WD 40 CO SEC 10-K Report

WD-40 Company, a global marketing organization known for its iconic WD-40® Multi-Use Product, has released its Form 10-K report for the fiscal year 2024. The report highlights significant financial growth, strategic initiatives aimed at enhancing market presence and operational efficiency, and the challenges and risks the company faces in the current economic landscape.

Financial Highlights

• Total Net Sales: $590.6 million, an increase of $53.3 million, or 10%, compared to the prior fiscal year.
• Gross Profit: $315.2 million, with gross profit as a percentage of net sales increasing to 53.4% from 51.0% in the prior fiscal year.
• Income from Operations: $96.4 million, an increase of $6.6 million, or 7%, compared to the prior fiscal year.
• Net Income: $69.6 million, an increase of $3.7 million, or 6%, compared to the prior fiscal year.
• Diluted EPS: $5.11, up from $4.83 in the prior fiscal year.

Business Highlights

• Business Overview: WD-40 Company, founded in 1953 and headquartered in San Diego, California, focuses on developing and selling products that solve problems in workshops, factories, and homes worldwide.
• Product Evolution: The company has expanded its product offerings beyond the original WD-40® Multi-Use Product through research, development, and acquisitions.
• Global Reach: WD-40 markets and sells its products in over 176 countries and territories through various channels, including hardware stores, automotive parts outlets, and online retailers.
• Revenue Segments: Sales are divided into maintenance products and homecare and cleaning products, with maintenance products sold worldwide and homecare products primarily in North America, the U.K., and Australia.
• Strategic Focus: The company is reviewing its homecare and cleaning product portfolios in the Americas and EIMEA segments, aiming to sell these by fiscal year 2025 to focus on higher-margin maintenance products.
• Innovation and Renovation: Recent innovations include WD-40 EZ-Reach Flexible Straw®, WD-40 Smart Straw®, and WD-40 Specialist® Degreaser & Cleaner EZ-Pods.
• Human Capital: The company employs 644 people globally, with a significant focus on diversity and inclusion, and a retention rate greater than 90%.
• Geographical Performance:
  • Americas: Sales increased by 6%, driven by a 7% increase in WD-40 Multi-Use Product sales, particularly in Latin America.
  • EIMEA: Sales increased by 16%, with significant growth in WD-40 Multi-Use Product sales due to higher sales volume and favorable currency exchange rates.
  • Asia-Pacific: Sales increased by 10%, driven by successful promotional programs and increased sales volume in China and other distributor markets.

Strategic Initiatives

• Acquisition: On March 4, 2024, WD-40 Company acquired Brazilian distributor Theron, transitioning to a direct distribution model in Brazil to bolster market penetration and sales in Latin America.
• ERP System: Implementation of a new cloud-based enterprise resource planning (ERP) system in the U.S. to achieve greater operational efficiencies.
• Capital Management: The company repurchased 34,250 shares at an average price of $236.32 per share, totaling $8.1 million, and increased its regular quarterly cash dividend by 6% to $0.88 per share.
• Future Outlook: WD-40 plans to focus on core maintenance products while divesting certain household brands, using proceeds to invest in higher growth and higher gross margin areas. The company aims to maintain its strategic framework, targeting a gross margin of 55%, cost of doing business at 30% of net sales, and Adjusted EBITDA at 25% of net sales.

Challenges and Risks

• Supply Chain Risks: The company relies on a limited number of third-party contract manufacturers and component suppliers, which could disrupt operations if supply chains are affected.
• Global Economic Conditions: Adverse global economic conditions, such as recession, inflation, and political instability, could negatively impact the company's financial condition and results of operations.
• Foreign Currency Exchange Rate Risk: With approximately 50% of revenues generated in currencies other than the U.S. Dollar, fluctuations in exchange rates could negatively impact financial results.
• Regulatory Compliance: The company faces risks related to compliance with international laws and regulations, including privacy, anti-corruption, and tax laws.
• Operational Risks: Attracting, retaining, and motivating talented employees, including senior management, is critical to the company's success.
• Cybersecurity Risks: The company is exposed to risks related to cybersecurity and data breaches, which could adversely affect its ability to conduct business.
• Market Risks: Volatility in the cost of finished goods, components, raw materials, and transportation could increase costs. Changes in customer purchasing patterns and promotional activities could also impact sales and profitability.
• ESG and Sustainability: Increasing focus on environmental, social, and governance (ESG) matters presents emerging risks, including potential cost increases and the need to comply with new regulations.

SEC Filing: WD 40 CO [ WDFC ] - 10-K - Oct. 21, 2024