Q4 2021 WD-40 Co Earnings Call

Ladies and gentlemen, thank you for standing by.

Good day and welcome to the WD 40 company fourth quarter fiscal year 2021 earnings Conference call.

This 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.

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Is turned off to allow your signal to reach our equipment.

If at any time during the conference you need to reach an operator, Please press star zero on your telephone keypad.

I would now like to turn the presentation over to your host for today's call Ms. Wendy Kelley Vice President stakeholder.

And Investor engagement. Please proceed.

Thank you good afternoon, and thanks to everyone for joining us today.

On our call today are WD, 40, company's chairman and Chief Executive Officer Garry Ridge.

Vice President and Chief Financial Officer, Jay Remo and putting.

<unk> operating officer, Steve brass in.

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-K for the period ending August 31 2021.

Documents are or will be available on our investor relations.

Web site at Investor Dot 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, 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.

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 company's expectations beliefs and projections are expressed in good faith, but there can be no assurance that they will be achieved or accomplished.

Presenters please refer to the risk factors detailed in our SEC filings for further discussion.

Finally for anyone listening to a webcast replay or reviewing a written transcript of this call. Please note that all information presented is current only as of today's date October 19th 2021.

The company disclaims any.

Propagation to update any forward looking information, whether as a result of new information future events or otherwise, but that I would now like to turn the call over to Gary.

Thank you Wendy.

Thank you for everyone joining us on today's call today, I am happy to share with you that we reported.

Record net sales.

Judy or $188 1 million for the full fiscal year 2021 up 19% over last fiscal year.

Changes in foreign currency exchange rates had a favorable impact of $19 7 million on net sales for the fiscal year 2021.

On a constant.

Currency basis, net sales would have been up 15% net.

Net income was 17 point.

Fiscal year 2021.

Reflecting an increase of 16%.

Diluted earnings per share in 2021 were $5 nine compared to $4.

Since last year.

For the fourth quarter, we reported net sales of $115 2 million, which reflects an increase of 3% from the fourth quarter of last year changes in foreign currency exchange rates had a favorable impact of $6 5 million on net sales for the fourth.

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On a constant currency basis, net sales would have decreased 3% compared to last year.

Net income was $8 4 million compared to $19 7 million in the fourth quarter of last fiscal year, reflecting a decrease of 57%.

Earnings per share in the.

Quarter to quarter was <unk> 61, compared to $1 42 in the fourth quarter of last year.

If you followed our business closely you'll know where fluctuations in performance quarter to quarter are not unusual.

This has been especially true since COVID-19 pandemic began.

Fourth quarter 2021 was a lumpy year with abnormal swings in net sales from period to period.

We've seen more variability between quarters than we experienced before the pandemic.

We know this quarter looks different however, we're going to share with you today why our results are actually an exciting step forward.

Fiscal <unk> in the fourth quarter, we made a thoughtful and deliberate decision to invest significantly in sales momentum, we have been experiencing and increase our investments in brand awareness and market penetration.

These decisions negatively impacted our net income in the fourth quarter, we believe the investments in these key.

Thank you Jack areas will drive strong topline growth in the future.

If you follow us with an incident mindset youll be pleased with our results this year.

Incidents minded decisions have delivered a compounded annual growth rate of total shareholder return of 14th since 1998.

This.

He stood unprecedented year brought many unexpected opportunities and challenges I am so proud of that tribe and what they have been able to accomplish during these extraordinary times.

In many ways. The challenges we have experienced since the pandemic began has brought out the best in our tribe and has enabled us to learn together.

This pivot through some very challenging times.

Steve will talk with you in a few minutes about the specific sales trends, we experienced in the fourth quarter in each of that trading blocks, but first I'm going to share an update with you on our strategic initiatives, our strategic initiatives by the continuing plan we have in.

And to achieve the company's long term aspirations as most of you will recall, we recently adjusted our long term revenue aspirations to drive net sales to a range of between $650 and $700 million by the end of fiscal year 2025.

We start to do this while following 50 530 25 business model.

Place well these financial objectives remain we recently decided to refresh our strategic initiatives said, they more accurately and holistically reflect the top priorities of our organization.

Before I share with you our refreshed strategic.

<unk> shared with you the progress we've made against that.

Model for its strategic initiatives during fiscal year 2021.

Strategic initiative number one is to grow WD 40, multi use product in fiscal year 2021 sales of WD 40, multi use product increased 22% globally to $371 million.

Strategic.

Initiative number two is to grow the WD 40 specialist product line in fiscal year 2021 sales of WD 40 specialist increased 16% globally to $42 5 million.

