Sign in

You're signed outSign in or to get full access.

W4

WD 40 CO (WDFC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY25 delivered solid top-line and margin execution: net sales $153.5m (+9% y/y), gross margin 54.8% (+100bps y/y, +70bps q/q), and diluted EPS $1.39 (+9% y/y) .
  • Maintenance products drove performance (95% of sales); WD‑40 Multi‑Use Product up 10% y/y to $118.5m and Specialist up 14% y/y to $19.2m; volume accounted for ~90% of growth per management .
  • EIMEA strength (+18% y/y) and Americas (+8% y/y) offset Asia-Pacific timing headwinds (-4% y/y); margin progress broad-based with EIMEA 57.8% (+290bps y/y), Asia Pac 57.6% (+130bps y/y), Americas 50.4% (-30bps y/y) .
  • FY25 guidance maintained: net sales $600–$630m, GM 54–55%, A&P ~6%, operating income $95–$100m, tax ~24%, EPS $5.20–$5.45; if divestiture of homecare brands does not occur, add ~$23m sales, ~$6m OI, ~$0.33 EPS tailwind .
  • Subsequent event: expected $11.9m favorable non‑cash tax adjustment in Q2 FY25 to be excluded in non‑GAAP EPS; divestiture process continues with assets classified as held for sale; dividend raised to $0.94 and ~$16m returned to shareholders in Q1 via dividends and buybacks .

What Went Well and What Went Wrong

What Went Well

  • Strong core execution: maintenance products up 10% y/y; third consecutive quarter of double‑digit growth, with volume driving ~90% of growth; CEO: “all I see is opportunity” and focus on “few things, many places, bigger impact” .
  • Broad margin recovery: gross margin 54.8% (+100bps y/y, +70bps q/q), with favorable mix and lower specialty chemical costs (+200bps combined), partially offset by higher warehousing/freight (-100bps); EIMEA and APAC margins expanded significantly .
  • EIMEA and Americas momentum: EIMEA +18% y/y led by Multi‑Use Product (+21%) across India/France/Benelux/Iberia; Americas +8% y/y with U.S. promos and Brazil market transition adding ~$3.1m; Specialist up double digits in both regions .

What Went Wrong

  • Asia distributor timing pullback: Asia‑Pacific -4% y/y as large Q4 distributor orders (e.g., Indonesia, S. Korea, Philippines) did not repeat in Q1; management expects pickup in 2H .
  • Higher operating cost run‑rate: SG&A +14% y/y; cost of doing business 37% of sales vs 36% prior-year driven by employee costs, professional services, higher freight, increased A&P (5.5% of sales) .
  • Americas profitability noise: Americas operating income faced headwinds from timing of A&P, higher growth rewards accrual, and ~$0.8m customer bankruptcy charge; analyst flagged y/y OI decline; CFO detailed drivers .

Financial Results

Headline Metrics vs Prior Periods

MetricQ3 2024Q4 2024Q1 2025
Net Sales ($USD Millions)$155.0 $156.0 $153.5
Gross Margin (%)53.1% 54.1% 54.8%
Operating Income ($USD Millions)$27.2 $24.1 $25.1
Net Income ($USD Millions)$19.8 $16.8 $18.9
Diluted EPS ($)$1.46 $1.23 $1.39

Notes:

  • Q1 2025 gross margin excludes held-for-sale effect would be +60bps; operating income/EPS would be reduced by $1.5m/$0.08, respectively .

