Financial Data and Key Metrics Changes - The company reported net sales of $140.5 million for Q4 2023, an increase of nearly 8% compared to the same quarter last year [50] - Gross margin for Q4 was 51.4%, reflecting a 400 basis point improvement year-over-year [97] - EBITDA margin improved to 18% from 16% in the previous year [102] - Diluted earnings per share for the quarter were $1.21, compared to $1.08 for the same quarter last year, reflecting a 12% increase [104] Business Line Data and Key Metrics Changes - Sales in the Americas increased by 10% to $74.7 million, with maintenance product sales in the U.S. up 18% [43] - Maintenance product sales in EMEA increased by 19% in Q4, driven by strong performance in the UK, Italy, and Benelux [54] - Sales in Asia-Pacific decreased by 20% to $50 million, primarily due to foreign currency exchange rates [58] Market Data and Key Metrics Changes - The U.S. market experienced double-digit volume growth, with POS sales up 13% in units and 19% in dollars [1] - EMEA showed signs of recovery with double-digit constant currency growth for the last two quarters, despite a negative currency impact of nearly $18 million [49] - Latin America saw a 12% decline in maintenance product sales against a strong comparative period [51] Company Strategy and Development Direction - The company introduced a new Four-by-Four strategic framework aimed at driving profitable growth and sustainable value creation [62] - Key focus areas include geographic expansion, premiumization of products, and enhancing digital commerce capabilities [63][75] - The company is committed to achieving a gross margin target of 55% over the long term, with a short-term target range of 50% to 55% [119] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovery trends in the second half of fiscal year 2023, entering fiscal year 2024 with positive momentum [41][94] - The company anticipates net sales growth of 6% to 12% for fiscal year 2024, with gross margin expected between 51% and 53% [123] - Increased foreign taxes and interest rates are expected to impact net income and EPS for the upcoming fiscal year [17] Other Important Information - The company is undergoing a global strategic review of its homecare and cleaning brands, with no decisions made yet [46] - The implementation of a new cloud-based ERP system is expected to go live in the first half of fiscal year 2024 [114] - The company has reduced inventory levels by $32.5 million or 27% since the first quarter of fiscal year 2023 [113] Q&A Session Summary Question: Clarification on SG&A expense growth - Management indicated that SG&A growth will be less in percentage terms compared to the previous two years, primarily due to investments made in FY'23 [2][3] Question: FX effect on topline growth for FY'24 - The company plans to provide both actuals and constant currency guidance starting in Q1 FY'24, using the average FX rate from FY'23 [4][5] Question: Factors affecting EPS guidance - Management highlighted increased SG&A costs, non-cash amortization expenses from the new ERP system, and a rising tax rate as key factors impacting EPS [16][17] Question: Supply chain improvements - The company has stabilized its supply chain and expanded its supplier network, focusing on optimization as volumes recover [21][22] Question: Potential acquisitions - Management mentioned ongoing strategic reviews but indicated no immediate plans for acquisitions, focusing instead on organic growth and geographic expansion [25]

Financial Data and Key Metrics Changes - The company reported net sales of $141.7 million for Q3 2023, an increase of 15% compared to the same period last year, marking a new record for the company [41] - Year-to-date net sales reached $396.8 million, up 2% compared to the prior year [42] - Net income for the quarter was $18.9 million, reflecting a 30% increase year-on-year [12][31] - Gross margin improved to 50.6% in Q3 2023, up from 47.7% in the same quarter last year, representing a 290 basis points improvement [56] Business Line Data and Key Metrics Changes - Sales in the Americas increased by 16% to $71.1 million, driven by a 21% increase in maintenance product sales in the U.S. [13] - Sales of WD-40 Specialist increased by 7% in Q3 and 11% year-to-date [23][85] - Sales of homecare and cleaning products in the Americas remained flat compared to the prior year [15] - In Asia Pacific, sales surged by 42% to $18.1 million, with distributor markets seeing a 151% increase [18] Market Data and Key Metrics Changes - Sales in EMEA rose by 6% to $52.5 million, with a constant currency basis increase of 13% [16] - Sales in Latin America increased by 18% in Q3, primarily due to preemptive purchases ahead of a price increase [44] - Sales in Australia declined by 14% due to weaker market conditions and unfavorable currency changes [48] Company Strategy and Development Direction - The company is focusing on geographic expansion, premiumization of products, and digital commerce as part of its growth strategy [21][53] - A new global online marketing campaign titled "Repair It, Don't Replace It" was launched to promote sustainability [24][65] - The company is strategically reviewing its homecare and cleaning brands, indicating a potential de-emphasis on these lines [50][72] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about returning to growth, despite ongoing challenges from inflation and currency fluctuations [25][86] - The company anticipates a decline in inventory levels and expects to end the fiscal year in growth mode [33][36] - Future gross margin targets remain at 55%, with a commitment to restoring margins over the mid to long term [58][60] Other Important Information - The company