Strategic initiative number three is to broaden product and revenue base in fiscal year 2020 on sales of products included under this initiative.

<unk> increased 13% globally to $63 2 million.

Strategic initiative number four attract develop and retain outstanding tribe members. When we lost <unk> in January 2022, overall global employee engagement score was 93%.

Tribe has continued to.

To adapt during the pandemic and we have made every effort to make our tribe members will being a top priority in.

In January 2021, we get a chicken survey with the tribe, which reconfirmed engagement continues to be at this level.

98% of our tribe shared they were excited about.

Initiative in the future.

Strategic initiative number five operational excellence.

Our goal under this initiative is to drive for continuous improvement and we measure ourselves against this initiative. Following the $55 30 25 business model in fiscal year 2021, we reported gross margin of 54% cost.

The accompanying business of 35% and EBITDA of 20%.

Now our strategic refresh we decided to refresh our strategic initiatives said, they more accurately and holistically reflect the top priorities of our organization moving forward. We believe our long term financial objectives can only be achieved if we make infinite.

Cost of guided decisions that create and protect long term shareholder value. We have always considered ourselves a purpose driven organization, which puts people first.

Our philosophy has always been if we take care of our employees our employees will take care of our customers have philosophy has not changed however, we wanted a strategic.

To better reflect this audiology.

With that I'm pleased to share with you our refreshed strategic drivers, which can also be found within our quarterly earnings presentation.

Strategic initiative number one build a business for the future our goal under this initiative to build an enduring business.

Driving will be proud to pass onto the next generation by using our purpose and values as the decision, making filter we will make infinite minded decisions that create and protect long term stakeholder value as mentioned in our fourth quarter, we significantly increased investment in that brand building to support our must win battles because we are playing.

This that we're going to guide.

The desired outcome for this strategic initiative is to further embed infinite minded decisions into our business and to fully integrate our ESG initiatives into the heart of our strategic planning process.

Strategic initiative number two attract develop and engage outstanding tribe members.

We know our people make us great by building and nurturing and inclusive diverse purpose driven learning and teaching organization.

Tribe members will succeed together, while acts selling as individuals.

This.

<unk> has always been important to our organization to long term success, we believe in.

The people well does not tangible you won't find it on that balance sheet. It encompasses morale motivation collaboration inspiration commitment and the desire to offer discretionary effort.

Some see human capital is expense, we see our people at tribe.

And valuable asset.

Well, because we know that our success is the result of the engagement and the commitment of our people the desired outcome of this strategic initiatives is to grow employee engagement to greater than 95%.

Ticket issued number three is to strive for operational excellence our goal under this initiative is to foster a culture of continuously.

The improvement in which operational excellence operational excellence means optimizing collaboration resources systems and processes as well as prioritizing.

The use of that time talent treasure and technology using a 50 530 25 business model.

<unk> framework, we measure ourselves against this operational excellence initiative.

Our <unk> initiative number four is to grow WD 40, multi use product.

Our goal under this initiative is to make the blue and yellow can with the little Red top available in more places to more people, who will find more uses more often we will grow the WD 40.

As if he use product lines through continued geographic and digital expansion increased market penetration educating end users about new uses and through the development of new and unique delivery systems that make the product easier to use.

The desired outcome for this strategic initiative is to grow sales of WD 40, multi use product.

Product to approximately $525 million by 2025.

Strategic initiative number five is to grow the WD 40 specialist product line.

Goal under this initiative is to leverage the WD 40 brand by developing new products and categories, which build and reinforce the cole brand positioning and create.

<unk> through continued geographic and digital expansion is part of the brand architecture project. We completed in fiscal year 2020, WD 40 bike was absorbed into the WD 40 specialist line of products. Accordingly, we will begin to report WD 40 bike as part of our specialist results beginning the first quarter.

Growth in fiscal year 2022.

The desired outcome for this strategic initiative is to grow sales of WD 40 specialist to approximately $125 million by 2025.

Strategic initiative number six as it expand and support portfolio opportunities that help us grow our goal under this initiative is it.

And then support brands that.

Our focus will be to expand three in London, <unk> or future maintenance brands, including well known brands such as 1000.

On the one spot shot salvo 2000, flushes carpet fresh.

14 lava in the deck the desired outcome for this strategy.

Expansion initiatives is to grow sales in this category to approximately $50 million by 2025, and our decision to report WD 40 bike.

As part of the WD 40 specialist results going forward has lowered the desired outcome for this initiative as compared to the prior corresponding initiative.

Supporting our strategic.

Strategically our must win battles. These are focused action plans that support our strategic themes I will now pass the call to Steve who will share an overview of our sales results and update you on our must win battles.

