% ↑ 7%
Canada ↓ -1% ↓ -7%
Year-to-DateSecond Quarter
$25.8 $30.9
$74.6 $73.3
$89.3 $89.5
YTD FY14 YTD FY15
$10.9 $13.9
$38.1 $38.7
$45.2 $44.7
Q2 FY14 Q2 FY15
Net Sales by Segment
9
Americas EMEA Asia-Pacific
Second Quarter Sales by Segment ($M)
$97.3$94.2
$193.7$189.7
Americas
EMEA
Asia-Pacific
Year-to-Date Sales by Segment ($M)
Q2 FY15 EARNINGS PRESENTATION
FINANCIAL RESULTS
10
Q2 FY15 EARNINGS PRESENTATION
Gross Margin Results
11
Q2 FY15 GM of 52.6% vs. Q2 FY14 GM of 51.6%
• Changes in petroleum-based specialty chemicals
and aerosol cans (+1.3pp)
• Lower promotional discounts (+0.5pp)
• Price increases, primarily in Asia-Pacific (+0.2pp)
• Changes in foreign currency exchange rates in
EMEA (-0.2pp)
• Sales mix and miscellaneous costs (-0.8pp)
YTD FY15 GM of 52.1% vs. YTD FY14 GM of 51.8%
• Changes in petroleum-based specialty chemicals
and aerosol cans (+1.0pp)
• Price increases, primarily in Asia-Pacific (+0.2pp)
• Sales mix and miscellaneous costs (-0.5pp)
• Changes in foreign currency exchange rates in
EMEA (-0.4pp)
Gross margin can be impacted positively and negatively by things not under the Company’s
control like changes in foreign currency exchange rates and changes in input costs
YTD Gross Margin up 0.3 ppQ2 Gross Margin up 1.00 pp
Q2 FY15 EARNINGS PRESENTATION
35%
12%
30%
21%
3%
What Makes Up the Cost of a Can?
12
Approximate Cost Breakdown of a Typical Can of
WD-40 MUP Manufactured in the United States
Data as of February 2015. Represents average input costs over 6-month period of a typical 12 ounce can of WD-40 Multi-Use Product manufactured in the United States.
We estimate only
a small portion of
the input costs
associated with
petroleum-
based specialty
chemicals
directly correlate
to the price of a
barrel of crude oil
Petroleum-Based
Specialty Chemicals
Manufacturing Fees
Can
Plastic
Corrugate
Q2 FY15 EARNINGS PRESENTATION
50/30/20 Results
13
* See appendix for descriptions and reconciliations of these non-GAAP measures.
Note: Percentages may not aggregate to EBITDA percentage due to rounding
50/30/20 Business Model Target Q2 FY15 Q2 FY14 Q2 FY13
Gross Margin 50% 53% 52% 51%
Cost of Doing Business 30% 34% 34% 33%
EBITDA 20% 18% 18% 19%
Q2 FY15 EARNINGS PRESENTATION
Selected Financial ResultsSecond quarter
14
Q2 FY15 Q2 FY14 % Change(1)
Selling, general and administrative $27.4 $26.7 3%
Advertising and sales promotion $5.5 $6.0 -9%
Amortization $0.8 $0.7 16%
Total operating expenses $33.6 $33.3 1%
Other expenses(2) $1.5 $0.3 419%
Provision for income taxes $4.8 $4.6 3%
Net Income $11.3 $10.3 10%
EPS (Diluted) $0.76 $0.67 13%
($ in millions; except % change and EPS)
1) Percentage change is based on whole numbers and not the rounded amounts as presented above. There will be minor calculation differences in percentages
due to rounding.
2) Other expenses include interest income, interest expense and other expense. Other expense increased primarily due to higher foreign currency exchange
losses as a result of significant fluctuations in the foreign currency exchange rates for the euro against the pound sterling.
Q2 FY15 EARNINGS PRESENTATION
Selected Financial ResultsYear to date
15
YTD FY15 YTD FY14 % Change(1)
Selling, general and administrative $54.8 $53.4 3%
Advertising and sales promotion $11.4 $11.6 -2%
Amortization $1.5 $1.2 22%
Total operating expenses $67.7 $66.2 2%
Other expenses(2) $1.6 $0.6 169%
Provision for income taxes $9.5 $9.6 -1%
Net Income $22.1 $21.8 1%
EPS (Diluted) $1.49 $1.41 6%
($ in millions; except % change and EPS)
1) Percentage change is based on whole numbers and not the rounded amounts as presented above. There will be minor calculation differences in percentages
due to rounding.
2) Other expenses include interest income, interest expense and other expense. Other expense increased primarily due to higher foreign currency exchange
losses as a result of significant fluctuations in the foreign currency exchange rates for the euro against the pound sterling.
Q2 FY15 EARNINGS PRESENTATION
Q2 FY15 Q4 FY14 % Change(1)
Cash and cash equivalents $43.7 $57.8 -24%
Short-term investments $42.1 $45.1 -5%
Other assets $252.0 $244.8 3%
Total assets $337.7 $347.7 -3%
Revolving credit facility $103.0 $98.0 5%
Other liabilities $74.2 $80.3 -8%
Total liabilities $177.2 $178.3 -1%
Total Shareholders' equity $160.6 $169.4 -5%
Total liabilities and shareholder's equity $337.7 $347.7 -3%
Condensed Balance Sheet
16
($ in millions; except % change)
1) Percentage change is based on whole numbers and not the rounded amounts as presented above. There will be minor calculation differences in percentages
due to rounding.
