Q3 2021 WD-40 Co Earnings Call
Investors to review our earnings presentation earnings press release and form 10-Q for the period ending May 31.2021.
These documents are available on our Investor Relations website at Investor Day at 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.
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 Companys 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 todays date July 7th 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 Gary.
Thank you Wendy.
Hi, and thanks for joining us for today's conference call.
We hope that you and your families are staying safe and healthy.
Our product continues to work together through the challenges and opportunities associated with the COVID-19 pandemic.
In the third quarter, we experienced unprecedented demand from maintenance products and the value. We reported net sales of 136.4 million from the third quarter of fiscal year 2021.
39% compared to the third quarter of last year, and a new all time record quarter.
Delek has created both headwind tailwind for our business.
In the third quarter of last fiscal year, we experienced a strong headwind in our sales results were negatively impacted by disruptions related to COVID-19 pandemic.
Over the last year, we have experienced the myriad of lockdown measures various disruptions in our U S supply chain and increasingly higher costs. However, these challenges have been more than offset by significant towers do.
Due to the shift in consumer spending and the oscillation renovation trains that we have dedicated with the pandemic.
And users have been introduced to our brands for the very first time.
In addition.
Our robust travel culture and increased focus on our must win battles have enabled us to mitigate many of the adverse impact COVID-19 has had on our business.
The Cogs efforts have enabled us to meet most of the very high demand we experienced per that maintenance products. As a result, we experienced a 45% increase in sales of maintenance products during the third quarter compared to the same period last year.
In addition translation of our foreign subsidiaries results from their functional currencies to the U S. Dollar had a favorable impact on thousands of third quarter.
On a constant currency basis sales would have been $128.7 million up 31 per cent compared to the third quarter of last year.
Steve will talk to you in a few minutes about the sales trends, we experienced in the quarter in each about trading blocks.
But first I'm going to share an update with you on our strategic initiatives.
When the pandemic began.
Like many other companies we are on certain what impacts it would have on our business.
We knew that we were going to price in challenging times. However, we also knew that we had a strong tribe, who is dedicated to our brands and to our users and we had a famous brand that people trust, which could bring certainty to both our customers and our end users in uncertain times.
<unk> had a strategy with supporting tactics also known as a must win battles.
Thats focused on driving long term sustainable growth.
We knew that there would be some choppy waters ahead.
But we were well positioned to navigate them otherwise say has smoothed see never made a skilled silo.
Our progress learned a tremendous amount from operating under this environment, we have been thrust into in the last year and a half.
Note that the consumer spending patterns or what we refer to as isolation, where innovation will not last forever as things get back to normal from the past.
Pandemic consumer spending patterns will change and our sales volumes will most likely return to more normal growth patterns. However, we do believe that the shift in consumer spending patterns associated with the pandemic will benefit us over the long term.
No that new end users have been introduced to our balance for the very first time in history tells us that our brand is a sticky brand. This means a high possibility that the buying behavior as we have been experiencing during the pandemic have created permanent uses of our maintenance products, having said all of that.
We continue to think that at 2025 targets, just that's probably wrong and just is roughly right as.
Before we went into the pandemic.
However, we will be up against sizable comparable periods in the next few quarters. In addition, the currency tailwind. We are currently experiencing will likely turn into headwinds at some point in the future.
Taking those additional factors into consideration we are adjusting our 2025 revenue targets today to a range of between $650 and $700 million. We believe we can successfully bring these targets within the reach by the end of fiscal year 2025, and we will strive to do so while following our 50.
530, 25 business model.
Now I'd like to turn to an update on our strategic initiatives.
Strategic initiative number 1 is to grow WD 40, multi use product.
Our total under this initiative is to make the blue and yellow can with little Red top available to more people in more places who will find more uses more often in.
In the third quarter sales of WD 40, multi use product increased 45% globally to $104.1 million compared to the third quarter of last year.
Strategic initiative number 2 is to grow the WD 40 specialist product line on both.