Thanks, Gary and good afternoon today, we closed.

And this spectacular year of incredible growth for our company globally sales of <unk> branded products grew 22% in fiscal year 2021, compared to last year, we experienced very high end user demand for our maintenance products due to the higher level of renovation and maintenance activities driven by the pandemic.

In addition, we continue to see recovery in many markets due to improvements in public health and safety standards.

As well as an expanded brick and mortar distribution and continued success within the E Commerce channel.

But as Gary mentioned earlier the pandemic continues.

To create abnormal swings in our net sales results from theory to theory, which is evidenced in our fourth quarter net sales results.

Let's take a closer look at what happened in entre folks in the fourth quarter, starting with the Americas.

Net sales in the Americas, which includes the United States, Latin America, and Canada, but down five.

<unk> in the fourth quarter to $54 2 million.

Sales of maintenance products decreased 5% in the Americas decreased sales of <unk> product in the U S and Canada, which declined 5% and 17% respectively.

Declines are driven by several factors in the United States, we were up against.

Percent very strong comparable period, while we continue to experience very strong end user demand for our maintenance protocols. We were unable to fully meet those demands due to the current state of the global supply chain team to cases of which were felt most significantly in the United States.

The biggest challenge facing many consumer product companies.

<unk> is a continued as the global supply chain is experiencing the supply chain issues are contributing to rising input costs.

Factoring fees and higher warehousing and distribution expenses, which Jay will discuss in greater detail shortly.

In Canada net sales of maintenance products declined because of the timing.

In addition, we were up against a very strong year over year comparable period in Canada.

Latin America, we experienced strong sales of all our maintenance products during the fourth quarter, which increased 24% compared to the prior year.

This growth was primarily due to strong sales in our newest market Mexico.

In addition sales in Latin America in the corresponding period of the prior fiscal year were negatively impacted by disruptions and lockdowns related to the early stages of the COVID-19 pandemic.

As conditions continue to improve and restrictions in the region decrease we continue to see increased end user demand in Latin America.

Sounds about homecare and cleaning products in the Americas decreased 2% in the fourth quarter compared to the prior year, we continue to consider our homecare and cleaning products as harvest brands that continue to generate meaningful contributions and cash flows but are generally expected to become a smaller part of the business over time.

For the full.

Fiscal year net sales in the Americas were up 7% to $214 6 million in total our Americas.

And then I had a 47% above global business in the fourth quarter.

Over the long term, we anticipate sales within this segment will grow between 5% to 8% annually.

Now onto EMEA.

<unk>.

Net sales in EMEA, which includes Europe, the Middle East Africa, and India were up 6% in the fourth quarter to $45 1 million changes in foreign currency exchange rates had a favorable impact on sales with Eni segment from period to period.

On a constant currency basis.

Would have decreased by 6%.

Compared to last year, primarily due to translation and banks caused by unfavorable changes between the pound Sterling and the U S dollar.

However, when also considering transactional impacts caused by changes between the euro and pound Sterling sales were relatively constant only down 1% compared to the prior year period.

<unk> percent decrease in demand sales after all currency impacts will remove with pilot caused by decreased sales in EMEA direct markets, which were mostly offset by increased sales of maintenance products in the EMEA distributor markets.

Sales levels were higher in the fourth quarter of this year in the United distributed market due to the severe lockdown.

<unk>.

This compared to a relatively open conditions in the fourth quarter of this year.

Fourth quarter net sales in our EMEA distributor markets accounted for 26% of the region's sales it sounds decline from period to period because sales levels are much higher in the fourth quarter of last year due to the lifting of severe lockdown measures.

The region.

In the fourth quarter net sales in our remaining direct markets accounted for 74% of the region.

For the full fiscal year net sales in EMEA.

We're up 33% to $208 3 million, resulting in another successful year in the history of the trade law.

In total our remaining segments.

And the rooms in the fourth quarter.

The long term, we anticipate sales within this segment will grow between eight.

Now on to Asia Pacific.

In Asia Pacific, which includes Australia, China and other countries in the region were up 32% in the fourth quarter to $15 9 million.

Changes in foreign currency exchange rates had a favorable.

The Asia Pacific segment from period to period on.

On a constant currency basis sales would have increased by 24% compared to last year.

In Australia net sales of $5 3 million in the fourth quarter of 2% compared to last year changes.

Foreign currency exchange rates had a favorable impact on sales in Australia from period to period.

In local currency net sales in Australia declined 7% compared to last year.

Australia was up against a very strong year over year comparable to sales in.

In addition, some regions in Australia were under severe locked.

Changes introduced during the fourth quarter of 2021.

