Operator:

Ladies and gentlemen, thank you for standing by. Good day, and welcome to the WD-40 Company Second Quarter Fiscal Year 2025 earnings conference call. Today's call is being recorded. At this time, all participants are in a listen-only mode. At the end of the prepared remarks, we will conduct a question and answer session. To register a question at any time during this call, please press star one on your telephone keypad. Please make sure that your mute function is turned off to allow your signal to reach our equipment. Star zero on your telephone keypad. I would now like to turn the presentation over to the host for today's call, Wendy Kelley, Vice President, Stakeholder and Investor Engagement. Please proceed. Wendy Kelley: Thank you. Good afternoon, and thanks to everyone for joining us today. On our call today are WD-40 Company's President and Chief Executive Officer, Steve Brass, and Vice President and Chief Financial Officer, Sara Hyzer. 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 February 28, 2025. These documents will be made available on our Investor Relations website at investor.wd40company.com. A replay and transcript of today's call will also be made available 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 the earnings documents posted on our Investor Relations website. As a reminder, today's call includes forward-looking statements about our expectations for the company's future performance. 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, April 8, 2025. The company disclaims any duty or obligation to update any forward-looking information as a result of new information, future events, or otherwise. With that, I'd now like to turn the call over to Steve. Steve Brass: Thanks, Wendy, and thank you all for joining us today. Today, I'll start with an overview of our sales results and second fiscal quarter of 2025. I'll also provide updates on our must-win battles and key strategic enablers. After that, Sara will go over our second quarter results in more detail, provide a brief update on the anticipated divestiture of our home care and cleaning business, review our 55/30/25 business model, and share an updated outlook for fiscal year 2025. We'll then open the floor for your questions. Today, we reported net sales of $146.1 million for the second quarter, an increase of 5% from the second quarter of last fiscal year. Changes in foreign currency exchange rates have been a bit of a headwind for us this quarter. So adjusting for the estimated translation impact of foreign currency, net sales would have been $150.9 million, reflecting an increase of 9% compared to the prior year fiscal quarter. Our target sales growth for core maintenance products remains in the mid to high single digits. In the second quarter, we achieved $139.3 million in net sales for these products, a 6% increase despite currency headwinds. This performance aligns with our long-term growth target. Much of this growth is driven by strong volume performance. We experienced double-digit volume growth both in the second quarter and year to date, with particularly strong volume growth in EMEA. Now let's talk about second quarter sales results in dollars by segment, starting with the Americas. Total sales in the Americas, which includes the United States, Latin America, and Canada, increased 3% in the second quarter to $65.5 million compared to the same period last year. Adjusting for the estimated translation impact of foreign currency, net sales in the Americas would have increased by 5% compared to the prior year fiscal quarter. Sales and maintenance products increased 4% in the second quarter to $62.4 million compared to the same period last year. The bulk of this growth was driven by higher sales volume of WD-40 multi-use products in Latin America, which increased 47% compared to the prior year quarter. Sales of WD-40 multi-use products in Latin America were favorably impacted by our transition to a direct market model in Brazil. This distribution model shift favorably impacted net sales in Brazil by approximately $3.4 million in the second quarter. Our US direct market is celebrating its one-year anniversary this quarter, and it continues to perform fully in line with our expectations. In addition, sales in other Latin American markets increased $1.3 million due to improved economic conditions in certain regions as well as a higher level of brand-building activity and expanded distribution. Higher sales in Latin America were partially offset by a lot of sales of the WD-40 multi-use products in the United States, which decreased by $2.7 million compared to the prior year quarter due to the timing of customer orders. I'm happy to share that many of those customer orders have already shipped into March, contributing to a strong start we're seeing in the US for our third fiscal quarter. In the Americas, sales of the WD-40 Specialist increased 9% compared to the prior year, primarily due to expanded distribution in the United States. Growth in maintenance products was partially offset by a 6% decline in home care and cleaning products. This drop is primarily due to reduced distribution for these brands as we shift our focus to our more profitable maintenance products in line with our four by four strategic framework. In total, our Americas segment made up 45% of our global