Under this initiative is to leverage on most of our clinic assets, the blue and yellow can with little Red top and grow the WD 40 specialist product line through continued geographic expansion as well as by developing new products and product categories. In the third quarter sales of WD 40 specialist increased 24% globally to $11.2 million.
Compared to the third quarter of last year.
Strategic initiative number 3 is to broaden product and revenue guidance have borrowed under this initiative is to leverage the recognized strengths of WD 40 company to derive revenue from existing brands as well as from new sources and products.
Strategic initiative number 3 includes well known brands such as 3 in 1 WD 40 bike <unk> 5.1001 spot shot solve a lava and moving in.
The third quarter sales of products included under this initiative increased 32% probably to $18.6 million compared to the third quarter of last year.
Strategic initiative number 4 attract develop and retain outstanding fraud members.
Our goal under this initiative is to attract develop and retain talented tribe members and to grow tribe member engagement to greater than 95% I'm often asked why do we call at company employees tribe members at WD 40 company.
We define price as a community with a shared purpose that help feed and defend each other.
Definition has remained consistently true for us throughout the duration of dependent it is a culture that empowers tried to successfully navigate some extremely challenging times, we cultivate a culture at WD 40 company that has been the cornerstone to our success for decades and <unk>.
Good times that culture, given the subscriber family to celebrate and.
And not so good times that tribal culture gives us a global travel family to fight for and support.
And strategic initiative number 5 is operational excellence.
All under this initiative is to strive for continuous improvement by optimizing resources systems and processes operational excellence also means making sustainable business decisions that create and protect long term stakeholder value. We consider all stakeholders to be any group without who support the business would not exist.
Our commitment to operational excellence continues to be an enormous asset for us as we navigate the challenges associated with depend on it.
Using our 50.530 25 business model as a framework, we measure ourselves against this operational excellence initiative.
I'll now pass the call to Steve who share an overview of our sales and an update on our must win battles.
Thanks, Garry good afternoon.
When we last spoke I share with you that we believed there was a tailwind for us coming in at the COVID-19 pandemic.
Reality, the pandemic has created both headwinds and tailwind for our tribe Jay.
Jay will talk in greater detail in a few moments about the headwinds we are experiencing in the <unk>.
On this decisions, we're making to come back then I.
I will focus on the tailwind today, we're reporting sales that are up 13, 9% compared to the third quarter of last year. We continue to experience very high demand from maintenance products due to the shift in consumer spending patterns associated endemic.
We do not expect to see sales growth of this magnitude over the long term, we do know that due to the shift in consumer spending patterns, we experienced due to the duration of the pandemic. We believe we have acquired millions of new end users around the world. The post pandemic era is coming and we are confident that many of the new end users who have interacted with our products during the.
<unk> will become covenants uses of on maintenance products.
Let's take a closer look at what's happening in on trade block starting with the Americas net sales in the Americas, which includes the United States Latin America, and Canada were up 20% in the third quarter to $60 million, a new record for the trading book.
Rentals of maintenance products increased 28% in the Americas, Jay to increased sales of WD 40, multi use product in the U S Latin America, and Canada, which increased 24%, 138% and 74% respectively.
These strong sales trends are driven by several factors.
In the United States, we experienced strong sales of to be 40, multi use product due to the isolation revenue innovation phenomenon.
In addition sales in the corresponding period of the prior fiscal year, but negatively impacted by disruptions of Lockdowns related to the early stages of the COVID-19 pandemic.
Offsetting these strong sales with lower sales of WD, 40, specialist, which decreased 33% in the U S. During the quarter.
Good news is it consumer demand for WD 40 specialist continues to be strong sales activity for the specialist increased 85% in Canada and 253% in Latin America to be 40 specialty sales in the United States, but negatively impacted by supply chain disruptions and constraints, which we shared with investors last quarter.
In the U S. We continue to experience some issues, making the very high level of demand from maintenance products, particularly for WD 40 specialist, which is sort of on certain third party manufacturers that were heavily impacted by the recent global supply chain constraints.
The availability and cost of raw materials components labor and freight continue to impact our supply chain in North America.