These had been much more severe than what the country has experienced in the past and has contributed to the decline in sales.

In our Asia distributor markets net sales of $5 8 million in the fourth quarter, but 172% compared to last year, primarily due to a nearly.

<unk>, 200% increase in sales of WD 40, multi use product in the region.

These sales increases were primarily driven by the easing of COVID-19, lockdown measures and restrictions.

These reduced lockdown measures positively impacted economic conditions during the fourth quarter of this year and resulted in increased demand and higher sales.

Nearly three in South Korea and Indonesia.

In China net sales of $4 8 million in the fourth quarter of 2% compared to last year.

Changes in foreign currency exchange rates had a favorable impact on sales in China from period to period.

In local currency net sales in China declined 7% compared to last year.

Overall, China is currently doing well and experiencing no major impacts from the pandemic the decline in sales in the fourth quarter was primarily driven by the timing of customer orders and promotional activities.

For the full fiscal year net sales in Asia Pacific were up.

Typically 6% to $65 3 million in total our Asia Pacific segment made up 14% of our global business in the fourth quarter.

Long term, we anticipate sales within this segment will grow between 10% to 13% annually.

As we begin our journey into fiscal year, 2022 and seek to execute.

20 deliver against our 2025 revenue growth aspiration to drive net sales to between 650 and $700 million.

We are more focused than ever before on our must win battles.

These hyper focused actions support our overall strategy and other key drivers of revenue growth.

Ah.

Our largest growth opportunity in first must win battle is the geographic expansion of the blue and yellow can with the little Red top and Gary shared with you earlier it sounds like <unk> 40, multi use product for the full fiscal year with $371 million of 22% compared to last year.

Focus like never before in our top 20 global growth markets.

We never stopped investing during the pandemic, we increased our marketing investments by over $6 million this year, including nearly $4 million in the fourth quarter alone. These investments will focus on building brand awareness and market penetration and identified markets, we're doubling down on the future because of the tremendous growth we've seen in markets like.

<unk> friends, United Kingdom in Russia during fiscal year 2021, we saw growth of 36%, 28% from 43%.

In addition, we've seen tremendous growth in Mexico, which has been the fastest growing dynamic market. We have a launch in the history of the company in fiscal year 2022.

Continue to invest in building our flagship brand with end users around the world.

Our second must win battle is to grow to be 40, multi use product through premium amortization premium amortization creates opportunities for revenue growth gross margin expansion and most importantly, it delights our end users for the full fiscal year.

We will go before the smart straw and EZ reach when combined with $187 million up nearly 19% compared to last year and representing nearly 49%.

Global sales of WD.

<unk> multi use product.

Our smart straw next generation delivery system is currently available.

And its been rolled out in the United States.

But it will be available later in fiscal year, 2022, and Europe Smart straw next generation supports our objective to grow premium delivery system penetration to greater than 60% of our WD 40, multi use product sales by 2025.

A third must win battle is to drive Adobe 40 specialist product line for the full fiscal year 2340 specialist were up 16% compared to last year and up 21%. If you include sales of WD 40 bike as we will be doing going forward.

Absent the supply chain disruptions and constraints, we experienced in the United States to be 40 specialist.

Candidate have grown even more.

We recently completed some very interesting research, which suggests the end uses of WD 40 specialist as some of our most loyal to be 40, multi use product plans as you might recall in early fiscal year 2020, we debuted new packaging could it be 40 specialist, which gave us a stronger brand presence.

For both to be fully multi use product Adobe 40 specialist aligning and fluent.

Blue and yellow brand with a little Red top.

Believe we get to see the full benefit of this brand architecture project because of the pandemic and associated supply chain issues.

Our final must win Battle is focused on driving digital commerce for the.

This fiscal year Global E Commerce sales were up 25% compared to last year and we believe we are well positioned to benefit from the significant shift to online behaviors in the post pandemic world.

We're focused on developing a data driven marketing strategy that empowers us to engage directly with end users in meaningful ways online that.

<unk> has already delivered a year over year increase of nearly 80% in website visits doubled the views of our digital content globally and has accelerated and deepened our engagement with end users on many digital platforms around the world.

In closing I want to share a few thoughts with you about the future fiscal year 2000.

That stress one was an exceptional year for the blue and yellow brand with a little red top with increased end user demand across all of our trade blocks, we remain optimistic that many of the new end users.

<unk> with our brands during the pandemic will become permanent uses of our maintenance solutions. However.

However, it's also important to note we haven't spend a lot.

2018 months Twiddling, our thumbs and nine if you're thinking of pandemic related windfalls will last forever.

