Ladies and gentlemen, thank you for standing by. Good day, and welcome to the WD-40 Company Fourth Quarter and Full Fiscal Year 2024 Earnings Conference Call. Today's call is being recorded. At this time, all participants are in listen-only mode. At the end of the prepared remarks, we will conduct a question-and-answer session. [Operator Instructions] I would now like to turn the presentation over to the host for today's call, Wendy Kelley, Vice President, Stakeholder and Investor Engagement. Please proceed.

Good afternoon, and thanks to everyone for joining us today. On our call today are WD-40 Company's President and Chief Executive Officer, Steve Brass; and Vice President and Chief Financial Officer, Sara Hyzer. In addition to the financial information presented on today's call, we encourage investors to review our earnings presentation, earnings press release, and Form 10-K for the period ending August 31, 2024. These documents will be made available on our Investor Relations website at investor.wd40company.com. A replay and transcript of today's call will also be made available shortly after this call. On today's call, we will discuss certain non-GAAP measures. The descriptions and reconciliations of these non-GAAP measures are available in our SEC filings as well as the earnings documents posted on our Investor Relations website. As a reminder, today's call includes forward-looking statements about our expectations for the company's future performance. Actual results could differ materially. The company's expectations, beliefs and projections are expressed in good faith, but there can be no assurance that they will be achieved or accomplished. Please refer to the risk factors detailed in our SEC filings for further discussion. Finally, for anyone listening to a webcast replay or reviewing a written transcript of this call, please note that all information presented is current only as of today's date, October 17, 2024. The company disclaims any duty or obligation to update any forward-looking information as a result of new information, future events or otherwise. With that, I'd now like to turn the call over to Steve.

Thank you, Wendy, and thanks to all of you for joining us this afternoon. Fiscal year '24 has been a year of exceptional strength, resilience and strategic progress. We've navigated challenges, capitalize on opportunities and continue to build on the strong foundation that has WD-40 Company a success for over seven decades. Today, I'll provide you an overview of our sales results for the full fiscal quarter of 2024 and the progress we've made against our Four-by-Four strategic framework. After that, Sarah will provide you a brief update on the divestiture of our home care and cleaning business and update on our business model, and outlook for fiscal year 2025. We will then take your questions. I'm pleased to announce that our fourth quarter was our second consecutive record-breaking sales quarter. Today, we reported fourth quarter net sales of $156 million, representing an increase of over 11% and sales and maintenance products experiencing double-digit growth during both the fourth quarter and the full fiscal year. By the close of fiscal year '24, sales of our signature product, WD-40 Multi-Use Product, reached $453 million, an 11% increase over prior year, and a new annual record for our core brand. In addition, I'm very happy to report that gross margin continues to improve and is moving closer to our target of 55%. In the fourth quarter, we reported gross margin of 54.1%, which is an improvement of 100 basis points sequentially from the third quarter and 270 basis points compared to the fourth quarter of last fiscal year. Now let me discuss fourth quarter sales results by segment. Unless otherwise noted, I will discuss sales on a reported basis compared to the fourth quarter of last fiscal year. This quarter, sales in the Americas, which includes the United States, Latin America and…

Thanks, Steve for that overview of our sales results and strategic framework. I'm pleased to announce that we delivered a strong performance in the fourth quarter, leading to a solid fiscal year 2024. Let's start with a discussion about how we performed since our most recently issued fiscal year 2024 guidance. We expected net sales growth to be between 6% and 12%, with net sales of between $570 million and $600 million on a non-GAAP constant currency basis. Today, we reported fiscal year revenue of $583 million, up 8% compared to last fiscal year on a non-GAAP constant currency basis and in line with our expectations. We expected gross margin to be between 51.5% to 53%. Today, we reported a gross margin of 53.4%, slightly above our guidance expectations. We expected our global advertising and promotion investment to be between 5% and 6% of net sales. Today, we reported an A&P investment of 5.7%. We expected net income to be between $67.7 million and $71.8 million and a diluted EPS of between $5 and $5.30. Today, we reported net income of $69.6 million and diluted EPS of $5.11, in line with our expectations. To better understand what is driving these results, let's begin with a review of our fourth quarter results against our 55/30/25 business model. I will then provide an update on our financial results, an update on the divestiture of the home care and cleaning brands in the Americas and the U.K., and finish with providing a view towards fiscal year 2025. Our asset-light and dynamic business model has helped the company maintain a healthy financial position and generate strong returns for our stockholders for many years, and it continues to be our guiding light. Our 55/30/25 business model has been a long-term beacon for us that we…