However, the tribe is making good progress towards resolving the issues and I expect we will see resolution of most of the issues impacting to be fluid, especially for the first half of 2022.
I'll drive has gained many learning moments operating on supply chain in the current environment, we will apply those learnings to make future improvements to our supply chain in North America.
In Latin America, we experienced strong sales funnel on maintenance products during the third quarter, which increased 151% in the quarter.
This growth was primarily due to strong sales in non U S direct markets Mexico.
In addition sales in Latin America in the corresponding period of the prior fiscal year, but negatively impacted by disruptions and lockdowns related to the early stages of the COVID-19 pandemic as.
As conditions continue to improve on restrictions in the region decrease we continue to see increased end user demand in Latin America.
In Canada, we experienced strong sales overall on maintenance products during the third quarter, which increased 87% driven by the isolation renovation phenomenon and increased sales to the E. Commerce channel. In addition sales in the corresponding period of the prior fiscal year, but negatively impacted by disruptions and lockdowns related to the early stages of it.
The COVID-19 pandemic.
Sales of our homecare and cleaning products in the Americas decreased 37% in the third quarter compared to the prior year and a co.
Comparable period of the prior year, 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 for such products due to the pandemic.
We have now seen demand for these products returned to more normal levels due to improvements in public health and safety restrictions related to the pandemic and many regions within the Americas.
However, we continue to consider our homecare and cleaning products, except for those listed as strategic brands as harvest brands that continue to generate meaningful contributions and cash flows but are generally expected to become a smaller part of the business overtime.
In total our Americas segment made up 44% of our global business in the third quarter.
Long term, we anticipate sales within this segment will grow between 5% to 8% annually.
This revision from 2 to 5 per cent.
Alex the new growth opportunities, we've identified within the trade block.
Now on 29 net sales in EMEA, which includes Europe, the Middle East Africa, and India were up 80% in the third quarter to $58.6 million and changes in foreign currency exchange rate had a favorable impact of themselves for the EMEA segment from period to period on.
On a constant currency basis sales would have increased by 63 per cent compared to last year.
Sales of maintenance products increased by 82% any man.
Increased sales in both of them on a direct on our EMEA distributor markets, which increased to 88% and 70% respectively.
In our EMEA direct markets, we experienced an 81% increase in sales of WD 40, multi use product on a 95 per cent increase yourselves of WD 40 specialist to today on isolation renovation phenomenon increased sales from E Commerce channel and increased promotional activities.
In addition sales levels are much higher in the third quarter of this year due to severe lockdown measures that occurred during the third quarter of fiscal year 2020, and a third quarter net sales on our EMEA direct markets accounted for 69% of the region South.
In our EMEA distributor markets, we experienced a 68% increase in sales of Adobe 40, multi use product on 151% increase in Derby food, especially sales primarily due to the continued recoveries in EMEA distributor markets, which had previously experienced severe lockdowns due in the second half of fiscal year 2022, just to Covid.
19, pandemic and the third quarter net sales in our EMEA distributor markets accounted for 31 per cent of the region sales.
In total our EMEA segment made up 43% of our global business in the third quarter over the long term, we anticipate sales within this segment will grow between 8% to 11% annually.
They want to Asia Pacific net sales in Asia Pacific, which includes Australia, China and other countries in the Asia region were up 14% in the third quarter to $17.8 million.
Changes in foreign currency exchange rates had a favorable impact on sales for the Asia Pacific segment from period to period.
On a constant currency basis sales would have increased by 5% compared to last year.
In Australia net sales were $6 million on the third quarter up 22% compared to last year changes in foreign currency exchange rates had a favorable impact on sales in Australia from period to period.
On a constant currency basis sales would have remained relatively constant compared to last year.
In local currency sales on maintenance products were up 9% and Australia, driven primarily by strong sales of 3 and 1 on WD 40, specialist, which were up 114% and 24% respectively due to the isolation renovation phenomenon.