Rather we spend the time, becoming laser focused on the areas, where we believe future revenue growth will come from we are investing our time talent treasure and technology to support specific growth objectives, because we believe.

Statements in these areas will drive our growth in the future.

So how do you talk to your best year ever with a great start to the new year I am pleased to report the demand continues to be exceptionally strong and September was the second largest sales month in the company's history.

Now I will turn the call over to Jay.

Even provide you with a financial update on the business.

Thanks, Steve we're pleased that in fiscal 2021, we saw robust demand across our maintenance products.

With strong comparisons as well as some gross margin headwinds, which I'll speak about in a minute.

It will prevent it.

But first let's start with a discussion about how we performed.

Again Q last quarter.

Due to the uncertainty regarding the pandemic near term impact.

So on our business did not issue a comprehensive financial guidance for fiscal 2021.

However, we did share that we thought.

Market condition suggested that for the full fiscal year net sales would fall in the range of between 475 million to $490 million.

Today, we reported fiscal.

Revenue of $488 $1 million up 19% compared with fiscal 2020.

And coming in at the top end of our projected range.

Now, let's review 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 55% of net sales.

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.

That business over time towards 30% of net sales and finally, the 25 represents our target for EBITDA.

In the fourth quarter, our gross margin was 51, 2% compared to 56, 3% last year.

This represents a decline of 500.

Doing basis points year over year. This large decrease in gross margin was primarily due to the inflationary headwinds and the current state of the global supply chain.

Like others, we are experiencing significant increases in input and transportation costs as well as increased fees from.

10 party manufacturers.

In order to combat these backrow economic factors, we began implementing price increases, but they'll take time to implement.

And to make their way into our reported results.

Changes in major input.

<unk> costs, which include specialty chemicals, and aerosol cans were the primary driver of this decline and negatively impacted our margin by 300 basis points.

Specialty chemical costs negatively impacted our margin by 240 basis points period over period with the remaining 60 basis.

<unk> points, driven by the increased cost of aerosol cans.

Also impacting gross margin were higher warehousing and inbound freight along with higher discount charges, primarily in the Americas, which negatively impacted our gross margin by 180 basis points when combined.

Increased costs reflect the current state of the supply chain environment had been further complicated by labor and truck driver shortages.

Primarily in the U S.

We've seen it elsewhere.

Changes in foreign currency exchange rates.

Primarily in EMEA.

Also negatively impacts margin by 70 basis points due to the fluctuations in exchange rates.

For the year.

This is because in EMEA, our most of our cost of goods sold are sourced in pound sterling, while approximately 65% of our revenues are generated.

Currencies other than the pounds.

Sterling.

These negative impacts to gross margin were partially offset by miscellaneous impacts and price increases, which combined positively impacted gross margin by 40 basis.

Basis points.

Now, let's talk about gross margin expectations.

The environment remains dynamic with significant inflationary pressures increased cost of goods and continued uncertainty around logistics, we expect to begin to recover gross.

And with tactical moves over the short term with price increases.

It may take a few quarters, our intention is to build gross margin back to our guided range.

End of the fiscal year.

I have every confidence that over the long term.

We will be able to strategically expand.

Margins margin above our target of 55% through premium amortization product mix and continued geographic expansion.

Now I'll address the 30 or our cost of doing business in the fourth quarter, our cost of doing business increased to 39.

<unk> growth at our sales increased by 3%, while our operating expenses increased by 22%, causing an increase in our cost of doing business percentage.

Our long term goal is to have is to drive our cost of doing business percentage.

But 30% of net sales.

Yeah.

For the fourth quarter, 79% of our cost of doing business came from three areas.

People costs or the investments we make in our tribe. This includes the impact of paying higher earned incentive compensation. Our incentive plan applies to every member of our tribe at every level of the organization.

And we couldnt be more pleased to reward their outstanding individual and collective efforts.

The investments, we make in marketing advertising and promotion as a percentage of sales our A&P investment.

This quarter, we made the deliberate decision to significantly in.

Okay.

He's our A&P investment, which increased by 61% compared to the fourth quarter of last year as we chose to accelerate our efforts and build.

Building long term brand awareness.

Ernest and market penetration.

This investment represents over half of the increase.

And the cost of doing business in the fourth quarter.

And finally.

The freight costs to get our products to our customers.

Higher freight costs continue to impact our cost of doing business.

<unk> due to constraints and limited capacity and global distribution markets.

This brings us to EBITDA the loss.

<unk> of our 50 530 25 measures EBITDA was 12% of net sales for the fourth quarter, which is down significantly compared to the fourth quarter of last fiscal year.

<unk>, primarily due to our increased A&P investments and the lower gross margin we reported in the fourth quarter.