business in the second quarter. Now let's take a look at our sales in EMEA, which includes Europe, India, the Middle East, and Africa. Total sales in EMEA increased 10% in the second quarter to $59.6 million compared to the same period last year. Adjusting for the estimated translation impact of foreign currency, net sales in EMEA would have increased by 15% compared to the prior year fiscal quarter. Sales and maintenance products increased 11% in the second quarter compared to the same period last year. The strong growth in EMEA was driven most significantly by high sales volumes of WD-40 multi-use product in our direct market. Sales increased most significantly in Italy, France, and the Benelux regions, which were up 28%, 13%, and 27%, respectively. In EMEA, most regions have seen continued volume growth momentum following a temporary decline in volumes associated with price increases we implemented over two years ago. While much of this volume recovery occurred in fiscal year 2024, momentum in sales volumes has continued into fiscal year 2025, leading to higher sales. Sales of the WD-40 Specialist increased 12% compared to the prior year fiscal quarter, primarily due to higher sales volume due to increased distribution and stronger levels of demand in various direct markets, most significantly in the DACH, Benelux, and Iberia regions. Growth in maintenance products was partially offset by a 32% or $715,000 decline in home care and cleaning products. This was primarily due to reduced promotional efforts for these brands as we shift our focus to our more profitable maintenance products in line with our four by four strategic framework. In total, our EMEA segment made up 41% of our global business in the second quarter. Now on to Asia Pacific. Southern Asia Pacific, which includes Australia, China, and other countries in the Asia region, decreased 1% in the second quarter to $21 million compared to the same period last year. Adjusting for the estimated translation impact of foreign currency, net sales in Asia Pacific would have increased by 1% compared to the prior year fiscal quarter. Sales and maintenance products decreased 1% in the second quarter to $18.9 million compared to the same period last year. This decline was driven primarily by lower sales of WD-40 multi-use products in our Asia distributed markets, where sales decreased 8% compared to the prior year quarter due to the timing of customer orders. Sales volume in our Asia distributor markets declined due to in-market knock-on effects associated with changes in foreign currency exchange rates. Since we sell to these distributors in the US dollar, a stronger dollar makes our products more expensive to buy in-market. As a result, our marketing distributor partners may raise prices in the market, leading to temporary market disruption. In March, we began to see recovery in our Asia Pacific distributor markets, and anticipate a strong second half of fiscal year 2025. Lower sales in our Asia distributor markets were partially offset by higher sales of the WD-40 multi-use product in China, which increased 5% due to increased sales volume from successful brand building and marketing activities, as well as expanded distribution. In Australia, sales were down 5% in the second quarter, primarily due to lower sales of home care and cleaning products in the region, which decreased 7% due to the timing of customer promotions. In Asia Pacific, sales of WD-40 Specialist were up 10% in the second quarter, due to higher sales volume from successful promotions and marketing efforts in our Asia distributor markets, along with expanded distribution in China. In total, our Asia Pacific segment made up 14% of our global business in the second quarter. Now let's take a look at our must-win battles. Our must-win battles focus on maintenance product revenue growth and improved profitability. Starting with must-win battle number one, lead geographic expansion. Year to date, global sales of WD-40 multi-use product were $232 million, representing growth of 8% compared to the same period last year. We experienced 16% growth of our signature brand in EMEA, and 7% growth in the Americas. This growth was partially offset by a 4% sales decline in Asia Pacific. Every day, we continue to uncover new opportunities to build our flagship brand with end users around the world. As geopolitical fragmentation increases, we're exploring new go-to-market strategies in specific regions. Over the past five years, we've successfully transitioned two markets, Mexico and Brazil, to a direct model, gaining valuable insights and driving strong growth. However, going direct is not the only way to accelerate top-line growth. We're also exploring alternative go-to-market strategies. To improve efficiency, we've started grouping our EMEA market into strategic regional hubs. With centralized operations and business functions, these hubs manage sales, distribution, and marketing from multiple nearby markets, helping us reduce costs, accelerate the rate of execution, and better adapt to regional needs. In the Asia Pacific region, we're adopting hybrid models in some markets to accelerate learning and growth. We've identified Indonesia, Vietnam, and Japan as top market opportunities within our Asia distributed network. Experience has shown that having boots on the ground benefits