Partially offsetting these sales increases were lower sales of our homecare and cleaning products, which were down 9% in the quarter as we've seen demand for these products returned to more levels due to improvements in public health and safety restrictions related to the pandemic.
Asia distributor markets net sales of 7.3 million on the third quarter of <unk> 26 per cent compared to last year, primarily due to a 22% increase in sales of 30.40 multi use product in the region.
Sales increases were primarily driven by the easing of COVID-19, lockdown measures and restrictions on these reduced lockdown measures positively impacted economic conditions during the third quarter and resulted in increased demand and higher sales, particularly in the Philippines, South Korea and Indonesia.
In China net sales were $4.5 million in the third quarter down 9% compared to last year.
As I shared with you last quarter in the third quarter of 2020, we experience a significant increase in sales in China, because COVID-19, lockdown measures will reduce considerably that resulted in very strong sales in the third quarter as we began to resume normal operations and ship. Some sizable low does that had been delayed due to the COVID-19.
Panic.
So there was no comparable event occurring this fiscal year of third quarter sales to China were lower overall, we expect strong sales growth for China for the full fiscal year.
In total our Asia Pacific segment made up 13% of our global business in the third quarter.
Over the long term, we anticipate sales within this segment will grow between 10% to 13% annually.
As we set our sights on emerging from the pandemic.
To execute and deliver against our probably wrong and roughly right 2025 targets to drive consolidated net sales to between 650 and $700 million. We continue to remain focused on on key drivers of revenue growth, which we call on must win battles on.
Our largest growth opportunity in first must win battle is the geographic expansion of the blue and yellow can with little Red top.
Significant growth opportunities exist within this must win battle year to date sales are to be 40, multi use product with $284.7 million of 27 per cent compared to last year.
This impressive growth reflects our increased focus on our top 20 global growth opportunity markets. We've increased our marketing investment in these top priority markets by over $2 million this year with the <unk>.
Cause on winning the Hearts and minds of end users in these markets. For example in China. We have made a significant investment in industrial sampling and that has contributed to an increase of net sales to be 40, multi use product a 48% year to date. In addition, we continue to make A&P investments in India, and Mexico, which are driving very strong.
<unk> sales growth in those regions.
We'll continue to invest in building on our flagship brand with end users around the world.
Secondly must win battle is to grow to be 40, multi use product through premium amortization.
Criminalization creates opportunities for revenue growth as well as gross margin expansion.
To date sounds Adobe 40, smart straw and EZ reach when combined with $135.8 million, representing nearly 48% of total global sales of to be 40 multi use product.
As we continue to roll out next generation Smart straw. Our objective is to grow smart straw global penetration to greater than 60 per cent.
A third must win battle is to grow to be 40 specialist the product line has enabled us to deliver solutions that rich new end user needs and to remove competitors from store shelves around the world to be 40 specialists is driving physical availability through brand stretch, but also enabling us to grow our core productivity 40 multi use product.
As we add distribution for WD 40 specialist to remove competitors from shelves around the world, we often getting shelf space for the blue and yellow can with the little red top as well.
Year to day sales of WD, 40 specialist with $32 million up 21% compared to last year as Gary mentioned earlier, we believe sounds Adobe 40 specialist will reach approximately 100 million in revenue by the end of fiscal year 2025.
Our final must win Battle is focused on driving digital commerce. Our ambition for this battle is to engage with end users at scale and create positive lasting memories on line, making it easy for end users to educate themselves and find and purchase all brands global.
Global ecommerce sales have grown 25% year to date, we believe we are well positioned to benefit from the significant shift to online behaviors in the post pandemic World. We certainly see digital and E. Commerce is a strong accelerator of our future growth.
In closing I won't share a few thoughts with you about the future reflecting on the outstanding results. This quarter demand has been exceptionally strong.
Next quarter, we'll be up against very strong sales comparisons and investors should take that into consideration.
Market conditions suggest it for the full fiscal year net sales are likely to be in a range of between 475 million to $419 million, which reflects year over year growth of between 16 and 20%. This upward revision to net sales is primarily driven by the strong sales results, we experienced in the third quarter.