Always been good stewards of our resources frugal in our spending and conservative on our financial commitments, we expect to move closer to our historic EBIT levels in the future.

Is that complete discussion of our business model.

Now, let's discuss some items that fall below the EBITDA line.

The provision for income taxes was 25, 9% in the fourth quarter compared to 25% last year.

The increase in our effective tax rate was prime.

Italy due to fluctuations in book income from quarter to quarter and the effect of a corporate tax rate change in the UK.

We expect that our effective tax rate will be approximately 21% to 22% for the full fiscal 2020 to compare.

Compared to.

Primarily a higher rate for fiscal 'twenty, two is mostly related to non repeatable and expiring tax benefits realized in fiscal 2021 that are not expected to reoccur in 2022.

Net income for the fourth quarter was $8.

<unk> million dollars compared to $19 $7 million last year.

Diluted earnings per common share for the fourth quarter.

61, compared to $1 42 for the same period last year.

Our net income and diluted earnings.

Foreign share were unfavorably impacted in the fourth quarter compared to last year due to all the reasons outlined above.

However, net income and do with earnings per share were very strong for the full fiscal year.

<unk> had a great year with earnings growth of 16%.

And now a word.

<unk>.

Company's financial condition and liquidity remained strong.

Capital allocation strategy includes a comprehensive approach to balance investing in long term growth.

While providing strong returns to our shareholders.

We continue to return capital to our shareholders through regular dividends.

EBITDA on October four our board of directors declared a quarterly cash dividend of <unk> 72 per share.

Payable October 29 to stockholders of record at the close of business on October 15th 2021.

In addition, I'm happy to share with you that our board of directors recently approved a new.

Worried about purchase to suspend stock repurchases under our previous.

Purchase plans of the pandemic.

Okay.

Newly authorized share repurchase.

And our long term growth outlook, our commitment to our capital allocation strategy and our capacity.

Sure returned capital to our stockholders under the new plan, which will be effective November one the company is authorized to acquire up to $75 million.

Ending shares through August 31, 2023.

In fiscal year 2022.

We expect to invest approximately $14 million in capital projects.

The majority of which will be used to complete the procurement of the proprietary machinery and equipment.

We are using to manufacture our index generation smart straw delivery systems.

We essentially expected this project would be completed by fiscal 2021, however, due to the impacts of the pandemic. This investment will continue into FY 'twenty two.

We have historically had a very asset light business model.

Which is typically required very low levels.

We had a real capital investment roughly between one and 2% in sales.

And we believe beginning in fiscal 2023, we will see Capex return to these levels.

Now, let's turn to fiscal 2022 guidance, we want to remind everyone that there are.

Level amex outside of our control that may impact, our fiscal 2022 results, including the impact of fluctuating foreign currency exchange rates continued inflationary headwinds and other unforeseen events.

Guidance does not include any future that we expect.

Net sales growth projected to.

Be between seven and 11% with net sales.

Between $522 million and $542 million.

<unk> gross margin for the full fiscal year is expected to be between 53% 54%.

Advertising and promotion investment is projected to be between five five and 6% of net sales.

The provision for income tax.

<unk> expected to be between 21 and 22% net.

Net income.

This projected to be between $71 $7 million and $73 6 million.

And diluted earnings per share is expected to between <unk>.

$5 24.

Five.

38.

Based on an estimated $13 7 million now back to Garry.

Thanks, Jay in summary, what did you hear from us on this call.

You heard that we have delivered a compound annual growth rate of total shareholder return of 14% since 19.

$5 eight.

You heard that net sales were $498 1 million up 19% compared to last fiscal year and a new record for the company.

You heard that global sales of WD 40 brand products were up 22%.

Ed to last fiscal year.

You heard.

Not yet refreshed our strategic initiatives to more accurately and holistically reflect the top priorities.

Although our organization.

You heard that for the full year Global E Commerce sales grew by 25%.

You heard that we increased our A&P investment.

Ed that we in the fourth quarter.

To support specific growth objectives, because we believe these investments will drive our future growth.

You heard that we expect we will continue to see pressure on gross margin Q2, inflationary headwinds and a challenging supply chain environment.

You heard that we have issued.

<unk> guidance for fiscal year, 2022, and believe that nets out.

Sales will grow between seven and 11% and then we're off to a very strong start in the new fiscal year.

Finally, I'd like to share with you the biggest learning I have taken.

Taken away from this fiscal year.

One thing the pandemic has proven to me is that the diversification across geographies and trade channels, which we built into our business creates a protective moat, which allows us to succeed even in the most abnormal times.

In closing I'd like to share.

