WD-40 Company — Q3 FY2024 Form 10-Q
Reporting period: Fiscal third quarter and nine months ended May 31, 2024; comparable period is the same periods in 2023. WD-40 sells maintenance and homecare and cleaning products globally through three geographic segments: Americas, EIMEA, and Asia-Pacific. Figures are in U.S. dollars unless noted.
Financial performance
| Metric | Q3 FY2024 | Q3 FY2023 | Nine months FY2024 | Nine months FY2023 |
|---|---|---|---|---|
| Net sales | $155.0m (+9%) | $141.7m | $434.6m (+10%) | $396.8m |
| Gross profit | $82.4m | $71.8m | $230.9m | $202.1m |
| Gross margin | 53.1% vs. 50.6% | 53.1% vs. 50.9% | ||
| Operating income | $27.2m (+6%) | $25.7m | $72.3m (+9%) | $66.5m |
| Net income | $19.8m (+5%) | $18.9m | $52.9m (+7%) | $49.4m |
| Diluted EPS | $1.46 | $1.38 | $3.88 | $3.62 |
| Operating cash flow | — | $64.8m | $55.6m |
Q3 sales growth was led by WD-40 Multi-Use Product and Specialist; homecare and cleaning product sales declined 6%. For the nine months, maintenance product sales rose 10%, while homecare and cleaning product sales fell 4%. By segment, nine-month sales increased 6% in the Americas, 16% in EIMEA, and 7% in Asia-Pacific. Management attributed nine-month sales growth to volume (+approximately $23.0m), pricing (+approximately $6.5m), and favorable currency (+$8.3m); constant-currency growth was 7%.
Gross margin improved on favorable product and market mix, lower specialty chemical costs, and lower warehousing, distribution, and freight costs. Operating expenses rose 20% in Q3 and 17% year to date, including higher employee costs, strategic professional services, advertising and promotion, and ERP-related costs. Q3 SG&A was $45.6m (+19%) and advertising and sales promotion expense was $9.3m (+22%).
Cash, debt, and liquidity
Cash and cash equivalents were $45.3m at May 31, 2024, versus $48.1m at August 31, 2023. Nine-month operating cash flow was $64.8m; investing used $9.1m, including $6.2m for the Brazil acquisition; financing used $58.1m, including $35.2m of dividends, $8.1m of share repurchases, and net revolving-credit repayments. Cash declined $2.8m over the period.
Total borrowings were $107.8m, down from $120.5m at fiscal year-end. The company had $40.99m drawn on its revolving facility and $66.8m of fixed-rate senior notes. The revolving facility was amended in April 2024: commitment reduced from $150m to $125m and maturity extended to April 30, 2029. The company reported compliance with debt covenants and said it expects cash from operations and available credit to fund operating needs, capital expenditures, dividends, acquisitions, and repurchases.
Current assets were $248.8m and current liabilities $105.2m. Accounts receivable rose to $116.4m from $98.0m at fiscal year-end; inventory declined to $76.6m from $86.5m.
Changes, outlook, and risks
- On March 4, 2024, WD-40 acquired Brazilian distributor Theron for approximately $6.9m and shifted to direct distribution in Brazil. The acquisition added approximately $1.5m of goodwill; purchase accounting remains subject to a measurement period. Brazil’s direct-model transition contributed $2.7m to Q3 sales, according to management.
- The U.S. ERP system went live in January 2024. Management said its implementation affected the timing of some U.S. customer orders and increased professional-services costs.
- No specific full-year sales or earnings guidance is provided in the supplied filing text. Management’s long-term operating targets are 55% gross margin, cost of doing business of 30% of sales, and adjusted EBITDA of 25% of sales. Q3 results were 53%, 34%, and 19%, respectively; nine-month results were 53%, 35%, and 18%. These are long-term targets, not near-term guidance.
- Management cited ongoing uncertainty from global economic conditions, financial-market volatility, inflation, supply-chain factors, interest rates, foreign exchange, and commodity prices. Foreign currency had a favorable $1.5m effect on nine-month net income; other expense included FX losses versus gains in the prior-year period.
- The company estimated that up to $12.7m of unrecognized tax benefits could be affected by tax examinations or expiring statutes within 12 months, including $12.4m related to the mandatory toll tax on unremitted foreign earnings. Audit outcomes and settlement timing are uncertain. It reported no pending claims believed likely to cause a probable loss or materially adverse outcome, and no material changes to previously disclosed risk factors.
- A $0.88-per-share dividend was declared June 18, 2024, payable July 31, 2024. The $50m repurchase authorization runs through August 31, 2025; $41.9m remained available at May 31, 2024.
Most important facts for investors to verify
- Whether sales growth—particularly EIMEA growth, foreign-exchange benefits, and Brazil’s transition to direct distribution—continues in subsequent quarters.
- Whether gross-margin improvement persists as input costs, sales mix, pricing, and freight costs change, and whether operating-expense growth moderates.
- How the ERP implementation affects order timing, operating costs, and customer service after the initial rollout.
- Debt, covenant headroom, cash generation, and the company’s capacity to sustain dividends and repurchases while funding strategic investment.
- Resolution and timing of tax audits and the potential effect of the unrecognized tax benefits disclosed by the company.