WD-40 pany(US:WDFC)2021-04-09 00:32Financial Data and Key Metrics Changes - Net sales for Q2 2021 were $111.9 million, up 12% compared to the same period last year [8] - Net income for Q2 was $17.2 million, compared to $14.3 million last year, with diluted earnings per share increasing to $1.24 from $1.04 [9] - Gross margin improved to 55.4% from 53.6% year-over-year, an increase of 180 basis points [43] - EBITDA was 20% of net sales, unchanged from the previous year [51] Business Line Data and Key Metrics Changes - Sales of WD-40 Multi-Use Product increased 14% to $86.4 million, driven by demand in EMEA and Asia Pacific [11] - WD-40 Specialist sales grew 4% globally to $9.2 million, with significant growth in EMEA and Asia Pacific, but a decline of 36% in the Americas due to supply chain disruptions [13] - Global sales of products under the broader initiative, including WD-40 BIKE, increased 7% to $13.7 million, with WD-40 BIKE sales up nearly 34% [14] Market Data and Key Metrics Changes - Net sales in the Americas decreased 1% to $46.2 million, with maintenance product sales down 3% due to supply chain issues [22] - EMEA net sales increased 19% to $49.8 million, becoming the largest trading block for the second consecutive quarter [27] - Asia-Pacific net sales rose 39% to $15.9 million, with significant growth in China and Australia [30] Company Strategy and Development Direction - The company aims to drive consolidated net sales to approximately $700 million while following a 55/30/25 business model [11] - Strategic initiatives include growing the WD-40 Multi-Use Product, expanding the WD-40 Specialist line, and enhancing operational excellence [18] - Focus on geographic expansion and premiumization of products to drive revenue growth [36] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about fiscal year 2021, expecting total net sales between $445 million and $475 million [41] - Supply chain disruptions are anticipated to continue impacting gross margins in the short term, with a potential deterioration of 200 to 300 basis points [65] - The company believes that new DIY habits formed during the pandemic may lead to long-term customer loyalty [40] Other Important Information - The company plans to invest approximately $20 million in capital projects, primarily for proprietary machinery [54] - A quarterly cash dividend of $0.72 per share was approved, reflecting a more than 7% increase over the previous quarter [53] Q&A Session Summary Question: Can you quantify the impact of the supply chain disruptions? - The major impact was in the U.S., estimating 50% of Specialist and 85% of Multi-Use Product volume shipped against demand signals [61] Question: Will these issues be cleared up in the third or fourth quarter? - Recovery is expected by the end of the fourth quarter, with improvements anticipated as the year progresses [63] Question: What is the expected impact on gross margin due to supply chain issues? - A potential deterioration of 200 to 300 basis points is expected as the company navigates through the recovery plan [65] Question: Why are supply chain issues more pronounced this quarter? - Increased demand and pressures have widened the gap, leading to significant supply chain challenges [70] Question: How long does it take to onboard new third-party manufacturers? - Onboarding can take 30 to 60 days for new suppliers, depending on safety and quality testing [71] Question: Is there a material impact from the Suez Canal delays? - No significant impact from the Suez Canal delays has been observed; the main issues stem from increased demand and labor restrictions [76] Question: What is the outlook for SG&A as a ratio to revenues? - The cost of doing business is expected to remain around 34% for the rest of the year [81]