plans to continue returning capital to shareholders through dividends and share repurchases, with a new plan approved for up to $50 million in buybacks [32][82] - The gross margin for the Americas was reported at 48.2%, showing improvement from previous lows [58] Q&A Session Summary Question: How should the company think about the next quarter regarding sales growth in the Americas? - Management indicated that while there will be some impact from prior price increases, they expect to see a turnaround in volumes, with a cautious outlook for the fourth quarter [37][89] Question: Is the company considering divesting any homecare and cleaning brands? - Management clarified that there are no firm plans to exit these brands but will take a strategic look at their long-term future [72][95] Question: When can the company expect to return to 55% gross margins? - Management stated that while they are making progress, it is difficult to pinpoint a timeline, suggesting it may take longer than a year to reach that target [100][104]

Q3 FY23 Financial Performance - Net sales increased by 15% to $141.7 million compared to Q3 FY22's $123.7 million[7] - Gross profit margin improved by 290 basis points to 50.6% from 47.7% in Q3 FY22[7, 27] - Operating income rose by 35% to $25.7 million, up from $19.0 million in Q3 FY22[7] - Net income increased by 30% to $18.9 million compared to $14.5 million in Q3 FY22[7] - Diluted EPS increased by 29% to $1.38, compared to $1.07 in Q3 FY22[7] - On a constant currency basis, Q3 FY23 net sales would have increased by $21.9 million or 18% compared to Q3 FY22[7] - Year-to-date net sales were $396.8 million, a 2% increase compared to the same period last fiscal year; on a constant currency basis, the increase would have been $27.3 million or 7%[7] Segment Performance - Americas segment sales increased by 16% to $71.1 million and made up 50% of global sales[13] - EMEA segment sales increased by 6% to $49.5 million and made up 37% of global sales[14, 15] - Asia-Pacific segment sales increased by 42% to $18.1 million and made up 13% of global sales[15] Gross Margin Drivers - Price increases contributed +740 basis points to gross margin improvement[25] - Lower input costs contributed +210 basis points to gross margin improvement[25] - Changes in FX rates contributed +60 basis points to gross margin improvement[25] - Higher costs of specialty chemicals negatively impacted gross margin by -300 basis points[26] - Higher costs of aerosol cans negatively impacted gross margin by -300 basis points[26] - Higher filling fees negatively impacted gross margin by -100 basis points[26] FY23 Guidance - The company reiterated its FY23 guidance, with net sales projected between $535 million and $560 million, representing sales growth between 3.5% and 7.5%[33]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 31, 2023 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number: 000-06936 Commission Company Name: WD 40 CO WD-40 COMPANY (Exact name of registrant as specified in ...

Q2 FY23 Earnings Results April 6, 2023 Historical financial and operating data in this presentation reflect the consolidated results of WD-40 Company and its subsidiaries (collectively, the "Company"). The Company markets maintenance products ("MP") under the WD-40®, 3-IN-ONE® and GT85® brand names. The WD-40 brand portfolio also includes the WD-40® Multi-Use Product, the WD-40 Specialist® and WD-40 BIKE® product lines. The Company markets the homecare and cleaning ("HCCP") under the following brands: X-14® ...

WD-40 Company (NASDAQ:WDFC) Q2 2023 Earnings Conference Call April 6, 2023 5:00 PM ET Company Participants Wendy Kelley - Vice President, Stakeholder, and Investor Engagement Steve Brass - President & CEO Sara Hyzer - Vice President & CFO Conference Call Participants Daniel Rizzo - Jefferies Linda Bolton-Weiser - D.A. Davidson Rosemarie Morbelli - Gabelli Funds Operator Ladies and gentlemen, thank you for standing by. Good day and welcome to the WD-40 Company Second Quarter 2023 Earnings Conference Call. To ...

[PART I — FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents WD-40 Company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, with detailed notes for the periods ended February 28, 2023 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | Feb 28, 2023 (in thousands) | Aug 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total assets | $450,337 | $434,295 | | Total liabilities | $253,065 | $245,671 | | Total stockholders' equity | $197,272 | $188,624 | | Cash and cash equivalents | $37,992 | $37,843 | | Inventories | $108,565 | $104,101 | | Short-term borrowings | $47,477 | $39,173 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | Three Months Ended Feb 28, 2023 (in thousands) | Three Months Ended Feb 28, 2022 (in thousands) | Six Months Ended Feb 28, 2023 (in thousands) | Six Months Ended Feb 28, 2022 (in thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net sales | $130,193 | $129,986 | $255,086 | $264,732 | | Cost of products sold | $64,115 | $64,468 | $124,753 | $130,744 | | Gross profit | $66,078 | $65,518 | $130,333 | $133,988 | | Income from operations | $22,153 | $24,743 | $40,832 | $48,803 | | Net income | $16,526 | $19,508 | $30,523 | $38,063 | | Basic EPS | $1.21 | $1.41 | $2.24 | $2.76 | | Diluted EPS | $1.21 | $1.41 | $2.23 | $2.75 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) | Metric | Three Months Ended Feb 28, 2023 (in thousands) | Three Months Ended Feb 28, 2022 (in thousands) | Six Months Ended Feb 28, 2023 (in thousands) | Six Months Ended Feb 28, 2022 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net income | $16,526 | $19,508 | $30,523 | $38,063 | | Foreign currency translation