• Net Sales: $153.5 million for Q1, up 9% year-over-year.
• Maintenance Products Sales: $145.5 million for Q1, up 10% year-over-year.
• Gross Margin: 54.8% for Q1, an improvement of 100 basis points year-over-year.
• Net Income: $18.9 million for Q1, up 8% year-over-year.
• Americas Sales: $69.4 million for Q1, up 8% year-over-year.
• EIMEA Sales: $57.5 million for Q1, up 18% year-over-year.
• Asia Pacific Sales: $26.6 million for Q1, down 4% year-over-year.
• WD-40 Specialist Sales: $19 million for Q1, up 14% year-over-year.
• Adjusted EBITDA Margin: 18% for Q1, down from 19% year-over-year.
• Diluted EPS: $1.39 for Q1, up 9% year-over-year.
• Dividend: Increased to $0.94 per share, up 7% from the previous quarter.
• Share Repurchases: Approximately 13,750 shares repurchased at a cost of $3.6 million.

• Warning! GuruFocus has detected 3 Warning Signs with WDFC.

Release Date: January 10, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• WD-40 Co (NASDAQ:WDFC) reported a 9% increase in net sales for the first quarter, reaching $153.5 million.
• The company's maintenance products saw a 10% increase in sales, marking the third consecutive quarter of double-digit growth.
• Gross margin improved to 54.8%, a 100 basis point increase from the previous year, moving closer to the target of 55%.
• The company experienced strong sales growth in the Americas and EIMEA regions, with increases of 10% and 13% respectively.
• WD-40 Co (NASDAQ:WDFC) has gone public with its sustainability targets, aiming for significant reductions in carbon emissions by 2030.

Negative Points

• Sales in the Asia Pacific region decreased by 4% due to lower sales volumes and timing of customer orders.
• The Americas segment experienced an 11% decline in operating income, partly due to a customer bankruptcy impacting results by $800,000.
• Higher costs associated with warehousing, distribution, and freight negatively impacted gross margin by 100 basis points.
• The company's cost of doing business increased by 15%, driven by higher employee-related expenses and increased professional service costs.
• The homecare and cleaning product segment saw a decline, with a 19% drop in the UK, as the company shifts focus to maintenance products.

Q & A Highlights

Q: I noticed that operating income in the Americas was down 11% year over year. Can you explain the reasons behind this decline? A: Sara Hyzer, CFO, explained that the decline was due to the timing of A&P spend, a customer bankruptcy impacting the Americas by about $800,000, and a higher growth reward program accrual compared to the prior year.

Q: You mentioned a target of 55% gross margin by 2026, but you're already at 54.8%. Could you explain the timeline and any potential challenges? A: Sara Hyzer noted that while they are optimistic about reaching the target sooner, gross margin can fluctuate due to sales and product mix. They are seeing higher costs in freight and logistics in the US but remain cautiously optimistic about maintaining margins.

Q: There was a significant year-over-year increase in G&A expenses. Is this the expected run rate for the year, or were there specific factors in the quarter? A: Sara Hyzer mentioned that the increase was partly due to the one-time impact of a customer bankruptcy and a higher growth reward program accrual. These are factored into the guidance for the year.

Q: Can you provide more details on the impact of US promotions on multi-use product sales in the quarter? A: Steve Brass, CEO, clarified that there were no significant volume promotions affecting sales. The growth was driven by strong retail sales, particularly in the home center channel, and increased DIY activity.

Q: If the cleaning business is not sold by the end of the second quarter, will it be removed from the financials as discontinued operations? A: Sara Hyzer stated that if the business is not sold, it will remain in the reported results as it does not qualify for discontinued operations. They will continue to provide transparent reporting.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.