WD-40 pany(WDFC) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements (Unaudited) Presents unaudited condensed financial statements for the six months ended February 28, 2025 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | February 28, 2025 | August 31, 2024 | | :--- | :--- | :--- | | Total Assets | $458,262 | $449,039 | | Total Current Assets | $272,437 | $255,441 | | Total Liabilities | $216,120 | $218,513 | | Total Current Liabilities | $113,479 | $103,500 | | Total Stockholders' Equity | $242,142 | $230,526 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Six Months Ended Feb 28, 2025 | Six Months Ended Feb 29, 2024 | | :--- | :--- | :--- | | Net Sales | $299,599 | $279,521 | | Gross Profit | $163,803 | $148,494 | | Income from Operations | $48,402 | $45,125 | | Net Income | $48,776 | $33,018 | | Diluted EPS | $3.58 | $2.42 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Six Months Ended Feb 28, 2025 | Six Months Ended Feb 29, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $22,908 | $44,892 | | Net cash used in investing activities | ($1,800) | ($1,743) | | Net cash used in financing activities | ($12,633) | ($35,589) | | Net increase in cash and cash equivalents | $6,296 | $7,300 | - In Q1 FY2025, the company reclassified certain assets of its homecare and cleaning product businesses in the Americas and EIMEA segments as held for sale, totaling $9.5 million[45][46] - The functional currency for the company's U.K. subsidiary was changed from Pound Sterling to the Euro, effective September 1, 2024, to reflect shifts in operating income currency mix[38] Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes financial performance for H1 FY2025, highlighting sales growth and a tax-driven net income increase - For the six months ended Feb 28, 2025, consolidated net sales increased by 7% to $299.6 million, and net income rose 48% to $48.8 million, significantly impacted by a one-time favorable tax adjustment[103] - The company's business model targets a 55% gross margin and 25% Adjusted EBITDA; for H1 FY2025, it achieved a 55% gross margin but Adjusted EBITDA was 18%[144][145] Results of Operations Net sales grew 7% to $299.6 million and gross margin improved to 54.7% in H1 FY2025 Net Sales by Product Category (Six Months Ended, in thousands) | Product Category | FY2025 | FY2024 | % Change | | :--- | :--- | :--- | :--- | | Total maintenance products | $284,824 | $263,384 | 8% | | Homecare & cleaning products (HCCP) | $14,775 | $16,137 | (8)% | | Total net sales | $299,599 | $279,521 | 7% | - Gross margin increased by 160 basis points to 54.7%, driven by lower costs of aerosol cans and specialty chemicals[118] - SG&A expenses increased by 12% ($10.4 million), mainly due to higher employee-related costs ($5.7 million) and increased professional services fees ($1.3 million)[121] - Total advertising and promotional (A&P) spending for the six months was $32.3 million, up from $29.1 million, reflecting increased marketing support[128] Net Sales by Segment EIMEA segment sales grew 14%, Americas 6%, while Asia-Pacific declined 3% in H1 FY2025 Net Sales by Segment (Six Months Ended, in thousands) | Segment | FY2025 | FY2024 | % Change | | :--- | :--- | :--- | :--- | | Americas | $134,965 | $127,582 | 6% | | EIMEA | $117,058 | $103,067 | 14% | | Asia-Pacific | $47,576 | $48,872 | (3)% | | Total | $299,599 | $279,521 | 7% | - Americas sales growth was primarily driven by a $7.0 million increase in Latin America, benefiting from a new direct marketing model in Brazil[108] - EIMEA sales growth was due to higher sales volume across nearly all regions as demand recovered following prior price increases[112] - Asia-Pacific sales decreased mainly in distributor markets ($3.3 million) as distributors reduced orders to normalize high inventory levels[116] Non-Operating Items and Net Income A one-time $11.9 million tax benefit significantly increased net income and diluted EPS for H1 FY2025 - The effective tax rate for Q2 FY2025 was (33.0)%, a sharp decrease driven by the release of an $11.9 million uncertain tax position after the statute of limitations expired[86][138] GAAP vs. Non-GAAP Adjusted EPS (Six Months Ended) | Metric | Feb 28, 2025 | Feb 29, 2024 | | :--- | :--- | :--- | | Diluted EPS - GAAP | $3.58 | $2.42 | | Release of Uncertain Tax Position | ($0.87) | — | | Adjusted diluted EPS - Non-GAAP | $2.71 | $2.42 | Liquidity and Capital Resources Operating cash flow decreased to $22.9 million while the company returned $31.4 million to shareholders - Net cash from operating activities decreased by $22.0 million YoY, primarily due to a $15.8 million decrease from changes in inventory balances[157][158] - Net cash used in financing activities decreased by $23.0 million YoY, mainly due to net proceeds of $22.1 million from the revolving credit facility[160] - As of February 28, 2025, the company had $53.0 million in cash and cash equivalents and was in compliance with all debt covenants[153] - Under the 2023 Repurchase Plan, $35.2 million remains available for share repurchases as of February 28, 2025[155] Quantitative and Qualitative Disclosures About Market Risk Market risk disclosures are incorporated by reference from the FY2024 Annual Report on Form 10-K - The information required for this item is incorporated by reference from the company's Annual Report on Form 10-K for the fiscal year ended August 31, 2024[171] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of February 28, 2025 - The Company's CEO and CFO concluded that as of February 28, 2025, the company's disclosure controls and procedures were effective[172] - There were no material changes in internal control over financial reporting during the quarter ended February 28, 2025[172] PART II — OTHER INFORMATION Legal Proceedings The company reports no pending claims expected to have a materially adverse financial impact - As of February 28, 2025, the Company believes that no pending claims will result in a loss that would have a materially adverse impact on its financial condition[82][175] Risk Factors No material changes to risk factors have occurred since the FY2024 Annual Report on Form 10-K - There have been no material changes in risk factors from those disclosed in the Annual Report on Form 10-K for the fiscal year ended August 31, 2024[176] Unregistered Sales of Equity Securities and Use of Proceeds Details share repurchase activity, with 26,250 shares repurchased for $6.7 million in H1 FY2025 - The company is authorized to acquire up to $50.0 million of its shares through August 31, 2025, under the 2023 Repurchase Plan[177] Share Repurchases (Three Months Ended February 28, 2025) | Period | Total of Shares Purchased | Average Price Paid Per Share | Max $ Value of Shares That May Yet Be Purchased | | :--- | :--- | :--- | :--- | | Dec 2024 | 3,750 | $271.00 | $37,263,141 | | Jan 2025 | 3,750 | $234.93 | $36,382,152 | | Feb 2025 | 5,000 | $234.88 | $35,207,747 | | Total | 12,500 | $245.73 | | Other Information No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement - During the quarter ended February 28, 2025, no directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement[180] Exhibits Lists filed exhibits, including CEO/CFO certifications and iXBRL data files - The exhibits filed with this report include CEO/CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and financial statements formatted in iXBRL[181]