Q1 2021 WD-40 Co Earnings Call
Ladies and gentlemen, thank you for standing by good day and welcome to the WD 40 company first quarter fiscal years 2021 earnings conference call on it.
Todays call is being recorded at this time, all participants are in English and the only mode and.
And of the prepared remarks, we will conduct a question and answer session.
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I would now like to turn the presentation over to the host for todays call Mitchell Wendy Kelley director of Investor Relations and corporate Communications. Please proceed.
[music]. 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 Frank.
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 November Thirtyth 2028.
These documents are available on our Investor Relations website at Investor Day on WD 40 company Dot 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 the will discuss certain non-GAAP measures the descriptions and reconciliations of these non-GAAP measures are available in the FCC filings as well as our earnings presentation.
As a reminder, todays call includes forward looking statements about our expectations for the Companys future performance.
Of course actual results could differ materially the companys 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 and FCC filings for for the discussion I.
Finally for anyone listening to a webcast replay of reviewing of written transcript of this call. Please note that all information presented is current only as of today's date January seven 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 the Garry.
Thank you Wendy good day, and thanks for joining us for today's conference call Jay.
Hi, Steve where do you know why the once again, the calling in from our respect the patterns.
It has truly been a challenging year for the world and we hope that you and your families and staying safe and healthy.
Outright continues to work through the many challenges associated with the ongoing kind of the 19 pandemic Howard.
Of it today I'm happy to share some much needed good news with you.
The market of variety of maintenance and cleaning products that have been in high demand. During these extremely unusual times.
This increased the mom, primarily came from and maintenance products and was linked to renovation trends and associated with the pandemic or what we call isolation renovation.
As the result of the trend.
Today, we reported net sales of 124.6 million for the first quarter fiscal year 2021 up 26, the same compared to the first quarter of last year.
This tremendous result is due to wear tribes hard work and dedication to delivering products to meet the increased consumer demand.
He tried nights for working hard to ensure the customer orders can be fulfilled production line had out the potty manufacturers', how function and customers and end users can get the products. They need I know would have been easy fire and grateful for each one of you.
And so I'm happy to share this much needed good news.
I do want to caution investors the due to the uncertainties that the pandemic continues to present its very difficult for us. The it's the might have the pandemic might continue to impact of business over the short to mid term.
Steve will share some of the additional thoughts on the future, we view and a few months.
Today, I'm going to share a quick update on the our strategic initiatives and then I'm going to turn the call David and Steve to walk you through that sells the results and provide you with an eye of the view, what we cool how must win battles we.
We've always had a very clear strategy with very clear growth aspirations of growth aspirations and to drive consolidated net sales to approximately 700 million and.
And to do so well following L 50, 530 25 business model.
The pandemic has not altered and strategy or EPS growth aspirations.
The pandemic has required us to do is the become more laser focused on how well the which we will achieve that goal.
Because of the uncertain global economic conditions ahead the.
The talking about gross aspirations and he's still unclear. What is clear is out of confidence you know try and the must win battle instead of going to get us there.
The strategic initiative number one is to grow WD 40, multi use product.
Our goal under this initiative is to make the blue and yellow can with of the grid tall available.
The available to more people in more places the will find more uses more often.
We aspire to grow WD 40, multi use product to approximately 500 and city me.
In the first quarter South of the WD 40, multi use product wouldn't 94.2 million of 24% compared to last year. This.
This growth was primarily driven by increased demand linked to isolate the renovation I referred to earlier.
The more time people spend isolated in the homes, the more time and money they spend and making had the improvements research suggests that day out by making these improvements themselves and Bihar and trades from him.
The strategic initiative number the two weeks to grow the WD 40 specialist product line.
Due to the brain on picture project, we completed the in fiscal year 2020 for the first time ever WD 40 specialist is fully leveraging on most iconic asset the blue and yellow can with the little Red total.
We are optimistic about the low to them opportunities for WD 40 specialist and believe we can grow the product line to approximately 100 million in revenue.
And the first quarter of cells of WD 40 specialist were 11.5 million up 37 per cent compared to the first quarter of last year the.
This growth was driven by strong E commerce styles, as well and strong styles and all three trading blocks driven by increased the man linked to renovation trends associated with the paying debt.