Q2 FY15 EARNINGS PRESENTATION
GUIDANCE
17
Q2 FY15 EARNINGS PRESENTATION
Updated Fiscal Year 2015 Guidance*
18
Diluted EPS
Net Income
A&P Investment
Gross Margin
Net Sales
Sales Growth Between 1% and 4%
Between $387 and $400 million
Better than 52%
In the range of 6.0% to 7.0% of net sales
Between $45.1 and $46.0 million
Between $3.07 and $3.13 based on 14.7
million shares outstanding
* As of 4/8/15. This guidance does not include any future acquisitions or divestitures and is based on recent foreign currency exchange rates.
Changes to guidance indicated in BLUE.
Q2 FY15 EARNINGS PRESENTATION
APPENDIX
19
Q2 FY15 EARNINGS PRESENTATION 20
Foreign Currency Translation Impact or“Constant Currency” - Q2 FY15
Q2 FY15 Q2 FY14 % Change
Net Sales $97.3 $94.2 3%
Gross Profit (%) 52.6% 51.6% 100 bps
Operating Income $17.6 $15.3 16%
Net Income $11.3 $10.3 10%
EPS (Diluted) $0.76 $0.67 13%
Q2 FY15 CC* Q2 FY14 % Change
Net Sales $100.6 $94.2 7%
Operating Income $18.4 $15.3 21%
Net Income $11.8 $10.3 15%
EPS (Diluted) $0.80 $0.67 19%
Financial ResultsAs reported
Financial ResultsConstant currency basis
*Q2 FY15 results translated at Q2 FY14 foreign currency exchange rates
($ in millions; except % change and EPS)
Q2 FY15 EARNINGS PRESENTATION
YTD FY15 CC* YTD FY14 % Change
Net Sales $196.4 $189.7 4%
Operating Income $33.9 $32.0 6%
Net Income $22.6 $21.8 4%
EPS (Diluted) $1.52 $1.41 8%
YTD FY15 YTD FY14 % Change
Net Sales $193.7 $189.7 2%
Gross Profit (%) 52.1% 51.8% 30 bps
Operating Income $33.2 $32.0 4%
Net Income $22.1 $21.8 1%
EPS (Diluted) $1.49 $1.41 6%
Foreign Currency Translation Impact or“Constant Currency” – YTD
21
Financial Results(As reported)
Financial Results(Constant currency basis)
*YTD FY15 results translated at YTD FY14 foreign currency exchange rates
($ in millions; except % change and EPS)
Q2 FY15 EARNINGS PRESENTATION
Non-GAAP Reconciliation
22
(1) This presentation contains certain non-GAAP (accounting principles generally accepted in the United States of America) measures, that our
management believes provide our stockholders with additional insights into WD-40 Company’s results of operations and how it runs its business. Our
management uses these non-GAAP financial measures in order to establish financial goals and to gain an understanding of the comparative performance
of the Company from year to year or quarter to quarter. The non-GAAP measures referenced in this presentation, which include EBITDA (earnings before
interest, income taxes, depreciation and amortization) and the cost of doing business, are supplemental in nature and should not be considered in isolation
or as alternatives to net income, income from operations or other financial information prepared in accordance with GAAP as indicators of the Company’s
performance or operations. Reconciliations of these non-GAAP financial measures to the WD-40 Company financials as prepared under GAAP are as
follows:
Cost of doing business:
Total operating expenses - GAAP $ 33,602 $ 33,306
Amortization of definite-lived intangible assets (757) (654)
Depreciation (in operating departments) (202) (529)
Cost of doing business $ 32,643 $ 32,123
Net sales $ 97,331 $ 94,184
Cost of doing business as a percentage of net sales 34% 34%
EBITDA:
Net income - GAAP $ 11,333 $ 10,317
Provision for income taxes 4,758 4,638
Interest income (178) (158)
Interest expense 275 226
Amortization of definite-lived intangible assets 757 654
Depreciation 857 817
EBITDA $ 17,802 $ 16,494
Net sales $ 97,331 $ 94,184
EBITDA as a percentage of net sales 18% 18%
Three Months Ended
2/28/2015 2/28/2014 Cost of doing business:
Total operating expenses - GAAP $ 67,710 $ 66,212
Amortization of definite-lived intangible assets (1,526) (1,246)
Depreciation (in operating departments) (405) (1,014)
Cost of doing business $ 65,779 $ 63,952
Net sales $ 193,684 $ 189,725
Cost of doing business as a percentage of net sales 34% 34%
EBITDA:
Net income - GAAP $ 22,119 $ 21,799
Provision for income taxes 9,507 9,625
Interest income (312) (289)
Interest expense 569 441
Amortization of definite-lived intangible assets 1,526 1,246
Depreciation 1,721 1,603
EBITDA $ 35,130 $ 34,425
Net sales $ 193,684 $ 189,725
EBITDA as a percentage of net sales 18% 18%
Six Months Ended
2/28/2015 2/28/2014