Q3 FY17 Earnings Results. July 10, 2017

Transcription

1 Q3 FY17 Earnings Results July 10, 2017

2 Forward-Looking Statements Historical financial and operating data in this presentation reflect the consolidated results of WD-40 Company, its subsidiaries and its legal entities. WD-40 Company markets maintenance products ( MP ) under the WD-40, 3-IN-ONE and GT85 brand names. Currently included in the WD-40 brand are the WD-40 Multi-Use Product and the WD-40 Specialist and WD-40 BIKE product lines. WD-40 Company markets the following homecare and cleaning ( HCCP ) brands: X-14 mildew stain remover and automatic toilet bowl cleaners, 2000 Flushes automatic toilet bowl cleaners, Carpet Fresh and no vac rug and room deodorizers, Spot Shot aerosol and liquid carpet stain removers, 1001 household cleaners and rug and room deodorizers and Lava and Solvol heavy-duty hand cleaners. Except for the historical information contained herein, this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Such statements reflect the Company s current expectations with respect to currently available operating, financial and economic information. These forward-looking statements are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated in or implied by the forward-looking statements. Our forward-looking statements include, but are not limited to, discussions about future financial and operating results, including: growth expectations for maintenance products; expected levels of promotional and advertising spending; plans for and success of product innovation, the impact of new product introductions on the growth of sales; anticipated results from product line extension sales; and forecasted foreign currency exchange rates and commodity prices. Our forward-looking statements are generally identified with words such as believe, expect, intend, plan, could, may, aim, anticipate, estimate and similar expressions. The Company's expectations, beliefs and forecasts are expressed in good faith and are believed by the Company to have a reasonable basis, but there can be no assurance that the Company's expectations, beliefs or forecasts will be achieved or accomplished. Actual events or results may differ materially from those projected in forward-looking statements due to various factors, including, but not limited to, those identified in Part I Item 1A, Risk Factors, in the Company s Annual Report on Form 10-K for the fiscal year ended August 31, 2016 which the Company filed with the SEC on October 24, 2016 and in the Company s Quarterly Report on Form 10-Q for the period ended May 31, 2017 which the Company expects to file with the SEC on July 10, All forward-looking statements included in this presentation should be considered in the context of these risks. All forward-looking statements speak only as of July 10, 2017 and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Investors and prospective investors are cautioned not to place undue reliance on our forward-looking statements. 2

3 Q3 FY17 Results 3

4 Q3 FY17 Results ($ in millions; except EPS, gross profit and % change) Q3 FY17 Q3 FY16 % Change Net Sales $98.2 $96.4 2% Gross Profit (%) 55.3% 56.8% -150 bp Operating Income $20.6 $ % Net Income $14.4 $ % EPS (Diluted) $1.02 $ % Top-line sales growth was impacted by foreign currency exchange rates in Q3 FY17 When you take both translation (or constant currency ) and transaction exposure into consideration, the impacts of foreign currency exchange rates reduced our total net sales by approximately $2.1 million 4

5 Foreign Currency Impact Translation Impact Transaction Impact Reporting currency As a U.S. based company the reporting currency of WD-40 Company is the U.S. dollar Translation from functional currency to WD-40 Company s reporting currency Functional currency Main currency in which subsidiaries conduct business; typically the same as that of the country in which the subsidiary is headquartered Subsidiary (Functional Currency) Conversion from transaction currency to subsidiaries functional currency Transaction currency Currency in which sales, costs, expenses are transacted; typically the same as that of the country in which the sales transaction takes place Subsidiary (Non-Functional Currency) UK GBP CANADA- CAD AUSTRALIA- AUD CHINA- CNY UK USD & EUR 5

6 Q3 FY17 Foreign Currency Exchange Impact Q3 FY17 Net Sales (In millions) Reporting Currency Translation Impact (Functional Currency) Translation and Transaction Impact $98.2 $4.7 $102.9 $2.6 In total changes in FX rates reduced net sales by ~$2.1M in Q3FY17 $100.3 Q3 FY17 net sales at Q3 FY17 FX rates Q3 FY17 net sales at Q3 FY16 FX rates Q3 FY17 net sales at Q3 FY16 FX rates (as reported) (constant currency) (constant currency plus transaction impacts) Reported Net Sales Translation Impact Transaction Impact 6

7 Americas Segment $6.2 $6.6 $42.8 $43.3 Q3 FY17 Americas Net Sales (in millions) $49.0 $49.9 Q3 FY16 Americas Q3 FY17 vs. Q3 FY16 Total reported segment sales 2% Segment makes up 50% of global sales Maintenance product sales 1% WD-40 Specialist sales 32% HCCP sales 5% Maintenance Product (MP) sales: U.S. MP sales 3% Latin America MP sales 8% Canadian MP sales 10% Maintenance Products Homecare and Cleaning Products 7

8 EMEA Segment EMEA Q3 FY17 vs. Q3 FY16 $34.4 EMEA Net Sales (in millions) $1.2 $32.9 $1.4 Total reported segment sales 4% Segment makes up 35% of global sales Changes in foreign currency exchange rates had an unfavorable impact on sales Maintenance product sales 5% WD-40 Specialist sales 32% HCCP sales 12% $33.2 $31.5 Q3 FY17 Q3 FY16 Maintenance Products Homecare and Cleaning Products EMEA direct market sales 1% 64% of segment sales came from direct markets In GBP-based markets sales 8% in GBP In EUR-based markets sales 4% in EUR EMEA distributor market sales 16% 36% of segment sales came from distributor markets 8