Strategic initiative number three broaden product and revenue base.
Strategic addition of number three includes three and one WD 40 bike GT 85, 1001 spot shot so volume LABA and of the deck.
We believe we are on track to reach a combined revenue for these products of approximately 17 million global.
Global sales of the products included in this initiative will get the 15.7 million in the first quarter of 33% compared to last year.
Homecare and cleaning products continue to benefit from increased demand as a result of the pandemic.
Michael South and about homecare and cleaning products with 10.2 million in the first quarter of.
The percentage compared to last year Michael.
Michael South of the WD 40 bike well also particularly strong in the first quarter of nearly 260% compared to last year as people are buying fixing riding bicycles more off and as a result of the pandemic.
Yeah.
Strategic could each day of number four attract develop and retain outstanding tribe members and the.
All of the this initiative is to attract develop and retain 10 of the tribe members and to grow tried member engagement to greater than 95% I have never been so proud of that trial one world. One company. One try this long the the mantra for WD 40 company, but never hasn't been true up and it has the during this time.
And then Nick you on preceded the global crisis has brought us many unexpected challenges, but we of whether the current together we've lived and together we have collaborated the new ways and perhaps even thrived in some unexpected was true.
The strategic initiative number five operation excellence and.
The goal under this initiative is the best summarized by one of the core values here of WD 40 company make it better than it is today and I believe our commitment to operational excellence has been an enormous asset for us as we navigated the challenges associated with the pandemic.
From a financial perspective, we've always been good stewards of our shareholders' capital resources and conservative enough financial commitments and that serves us well in times like the.
From an operational perspective of truck has never been more focused on better equipped to execute and deliver despite the considerable hurdles they must overcome the due to the impacts of the parent debt Nick.
I will now pass the call to Steve the will share an overview of the ourselves results with you and discuss and must win battles.
Thanks, Gary and good afternoon.
The impact of the pandemic on our operations over the last 10, and it's created an unprecedented amount of uncertainty around on business. When we last spoke I share with you that despite the many disruptions caused to our business by the pandemic. We were encouraged by what we're seeing in September in early October and direct markets and we will be getting to see some.
Recovery and on distributor markets.
Today, and I'm happy to share with you. The those trends continued throughout the duration of the first quarter and today, we're reporting total global sounds quite a bit of over 26% for the quarter.
It has been said the look is what happens when preparation meets opportunity.
Well remains side and that depend on any continues to impact. So many lives around the globe were pleased that all products of creating more positive lasting memories and at the deferral.
The first quarter results, reflecting increased demand for our products due to a change in end user behavior caused by the isolation renovation and phenomenon and.
Whether they also reflect the tribes the ability to pivot quickly and write the changing waves, particularly as it relates to the E. Commerce channel. So we experienced global sales growth of over 90% and the first quarter.
Now, let's take a closer look of what's happening in on trade block starting with the Americas.
Net sales and the Americas, which includes the United States, Latin America, and Canada were up 16% and the first quoted the 54.2 million.
Sales of maintenance products increased 16% and the Americas true to increase sales and the U.S., Latin America, and Canada, which all experienced double digit sales gross.
And the Americas, we experienced a 14% increase and sales of WD 40, multi use product and a 20% increase and WD 40 specialist sales due to the isolation and renovation phenomenon and increase sales through the E Commerce channel during the pandemic.
Like the states and Latin America also saw triple digit growth of ought to be 40 bike product line.
The thing has experienced the boom and it depends on it with increased ridership and the associated maintenance of bicycles throughout the region.
In addition, we saw increased sales and Latin America during the first quarter due to strong sales and on newest direct market Mexico.
This contributed to a 42% increasing the maintenance products sales in Latin America, and the first quarter of this year compared to last year.
While we anticipate the continued successful build of our direct customer base in Mexico, We expect and maybe a bit of volatility along the way as we continue to develop the this exciting new direct market.
As a reminder, on maintenance products sales and exclude on homecare and cleaning products sales of on homecare and cleaning products and the Americas increased 13% and the first quarter compared to the prior year largely due to higher sales of 2000 flow, she's which increased 42%.
We experienced a significant increase in sales of many of our homecare and cleaning products in the United States and Canada due to increased demand as a result of the pandemic.