Over the longer term, we are optimistic that many other new end users who have interacted with our products during the pandemic will become permanent to users of our maintenance solutions in a post pandemic world. We would expect consolidated net sales to grow in the mid to high single digits.
Now I'll turn the call over to Jay who will provide you with a financial update on the business.
Thanks, Steve.
Our record third quarter was driven by robust demand across all maintenance products, coupled with strong operating performance in net.
Third quarter, we grew consolidated net sales by 39%.
$136.4 million.
Net income for the third quarter was $21 million compared to $14.5 billion last year.
Diluted earnings per share for the third quarter was $1.52 per.
<unk> dollars 6 in the same period last year.
Now, let's begin our review of our 50.530 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 or above 55 per cent of net sales.
The 30 represents our cost of doing business, which is our total operating expenses.
Excluding depreciation and amortization on.
Our goal is to drive our cost of doing business over time.
Around 30% of net sales.
Finally, the 25 represents our long term target for EBITDA.
First we will look at the 55 or gross margin in the <unk>.
Third quarter gross margin was 53, 1% compared to 54% last year.
Represents a decline of 90 basis points year over year.
Gross margin was negatively impacted by 180 basis points due to increases in manufacturing costs changes in sales mix and higher miscellaneous costs.
These increased manufacturing costs were primarily driven by higher labor and overhead costs on our third party manufacturers.
Caused by the global supply chain constraints linked to the pandemic.
Also negatively impacting our gross margin.
And in foreign currency exchange rates.
Adversely affected our gross margin by 50 basis points.
This was due to the fluctuation in exchange rates for the Euro and U S dollar against the pound Sterling and are on.
<unk> segment.
Period to period.
This is because in EMEA. The majority of our cost of goods are sourced in pound sterling, while approximately 70% of our revenues are generated in currencies other than the pound sterling.
Finally negatively impacting our gross margin were petroleum based specialty chemical costs.
Which decreased our gross margin by 10 basis points in the third quarter.
Crude oil is 1 of the primary feedstocks of our petroleum based specialty chemicals.
Price of crude oil has risen significantly over the past several months as compared to the prior year per cost.
So now just beginning to see the impact of these increases.
There's often a delay of 1 quarter or more before changes in raw material costs impact our cost of goods sold.
Production and inventory life cycles.
Therefore, the recent increase in these costs are expected to continue to unfavorably impact our cost of goods. So as long as crude oil remains at these higher levels.
These negative impacts to gross margin were partially offset by lower aerosol can costs, which positively impacted our gross margin by 80 basis points.
In the third quarter, we achieved favorability in the cost of aerosol cans and other components.
New higher purchase volume incentives in our EMEA segment.
However, we've recently seen cost per aerosol cans and other components increased.
And our expected more cost pressure in the future.
Warehousing distribution and freight costs positively impacted our gross margin by 30 basis points in the quarter, primarily in our EMEA segment.
Gross margin benefited from fixed warehousing costs as these fixed costs on a smaller impact.
Due to higher sales, we experienced in the quarter.
In addition, the prior year quarter.
Had higher inbound freight costs associated with the movement of raw materials and finished goods in preparation for Brexit.
Finally positively impacting our gross margin were lower discount charges and.
And price increases, which when combined positively impacted gross margin by 40 basis points.
Now talking about our gross margin expectations.
Many other companies we are operating in a challenging supply chain an inflationary environment.
We're experiencing rises in raw material freight and wage costs, which are all driving higher input box.
We continue to adapt to these dynamic times.
Over the short to medium term, we expect to see continued pressure on gross margin.
Despite the inflationary pressures, we're experiencing our gross margin target of 55% remains unchanged.
Order to combat the economic factors, we've been experiencing we have begun implementing price increases in many of our markets.
Continue to be focused and deliberate in managing our business. So that we can maintain gross margin at or above our target.
<unk>, 5% over the long term.
Now I'll address the 30 or our cost of doing business.
In the third quarter, our cost of doing business was approximately 32% of net sales.