<unk> got a quote from my friend Simon Cynic.

Courage as it relates to leading with the incident mindset is the willingness to completely chip.

Section of how the World works. It has the courage to reject Milton Friedman stated purpose of business and embrace and alternative definition.

We do thank you for joining us today, and we will now be pleased to take your questions.

My two questions.

Please press star one.

Yes.

Please make sure you hear me.

Sure.

How long are sent out to meet our commitment.

Thanks for your question.

And answered and you would like to reach all your registration. Please press the pound key.

One moment please for the first question.

Our first question comes from the line of Linda Bolton Weiser with D. A Davidson. Please proceed with your question.

Okay.

That's great. Thank you hi, how are you doing.

Hi, Linda.

I guess I'll just start with.

Your update of the long term strategy and some of the targets.

It does seem like.

Growing the WD 40 core the goal for 2025 it does.

Strike me that that's lower than it was.

But can you just remind us what it was previously relative to the new role of $525 million and then talk about what has made that.

Change because even though you had some disruption during the pandemic you also had isolation renovation benefits. So what is the change in thinking that is changing some of these long term targets.

Thanks Linda.

They are substantially the same to be honest the $530 million.

Is substantially the.

And the figure that we had when we had a $700 million goal.

Did put that range in a $6 50 to 700, but the.

The only real change to the long term goal was moving WD 40 bike out of.

Say strategic dropped, but it was in and including it with specialist and in fact a specialist.

Our aspirational goal went up by $25 million from $100 million $125 million. So the bottom line is things have remained in our expirations are pretty much in line with what they were before.

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

Basically what we did is we wanted to kind of force rank them a little bit so as you can see our attention.

Two ESG and collaboration.

<unk> has moved to the top because it's become a big part of our strategic planning process.

But as far as the the aspirations for revenue growth are concerned they basically stayed the same we've added in.

<unk> focus that we've now brought on digital and E. Commerce as you know that's been a big push for us and it's been very successful.

In most cases, they were really putting things that have come into our business and into our thinking that we wanted to make sure were headlines not only to the outside world that headlines.

<unk> to the leadership team internally as well.

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

And some some words that now bring out and put into play.

Our intention around things.

Like the future of the company in relation to ESG DNI, all those things that have become.

Importantly, and rightly so.

Lines for most companies and to be honest with you the things that have been present in our company for a long long time, yet we haven't really put them in print.

Great. Thank you.

So tonight.

Let me ask you about.

In the quarter.

You alluded to some conscious investment to support the business and the brand.

And the A&P ratio, indeed with was quite quite high.

Hi, I mean, there was a lot of spending can you talk about what you spent on term brand building.

When will we see what we see in EMEA.

Like in the next couple of quarters.

Or is it more a longer term.

Thank you, but thanks Lynn.

And then I'm going to answer the back end of that question and I'm going to punt over to Steven.

He's going to tell talk what we specifically invested in but as you can see.

We see next year, our revenue growth of between seven and 11%.

Obviously some of what we're doing we're expecting to have some short term impact as we enter the new fiscal year and as Steve Shane.

To talk about.

The.

Substantial as the investments we make.

Night, which was pretty out of character.

For us, but we wanted to be deliberate, but we said now is the time, we're not afraid to invest when we see the opportunities are there.

<unk>.

Some of the work we did during the year really highlighted areas, where we felt.

We could really strengthen.

Outgrowth going forward by bringing forward.

And investing in some new areas.

Steve to talk about that.

Thank you, Gary Hi, Linda and three real areas of focus.

We will kind of.

With the investment so the first one was in sampling.

With professional end users around the world.

Which drives.

Faster end user penetration, especially with professional uses so that has a double whammy effect of driving both short term long term because once we win.

Users, we tend to keep them.

Yes.

We've expanded out.

Our digital asset base globally.

I think a lot of video will account and also the global picture.

Still tracking system.

Track the in real time to track the effectiveness of our digital marketing.

Assets around the World and then finally investing in our top 20 markets.

And.

In terms of.

Major research projects in places, such as China, and Brazil, and they will help us.

Our long term future strategy for those.

Those key markets, but also just investments in places like India, and Russia also where we believe we have strong fell short.

<unk> long term growth opportunity, so really investing in line with those top 20 opportunities around the world.

Okay.

Okay.

Sure.

Yeah.

Yeah.

Uranium.

No.

Longer term.

6% of revenue.

Small with smart.

Your level.

The average.

No Linda is in our current guidance that we just issued we shared that we feeling that totally A&P investment this fiscal year will be between $5 and 6%.

Which is in the range normally it's been about five six to five 7%.

Okay.

And then.