However, we continue to consider all emcare and cleaning products, except for those lists the strategic friends as harvest friends and continue to generate meaningful contributions and cash flows but are generally expected to become a smaller part of the business over time.
In total our Americas segment net of 44% of of global business and the first quarter.
The long term, we anticipate sales within this segment will grow between 2% to 5% annually.
Now on to the man.
Net sales and the mayor, which includes Europe, the Middle East Africa, and India were up 40% and the first quarter to 54.7 million share.
Changes in foreign currency exchange rates had a favorable impact on sales for the mass segment from period to period.
On a constant currency basis sales would have increased by 33% compared to last year.
Sales of maintenance products increased by 42% in the man due to increased sales in both on and they had direct and already may a distributor markets, which increased 47% and 34% respectively.
And they have direct markets be experienced the 42% in Greece and sales of do the 14 multi use product and the 61% increase in sales activity 40 specialist due to the isolation and renovation phenomenon and increased cell C. D E Commerce channel two independent and I remain a direct markets also saw the 260 fight the.
And to increase and on WD 40 bike product line and.
On the first quarter net sales and already med direct markets accounted for 65% of the reach and sales.
Ill remain a distributor markets, we experience of 34% increase and sellers of did the 40 multi use product and of 42% increase and duty 40 specially sales primarily due to improved economic conditions as the result of reductions and COVID-19 related movement restrictions.
So, particularly strong sales of to be 40, multi use product and northern and eastern Europe, and India, which were up 62%, 24% and 120% respectively areas.
Areas, where we are experiencing strong recoveries. In addition, the isolation renovation phenomenon led to increased demand and consumption of of products and some of already may and distributor markets and the first quarter net sales and our and their distributor markets accounted for 35% of the reach and sounds.
And total RMS segment of made up 44% of all global business and the first quarter.
It's interesting to note that sales and the mayor and the Americas, both represented about 44% of our total global business this quarter the.
This demonstrates the significant future growth opportunity available to us and the man.
Over the long term, we anticipate sales and in this segment will grow between 8% to 11% annually.
Now on to Asia Pacific.
Net sales and Asia Pacific, which includes Australia, China and other countries and the Asia region were up 24% in first quarter to 15.6 million.
Changes in foreign currency exchange rates had a favorable impact on the sales of the Asia Pacific segment from period to period.
On a constant currency basis sales would have increased by 21 per cent compared to last year.
That was the maintenance products increased by 22% in Asia Pacific due to increased sales in China, Australia, and Asia distributor markets, which all experienced double digit sales growth.
Australia, and net sales of 5.2 million and the first quarter of 28% compared to last year, driven by increased demand for both the homecare and cleaning and maintenance products.
Sales of our homecare and cleaning products from 44%. The result, as the result of the cause of 19 pandemic.
So the more sales of the before the multi use product tend to be 40 specialist were also of 20% and 25% respectively due to the isolation renovation phenomenon.
China and net sales were $3.6 million and the first quarter of 53% compared to last year, driven primarily by the timing of customer orders and increased sales through the E Commerce channel and.
In addition sales in China during the first quarter of fiscal year Twentytwenty were negatively impacted by the 70th anniversary and National day in China, which resulted in slower market conditions and lower sales with no comparable event occurring this year.
We remain optimistic about the long term opportunities in China, how does the we expect volatility along the way to the economic and health related impacts of COVID-19, the timing of promotional programs the building of distribution and shifting economic buttons and varying industrial activities.
And your distributor markets net sales of 6.9 million in the first quarter hope, 11% compared to last year, primarily attributable to the timing of customer orders in the region.
EBIT 19 locked down and measures were reduced considerably and many of the Asian markets. During the first quarter of fiscal year Twentytwenty one.
These reduce looked and measures of positively impacted the economic conditions and the region, which resulted in a marketing distributors normalizing their inventory levels.
Although the health concerns associated with the pandemic less and and the resulting movement restrictions were lifted and many Asian countries. Some larger countries and the region continue to observe the movement restrictions.
In total our Asia Pacific segment made of 12% of on global business and the first quarter.
The long term, we anticipate sales within this segment will grow between 10% to 13% annually.
Now, let's dig into and must win battles.