Which as a percentage of sales was flat compared to the last year.
As you know majority of our cost of business comes from 3 areas people costs or the investments we make in our tribe.
The investments, we make in marketing advertising and promotion.
As a percentage of sales our A&P investment was 4.9% in the third quarter and finally freight costs the cost to get our products to our customers.
On a dollar basis, our cost of business was up 39% compared to the same period last year increase was driven by both higher SG&A.
A&P investments.
Over a period.
SG&A expense increased by $10.2 million compared to the third quarter of last year.
Merrily due to higher employee related costs associated with incentive compensation accruals due to the stronger financial results.
A&P investment increased by 1.9 million compared to the third quarter of last year, primarily due to a higher level of promotional programs and marketing support in all 3 trading blocks.
This brings us to EBITDA the last of our 50.530 25 measures EBITDA was 21% of net sales for the third quarter on.
Changed from the comparable period last year.
And that will complete our discussion on our business model now lets discuss some of the items that fall below the EBITDA line.
The provision for income taxes was 21, 9% in the third quarter compared to 23, 9% last year.
The decrease in our effective income tax rate was primarily due to tax benefits, resulting from higher earnings from foreign operations, coupled with a 1 time investment tax credit in fiscal 2021.
We expect that our effective tax rate will be approximately 18% to 19% for the full year of 2021 compared to an effective tax rate of 19, 6% in fiscal year 2020.
Now a word about our balance sheet and capital allocation strategy.
The company's financial condition and liquidity remained strong.
The capital strategy includes a comprehensive approach to balance investing in long term growth.
I'll, providing strong returns to our shareholders.
We continue to return capital to our shareholders through regular dividends.
On June 15th our board of Directors approved a quarterly cash dividend of 72 cents per share payable.
Payable July 32021.
Stockholders of record at the close of business on July 16th 2021.
So far in fiscal 2021, we have invested approximately $12 million in capital projects. The majority of which have been used to complete the procurement of our proprietary machinery and equipment.
We're using to manufacture our next generation smart straw delivery system.
We expect by the end of this fiscal year, we will have invested a total of $16 million in capital projects. This is down from our prior expectations.
<unk> due to $3 million of the next generation smart straw equipment investment being delayed until next year.
So with that let's turn to fiscal 2021 guidance due to the uncertainty regarding the pin debit its near term impact on our business, we have not issued comprehensive financial guidance for fiscal year 2021.
We have provided revenue guidance and as Steve mentioned earlier, we are increasing our revenue expectations for the full year due to the strong sales results, we experienced in the third quarter.
Well that completes the financial overview now I'll turn it back to Garry.
Thanks Jay.
In summary, what did you hear from us on this call.
You heard that consolidated net sales were up 39% in the third quarter to $136.4 million, a new quarterly record for the company.
Net sales of WD 40, multi use product were up 45% in the third quarter.
You heard that sales of WD 40 specialist were up 24% in the third quarter.
You heard that year to date Global E. Commerce sales grew by about 25 per cent.
You heard.
But we have increased our marketing investment by over $2 million. This year with a focus on winning the hearts and minds of end uses in some of our top priority markets.
You heard the way are being impacted by inflationary pressure and that in the order to combat things rising costs. We've recently begun to implement price increases in many of our markets. Because we are committed to our 50.530 25 business model.
You heard that we have increased our revenue expectations for the full fiscal year and believe that net sales will be between 475 and $419 million and that upward revision is driven by strong sales we experienced in the third quarter.
You heard that we are adjusting our 2025 net revenue targets day to a range of between $650 and 700 million, which reflects a compounded annual growth rate in the mid to high single digits that we believe we can successfully bring these projects within reach by the end of fiscal year 2025.
Yeah.
In closing today I'd like to share with you a quote from Albert Einstein.
In the middle of every difficulty line opportunity.
Thank you for joining us today would now be pleased to take your questions.
At this time, if you'd like to ask a question. Please press Star then the number 1 on your telephone keypad again Star then the number 1 to ask a question.