Segment Net Sales (Q1 FY25)

SegmentNet Sales ($USD Millions)Y/Y Change
Americas$69.4 +8%
EIMEA$57.5 +18%
Asia-Pacific$26.6 -4%
Total$153.5 +9%

Product Group Net Sales (Q1 FY25)

Product GroupNet Sales ($USD Millions)Y/Y Change
WD‑40 Multi‑Use Product$118.5 +10%
WD‑40 Specialist$19.2 +14%
Other Maintenance$7.8 +2%
Total Maintenance$145.5 +10%
Homecare & Cleaning (HCCP)$8.0 -3%
Total$153.5 +9%

KPIs and Operating Details (Q1 FY25)

KPIValueContext
Maintenance Products as % of Sales95% Core strategic focus
Premium formats (Smart Straw + EZ‑REACH) growth+17% y/y Premiumization strategy
Specialist sales ($)$19.0m +14% y/y; Americas +16%, EIMEA +17%
E‑commerce sales growth+22% y/y Strength in EIMEA
Gross Margin by Trade BlockAmericas 50.4% (-30bps), EIMEA 57.8% (+290bps), Asia Pacific 57.6% (+130bps) Mix recovery and lower specialty chemicals
A&P investment5.5% of sales ($8.4m) Up from 5.0% y/y
Adjusted EBITDA Margin18% (vs 19% y/y) EBITDA grew ~4% y/y
Share Repurchases~13,750 shares; $3.6m cost Under $50m plan (thru Aug 31, 2025)
Dividend$0.94 declared Dec 11, 2024 +7% vs prior quarter ($0.88)

Guidance Changes

MetricPeriodPrevious Guidance (Q4 FY24)Current Guidance (Q1 FY25)Change
Net Sales ($)FY 2025$600–$630m (pro forma) $600–$630m (pro forma) Maintained
Net Sales Growth (%)FY 2025+6% to +11% vs 2024 PF +6% to +11% vs 2024 PF Maintained
Gross Margin (%)FY 202554%–55% 54%–55% Maintained
A&P (% of Sales)FY 2025~6% ~6% Maintained
Operating Income ($)FY 2025$95–$100m $95–$100m Maintained
Tax Rate (%)FY 2025~24% ~24% Maintained
Diluted EPS ($)FY 2025$5.20–$5.45 $5.20–$5.45 Maintained
Divestiture Scenario Add‑onsFY 2025+$23m sales / +$6m OI / +$0.33 EPS if not divested +$23m sales / +$6m OI / +$0.33 EPS if not divested Maintained
DividendOngoing$0.88 (Oct 4, 2024) $0.94 (Dec 11, 2024) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY24)Previous Mentions (Q4 FY24)Current Period (Q1 FY25)Trend
Gross margin recoveryGM 53.1%; tracking to upper end FY24 guide GM 54.1%; FY25 guide 54–55% GM 54.8%; target 55% by FY26, potentially FY25 ex HFS Improving
Core maintenance product growthMaintenance +10% y/y Maintenance +12% y/y Maintenance +10% y/y; volume ~90% of growth Consistent strength
Geographic expansion (Brazil/Mexico/India)Brazil strong start; Latin America growth LATAM growth; EIMEA distributors strong Brazil direct adds ~$3.1m; India/France/Benelux/Iberia strong Accelerating
Asia distributor timingStrength in Q3: China & distributors up Distributors up 26% in Q4 Q1 timing headwinds; expect 2H pickup Soft near-term
Digital commerceProgress implied Ongoing initiatives E‑commerce +22% y/y (EIMEA-led) Improving
Divestiture of HCCPProcess underway (bank engaged) Expect 1H FY25 completion Assets held for sale; progressing; may complete in coming months Advancing
FX and functional currencyFX favorable in Q3 EIMEA FX mixed EIMEA functional currency changed to EUR; FX methodology update Structural change
Operating expense disciplineA&P 6.0% in Q3; SG&A up SG&A up 27% in Q4 CODB 37% (vs 36%); A&P 5.5%; one‑time bankruptcy $0.8m Mixed