adjustment | $8 | $627 | $1,344 | $(1,266) | | Total comprehensive income | $16,534 | $20,135 | $31,867 | $36,797 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | Metric | Feb 28, 2023 (in thousands) | Aug 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total Stockholders' Equity | $197,272 | $188,624 | | Retained Earnings | $464,641 | $456,076 | | Common Stock Held in Treasury | $(402,877) | $(397,236) | - Cash dividends paid were **$0.83 per share** for the quarter ended Feb 28, 2023, totaling **$11.3 million**, and **$0.78 per share** for the quarter ended Nov 30, 2022, totaling **$10.6 million**[19](index=19&type=chunk) - The Company repurchased **9,250 shares** of common stock for **$1.6 million** during the quarter ended Feb 28, 2023, and **22,420 shares** for **$4.1 million** during the quarter ended Nov 30, 2022[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity | Six Months Ended Feb 28, 2023 (in thousands) | Six Months Ended Feb 28, 2022 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | $20,947 | $4,083 | | Net cash used in investing activities | $(3,281) | $(3,571) | | Net cash used in financing activities | $(20,294) | $(42,267) | | Net increase (decrease) in cash and cash equivalents | $149 | $(42,639) | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. The Company](index=9&type=section&id=Note%201.%20The%20Company) - WD-40 Company is a global marketing organization selling maintenance products (WD-40® Multi-Use Product, WD-40 Specialist®, 3-IN-ONE®, GT85®) worldwide and homecare and cleaning products (X-14®, 2000 Flushes®, Carpet Fresh®, no vac®, Spot Shot®, 1001®, Lava®, Solvol®) primarily in North America, the U.K., and Australia[26](index=26&type=chunk)[27](index=27&type=chunk) - Products are sold through various channels including warehouse club stores, hardware stores, automotive parts outlets, industrial distributors, mass retail, home centers, value retailers, grocery stores, and online retailers[27](index=27&type=chunk) [Note 2. Basis of Presentation and Summary of Significant Accounting Policies](index=9&type=section&id=Note%202.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) - The condensed consolidated financial statements are unaudited, prepared in accordance with SEC rules and U.S. GAAP, and include all wholly-owned subsidiaries with intercompany transactions eliminated[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - Management uses estimates and assumptions, which could materially differ from actual results, especially given the ongoing impacts of the COVID-19 pandemic on global economic conditions and financial markets[31](index=31&type=chunk)[32](index=32&type=chunk) - The Company uses foreign currency forward contracts to manage exposure to exchange rate fluctuations, primarily for its U.K. subsidiary, with a notional amount of **$7.0 million** outstanding as of February 28, 2023[34](index=34&type=chunk)[35](index=35&type=chunk) [Note 3. Inventories](index=11&type=section&id=Note%203.%20Inventories) - Inventories are valued at the lower of cost or net realizable value, using a first-in, first-out (FIFO) or average cost method[38](index=38&type=chunk) | Inventory Type | Feb 28, 2023 (in thousands) | Aug 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Product held at third-party contract manufacturers | $5,271 | $7,915 | | Raw materials and components | $18,103 | $13,952 | | Work-in-process | $1,108 | $881 | | Finished goods | $84,083 | $81,353 | | Total Inventories | $108,565 | $104,101 | [Note 4. Property and Equipment and Capitalized Cloud-Based Software Implementation Costs](index=11&type=section&id=Note%204.%20Property%20and%20Equipment%20and%20Capitalized%20Cloud-Based%20Software%20Implementation%20Costs) | Asset Category | Feb 28, 2023 (in thousands) | Aug 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Property and equipment, net | $65,791 | $65,977 | | Capitalized cloud-based implementation costs | $8,900 | $6,500 | - Capitalized cloud-based implementation costs primarily relate to the ongoing implementation of a new cloud-based enterprise resource planning system[39](index=39&type=chunk) [Note 5. Goodwill and Other Intangible Assets](index=12&type=section&id=Note%205.%20Goodwill%20and%20Other%20Intangible%20Assets) | Segment | Goodwill as of Feb 28, 2023 (in thousands) | Goodwill as of Aug 31, 2022 (in thousands) | | :-------------------------------- | :----------------------------------------- | :----------------------------------------- | | Americas | $85,412 | $85,402 | | EMEA | $8,658 | $8,569 | | Asia-Pacific | $1,209 | $1,209 | | Total Goodwill | $95,279 | $95,180 | - The Company performed its annual goodwill impairment test as of December 1, 2022, and concluded that no impairment existed, nor were there indicators of impairment through February 28, 2023[41](index=41&type=chunk)[42](index=42&type=chunk) - Net carrying amount of definite-lived intangible assets was **$5.1 million** as of February 28, 2023, with no impairment charges for the six months ended February 28, 2023[42](index=42&type=chunk)[44](index=44&type=chunk) [Note 6. Accrued and Other Liabilities](index=13&type=section&id=Note%206.%20Accrued%20and%20Other%20Liabilities) | Accrued Liabilities | Feb 28, 2023 (in thousands) | Aug 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Accrued advertising and sales promotion expenses | $14,062 | $13,563 | | Deferred revenue | $3,102 | $4,988 | | Total Accrued Liabilities | $28,427 | $27,161 | | Accrued Payroll and Related Expenses | $11,912 | $11,583 | [Note 7. Debt](index=13&type=section&id=Note%207.