Thank you, Sara for that update. Our focus for fiscal year 2025 and beyond is clear, stay true to our Four-by-Four Strategic Framework, continue to unlock value in high potential markets, and take care of our people who drive our success. The key theme throughout this journey for the WD-40 Company will be a few things, many places, bigger impact. This approach will help us leverage global synergies and become more efficient as we expand. In summary, what did you hear from us on this call? You heard that for the fourth quarter, we reported consolidated net sales of $156 million, an increase of over 11% over the prior year and the second consecutive record quarter for the company. You heard that all three of our trade blocks reported revenue growth that aligns with or exceeds our long-term growth targets for each region, both in the fourth quarter and the full fiscal year. You heard that our newest direct market in Brazil continues to do well and that we believe the acquisition of the Brazil market was a game changing opportunity for us. You heard that we estimate the benchmark sales opportunity for WD-40 Multi-Use Product to be approximately $1.6 billion and that we have achieved only 28% of that benchmarked opportunity. You heard that we estimate the benchmark sales opportunity for WD-40 Specialist to be approximately $605 million and that we've achieved nearly 12% of that benchmark opportunity. You heard that we're making good progress on the sale of our Americas and U.K. home care and cleaning product brands. You heard the gross margin continue to improve and is moving closer to our long-term target of 55%. And you heard that we're issuing guidance for fiscal year 2025 on a pro forma basis, excluding the brands we expect to divest this year. Thank you for joining our call today. We'd now be pleased to answer your questions.

[Operator Instructions] Our first question comes from the line of Daniel Rizzo with Jefferies. Daniel, please proceed with your question.

Thanks for taking my question. I was just going through the deck and one thing I noticed is that, I think in the second half of ‘24 there was some -- I think pricing was a bit of a headwind, I think, to the 2% to 1%, I can't find right now. I was just wondering what that was, if that's just promotional activity or if it's something else?

Hi, Daniel. It's Sara. So yes, there was a little bit of swing in the back half of the year. Most of that is going to be mix. It's hard right now for us to break out mix from that metric. And so there's no -- there's nothing significant on pricing that went backwards. It's going to all be mix related.

Okay. And then with -- I mean, with the ongoing rollout of the ERP with everything that's going on with the divestiture, I would imagine that SG&A expenses are going to remain relatively elevated for at least the next couple of quarters. And I'm just trying to -- modeling it out, is that something we should probably expect?

Yeah. I think we are obviously continuing to invest in the ERP, and we also are inheriting Brazil expenses in addition to that. So if you're looking at the upcoming year, we're not growing at the pace that we grew out last year, especially because we've rebuilt that ERP that I mentioned on the call. So it won't be as large as an increase as last year, but it will continue to be more elevated than it has been in the past.

Okay. And then one final question. Then you've had good success with moving to a direct business model in Brazil, Mexico and elsewhere. I was wondering where the other opportunities to do that are? And if we expect more announcements like that within, I don't know, the next year or so, how should we think about it?

Hey, Daniel. It's Steve. Thanks for the question. So yeah, we're really delighted with the progress. Mexico continued to grow, grew by another 25% in last fiscal year. Brazil actually beat our expectations in terms of delivering overall $8 million or $7 million of growth almost over prior year. And we expect for this next fiscal year for that to continue to grow and deliver a further $7 million to $9 million on top of that base of $8 million for the first year. So yeah, these are game-changing opportunities. And so as we look around the world, we are absolutely laser focused on those top 20 growth opportunities that we have. And I look back at the last year, China local currency 17% growth; India, 21% growth; Indonesia, 17% growth; Turkey, 66% growth. On top of phenomenal growth across -- just about everywhere in Europe and Latin America. So phenomenal focus, I think, is delivering these really exceptional results. And yeah, you're going to see more of that. We have no announcements that are imminent in terms of planned kind of direct markets. A lot of our growth internationally is achieved by excellent partnerships around the world with our marketing distributor partners as well.

Thank you very much.

Our next question comes from the line of Linda Bolton Weiser with D.A. Davidson. Linda, please proceed with your question.

