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W4

WD 40 CO (WDFC)·Q3 2025 Earnings Summary

Executive Summary

  • Record net sales quarter: Q3 2025 net sales were $156.9M (+1% YoY); gross margin expanded to 56.2% (+310 bps YoY), and diluted EPS was $1.54 (+5% YoY) .
  • Mixed vs consensus: EPS beat ($1.54 vs $1.40*) while revenue missed ($156.9M vs $160.6M*); management raised FY25 operating income and EPS guidance and narrowed net sales range (6–9%) . Values retrieved from S&P Global.
  • Segment dynamics: Americas +4% YoY, Asia-Pacific +7% YoY; EIMEA -5% YoY driven by distributor timing and a manufacturing transition in the Middle East (short-term disruption) .
  • Capital allocation: $0.94 dividend declared (paid 7/31/25) and active buybacks; $32.2M remains under repurchase authorization as of 5/31/25 .
  • Narrative catalysts: Gross margin recovery ahead of plan (55–56% FY25), strong June start to Q4, and updated guidance with potential upside if HCCP divestiture does not close .

What Went Well and What Went Wrong

What Went Well

  • Gross margin recovery ahead of schedule to 56.2%, with drivers: +110 bps from pricing/premiumization, +80 bps from lower specialty chemical costs, +60 bps from reduced can costs; management expects FY25 GM of 55–56% .
  • Maintenance products up 2% YoY to $150.4M; WD‑40 Specialist up 9% YoY; maintenance products represented 96% of net sales, consistent with strategic focus .
  • CEO: “third quarter net sales of $156.9 million — a new record high… significant progress on gross margin recovery” supporting long-term value creation .

What Went Wrong

  • EIMEA -5% YoY driven by -6% WD‑40 Multi‑Use Product in distributor markets (Turkey and Middle East) due to order timing and operational changes; short‑term disruption as customers adapt to new manufacturing partner .
  • SG&A up 13% YoY to $51.5M; cost of doing business (operating expenses framework) at 38% of sales vs 34% last year; CFO highlights timing of incentive comp and increased headcount/IS investments .
  • Revenue softer vs consensus; FX was an unfavorable ~$1.6M impact to quarterly net sales; Americas and Asia‑Pacific faced currency headwinds . Values retrieved from S&P Global.

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Net Sales ($USD Millions)$155.045 $153.495 $146.104 $156.915
Gross Margin %53.1% 54.8% 54.6% 56.2%
Operating Income ($USD Millions)$27.176 $25.122 $23.280 $27.365
Net Income ($USD Millions)$19.842 $18.925 $29.851 (includes $11.9M tax benefit) $20.977
Diluted EPS ($USD)$1.46 $1.39 $2.19 (includes $0.87 tax benefit) $1.54
Segment Net Sales ($USD Thousands)Q3 2024Q3 2025YoY Change
Americas$75,103 $78,162 +4%
EIMEA$59,399 $56,705 -5%
Asia-Pacific$20,543 $22,048 +7%
Total$155,045 $156,915 +1%
Product Group Net Sales ($USD Thousands)Q3 2024Q3 2025YoY Change
WD‑40 Multi‑Use Product$119,053 $120,687 +1%
WD‑40 Specialist$20,224 $22,028 +9%
Other Maintenance$7,885 $7,687 -3%
Total Maintenance$147,162 $150,402 +2%
HCCP$7,883 $6,513 -17%
Total$155,045 $156,915 +1%
KPIs (Q3 2025 unless noted)Value
Maintenance Products % of Net Sales96%
Advertising & Promotion (% of Sales)5.8%
Adjusted EBITDA Margin20%
Adjusted EBITDA ($USD Millions)$30.7
Cost of Doing Business (% of Sales)38%
Actual vs Consensus (Q3 2025)Consensus*ActualBeat/Miss
Revenue ($USD)$160.6M*$156.9M Miss*
Primary EPS ($USD)$1.40*$1.54 Beat*
# of Estimates (EPS / Revenue)1* / 1*——

Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (Q2 2025)Current Guidance (Q3 2025)Change
Net Sales Growth (Pro Forma FY2024)FY 20256–11%; $600–$630M 6–9%; $600–$620M Narrowed (midpoint lower)
Gross MarginFY 202555–56% 55–56% Maintained
A&P InvestmentFY 2025~6% of net sales ~6% of net sales Maintained
Operating IncomeFY 2025$95–$100M $96–$101M Raised
Tax RateFY 2025~22.5% ~22.5% Maintained
Diluted EPSFY 2025$5.25–$5.55 (13.5M shares) $5.30–$5.60 (13.5M shares) Raised
Divestiture Impact if not completedFY 2025+$23M sales, +$6M OI, +$0.33 EPS +$20M sales, +$6M OI, +$0.33 EPS Sales impact lower