%20Debt) | Borrowing Type | Feb 28, 2023 (in thousands) | Aug 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total borrowings | $155,786 | $146,312 | | Short-term portion of borrowings | $(47,477) | $(39,173) | | Total long-term borrowings | $108,309 | $107,139 | - The Company has a revolving credit facility of up to **$150.0 million** and outstanding senior notes under a Note Purchase and Private Shelf Agreement[49](index=49&type=chunk)[51](index=51&type=chunk) - As of February 28, 2023, the Company was in compliance with all debt covenants, including a consolidated leverage ratio not greater than **3.5:1** and a consolidated interest coverage ratio not less than **3:1**[55](index=55&type=chunk)[58](index=58&type=chunk) [Note 8. Share Repurchase Plan](index=15&type=section&id=Note%208.%20Share%20Repurchase%20Plan) - A share repurchase plan authorized up to **$75.0 million** of outstanding shares through August 31, 2023[56](index=56&type=chunk) - During the six months ended February 28, 2023, the Company repurchased **31,670 shares** for a total cost of **$5.6 million** under this plan[56](index=56&type=chunk) [Note 9. Earnings per Common Share](index=15&type=section&id=Note%209.%20Earnings%20per%20Common%20Share) | Metric | Three Months Ended Feb 28, 2023 | Three Months Ended Feb 28, 2022 | Six Months Ended Feb 28, 2023 | Six Months Ended Feb 28, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net income available to common stockholders (in thousands) | $16,455 | $19,435 | $30,398 | $37,926 | | Weighted-average common shares outstanding, basic (in thousands) | 13,583 | 13,679 | 13,586 | 13,773 | | Weighted-average common shares outstanding, diluted (in thousands) | 13,608 | 13,704 | 13,608 | 13,804 | [Note 10. Revenue Recognition](index=16&type=section&id=Note%2010.%20Revenue%20Recognition) | Segment | Six Months Ended Feb 28, 2023 (in thousands) | Six Months Ended Feb 28, 2022 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Americas | $120,904 | $110,785 | | EMEA | $87,581 | $111,618 | | Asia-Pacific | $46,601 | $42,329 | | Total Net Sales | $255,086 | $264,732 | - Contract liabilities (deferred revenue) were **$3.1 million** as of February 28, 2023, down from **$5.0 million** as of August 31, 2022, with all prior period deferred revenue recognized[61](index=61&type=chunk) [Note 11. Commitments and Contingencies](index=16&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) - The Company has ongoing purchase commitments with contract manufacturers based on short-term projections, but definitive minimum obligations have been immaterial or well below historical purchase volumes[62](index=62&type=chunk) - No unasserted claims or pending proceedings are expected to result in a probable or materially adverse loss, and indemnification agreements are covered by insurance[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) [Note 12. Income Taxes](index=17&type=section&id=Note%2012.%20Income%20Taxes) | Period | Effective Tax Rate | | :-------------------------------- | :----------------- | | Three Months Ended Feb 28, 2023 | 20.8% | | Three Months Ended Feb 28, 2022 | 20.1% | | Six Months Ended Feb 28, 2023 | 20.9% | | Six Months Ended Feb 28, 2022 | 19.9% | - The increase in effective tax rate for the six months ended February 28, 2023, was primarily due to tax shortfalls from stock-based equity awards (**$0.7 million** unfavorable impact) partially offset by a one-time tax benefit from a charitable donation of its former corporate headquarters (**$0.7 million** favorable impact)[72](index=72&type=chunk)[74](index=74&type=chunk) [Note 13. Business Segments and Foreign Operations](index=18&type=section&id=Note%2013.%20Business%20Segments%20and%20Foreign%20Operations) - The Company operates in three geographical segments: Americas, EMEA (Europe, Middle East, Africa), and Asia-Pacific, with unallocated corporate expenses reported separately[76](index=76&type=chunk) | Segment | Six Months Ended Feb 28, 2023 (in thousands) | Six Months Ended Feb 28, 2022 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Americas Net Sales | $120,904 | $110,785 | | EMEA Net Sales | $87,581 | $111,618 | | Asia-Pacific Net Sales | $46,601 | $42,329 | | Americas Income from Operations | $26,484 | $23,234 | | EMEA Income from Operations | $16,666 | $27,928 | | Asia-Pacific Income from Operations | $16,640 | $15,227 | [Note 14. Subsequent Event](index=19&type=section&id=Note%2014.%20Subsequent%20Event) - On March 21, 2023, the Board declared a cash dividend of **$0.83 per share**, payable on April 28, 2023[80](index=80&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the Company's financial condition and results of operations, covering key highlights, macroeconomic impacts, segment performance, non-operating items, non-GAAP measures, and liquidity for the periods ended February 28, 2023 [Overview](index=20&type=section&id=Overview) - The Company's strategic initiatives focus on building for the future, talent development, operational excellence, growing WD-40 Multi-Use Product and Specialist lines, and expanding portfolio opportunities[91](index=91&type=chunk) - Consolidated net sales decreased **4%** (**$9.6 million**) for the six months ended February 28, 2023, primarily due to decreased sales volume (**$44.7 million** unfavorable) and foreign currency exchange rates (**$15.1 million** unfavorable), partially offset by price increases (**$50.2 million** favorable)[94](index=94&type=chunk) - Gross profit as a percentage of net sales increased to **51.1%** (from **50.6%**) due to price increases, but was offset by ongoing global supply chain challenges, increased raw material costs, and inflation[94](index=94&type=chunk) - The Russia-Ukraine conflict led to the suspension of sales in Russia and Belarus (historically **3-4%** of consolidated net sales) and increased crude oil