Yes. Hello. Thank you. Congratulations on a really strong quarter and year. So just to make sure I understand this. Your guidance for the next fiscal -- the dollar figure amounts like operating profit of $95 million to $100 million. Does that assume that the household cleaning business is not in for any of the year. Is that correct?

You have that, yes, Linda, that's correct. We've excluded it for the full year just given the uncertainty of the timing, and then provided you with some information of what the difference would be if it was included for the full year. So you have a kind of both with and without.

Yes. Thank you. Thank you for giving all that. But in reality, it's not going to be sold like it could be towards the end of the first half. So in reality, the numbers will probably be a little towards the higher end of these ranges that you've given. Am I understanding that correctly?

So on a GAAP basis, yes, we will also be presenting the business on a non-GAAP basis starting in Q1, so that you can have apples -- or how we're measuring ourselves for the full year against that guidance that we've provided.

Okay. Great. And then, I guess then with that -- I mean, your gross margin in 2024 was 53.4%. So I've just wondering about the guidance of 54% to 55%. If you're getting a list of 60 basis points from the divestiture, why wouldn't that guidance be like higher? I guess, I'm trying to understand that.

Well, most of the move that we've had in the last couple of years has come from price with premiumization and supply chain initiative being lesser of an impact. We are starting to now see the efforts of some of those supply chain initiatives that we've implemented both this year and then also plan to implement next year, those just have a smaller immediate impact to the margin. So we do intend to make improvement to the margin. It's just going to be at a lesser scale than it was for this year.

Okay. And then -- so usually, you have a, like, an oil price assumption that's baked in. Can you give what you're including in the guidance for oil price assumption?

Sure. The range right now we have is between $70 and $90.

Okay. And then, I guess, I was wondering about just the cadence of your pro forma sales growth in the next fiscal, I mean first quarter, in particular, has a pretty hard comparison in the first quarter '24. Is there anything we should be cognizant of in terms of growth rates and how that will kind of go through the year on a pro forma basis for sales growth?

Yeah. It's a good question, Linda. We obviously, as you know, don't guide to the quarter, but I will comment that similar to last year, if you looked at the growth of the business, it was weighted towards the back half of the year. And as we're forecasting out this year, I would say it's going to be a similar -- a similar balance between that Q1 to -- Q1, Q2 compared to Q3 to Q4, kind of that first half to second half balancing. You can look at last year as a guide and maybe it might just be a little bit spread, a little bit wider than that, but not by much.

If I could just add to that, Linda, as well. There's a little bit of phasing in Asia Pacific. The first quarter was so strong last year that, that's going to be a challenge to exceed that in Asia Pacific. So Asia Pacific in terms of growth, we'll probably have a slower start and build up in the year. And then Brazil, obviously, the impact of Brazil will mainly be felt in the first six months of the year. So that $7 million to $9 million of growth, a substantial part of that will be in the first half of the year.

You mean in terms of the incremental growth versus prior year?

Exactly. Correct. Yeah. Correct.

Okay. And just -- let me ask a little bit about China. I mean, I just quite remember what you said it was in the quarter. It seemed like it was pretty strong. And I think you said 17% for the year, so are you -- the economy there is just so weak, and that's all we hear about every day, but it doesn't seem to be affecting your business. Is it just that you have so much growth opportunity that you're immune from the macro or maybe could you give a little more color?

Yeah. We just continue to do our thing right. And so we talk often about our China sampling program, which is very successful multiyear program where we're putting out, I believe, last year, we sampled 33,000 factories and converted a substantial amount of those to WD-40 users. And so that happens year-in, year-out. And so we're always bringing new users into the brand. Combined with that, we were very successful last year also in expanding our distribution and making our product more available to buy with several hundred new points of distribution opened across the country. And so it's a very simple formula that just works, and the Chinese team are doing a great job of turning up the heat even further. So it's 17% local currency growth last year, 13.5% in U.S. dollars. With spectacular growth also on WD-40 Specialist of around 45% in U.S. dollars.

Okay. Well, I guess that's all I have then for now. Thank you very much.

Thank you.

Thank you, Linda.

Ladies and gentlemen, that does conclude our allotted time for questions. We thank you for your participation in today's conference call and ask that you please disconnect your lines. Thank you.