Earnings Call Themes & Trends

TopicQ1 2025 (Prev Mentions)Q2 2025 (Prev Mentions)Q3 2025 (Current)Trend
Gross Margin RecoveryGM 54.8%; progress toward 55% GM 54.6%; full-year raised to 55–56% GM 56.2%; FY 55–56% reiterated; drivers identified Improving, ahead of plan
EIMEA Performance+18% net sales; strong direct markets +10% net sales; broad growth -5% YoY; distributor timing; Middle East manufacturing transition Short-term disruption, direct markets strong
Asia-Pacific-4% YoY; China/AU offset; HCCP strength -1% YoY; Specialist +10% +7% YoY; China +19% and distributor markets +8% Reaccelerating
PremiumizationSmart Straw/EZ Reach momentum (implied via pricing) Continued brand building Premiumization contributing to margin; targeting >10% CAGR Positive
WD‑40 Specialist+17% in Q1 +10–12% growth +9% YoY in Q3; >15% CAGR target Sustained growth
FX/TariffsFavorable FX in Q1 (EIMEA/APAC) FX headwind ~$4.9M; biggest headwind in Q2 Modest headwind in Q3; Europe turning tailwind; tariffs largely offset Stabilizing FX; tariffs managed
HCCP DivestitureReclassified assets held for sale Guidance excludes; +$23M benefit if not sold Guidance excludes; +$20M benefit if not sold Progressing; outcome timing uncertain
Digital Commerce——E-commerce +11% YTD; brand-building tool Strategic enabler

Management Commentary

  • CEO: “record sales quarter… core maintenance products grew 2%… reaching 56% GM — an improvement of 310 bps… expect to exceed our 55% long-term GM target for FY2025, a full year ahead of schedule” .
  • CFO: GM drivers this quarter—“110 bps from higher average selling prices… 80 bps from lower specialty chemical costs… 60 bps from reduced can costs; no material unfavorable impacts” .
  • CFO on cost: “cost of doing business was 38% of net sales… timing differences for incentive compensation… higher employee-related expenses… information systems staffing” .
  • CFO on FY25 outlook: “Net sales growth narrowed to 6–9%… operating income increased to $96–$101M… diluted EPS to $5.30–$5.60; FX and non-operating items supportive” .
  • CEO on EIMEA: Middle East partner change reduced inventory needs (shorter lead times), creating a one-off impact; Turkey volatility typical of emerging markets .

Q&A Highlights

  • Guidance range: Narrowed as visibility improves; variability from promotional timing and distributor order timing warrants keeping a decent range .
  • Gross margin sustainability: Management sees potential accretion from supply chain initiatives; if input costs stay stable, initiatives could be additive; otherwise offset inflationary headwinds .
  • SG&A trajectory: After elevated investments (IT/ESG/org design), management is focused on reducing growth rate of costs next year versus recent double-digit trend .
  • FX and tariffs: Europe FX turning positive in Q3/Q4; Mexico/Brazil still headwinds; tariffs (steel cans) largely offset by supply chain initiatives—no notable order lumpiness .
  • Promotions vs brand building: Distinction between off-shelf programs timing and brand-building (e.g., sampling) driving demand; strong U.S. promotional calendar into Q4 .

Estimates Context

  • Q3 2025 EPS: $1.54 actual vs $1.40 consensus* → Beat*.
  • Q3 2025 Revenue: $156.9M actual vs $160.6M consensus* → Miss*.
  • Low coverage: # of estimates—EPS 1*, Revenue 1*, which can increase variability*.

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Margin story is the key: gross margin at 56.2% with clear drivers and FY25 guide 55–56%; sustainability supported by supply chain initiatives .
  • Top-line mixed: Americas and Asia-Pacific growth offset EIMEA distributor timing; near-term EIMEA headwinds linked to manufacturing transition appear transitory .
  • EPS positive surprise vs consensus and guidance raised; revenue miss likely tempers exuberance—watch Q4 promotional execution and order timing . Values retrieved from S&P Global.
  • Capital return consistent: $0.94 dividend and active buybacks; $32.2M remaining under plan through 8/31/2026 .
  • Strategic focus intact: maintenance products at 96% of sales; Specialist and premiumized formats targeted for double-digit CAGR growth .
  • FX risk moderating: Europe turning supportive; monitor MXN/BRL exposure; management adjusts guidance on constant currency basis .
  • HCCP divestiture optionality: Guidance excludes HCCP; if not closed, FY25 would see +$20M sales/+$6M OI/+$0.33 EPS uplift .