Good day, and welcome to the WD-40 Company Fourth Quarter Fiscal Year 2021 Earnings Conference Call. This call is being recorded. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Ms. Wendy Kelley, Vice President, Stakeholder and Investor Engagement. Please proceed.

Thank you. Good afternoon, and thanks to everyone for joining us today. On our call today are WD-40 Company's Chairman and Chief Executive Officer, Garry Ridge; Vice President and Chief Financial Officer, Jay Rembolt; and President and Chief Operating Officer, Steve Brass. In addition to the financial information presented on today's call, we encourage investors to review our earnings presentation, earnings press release and Form 10-Q for the period ending August 31, 2021. These documents are or will be available on our Investor Relations website at investor.wd40company.com. A replay and transcript of today's call will also be made available at that location shortly after this call. On today's call, we will discuss certain non-GAAP measures. The descriptions and reconciliations of these non-GAAP measures are available in our SEC filings, as well as our earnings presentation. As a reminder today's call includes forward-looking statements about our expectations for the Company's future performance. Of course, actual results could differ materially. The Company's expectations, beliefs and projections are expressed in good faith, but there can be no assurance that they will be achieved or accomplished. Please refer to the risk factors detailed in our SEC filings for further discussion. Finally, for anyone listening to a webcast replay or reviewing a written transcript of this call, please note that all information presented is current only as of today's date, October 19, 2021. The Company disclaims any duty or obligation to update any forward-looking information whether as a result of new information, future events or otherwise. With that, I'd now like to turn the call over to Garry.

Thank you, Wendy. And thank you for everyone joining us on today's call. Today I'm happy to share with you that we reported record net sales of $488.1 million for the full fiscal year 2021, up 19% over last fiscal year. Changes in foreign currency exchange rates had a favorable impact of $19.7 million on net sales for the fiscal year 2021. On a constant currency basis, net sales would have been up 15%. Net income was $70.2 million for fiscal year 2021, reflecting an increase of 16%. Diluted earnings per share in 2021 were $5.09 compared to $4.40 last year. For the fourth quarter, we reported net sales of $115.2 million, which reflects an increase of 3% from the fourth quarter of last year. Changes in foreign currency exchange rates had a favorable impact of $6.5 million on net sales for the fourth quarter. On a constant currency basis, net sales would have decreased 3% compared to last year. Net income was $8.4 million compared to $19.7 million in the fourth quarter of last fiscal year, reflecting a decrease of 57%. Diluted earnings per share in the fourth quarter were $0.61 cents compared to $1.42 in the fourth quarter of last year. If you follow our business closely, you'll know where fluctuations in performance quarter to quarter are not unusual. This has been especially true since COVID-19 pandemic began. Fiscal Year 2021 was a lumpy year with abnormal swings in net sales from period to period. We've seen more variability between quarters than we experienced before the pandemic. We know this quarter looks different, however we're going to share with you today why our results are actually an exciting step forward in our infinite game. In the fourth quarter, we made a thoughtful and deliberate decision to invest significantly…

Thanks, Gary and good afternoon. Today, we close out a spectacular year of incredible growth for our company. Globally sales of the WD-40 brand products grew 22% in fiscal year 2021 compared to last year. We experienced very high end user demand for our maintenance products due to the higher level of renovation in multi standards, as well as an expanded brick and mortar distribution and continued success within the ecommerce channel. As Gary mentioned earlier, the pandemic continues to create abnormal swings in our net sales results from period to period, which is evidenced in our fourth quarter net sales results. Let's take a closer look at what happened in our trade bloc in the fourth quarter starting with the Americas. Net sales in the Americas, which includes the United States, Latin America and Canada, were down 5% in the fourth quarter to $54.2 2 million. Sales and maintenance products decrease 5% in the Americas due to decrease sales of WD-40 product in the US and Canada, which declined 5% and 17% respectively. These declines are driven by several factors. In the United States, we were up against a very strong comparable period while we continue to experience very strong in user demand for our maintenance products. We were unable to fully meet those demands due to the current state of the global supply chain, the implications of which were felt most significantly in the United States. The biggest challenge facing many consumer product companies today is the continued -- to global supply chain is experiencing. These supply chain issues are contributing to rising input costs, manufacturing fees and higher warehousing and distribution expenses, which Jay will discuss in greater detail shortly. In Canada, net sales of maintenance products declined because of the timing of customer orders. In addition,…