both our company and our distributor partners. Currently, we have dedicated WD-40 Company personnel working alongside our Indonesian and Vietnamese distributors, and we're excited to announce the hiring of our first dedicated personnel in Japan, who will work closely with our Japanese distributor. We're confident that the focus and expertise these personnel will bring to their respective markets will create a significant unlock and contribute further to our success. Next is must-win battle number two, accelerating premiumization. Wendy Kelley: Our second must-win battle is to accelerate sales of premium formats of WD-40 multi-use product. For us, premiumization is a major contributor to achieving more profitable growth, and our premiumized products continue to leave our end users with positive lasting memories. Year to date, sales of WD-40 Smart Straw and Easy Reach, when combined, were up 11% compared to the prior year period. On a go-forward basis, we'll be targeting a compound annual growth rate for net sales of premiumized products of greater than 10%. Our third must-win battle is to drive WD-40 Specialist growth. Year to date, sales of WD-40 Specialist products were $38 million, up 12% compared to the same period last year. We continue to see growth of WD-40 Specialist products across all three trade blocks, with particularly strong growth in EMEA and the Americas, where sales grew 14% and 12%, respectively. As we continue to embrace our new mantra, "few things, many places, bigger impact," we'll review our portfolio to ensure we focus our resources on the products with the greatest growth potential, as well as those new or existing that support our sustainability agenda. On a go-forward basis, we'll be targeting a compound annual growth rate for net sales of WD-40 Specialist of greater than 15% in reported currency. Our final must-win battle number four is to turbocharge digital commerce. We view digital commerce as an accelerator for all our other must-win battles. E-commerce sales were up 9% year to date. The digital channel is so much more than just a sales platform. It's a powerful tool for building brand awareness and educating end users about our products. One example is our "Training the Trades" program, which offers technical training and skill development to aspiring technicians and tradespeople worldwide. Over the past seven years, we've expanded from training approximately 6,000 tradespeople in one country to facilitating 200,000 completed trainings each year across more than 20 countries, with pro-focused educational content reaching millions more. In fiscal year 2025, we aim to create more than 15 million online impressions and distribute more than 175,000 product samples for skilled trade professionals, effectively putting many cans in hands around the world. The digital channel has provided us with a tremendous opportunity to train more future tradespeople globally, faster. Now let's move to the second element of our four by four strategic framework, our strategic enablers, which emphasize operational excellence. Today, I'll provide an update on strategic enablers one and three. At WD-40 Company, we believe our greatest assets cannot be found on a balance sheet, but rather it resides within our talented global team. Therefore, it makes sense that our first strategic initiative is to ensure a people-first mindset. For over 20 years, we've measured employee engagement every two years, not just to track progress, but to drive improvements. However, in today's volatile, uncertain, complex, and ambiguous times, we recognize the need to develop more frequent and effective ways to listen to our employees. This allows us to gather real-time feedback, enhance our culture, and shift from employee engagement to true employee inspiration. Once again, we measured employee engagement, and I'm extremely proud that we've been able to increase our employee engagement index score to 94%. In addition, 94% of our employees agree that they understand the strategy for achieving WD-40 Company's future goals and ambition. This is important because when employees are highly engaged and understand the organization's strategy, it creates a more cohesive, motivated, and productive workforce that drives the organization towards its goals. I want to take a moment to say thank you to all of our employees for their dedication, hard work, and passion. It's because of you that our company can achieve great things. Moving on to strategic enabler number three, achieve operational excellence in supply chain. Through this strategic enabler, we're advancing our global supply chain strategy to both drive economic value and support our sustainability agenda. This fiscal year, we strengthened global partnerships with key suppliers, leading to improved efficiencies, supply chain optimization, and tangible cost savings. Based on what we know today, we believe these cost savings will largely offset the financial impact of any potential tariffs for the remainder of this fiscal year. Generally speaking, we expect any potential tariffs from what we know today to have a Operator: Ladies and gentlemen, thank you for standing by. Good day and welcome to the WD-40 Company Second Quarter Fiscal Year 2025 earnings conference call. Today's call is being recorded. At this time, all participants are in a listen