9 Asia-Pacific Segment Asia-Pacific Q3 FY17 vs. Q3 FY16 $14.7 Asia-Pacific Net Sales (in millions) $1.8 $13.6 $1.9 Total reported Asia-Pacific sales 8% Segment makes up 15% of global sales Maintenance product sales 10% WD-40 Specialist sales 12% HCCP sales 6% $12.9 Q3 FY17 $11.8 Q3 FY16 Australia sales 4% In functional currency (AUD) sales 1% China sales 6% In functional currency (RMB) sales 12% Asia distributor market sales 12% Maintenance Products Homecare and Cleaning Products 9

10 55/30/25 Business Model 10

11 Gross Margin Gross Margin 56.8% Q3 FY16 vs. 55.3% Q3 FY17 (-1.5pp) Changes in foreign currency exchange rates in EMEA (+1.0pp) Price increases in EMEA (+0.1pp) Changes in petroleum-based specialty chemicals and aerosol cans primarily in EMEA (-1.8pp) Sales mix changes and miscellaneous costs (-0.5pp) Lower advertising and promotional discounts (-0.2pp) Higher warehousing and in-bound freight costs (-0.1pp) FY14 52% FY15 53% FY16 56% Gross margin can be impacted positively and negatively by things not under the Company s control like changes in foreign currency exchange rates and input costs 11

12 Q3 FY17 55/30/25 Results 55/30/25 Business Model Target Q3 FY17 Q3 FY16 Q3 FY15 Actuals Actuals Actuals Gross Margin 55% 55% 57% 53% Cost of Doing Business 30% 33% 36% 34% EBITDA 25% 23% 20% 19% * See appendix for descriptions and reconciliations of these non-gaap measures. Note: Percentages may not aggregate to EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on the Company s consolidated statement of operations are not included as an adjustment to earnings in the Company s EBITDA calculation. 12

13 Guidance 13

14 Updated Fiscal Year 2017 Guidance* Sales Growth Flat to 2% Net Sales Gross Margin A&P Investment Net Income Diluted EPS Between $382 and $388 million Above 56% Below 6.0% of net sales Between $51.3 and $52.3 million Between $3.64 and $3.71 based on 14.1 million shares outstanding Changes to guidance indicated in BLUE. *As of 7/10/17. This guidance does not include any future acquisitions or divestitures and assumes that foreign currency exchange rates and crude oil prices will remain close to current levels for the remainder of fiscal year

15 Appendix 15

16 Foreign Currency Translation Impact or Constant Currency Q3 FY17 ($ in millions; except EPS, gross profit and % change) Financial Results As reported Q3 FY17 Q3 FY16 % Change Net Sales $98.2 $96.4 2% Gross Profit (%) 55.3% 56.8% -150 bp Operating Income $20.6 $ % Net Income $14.4 $ % EPS (Diluted) $1.02 $ % Financial Results Constant currency basis Q3 FY17 CC* Q3 FY16 % Change Net Sales $102.9 $96.4 7% Operating Income $21.6 $ % Net Income $15.1 $ % EPS (Diluted) $1.07 $ % *Q3 FY17 results translated at Q3 FY16 foreign currency exchange rates 16

17 Non-GAAP Reconciliation Q3 FY17 (1) This presentation contains certain non-gaap (accounting principles generally accepted in the United States of America) measures, that our management believes provide our stockholders with additional insights into WD-40 Company s results of operations and how it runs its business. Our management uses these non-gaap financial measures in order to establish financial goals and to gain an understanding of the comparative performance of the Company from year to year or quarter to quarter. The non-gaap measures referenced in this presentation, which include EBITDA (earnings before interest, income taxes, depreciation and amortization) and the cost of doing business, are supplemental in nature and should not be considered in isolation or as alternatives to net income, income from operations or other financial information prepared in accordance with GAAP as indicators of the Company s performance or operations. Reconciliations of these non-gaap financial measures to the WD-40 Company financials as prepared under GAAP are as follows: Three Months Ended May 31, Total operating expenses - GAAP $ 33,674 $ 36,143 Amortization of definite-lived intangible assets (718) (740) Depreciation (in operating departments) (698) (671) Cost of doing business $ 32,258 $ 34,732 Net sales $ 98,178 $ 96,446 Cost of doing business as a percentage of net sales - non-gaap 33% 36% EBITDA: Three Months Ended May 31, Net income - GAAP $ 14,444 $ 12,665 Provision for income taxes 5,842 4,957 Interest income (112) (186) Interest expense Amortization of definite-lived intangible assets Depreciation EBITDA $ 22,574 $ 19,451 Net sales $ 98,178 $ 96,446 EBITDA as a percentage of net sales - non-gaap 23% 20% Note: Percentages may not aggregate to EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on the Company s consolidated statement of operations are not included as an adjustment to earnings in the Company s EBITDA calculation. 17