Thanks Steve. We are pleased that in fiscal 2021, we saw robust demand across our maintenance products, coupled with strong book comparisons as well as some --, I'll speak about in a minute. But first, let's start with a -- against the limited fiscal year -- last quarter. Due to the uncertainty regarding the pandemics near term impact on our business, we did not issue comprehensive financial guidance for fiscal 2021. However, we did share that we thought -- market conditions suggested that for the full fiscal year, net sales would fall in the range of between $475 million to $490 million. Today, we reported fiscal year revenue of $488.1 million, up 19% compared to fiscal 2020 and coming in at the top end of our projected range. Now let's review our 55: 30:25 business model, the long-term targets we use to guide our business. As you may recall, the 55 represents gross margin, which we target to be at 55% of net sales. The 30 represents our cost of doing business, which is our total operating expenses, excluding depreciation and amortization. Our goal is to drive our cost of doing business over time for 30% of net sales. And finally the 25 represents our target for EBITDA. In the fourth quarter, our gross margin was 51.2% compared to 56.3% last year. This represents a decline of 510 basis points year-over-year. This large decrease in gross margin was primarily due to the inflationary headwinds and the current state of the global supply chain. Like others we are experiencing significant increases in input and transportation costs, as well as increase fees from our third party manufacturers. In order to combat these macroeconomic factors, we began implementing price increases, but they'll take time to implement -- and to make their way into…

Thanks Jay. In summary, what did you hear from us on this call? You heard that we have delivered a compound annual growth rate of total shareholder return of 14% since 1998. You heard that net sales were $498.1 million, up 19% compared to last fiscal year and a new record for the company. You heard that global sales of WD-40 brand products were up 22% compared to last fiscal year. You heard that we have refreshed our strategic initiatives to more accurately and holistically reflect the top priorities of our organization. You heard that for the full year, global ecommerce sales grew by 25%. You heard that we increased our A&P investment in the fourth quarter to support specific growth objectives, because we believe these investments will drive our future growth. You heard that we expect we will continue to see pressure on gross margin due to inflationary headwinds and a challenging supply chain environment. You heard that we have issued guidance for fiscal year 2022 and believe that net sales will grow between 7% and 11%. And that we are off to very strong start in the new fiscal year. Finally, I'd like to share with you the biggest learning I have taken away from this fiscal year. One thing that pandemic has proven to me is that the diversification of across geographies and trade channels which we built into our business creates a protective mode, which allows us to succeed even in the most abnormal of times. In closing, I'd like to share with you a quote from my friend Simon Sinek. Courage as it relates to leading with the infinite mindset is the willingness to completely change, is the courage to reject Milton Friedman's stated purpose of business and embrace an alternative definition. Thank you, to take your questions.

[Operator Instructions] Our first question comes from the lines of Linda Bolton Weiser with D.A. Davidson.

Great, thank you. Hi, how are you? -- So I guess I'll just start with your update of the long-term strategy and some of the targets, does seem like growing the WD-40 core. The goal for 2025, it does strike me that that's lower than it was. Can you just remind us what it was previously relative to the new goal of $525 million. And then -- that change because even though you had some disruption during the pandemic, you also had isolation renovation benefits. So what is the change in thinking that is changing some of these long term targets? Thanks.