And the gross margin can you just repeat what you said did you say that you hope that by the fourth quarter of fiscal fourth quarter, you can get to the long term.

Term goal, which is the 55% in my understanding that correctly.

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

Yes, Thank you Gary.

R R.

It's going to take a few quarters to build our gross.

Margin back to kind of the guided range between 53 and 54 for the year.

We do expect over time.

Build to the greater than 55%.

Margin over the long term so.

That is that that still remains.

Our target and our intention.

We're just.

In a period.

Where we are.

Really having a number of unknowns.

And at the moment, it's impossible to really be exact how too.

How at what point, we get there.

But.

We feel that we.

We will recover a portion a significant portion of the lost margin.

<unk> will be set to recover and drive north of that.

55%.

Beyond the year.

Okay. Thank you I'll pass it on thank you very much.

Thank you Linda.

Yes.

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

Please proceed with your question.

Good afternoon, everyone. Thanks for taking my question.

Just to get back where we were just talking about with the A&P costs. So they were up a bit in the fourth quarter, but the guidance and what's your outlook as of what you want to achieve over the next five years why it wouldn't be possibly a little bit higher for a longer period of time.

As opposed to the five 5%, 6% that you usually guide to.

Okay.

Large losses.

I agree of video assets.

And a normal A&P investment also.

A lot of.

Of sampling embedded in it anyhow so.

Well range going forward.

Thank you and then you mentioned ESG is a key part of the strategy going forward.

I was just wondering what specifically you're doing or how specifically ESG fits.

Fits into.

What we should expect I mean is there some sort of steps UK or just any color would be great.

But as you know Daniel we.

Released and published our first ESG report last year. We're currently have a large working group working on a lifecycle analysis.

So a number of different areas.

So that we can really.

Level set where we are which will allow us in our next to ESG report, which will be published next October to set out targets around particularly the E D.

<unk> as you know we've got.

Measurable targets and have had really great results around those over the years.

Yeah, we will be.

Kelly is heading up that that program with them.

Okay.

And then and then one final question is just with the strategic initiatives. It's a.

A little different now and then number six in particular, you mentioned expanding in supporting portfolio opportunities.

I think I know what the answers here, but would that mean that youre looking at I guess more inorganic opportunities where you might be.

<unk> focus, we're divesting something or possibly see.

Something out there that is actually possible to fit into the.

The portfolio that wasn't there before.

I'll give you an example of that internally.

Last year or over the last year and a bit we've taken.

And the three in one brand and extended the portfolio of the three in one brand to include a impressive range of recreational vehicles.

April maintenance products that now where the three in one brand and are in wide distribution. So.

With the GTA five brand in the UK, we've done the same thing.

Expanding that in some areas that we see opportunities in there's not a lot of other activity in the other brands.

With the exception I guess.

Carpet fresh or no back in Australia, which is a very strong brand and we continue to those areas, but there's nothing really magical or a mistake in that.

In that area.

Alright, alright, thank you very much.

We have a follow up question coming from Linda Bolton Weiser. Please proceed with your question.

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

We have a range J do you have a range that we've disclosed.

Oh, sorry.

Yes, we are.

At the moment, we're in the high end of the range, we usually plan with a about a $10 range.

So yes, we are.

We're comfortable with.

I wouldn't say, we're comfortable with the price of oil, but we see.

See today.

But it is reflected in our forecast and our outlook.

Yes.

Oh, Youre planning 70 to 80 or 80 to 90.

It's closer to the 70 to 80.

Okay.

And then can I just ask you too.

Now the supply chain challenges and I know you had some disruption disruptions earlier in the pandemic is is there anything right now that youre seeing.

That would cause you. Some problems are you able to handle the various challenges.

What are you kind of anticipating that you would need to look out for the next year.

Linda Whack a mole.

That's basically.

And that's not trying to be funny, Eva but every day there is something that that.

Shows its head to us that we hadn't anticipated that caused us to have to pivot in one way or do something differently.

For the most.

Most though you know if you look at al.

The year that just wind and the volume increases we had in a supply chain situation was extremely stressed.

Our supply chain team did a remarkable job.

And each day, we think we're getting better.

Better and areas of weakness, so I would say that there's not a huge threat today at this minute that we see however, it's a challenging situation that continues to be managed day to day, not only because of the supply chain issues that are happening in the U S and other parts.

Parts of the world, but also because of the increased volume where in some places around the world Some countries, where we're approaching that volumes, we thought we would have.

Caved in 'twenty three 'twenty four 'twenty five.

Substantial increases, but most of them.

Okay. Thank you good luck with everything.

Thanks Linda.

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

[music].

Okay.