prices, unfavorably impacting product and transportation costs[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) [Operating Items](index=23&type=section&id=Operating%20Items) | Metric | Six Months Ended Feb 28, 2023 (in thousands) | Six Months Ended Feb 28, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :------------------------------------------- | :------------------------------------------- | :-------------------- | :--------- | | Total net sales | $255,086 | $264,732 | $(9,646) | (4)% | | Gross profit | $130,333 | $133,988 | $(3,655) | (3)% | | Income from operations | $40,832 | $48,803 | $(7,971) | (16)% | | Net income | $30,523 | $38,063 | $(7,540) | (20)% | | Diluted EPS | $2.23 | $2.75 | $(0.52) | (19)% | [Net Sales by Segment](index=23&type=section&id=Net%20Sales%20by%20Segment) | Segment | Six Months Ended Feb 28, 2023 (in thousands) | Six Months Ended Feb 28, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :-------------------- | :--------- | | Americas | $120,904 | $110,785 | $10,119 | 9% | | EMEA | $87,581 | $111,618 | $(24,037) | (22)% | | Asia-Pacific | $46,601 | $42,329 | $4,272 | 10% | | Total | $255,086 | $264,732 | $(9,646) | (4)% | - On a constant currency basis, consolidated net sales would have increased by **$5.4 million** (**2%**) for the first half of fiscal year 2023, indicating a significant unfavorable impact from foreign currency exchange rates, particularly in EMEA[94](index=94&type=chunk) [Americas Sales](index=24&type=section&id=Americas%20Sales) - Americas net sales increased **9%** (**$10.1 million**) for the six months ended February 28, 2023, driven by a **$25.6 million** increase in average selling price, partially offset by a **$15.5 million** decrease in sales volume[103](index=103&type=chunk)[105](index=105&type=chunk) - U.S. sales increased **19%** due to price increases and improved supply chain capacity for WD-40 Multi-Use Product, WD-40 Specialist, and 3-IN-ONE products, despite lower customer orders[109](index=109&type=chunk) - Latin America sales decreased **16%** due to timing of marketing distributor orders (higher purchases in prior period before price increase) and weaker economic conditions, partially offset by growth in Mexico[109](index=109&type=chunk) [EMEA Sales](index=26&type=section&id=EMEA%20Sales) - EMEA net sales decreased **22%** (**$24.0 million**) for the six months ended February 28, 2023, primarily due to a **$12.9 million** unfavorable currency impact and a **$31.7 million** decrease in sales volume (including **$8.3 million** from Russian markets), partially offset by **$20.6 million** from price increases[103](index=103&type=chunk)[113](index=113&type=chunk) - Sales in Russia decreased **$8.3 million** due to the ongoing military action in Ukraine and suspension of sales[117](index=117&type=chunk) - Direct markets experienced sales volume decreases due to reduced demand and weaker economic conditions, while distributor markets saw lower sales volumes in India, Poland, and the Czech Republic[115](index=115&type=chunk)[117](index=117&type=chunk) [Asia-Pacific Sales](index=28&type=section&id=Asia-Pacific%20Sales) - Asia-Pacific net sales increased **10%** (**$4.3 million**) for the six months ended February 28, 2023, driven by a **$4.0 million** increase in average selling price and a **$2.5 million** increase in sales volume, partially offset by a **$2.2 million** unfavorable currency impact[103](index=103&type=chunk)[120](index=120&type=chunk) - Asia distributor markets sales increased **14%** due to successful promotional programs, easing of COVID-19 lockdowns, and price increases, leading to increased demand and sales volumes[122](index=122&type=chunk) - China sales increased **10%** (**20%** on a constant currency basis) due to promotional programs and price increases, while Australia sales increased **3%** (**11%** on a constant currency basis) driven by price increases and promotions[122](index=122&type=chunk) [Gross Profit](index=29&type=section&id=Gross%20Profit) | Metric | Three Months Ended Feb 28, 2023 | Three Months Ended Feb 28, 2022 | Six Months Ended Feb 28, 2023 | Six Months Ended Feb 28, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Gross profit (in thousands) | $66,078 | $65,518 | $130,333 | $133,988 | | Gross margin | 50.8% | 50.4% | 51.1% | 50.6% | - Gross margin increased by **40 bps** for the three months and **50 bps** for the six months ended February 28, 2023, primarily due to sales price increases (**910 bps** and **880 bps** favorable, respectively) and favorable foreign currency exchange rates in EMEA (**90 bps** and **100 bps** favorable, respectively)[124](index=124&type=chunk) - These gains were significantly offset by higher costs of specialty chemicals (**410 bps** and **380 bps** unfavorable), aerosol cans (**400 bps** and **390 bps** unfavorable), and filling fees (**90 bps** unfavorable) due to inflationary impacts[124](index=124&type=chunk) [Selling, General and Administrative ("SG&A") Expenses](index=30&type=section&id=Selling,%20General%20and%20Administrative%20(%22SG%26A%22)%20Expenses) | Metric | Three Months Ended Feb 28, 2023 (in thousands) | Three Months Ended Feb 28, 2022 (in thousands) | Six Months Ended Feb 28, 2023 (in thousands) | Six Months Ended Feb 28, 2022 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | SG&A expenses | $37,690 | $34,819 | $77,674 | $73,242 | | % of net sales | 28.9% | 26.8% | 30.5% | 27.7% | - SG&A expenses increased by **$2.9 million** (**8%**) for the three months and **$4.4 million** (**6%**) for the six months ended February 28, 2023, primarily due to higher employee-related costs (**$2.6 million** and **$3.5 million** respectively), increased travel and meeting expenses (**$0.9 