Thanks Linda. They're substantially the same to be honest; the $530 million is substantially the same figure we had when we had our $700 million goal. We did put that range in of $650 million to $700 million. But the only real change to the long term goal was moving WD-40 Bike out of the strategic [Indiscernible] and including it with Specialist. And in fact, the Specialist aspirational goal went up by $25 million from $100 million to $125 million. So the bottom line is things have remained and our aspirations are pretty much in line with what they were before.

Okay, so then what's the takeaway then on the strategic refresh? I mean maybe I'm missing or are things pretty much in line across the board.

Basically what we did is we wanted to kind of force rank them a little bit. So as you can see our attention to ESG. And collaboration has moved to the top because it's become a big part of our strategic planning process. But as far as the aspirations for revenue growth of concern, they basically stayed the same. We've added in the focus that we've now brought on digital and ecommerce, as you know, that's been a big push for us. And it's been very successful. So in most cases, they were really bringing them up to date with holistically what we're thinking these days and including things that have come into our business and into our thinking that we wanted to make sure were headlines, not only to the outside world, but headlines to the leadership team internally as well.

Okay, great. So it sounds like it's the order in which you talk about the goals, that is the real difference, as you said, right?

And some words that now bring out and put into play, our intention around things like the future of the company in relation to ESG, DE&I, all those things that have become, importantly, and rightly so, headlines for most companies, and to be honest with you, things that have been present in our company for a long, long time yet, we haven't really put them in print.

Great, thank you. So can I just ask you about? I mean, in the quarter, you alluded to some conscious investment to support the business and the brands. And the ANC ratio, indeed, was quite high. I mean, there was a lot of spending. Can you talk about what you spent on term brand building? And then if you've spent so much, when will we see like in the next couple quarters or is it more a longer term thing that will benefit from all this spending? Thank you.

Well, thanks Linda, I'm going to answer the back end of that question, I'm going to punt it over to Steve and he's going to tell talk, what we specifically invested in. But as you can see -- we see next year, our revenue growth of between 7% and 11%. So obviously, some of what we're doing, we're expecting to have some short term impact as we enter the new fiscal year. And as Steve shared that, specifically, I'll ask Steve to talk about the substantial investments we made, which was pretty out of character for us. But we wanted to be deliberate. We said now as the opportunities are there, and some of the work we did -- is where we felt we could really strengthen our growth going forward by bringing forward and investing into some new areas. So I'm going to -- Steve to talk about that.

Thank you, Gary. Hi, Linda. And three real areas of focus were - kind of where the investments, so the first one was in sampling. So particularly with professional end users around the world, which drives faster end user penetration, especially with professional users. So that has the double whammy of long term because once we win new users, we tend to keep them. We've expanded our digital asset base, globally, particularly a lot of video work, how to and also a global digital tracking system. And the effectiveness of our digital marketing efforts around the world, and then finally, investing in our Top 20 markets in terms of major research projects in places such as China and Brazil, and they will help us form our long-term future strategy for those key markets, but also just investments in places like India and Russia also, where we believe we have strong both short term and long term growth opportunities. So really investing in line with those Top 20 opportunities around the world.

Okay, and then longer term, beyond even FY22 -- your aim still longer term as you have implied 26% of revenue as a goal, [Indiscernible], it's like higher level of the average [Indiscernible]?

No, Linda, in our current guidance that we just issued, we shared that we think that total A&P investment for this fiscal year will be between 5% and 6%, which is in the range normally; it's been about 5.6 to 5.7.

Okay. And then, on the gross margin, can you just repeat what you said? Did you say that you hope that by the fourth quarter or fiscal fourth quarter, you can get to the long-term goal, which is the 55%. Am I understanding that correctly?

I'll let Jay talk about gross margin, Jay?

Yes, thank you, Gary. Yes, while it's going to take a few quarters to build our gross margin back to kind of the guided range between 53% and 54% for the year. We do expect over time, build to the greater than 55% margin over the long term. So we're just in a period where we're really having a number of unknowns. And at the moment, it's impossible to really be exact how to -- at what point we get there. But we feel that we will recover a portion, significant portion of the lost margin, and will be set to recover and drive north of that 55% beyond the year.