As Gary mentioned earlier, a must win battles are the tactics of specific steps, we are undertaking to deliver against our anticipated revenue targets, we have full global must win battles.
Lets went bad on the number one is geographic expansion, our largest growth opportunity and first must win by the lives of geographic expansion of the blue and yellow care and with the little Red top.
We estimate the potential global growth opportunity for WD 40, multi use product to be approximately 1 billion.
We are laser focused on delivering long term gross and on top 20 gross markets around the world.
China remains our largest growth opportunity, which is why we elected to open the direct operation there in 2006.
In addition, the China is the world's largest E commerce market and our digital strategy and the countries of significant area of opportunity and.
India also represents a substantial long term growth opportunity for us.
Three years ago, we initiated I'll step of program in partnership with on India and D. And this has already delivered impressive results.
In Latin America, we transition Mexico from the distributor market to a direct operation and May of Twentytwenty on me sets of very strong growth in Mexico over the coming years.
The second must win by the least Premiumization of WD 40, multi use product of small store delivery system has been on most successful innovation and of loved by end users across the world.
Pretty much the nation and creates opportunities for revenue growth as well as the gross margin expansion and.
As we continue to rollout small store next generation, which will increase capacity and reduce costs. Our objective is to gross small through penetration to greater than 60%.
Oh goodness and battle is to grow to the 40 specialist Garry mentioned earlier, we deputy the refresh brand architecture. The WD 40 specialist in fiscal year Twentytwenty now.
Now for the first one of the before the specialist is fully leveraging on most iconic asset the blue and yellow can with the little Red total.
The V. 40 specially its range of products aims to provide and maintenance professional and the i. wise the like over 20 unique formulas to complement our iconic multi use product. This.
This makes the WD 40 brand, even more relevant to more people in more places to use more of it.
We believe this refreshed packaging would accelerate awareness and improve find the ability in store and on line.
A final must win by the list digital Commerce, we set out the local digital ambition, two and a half years ago ambition is to engage with end users at scale and become the global category leader and I'll category within the digital Commerce platform.
Since Twentytwenty was the year that the global health crisis would transform the way people shop, a heightened focus on digital and E. Commerce has never been so important with E commerce set to deliver on behalf of global retail growth by 2025, and digital interactions playing an increasingly important role and purchase journeys. We believe we are well positioned to.
Benefit from the significant shift to online behaviors in the years ahead, we certainly see digital and E. Commerce is a strong accelerator of of future growth.
In closing I want to share a few thoughts with you about the future.
It was the long term, we are optimistic that many of the new and users who of interactive without products. During the pending will become permanent uses of on maintenance and home care solutions and over the short term to mid term is much more difficult to see clearly.
Due to the on certain to the the pandemic continues to present its very difficult for us to estimate how the pandemic my continued to impact of business. Many regions continue to experience increased coke and 19 case counts, resulting in temporary closures and look downs, which could negatively impact on sales and the short term.
In addition, if there was a shift in spending patents or a global economic downturn in the wake of the pandemic it could adversely impact of financial results.
Finally, keeping up the demand and the cobot environment. He the challenge, we're actively monitoring supply chain and transportation capacity constraints, which have arisen as the result of dependent and we.
We are managing through these issues, but there oh, mark and constraints impacting full consumer packaged goods companies, the not allowing us to meet some of on normal levels of service with our customers.
Despite these uncertainties and risks we remain cautiously optimistic about fiscal year Twentytwenty, one and believe current market conditions suggest that for the full fiscal year total net sales are likely to be in a range of between 435 to 400 and the 70 million.
Now I'll turn the call out of it to Jay who will provide you a financial update on the business.
Thanks, Steve let's start with the discussion about our 50 from I've 30, 25 business model.
The long term targets, we used the guide our business as.
As you May recall, the 55 represents gross margin, which.
And we target to be at 55% of net sales in the.
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 overtime toward 30% of.
Net sales.
And finally, the 25 represents our long term targets for EBITDA.
First we'll look at the 55 per our gross margin.
And the first quarter, our gross margin was 56.4 per cent compared to 54.3% last year.
This represents an improvement of 210 basis points year over year.
Changes and major input costs, which include petroleum based specialty chemicals, and aerosol cans positively impacted our gross margin by 340 basis points.