million** and **$3.0 million** respectively), and higher professional services fees (**$0.9 million** and **$1.7 million** respectively)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) - These increases were partially offset by favorable foreign currency exchange rates, which decreased SG&A expenses by **$1.5 million** for the three months and **$4.2 million** for the six months[127](index=127&type=chunk)[128](index=128&type=chunk) - Research and development costs were **$1.2 million** and **$2.5 million** for the three and six months ended February 28, 2023, respectively, supporting product innovation and renovation[129](index=129&type=chunk) [Advertising and Sales Promotion ("A&P") Expenses](index=31&type=section&id=Advertising%20and%20Sales%20Promotion%20(%22A%26P%22)%20Expenses) | Metric | Three Months Ended Feb 28, 2023 (in thousands) | Three Months Ended Feb 28, 2022 (in thousands) | Six Months Ended Feb 28, 2023 (in thousands) | Six Months Ended Feb 28, 2022 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | A&P expenses | $5,985 | $5,596 | $11,324 | $11,220 | | % of net sales | 4.6% | 4.3% | 4.4% | 4.2% | - A&P expenses increased by **$0.4 million** (**7%**) for the three months ended February 28, 2023, primarily due to higher promotional programs in the Americas, partially offset by favorable foreign currency changes in EMEA[131](index=131&type=chunk) - Total investment in A&P activities (including promotional costs as a reduction to sales) was **$13.1 million** for the three months and **$24.9 million** for the six months ended February 28, 2023[132](index=132&type=chunk)[134](index=134&type=chunk) [Income from Operations by Segment](index=32&type=section&id=Income%20from%20Operations%20by%20Segment) | Segment | Six Months Ended Feb 28, 2023 (in thousands) | Six Months Ended Feb 28, 2022 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Americas | $26,484 | $23,234 | | EMEA | $16,666 | $27,928 | | Asia-Pacific | $16,640 | $15,227 | | Unallocated corporate | $(18,958) | $(17,586) | | Total | $40,832 | $48,803 | [Americas Operating Income](index=32&type=section&id=Americas%20Operating%20Income) - Americas operating income increased **14%** (**$3.3 million**) to **$26.5 million** for the six months ended February 28, 2023, driven by a **$10.1 million** sales increase and higher gross margin (**49.4%** from **47.7%**), partially offset by increased operating expenses[137](index=137&type=chunk) [EMEA Operating Income](index=32&type=section&id=EMEA%20Operating%20Income) - EMEA operating income decreased **40%** (**$11.3 million**) to **$16.7 million** for the six months ended February 28, 2023, primarily due to a **$24.0 million** sales decrease and a lower gross margin (**51.5%** from **51.8%**), despite a slight decrease in operating expenses[140](index=140&type=chunk) [Asia-Pacific Operating Income](index=33&type=section&id=Asia-Pacific%20Operating%20Income) - Asia-Pacific operating income increased **9%** (**$1.4 million**) to **$16.6 million** for the six months ended February 28, 2023, driven by a **$4.3 million** sales increase, partially offset by a lower gross margin (**54.8%** from **55.2%**) and increased operating expenses[142](index=142&type=chunk) [Non-Operating Items](index=33&type=section&id=Non-Operating%20Items) | Metric | Six Months Ended Feb 28, 2023 (in thousands) | Six Months Ended Feb 28, 2022 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Interest income | $95 | $46 | | Interest expense | $2,671 | $1,233 | | Other income (expense), net | $315 | $(77) | | Provision for income taxes | $8,048 | $9,476 | [Interest Income](index=33&type=section&id=Interest%20Income) - Interest income remained insignificant for both the three and six months ended February 28, 2023 and 2022[144](index=144&type=chunk) [Interest Expense](index=33&type=section&id=Interest%20Expense) - Interest expense increased by **$0.9 million** for the three months and **$1.4 million** for the six months ended February 28, 2023, primarily due to higher interest rates and increased outstanding balances on the revolving credit agreement[145](index=145&type=chunk) [Other Income (Expense), Net](index=34&type=section&id=Other%20Income%20(Expense),%20Net) - Other income (expense), net, changed by **$0.4 million** for the six months ended February 28, 2023, primarily due to fluctuations in foreign currency exchange rates, particularly for the U.S. Dollar and Euro against the Pound Sterling[147](index=147&type=chunk) [Provision for Income Taxes](index=34&type=section&id=Provision%20for%20Income%20Taxes) - The effective tax rate increased to **20.9%** for the six months ended February 28, 2023 (from **19.9%**), mainly due to tax shortfalls from stock-based equity awards (**2.4%** unfavorable impact), partially offset by a one-time tax benefit from a charitable donation (**1.9%** favorable impact)[149](index=149&type=chunk) [Net Income](index=34&type=section&id=Net%20Income) - Net income decreased **20%** to **$30.5 million** for the six months ended February 28, 2023, resulting in diluted EPS of **$2.23** (down from **$2.75**)[151](index=151&type=chunk) - Foreign currency exchange rates had an unfavorable impact of **$2.2 million** on consolidated net income for the six months, meaning net income would have decreased **14%** on a constant currency basis[151](index=151&type=chunk) [Performance Measures and Non-GAAP Reconciliations](index=34&type=section&id=Performance%20Measures%20and%20Non-GAAP%20Reconciliations) - The Company's **55/30/25** business model targets a gross margin at or above **55%**, cost of doing business at **30%** of net sales, and EBITDA at or above **25%** of net sales[152](index=152&type=chunk) | Performance Measure | Three Months Ended Feb 28, 2023 | Three Months Ended Feb 28, 2022 | Six Months Ended Feb 28, 2023 | Six Months Ended Feb 28, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Gross margin – GAAP | 51% | 50% | 51% | 51% | | Cost of doing business as a percentage of net sales – non-GAAP | 33% | 30% | 34% | 31% | | EBITDA as a percentage of net sales – non-GAAP | 19% | 21% | 18% | 20% | - Current performance is below the **55/30/25** targets due to increased global supply chain constraints and an inflationary environment, which have significantly lowered gross margin[152](index=152&type=chunk)[153](index=153&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company maintains strong financial condition and liquidity, primarily relying on cash from operations and its unsecured revolving credit facility[157](index=157&type=chunk)[158](index=158&type=chunk) - As of February 28, 2023, the Company had **$38.0 million** in cash and cash equivalents and was in compliance with all material debt covenants[159](index=159&type=chunk) - Future cash from operations and the credit facility are expected to fund short-term and long-term operating requirements, capital expenditures, dividends, acquisitions, and share repurchases[160](index=160&type=chunk) [Cash Flows](index=37&type=section&id=Cash%20Flows) | Cash Flow Activity | Six Months Ended Feb 28, 2023 (in thousands) | Six Months Ended Feb 28, 2022 (in thousands) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | $20,947 | $4,083 | | Net cash used in investing activities | $(3,281) | $(3,571) | | Net cash used in financing activities | $(20,294) | $(42,267) | - Operating cash flow increased by **$16.9 million** due to a lower increase in inventory and lower incentive payouts, partially offset by decreases in accounts payable and accrued liabilities[164](index=164&type=chunk)[165](index=165&type=chunk) - Financing cash used decreased by **$22.0 million**, primarily due to **$12.5 million** less in treasury stock purchases and **$7.1 million** higher proceeds from the credit facility[167](index=167&type=chunk) [Commercial Commitments](index=38&type=section&id=Commercial%20Commitments) - The Company has ongoing purchase commitments with contract manufacturers based on short-term projections, but definitive minimum obligations have been immaterial or well below historical purchase volumes[170](index=170&type=chunk) - No significant commitments for finished goods or components to support innovation initiatives were outstanding as of February 28, 2023[172](index=172&type=chunk) [Share Repurchase Plan](index=38&type=section&id=Share%20Repurchase%20Plan) - Information regarding the share repurchase plan is incorporated by reference to Note 8 of the financial statements[173](index=173&type=chunk) [Dividends](index=38&type=section&id=Dividends) - Information regarding dividend declaration is incorporated by reference to Note 14 of the financial statements[174](index=174&type=chunk) [Critical Accounting Policies and Estimates](index=38&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Critical accounting policies involve subjective judgments and estimates in areas such as revenue recognition, accounting for income taxes, and impairment of definite-lived intangible assets[176](index=176&type=chunk) - There have been no material changes to critical accounting policies and estimates from those disclosed in the Annual Report on Form 10-K for the fiscal year ended August 31, 2022[177](index=177&type=chunk) [Recently Issued Accounting Standards](index=39&type=section&id=Recently%20Issued%20Accounting%20Standards) - No recently issued accounting standards are expected to have a material impact on the consolidated financial statements and related disclosures[178](index=178&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section incorporates by reference the Company's market risk disclosures from its most recent Annual Report on Form 10-K - Information regarding quantitative and qualitative disclosures about market risk is incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2022[179](index=179&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter - The Company's disclosure controls and procedures were evaluated as effective as of February 28, 2023, ensuring timely and accurate reporting under the Exchange Act[180](index=180&type=chunk) - There were no material changes in internal control over financial reporting during the three months ended February 28, 2023[181](index=181&type=chunk) [PART II — OTHER INFORMATION](index=40&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference legal proceedings information from Note 11 of the condensed consolidated financial statements - Information regarding legal proceedings is incorporated by reference to Note 11 — Commitments and Contingencies, included in this report[184](index=184&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section states no material changes to risk factors from the prior Annual Report on Form 10-K, while acknowledging additional unknown or immaterial risks - No material changes to risk factors have occurred since the Annual Report on Form 10-K for the fiscal year ended August 31, 2022[185](index=185&type=chunk) - The Company acknowledges that additional unknown or currently immaterial risks could adversely affect its operating results, financial condition, or future business[185](index=185&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's share repurchase activities under its authorized plan for the three months ended February 28, 2023 - The Company is authorized to acquire up to **$75.0 million** of its outstanding shares through August 31, 2023, under a plan effective November 1, 2021[186](index=186&type=chunk) | Period | Total of Shares Purchased | Average Price Paid Per Share | Total Shares Purchased as Part of Publicly Announced Plans & Programs | Max $ Value of Shares That May Yet Be Purchased Under the Plans & Programs | | :-------------------------------- | :-------------------------- | :--------------------------- | :-------------------------------------------------------------------- | :----------------------------------------------------------------------- | | December 1 – December 31 | 3,250 | $165.85 | 3,250 | $41,233,453 | | January 1 – January 31 | 3,750 | $170.00 | 3,750 | $40,595,836 | | February 1 – February 28 | 2,250 | $174.33 | 2,250 | $40,203,477 | | Total (3 months) | 9,250 | $169.60 | 9,250 | | [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents, certifications, and XBRL financial statements - Exhibits include the Certificate of Incorporation, Amended and Restated Bylaws, Change in Control Severance Agreement, CEO and CFO certifications (Sarbanes-Oxley Act Sections 302 and 906), and iXBRL formatted financial statements[189](index=189&type=chunk)

Q1 FY23 Financial Performance - Net sales decreased by 7% to $124.9 million compared to $134.7 million in Q1 FY22 [6] - Gross profit margin increased by 60 basis points to 51.4% [6] - Operating income decreased by 22% to $18.7 million [6] - Net income decreased by 25% to $14.0 million [6] - Diluted EPS decreased by 24% to $1.02 [6] - Changes in foreign currency exchange rates unfavorably impacted net sales, reducing total net sales by approximately $8.1 million [6, 10] Segment Performance - Americas segment sales increased by 3% to $58.0 million [11] - EMEA segment sales decreased by 29% to $40.8 million [12] - Asia-Pacific segment sales increased by 25% to $26.1 million [13] Growth Aspirations and Strategies - The company reiterates fiscal year 2023 guidance with net sales between $545 million and $570 million [31] - The company is targeting a compound annual growth rate in the mid-to-high single digits [17] - The company estimates the potential global market opportunity for WD-40 Multi-Use Product to be approximately $1 billion [18]

Financial Data and Key Metrics Changes - The company reported net sales of $124.9 million for Q1 2023, a decrease of 7% compared to the previous year [5] - Gross margin improved sequentially by 400 basis points compared to Q4 2022, reaching 51.4%, up from 50.8% year-over-year [11][46] - EBITDA was 17% of net sales, down significantly from the previous year due to lower sales and higher operating expenses [62] Business Line Data and Key Metrics Changes - Sales in the Americas increased by 3% to $58 million, driven by strong sales of WD-40 Specialist and Multi-Use Product [14] - Maintenance product sales in Canada rose by 7%, while Latin America saw a decline of 31% due to timing of customer orders [16][17] - EMEA sales decreased by 29% to $40.8 million, significantly impacted by currency fluctuations and reduced demand [19] - Asia Pacific sales increased by 25% to $26.1 million, with strong growth in distributor markets [22] Market Data and Key Metrics Changes - In the Americas, maintenance product sales were boosted by price increases and improved supply chain capacity [15] - EMEA sales were adversely affected by a suspension of sales in Russia and Belarus, resulting in a $5 million decline [21] - Asia Pacific saw a 41% increase in distributor market sales, attributed to successful promotional programs [23] Company Strategy and Development Direction - The company aims to achieve net sales between $650 million to $700 million by the end of FY 2025, focusing on geographic expansion and premiumization [29][33] - The Must-Win Battles include geographic expansion, premiumization of products, and driving digital commerce [34][39] - A new dedicated team for emerging markets has been established to capitalize on growth opportunities [77] Management's Comments on Operating Environment and Future Outlook - Management expects volume performance to improve in the second half of FY 2023 as price-related disruptions ease [69] - The company remains committed to restoring gross margin to 55% or higher over the long term [53] - There are dynamics outside the company's control that may impact FY 2023 results, including inflationary pressures [71] Other Important Information - The company donated its older San Diego facility to a community foundation, aligning with its values [56] - A quarterly cash dividend of $0.83 per share was approved, reflecting a 6% increase over the previous quarter [58] - Inventory levels increased from $104 million to $119 million, as the company builds up raw materials and finished goods [59] Q&A Session Summary Question: Inquiry about cash flow statement and payables - Management explained that the decrease in payables was due to timing and the payout of the incentive program occurring in the fourth quarter [83] Question: Clarification on China sales increase - Management confirmed that China sales were up 22%, with a local currency increase of 34%, and noted potential disruptions due to COVID [86] Question: Recovery of lost sales due to price increases - Management indicated that some lost sales momentum may be recovered, particularly in North America, while Europe may lag behind [89] Question: Future pricing strategies for gross margin restoration - Management stated that no further tactical pricing measures are planned, focusing instead on strategic gross margin enhancement [97]

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission File Number: 000-06936 Commission Company Name: WD 40 CO UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 2022 Securities registered pursuant to Section 12(b) of the Act: | Title of ea ...