Our next question comes from the line of Daniel Rizzo with Jefferies.

Hi. Good afternoon, everyone. Thanks for taking my question. Just to get back when we were just talking about with the A&P costs, so they were a bit in the fourth quarter, but the guidance isn't, what your outlook is, or what you want to achieve over the next five years, why it wouldn't be possibly a little bit higher, for a longer period of time, as opposed to the 5.5% to 6% that usually guide to?

Because we made specific investments in some areas that were one time investments, for example, the research that Steve mentioned, the production of a lot -- large library of video assets, and our normal A&P investment that also has a lot of sampling embedded in it anyhow. So more range going forward.

All right. Thank you. And then you mentioned ESG, as a key part of the strategy going forward. I was just wondering what specifically you're doing or how specifically ESG fits into, what will we see expect going -- what I mean, is this some sort of steps you're taking, or just any color would be great.

As you know, Daniel, we released and published our first ESG report last year; we're currently having a large working group working on a lifecycle analysis and a number of different areas. So that we can really level set where we are, which will allow us in our next ESG report, which will be published next October to set our targets around, particularly the ESG as you know, we've got measurable targets and have had really great results around those over the years. So yeah, we'll be, Kelley is heading that program with --

Okay and then one final question is just with the strategic initiatives, it's a little different now. And then number six, in particular, you mentioned expanding in supporting portfolio opportunities. I think I know what the answer is here. But would that mean that you're looking at, I guess, more inorganic opportunities where you might be shifting focus or divesting something or possibly seeing something out there that is actually possible to fit into the portfolio that wasn't there before.

I'll give you an example of that internally. Last year or over the last year and a bit, we've taken the 3-IN-ONE brand and extended the portfolio of the 3-IN-ONE brand to include impressive range of recreational vehicle maintenance products that now with the 3-IN-ONE brand and are in wide distribution. So with the GT85 brand in the UK, we've done the same thing, expanding that in some areas that we see opportunities in. There's not a lot of other activity in the other brands. With the exception, I guess of Carpet Fresh or no vac in Australia, which is a very strong brand and we continue to -- those areas, but there's nothing really magical or mystique in that area.

We have a follow up question coming from Linda Bolton Weiser.

Just tell us what your oil price planning assumption is price per barrel for the fiscal year.

We have a range, Jay; you have a range that we've disclosed.

Oh, sorry. Yes, we're at the moment, we're in the high end of the range; we usually plan with about a $10 range. So yes, we're comfortable with; I wouldn't say we're comfortable with the price of oil that we see today. But it is reflected in our forecasts and our outlook.

So you're planning 70 to 80 or 80 to 90.

It's closer to the 70 to 80.

Okay. And then can I just ask you to well the supply chain challenges, and I know you had some disruptions earlier in the pandemic, is there anything right now that you're seeing that would cause you some problems? Are you able to handle the various challenges? What are you kind of anticipating that you need to look out for the next year?

Linda, it's whack a mole basically. I think and that's not trying to be funny, either. But every day, there's something that shows that head to us that we hadn't anticipated. That causes us to have to pivot in one way or do something differently. For the most though if you look at our -- the year that just went and the volume increases we had in a supply chain situation that was extremely stressed, our supply chain team did a remarkable job. And each day, we think we're getting better in areas of weakness. So I would say that there's not a huge threat today at this minute that we see. However, it's a challenging situation that continues to be managed day to day, not only because of the supply chain issues that are happening in the US and other parts of the world, but also because of the increased volume where in some places around the world, some countries were approaching the volumes we thought we would have achieved in '23, '24, '25, so substantial increases, but at most of them.

Ladies and gentlemen, that does conclude our allotted time for questions. We thank you for your participation on today's conference call. And ask that you please disconnect your line.