Petroleum based specialty chemicals that of positive impact on gross margin of 260 basis points and the remaining 80 basis points came from lower cost associated with the aerosol cans.
Beginning in late February 2020, crude oil reached multiyear lows and is consistently remain lower year over year since that time.
Therefore, the average cost of crude oil, which flow through our cost of goods sold and the first quarter.
Just given the lower than in the prior year benefiting our gross margin and.
In addition, we achieved favorability and cost of aerosol cans due to higher than anticipated purchase volumes, especially in our EMEA segment.
Also impacting on the positive way, our gross margin or sales price increases, primarily and EMEA and Asia Pacific.
Which impacted gross margin by 40 basis points in the first quarter.
The positively impacts to gross margin were partially offset by the negative impacts of higher warehousing and inbound freight costs and both the Americas and EMEA.
Which negative.
The impact of gross margin by 120 basis points.
The favorable impacts were primarily due to increased freight and warehousing and expense due to the high demand labor shortages and distribution networks related to the pandemic.
Finally, miscellaneous costs and favorable sales mix changes and the other Jay.
Changes in foreign currency exchange rates, when combined negatively impacted our gross margin by 50 basis points.
Well, we cannot control market dynamics like foreign currency exchange rates or commodity based input costs, we continue to be focused and deliberate and managing the rest of our business. So the we can maintain gross margin at or above our target of 55% over the long term.
Now I'll address the 30 or our cost of doing business.
And the first quarter, our cost of doing business was approximately 32% of net sales compared to 38% last year.
Although SGN expense increased by 3.4 billion compared to the first quarter last year, our cost of doing business as a percentage of sales decreased year over year. Due is a significant increase in revenue and the first quarter the increase and SGN ex that's in the first quarter was primarily due.
The the higher employee related costs.
And the first quarter 80 per cent of our cost of doing business came from three areas people costs investments, we make and our tribe.
The investments, we make and marketing advertising and promotion.
As a percentage of sales are a and p. investment was 4.4% in the first quarter as the percentage of sales a and P. investment declined in the first quarter due to the significant increase in revenue. However, our a and P. investment was were relatively flat in dollars compared to the prior year.
And finally, the freight costs to get our products to our customers.
And this leads us to EBITDA the last of our 50 530 25 measures.
EBITDA was 24% of net sales for the first quarter up from the 17% last year.
I've shared with you many times the revenue growth the the most important factor and achieving our goal of the 50 530 25 measures that being EBITDA of 25% and this quarter clearly demonstrates just how impactful.
Revenue is within our business model.
That will complete the discussion of the business model and and now we'll turn to the other items the fall below the EBITDA line.
The provision for income taxes was 15.7% and the first quarter compared to 14.7 per cent last year.
We expect that our effective tax rate will be approximately 20% to 21% for the full fiscal year 2021, which compares to an effective tax rate of 19.6%.
In fiscal year 2020.
Due to the strong revenue growth and improved gross margin. We reported net income for the first quarter was $23.6 million compared to the $12.2 million last year.
Diluted earnings per common share for the first quarter were dollar 72 cents compared to the in the eight cents for the same period last year.
No word about our balance sheet and our capital allocation strategy.
The company's financial condition and liquidity remains strong.
And the pandemic began we took numerous steps to further strengthen our balance sheet.
In order to preserve cash while we monitored the impacts of the pandemic, we elected the suspend the stock repurchases, we were making under our previously approved stock buyback plan, which expired at the end of August 2020.
We do not expect to seek board approval for a new share buyback plan until we start to see a reduced level of uncertainty regarding the pandemic.
As a result, no repurchases were made during the first quarter of the fiscal year 2021.
We will continue to remain vigilant and managing our cash and liquidity during the is unprecedented times.
However, we continue to return capital to the shareholders through regular dividends.
On December 7th our board of directors approved on a regular quarterly cash dividend of 67 cents per share payable January 29, two share holders of record on the close of business on January 15th.
Our capital allocation strategy includes the comprehensive approach to balance investing and long term growth.
While providing strong returns to our shareholders.
In fiscal year, 2021, we will invest approximately $20 million and capital projects.
Majority of which will be used to complete the procurement of the proprietary machinery and equipment and.