Your first question is from the line of Linda Bolton Weiser with D. A Davidson.
Yes, hi, congratulations on a strong quarter really impressive top line growth there.
So if we look at your revised revenue guidance for the year. It does sort of imply a day.
Deceleration of growth in the fiscal fourth quarter, which I, you know I guess I would've expected.
I'm just kind of wondering.
And the Americas in particular have really hard comparisons I mean do you think like what are you seeing in June so far and do you think you can actually grow those regions a little bit even though the comparisons are hard and then secondly can you remind us why Asia was down so much in the prior year was that something COVID-19 related.
Yes, Thanks, Linda Garry.
Yeah, you know the.
The sales revenue guidance that we've given shows Q4 somewhere between approximately 105 and $120 million.
The top end of that would be growth year over year.
That's why we give a range.
So.
We increase the year end target because of the strong results in.
In the third quarter, and we feel fairly comfortable with the range that we've given COVID-19.
Full year, which will probably show a modest growth quarter over quarter.
Versus last year.
As far as wages concerned Steve do you want to comment on.
The ship there.
Thanks, Gary and Hey, Linda.
Yeah really it's just a comparable versus prior year. So if you look at China in particular, we had a very strong Q3 and prior year.
And the Q on Q2 to shift the mix between Q2 and Q3.
Overall for China, we're tracking very well year to date and for the year and we expect very strong growth and that's true for the whole of Asia as well. So it's just quarterly phasing.
Yeah.
Okay, and I mean can you give us any color about what you're seeing in June I mean is that a month, where you're facing the hard comparisons and so you see a little bit slower growth already in jail.
Again Linda on.
Just refer back to our full year guidance and we've given that out there on that.
Our guidance will show some growth in the quarter year over year.
If we took the medium of that so it's a hard comparison, but we don't we don't see that.
The fourth quarter is going to be.
Necessarily anything different than what we've now share it in the full year number which would be.
Revenue somewhere between 100 and something on $120 million for the quarter.
Okay and then.
Just on you mentioned, you're already starting to take some price increases in your various regions is that kind of across the board or are there any emphasis on any particular product lines and can you give us some idea of the person.
<unk> of magnitude of price increases being taken.
Yeah, it's across our major.
Our major product lines in varying price.
Most major countries around the world.
On the.
Okay.
Mid to high single digits, depending on on what country and what impact we've had on.
On a cost per boots.
WD 40, multi use product WD 40 specialist.
This is really passing on the real price increases, we're seeing due to increased manufacturing costs and increased raw material costs, some of which are coming from oil, but most of them component trees across the world, We're seeing inflationary pressure, so cross ballpark and needs.
To high single digits, depending on.
Which country and what impact does cost a habit.
Okay.
And then I'm on.
The last call.
I believe Jay had said like a little bit of a quantification would be gross margin in second half would be down 200 to 300 basis points versus the second quarter and.
Frankly in the third quarter it came in pretty pretty close to my estimates. So I'm just wondering with now the price increases and maybe materials costs going up even more I mean is that still an accurate statement or a day.
Do you want to modify the magnitude of what you were saying previously about the gross margin.
I'll punch that all the day he was the gross margin met.
Yeah, Thanks, Garry and Linda. Thank you I think what we did not see the kind of the.
The full brunt of some of the costs, we were expecting in the third quarter.
Even though our margin was down.
We still see unexpected from continued margin.
Margin pressure on the short term the 1 thank you.
Note is that many of the price increases that we were talking about will not make their way into the market by the time we.
Go through the fourth quarter. So they are primarily slated for earlier in the <unk>.
After the end of the year.
Hum.
So that'll that'll kind of mitigate some of that.
Or it'll it'll delay the benefit from price increases.
Yep.
Okay. Thank you that's helpful and then.
Then.
Can you talk about I think you had talked about launching this.
The new next Gen smart straw in the U S. In this quarter in the fourth quarter.
But then you said.
You had some push out of the Capex. So are there delays or anything that's changing that time line or are you still expecting to launch that in the U S. Here in this quarter.