Management Commentary

  • CEO strategic focus: “As I look around the world, all I see is opportunity… stay true to our Four‑by‑Four Strategic Framework while embracing ‘few things, many places, bigger impact’” .
  • Must‑Win Battles: “Sales of WD‑40 Multi‑Use Product were approximately $119 million (+10% y/y)… Specialist $19 million (+14% y/y)… premium formats up 17% y/y” .
  • Geographic expansion: Brazil direct market contribution and long‑term targets; Mexico nearly quadrupled since 2020; India now second-largest by unit sales; clear land‑and‑expand runway .
  • CFO on margin trajectory: Q1 GM 54.8% (+100bps y/y) driven by mix and lower specialty chemical costs; aiming for 55% by FY26 at latest, potentially by FY25 ex divested brands; leadership incentives aligned to GM recovery .
  • Capital allocation: Dividend raised to $0.94; ~$16m returned in Q1 via dividends and buybacks; maintenance capex 1–2% of sales .

Q&A Highlights

  • Americas profitability: OI down y/y due to timing of A&P spend, higher growth rewards accrual, and ~$0.8m bankruptcy charge; CFO quantified and flagged timing effects .
  • Gross margin cadence: Logistics/warehousing costs pressure in U.S.; management “cautiously optimistic” on holding margin; confident in 55% by end of FY26, possibly sooner .
  • U.S. demand: POS unit sales up ~4–5%; home center channel strong; promotions supportive but no outsized one‑time boosts .
  • Easy Q2 comp: Prior‑year ERP go‑live disrupted Q2 FY24 top line by ~$2.5m; sets up easier comparison for Q2 FY25, with caveats on Asia distributors and Brazil lapping .
  • Divestiture reporting: HCCP brands not discontinued ops; if not sold by Q2 end, will remain in reported results with transparent breakouts .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 FY25 Revenue, EPS, EBITDA was unavailable at the time of analysis due to access limitations; therefore, a formal beat/miss vs consensus cannot be provided at this time. Values would normally be retrieved from S&P Global.
  • Given strong y/y growth and margin trajectory, we expect sell-side models to reflect: sustained maintenance product momentum, EIMEA outperformance, and cautious Asia distributor cadence. Consensus adjustments may tilt toward higher GM assumptions within the 54–55% range and modestly higher FY25 EPS within guidance, subject to FX/logistics and divestiture timing .

Key Takeaways for Investors

  • Margin story intact and improving: Q1 GM 54.8% with a credible path to 55% supported by mix and supply chain initiatives; leadership incentives now directly tied to GM recovery .
  • Core growth durable: Maintenance products up 10% y/y with volume as the primary driver; EIMEA and Americas broad‑based strength indicate healthy end‑market demand .
  • Asia timing to watch: Distributor order cadence is the main swing factor; management expects 2H improvement—monitor Q2/Q3 for rebound confirmation .
  • Divestiture is a catalyst: Classification to held for sale and ongoing discussions signal progress; if not completed, FY25 results get a positive add‑on (~$23m sales, ~$6m OI, ~$0.33 EPS) .
  • FX and structure changes: EIMEA functional currency changed to EUR; expect distinct FX translation methodology in FY25 and reversion to constant currency in FY26—modeling nuance for segment results .
  • Capital returns: Dividend lifted to $0.94 and buybacks continued; asset‑light model enables ongoing shareholder returns with maintenance capex 1–2% of sales .
  • Near‑term trading implications: Q2 has easier prior‑year comp (ERP impact); potential positive setup, balanced by Asia cadence and logistics cost inflation; watch updates on HCCP divestiture progress and tax benefit exclusion in non‑GAAP Q2 EPS .

Appendix: Additional Relevant Items

  • Held‑for‑sale adjustments: Excluding HCCP held‑for‑sale assets, Q1 gross margin would be +60bps, while OI and diluted EPS would be reduced by $1.5m and $0.08, respectively .
  • Subsequent tax event: $11.9m favorable income tax adjustment in FY25 (Q2), to be excluded in non‑GAAP EPS; be mindful of reported vs adjusted comparisons .
  • FX translation impacts in Q1: Favorable ~$1.5m to total net sales; EIMEA +$2.0m; Asia Pac +$0.6m; Americas -$1.1m .