We're using to manufacturer our next generation smart straw delivery system.
We have historically had and asset light business model, which is required very low levels of capital investment roughly between one and two per cent of sales. We believe the beginning in fiscal 2022, well begin to see Capex return to these levels.
The pandemic continues to inject a measure of the uncertainty into our business, which makes it very difficult for us to accurately forecast short term and the answer results for the company as a result, we will not be issuing comprehensive financial guidance for fiscal year 2021.
At this time.
Well that well complete our discussion.
Of the financial overview.
Now I'll turn it back to Garry.
Thank you Jay.
In summary of what did you hear from us on this call.
You heard that sales of WD 40, multi use product were up 24% in the first quarter.
You heard that styles of WD 40 specialist were 37th and sent in the first quarter.
You heard the sales of WD 40 bike were up nearly 260% and the first quarter due to strong demand around the world.
You heard the styles of homecare and cleaning products were up 15% and the first quarter driven by strong demand for cleaning products due to the pandemic.
You heard that global E. Commerce sales grew by over 90 per se in the first quarter with strong sales growth across all three tried and blocks.
You heard that we continue to return capital to invest and through regular dividends.
You heard the juice to the uncertainties and risks the pandemic continues to present it is very difficult for us to estimate how the pandemic might continue to impact our business and the short to mid term.
You heard that despite these uncertainties.
We remain cautiously optimistic about fiscal year 2021, and believe that current market conditions suggest that for the full fiscal year total net styles and likely to be in a range of 435 to 470 million.
And you heard that while we are not issuing comprehensive guidance, we remain confident that our revenue growth aspirations remain a released the future opportunity.
In closing today I'd like to share with you a quote from my friend Simon said.
It is important to celebrate of victories, but.
But we cannot link the on debt for the infinite Guy and is still going and there is still much work to be done.
Thank you for joining us today, we would be pleased to take your questions.
Ladies and gentlemen, if you would like to register and question. Please press star one on your telephone keypad.
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And your first question comes from the line and often wiser from D.A. Davidson.
[noise], Hello, happy new year, and congratulations on the great quarter.
Thank you Linda.
So I guess first of all and thank you for giving the guidance for revenue for the fiscal year and I'm. Just curious what holds you back from giving earnings guidance is that the movements in your petroleum based input costs, because there has been a recent rise and oil.
The or is it more of the supply chain constraints on what what elements of the earnings profile is it that you're a little on certain about.
And that's really most of it is aligned with the with the revenue.
We don't we believe our gross margin will be and the now range and the.
The historic range for the year, but also.
Oh, the uncertainty around the extra or the implied cost that might come in and because of.
Certain changes and distribution.
Due to the pandemic.
The things that we can rely on so we think we've got a good idea of the revenue, but we are not comfortable issuing you know a comprehensive.
The P.S. the onto the yes.
Our guidance at this time and I'm sure you understand that and went out on the around here.
Okay. Also can you talk about how your a and P. spending I mean, you know you noted that the high revenue growth kind of made the ratio lower but I'm also wondering how much you're spending behind your brands given that maybe and.
And cases, you're you're chasing demand a little bit is that and and <unk> and environment, where you would actually want to pull back a little bit on brand spending because you're kind of chasing demand and don't need to spend as much could you comment on that.
Oh no not at all you know we've continued to invest and now marketing activities. The one area that weve been not pulled back on the have been force to reduces or areas that the of our marketing a toolbox that require of physical impact for example.
Oh, the sampling now sampling programs, which are hardly a people intensive but you know we're continuing to use this opportunity.
To further strengthen our brands and as you know in some markets. We've got a lot of aware and this opportunity. So no we won't be and we have no intention of of pulling back on our fundamental brand building marketing activities.
And.
Also can you.
Give us some some of your thoughts on I know this is a long time from now but a year from now when you're facing the strong comparisons due to the pandemic.
What are your thoughts on being able to grow your revenue against such strong comparisons a year from now.
Well, how long to aspiration hasn't changed and you know, we and as Steve and shared and I've shared the many years, we believe that there's still a long growth per.
GAAP for us and many countries around the world as Steve mentioned in his comments, we'll see how many of the new uses that of come into our brand that we've identified a ex we stick and historically, we would believe that will be a very very high number so.