Thanks, Brent I know you will see the appearance from smart straw next generation 1.5 on the shelves in the United States as we can start to move through the fourth quarter.
Okay.
Great.
And then.
I guess just a question on your I mean, clearly you're here.
Cash flows are very strong what with your strong earnings.
But you didn't you have not resumed share repurchase are you like kind of what are your plans and what are you thinking in terms of timing for maybe resuming some share repurchase.
Jay do you want them interest.
On that.
Yeah, Yeah, Yeah, we haven't we don't have an authorization, although we would expect to.
Looking for an authorization as we move into the new year.
Okay.
Well I guess I'll leave it at that and pass it onto the next person. Thank you.
Thank you very much Linda.
Your next question is from the line of Daniel Rizzo from Jefferies.
Hi, guys. Thank you for taking my question.
I was just wondering if you would increase the.
The outlook from the Americans I think the 5 to 8 per cent from 2 to 5 I mean, the long term sales growth I was just looking for more color on on where exactly you expect that to come from.
It will be elevated increase on the faster growth.
So Steve would you want to cover that please.
Sure, Thanks, Garry Hey, Danielle.
So it's really do.
We see them.
You say you've heard about the fantastic growth. We've had is we've taken the market Mexico direct that's driven significantly faster growth and that's really helped the overall Americas growth quicker. So.
Mexico is a part of it in Latin America, we see strong growth geographic growth opportunities for the whole of Latin America are higher than we saw before.
And also now it's smart straw next generation Canadian growth.
Prospects are transformed so we see strong growth out of Canada.
Premium amortization e-commerce on acceleration of growth across the whole of the Americas. So.
This growing channel, we were doing very well there broadly.
And then also 1 since the relaunch of the refreshed 40 specialist packaging distorted just thought on short term issues in the United States, we see that as being a stronger driver of growth going forward. So that would be the main.
Okay.
And behind the increase in our confidence in the future of the Americas region.
Okay.
Then.
Given what you saw in the in the third quarter and sales on the defense, sometimes order timing has played kind of move things around specifically last year I think in Asia. There was a delay which caused the decline I was wondering if there was any evidence in the fourth quarter.
That we would be.
During the battle will be happy with that I think yes.
From.
This is the line that we sold last year were really due to shutdowns of Covid and the major ones are in the beginning of the year.
Basically when China.
Around Chinese new year of 2020 shut down completely.
Yes.
It's how normalized things because.
Although we're seeing things improving in the U S, Australia and locked down again now we'd see.
Concrete dropping in and out depending on the rate of vaccinations et cetera, but it seems the waters seem somewhat calm obviously.
Certainly.
Yeah, a lot of hope on the horizon, given the way that the vaccines.
Helping too.
Controllable spread of Covid.
Okay.
Okay, and then final question. So the third party issues that you kind of highlighted last quarter and then we kind of co related I think they still exist, but it seems like you can just completely offset them or mess them. I was wondering why it's different cause it was such a strong quarter. This time and why it's I don't know I.
It was unclear on.
Because of the actions we took.
We were able to redirect some of our manufacturing across different areas.
There was.
So we didn't have the impact of the big freeze in Texas, which certainly impacted supply chain, particularly around aerosol cans. You know some of our major suppliers that can was shutdown for weeks. So a few things that happened on the <unk>.
On the flow of goods has freed up a little and we we've been working to redirect and.
And place a matter.
Manufacturing in different areas, where we had some about packages that have to bring on second shifts labor is now becoming available although it's still tight so there's a number of them.
Number.
Steps that would tighten the powerhouse that we were going to get through this but we were in a pretty critical time at that time and hats off to our tribe and hats off to our supply chain leaders. They have just done an amazing job and it just shows the resilience of our culture and we're so fortunate.
Grateful for it.
On the hard work on the sweating too as they have done to really hold up our supply chain. During this period of time.
Hey, guys. Thanks, Thanks for the color.
Youre welcome.
And that does conclude today's conference. Thank you for participating you may now disconnect have a great day.
Yeah.
Okay.