No I I wish I could give you I wish I had a crystal ball to give you that answer but the.
Got it was and I thought what play immune from the game and we you know and other areas to leave the like specialist and business and specialists, particularly in E. Commerce is very very exciting. So these are all new uses were bringing in a with new products and specialist new delivery system. So.
Yeah, we hope we're hopeful that that will that will help us can you sort of momentum, but we'll see a lot depends on how soon we were set free is the human rights again.
But we believe that day.
During the pandemic, we've actually strengthened our position without and user base and we'd strength and lpas at brand position globally.
Okay. Thank you that's it from me.
Thanks, Linda well, the best stay safe and well thank you.
And your next question comes from the line and younger and so from Jefferies.
Good afternoon, everyone Hauser on doing.
And Daniel the your good the to the talk on so just looking at and Europe was was much much stronger than than I think anybody anticipated and while I realize a lot of that was from the remodeling trends. You mentioned I was just wondering if it was there something particular on that particular region. The.
Let's let's from gross and also the margin seemed much better than I think the for sports talk the band and I was wondering what's driving that as well.
I I'll ask Steve to comment on the on the revenue so and he's very close to the European business.
Thank you, Kevin Hi, Hi debt.
And the rates really for Europe, and the well some rebound in terms of the marketing distributors of and these are really kind of global trends that we've seen and get on marketing distributors are rebounding strongly from kind of look downs and [noise].
Limited activity during the the Pandemics, that's the first thing and and the rest of its really its the same drivers on must win vitals. The just been translated to a two to Europe and yeah, great growth on on on small stroke premiumization strategy across Europe and doing.
The before the specialist growing very very nicely and.
Yes, some of the markets rebounding strongly India, Russia, and some of the challenge markets, we had in and in 2020 of rebounded very very strongly and.
And to be 40 bike has done very very well across one across the world, but again, a very strong growth across Europe as well. So it really of the same kind of drivers that have driven the all global results in terms of those those must be and vitals and great execution and from all the mayor team.
And and the margin.
Are you calling on gross margin Oh, there's always the especially on all of that the.
I was looking at the of the EBIT margins actually the which were I think of upwards of 32%.
It's really dropped to revenue I'm you know, we've often said that as Jay mentioned that you know we've got a business model that we built for the future and as we start to build revenue or we get the benefit all the use of the leverage of of the revenues. So your view if you.
And can bet out of future goal of 50 530 25, we were actually you know and 50 632, 24, which does prove that you of the model that we built for the future is the model. It's realistic and that was something that was the very you know something that where we are.
And experiencing that in the quarter was something that we were very pleased to see.
Okay, and then I know that there was some some tailwind from from from lower oil prices are low controlling costs that kind of flow through well the quote the cost of lower well the pricing was lower left in the earlier in the year now you're kind of feeling and I was wondering if that's kind of peaked and should probably ease over the next two to three quarters.
Hi, Jay can speak to that.
Yeah, we've seen as the oil has crept up recently, we've seen or we will see.
You know you know 90 to 120 days and you know beyond the little bit.
Hi, I'm, a little bit higher or a little more headwind to margin from where it is today.
Okay.
That's helpful. And then I guess finally, just in terms of timing I mean I have in the past. The certainly have has the Chinese new year ever had an effect on sales or does it sort of we have an effect on should we expect the seasonal slowdown here on the first quarter and at least in Asia.
Well it depends when it falls last year, obviously, it fell right in the beginning of the code and time. So when we see that thing we always get an upswing off the Chinese new year, but the you know we we would we believe that you.
It would be no different the previous years and as you know of Chinese new year does fall at different times during the day I during the first part of the year. Okay. And then finally I think I just want to in the deck and you mentioned that the the cost of doing business went down of pre previously and in the quarter. I was wondering if if that's again, that's just executing better of the something that you're doing differently to to reduce the.
Of course.
The revenue.
So the revenue as a percentage cost of business as a percentage went down in real dollars that across the business went up.
As a percentage of revenue went down on was because of the higher revenue.
Well, thank you very much.
Okay. Thanks Daniel.
Ladies and gentlemen, and that does conclude our a lot of time for questions. We thank you for your participation on today's conference call and that's that you. Please disconnect your line.
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