Q3 2022 WD-40 Co Earnings Call
Speaker 2: Good day and welcome to the WD 40 company. Third quarter fiscal year 2022 earnings conference call. Today's call is being recorded.
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Speaker 2: At the end of the prepared B remarks, we will conduct a question-and-answer session.
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Speaker 2: I would now like to turn the presentation over to the host for today's call, ms Wendy Kelly, Vice President of stakeholder and Investor engagement. Please proceed.
Speaker 3: Thank you good afternoon and thanks to everyone for joining us today.
Speaker 4: Joining us on our call today: our Deputy 40 company's Chairman and Chief Executive Officer, Gary Ridge.
Speaker 4: Vice President and Chief Financial Officer, Jay reumbold, and President and Chief Operating Officer and incoming Chief Executive Officer, Chief bras.
Speaker 4: Also joinuring us for today's call is our Vice President, global finance strategy and incoming Chief financial.
Speaker 5: They're either.
Speaker 3: 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 may thirty-first 2020 -two.
Speaker 4: A documents are available on our Investor Relations website at investors W 40 companies, com.
Speaker 4: A replay and transcript of today's call will also be made available at that location shortly after this call.
Speaker 4: On today's call, we will discuss certain non-GAAP measures.
Speaker 3: The descriptions and reconciliations of these non-GAAP measures are available in our SEC filings, as well as our earnings presentation.
Speaker 3: As a reminder. Today's call includes forward-looking statements about our expectations for the company's future performance.
Speaker 4: 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.
Speaker 4: Please refer to the risk factors detailed in our SEC filings for forurther discussion.
Speaker 3: 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, July seventh 2022. 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.
Speaker 6: Thank you, Wendy today and thank for joining us for today's conference call.
Speaker 6: Before we begin, I'd like to take a moment to welcome Sarah heiser to our call today.
Speaker 6: We shared with investors yesterday that Sarah will become Vice pisking finance treasure and Chief Financial Officer effective November one 2022, once we have completed the filing of our fiscal year 2022 10 -k.
Speaker 6: Sarah joined our dbe in 2021. has worked closely with global finance and accounting teams. As far as our financial strategies for this fiscal last year.
Speaker 6: We are thrilled that she has accepted this opportunity within Al tribe. Sarah will be available during the question-and-answer portion of today's call to answer any questions you have for her.
Speaker 6: As you may know, Jay announced his's planned retirement lead in 2020. je has been ourie financial Officer since 2008 and his impact on our company has been immeasurable.
Speaker 6: jaye will be with us on the next quarter call to report our full fiscal year results, and then he will sell off at the sunset and enjoy his well-deserved retirement.
Speaker 6: Now let's turn to our results.
Speaker 6: Today we reported net sales of 123.7 million for the third quarter of fiscal 2022, which was a decrease of 9% compared to the same quarter last year.
Speaker 6: As a reminder, in the third quarter of last year we recorded record sales driven by robust demand for our maintenance products, coupled with strong operating performance.
Speaker 6: Against such a comparable debt was high.
Speaker 6: In addition, you've heard me say for 25 years not to follow last quarter-to-quarter. If you follow our business closely you'll know the fluctu agentcy performance: quarter-to, -quarter and not unusual. This has been especially true as suits the COVID-19 pandemic began.
Speaker 6: Although the sales results we are reporting today are down, we believe we are positioned to achieve sales growth for the full fiscal year, which will result in record sales results for our trial.
Speaker 6: Steve will talk in greater detail in a few moments about the sales results in our trade block for the remainder of the.
Speaker 6: Unfortunately, we continue to face a challenging inflationary environment and our third quarter gross margin came in at 48%, reflecting significant increases to our cost of products soldt.
Speaker 6: Inflationary cost pressures are broad-based and continue to increase with little sign of near-term relief. These operational challenges are not unique to W for the company. However, we think that the strategies we've chosen will position us to manage through these challenges over time. Jay will talk in greater detail in a few moments about what the impact has been on our margin and what we are goinging to resto.
Speaker 6: We continue to be a business with the strong note, diversified across many trade channels and countries around the world. We have a strong balance sheet, generates steady cash flows and continue to run deturnm capital to our investors with regular dividends. In addition, the W 40 brands- strong and robust brands like ours, our great assets in turbulent times.
Speaker 6: Most critical of all, we have a trived, passionate and committed employees who are dedicated to our company's purpose.
Speaker 6: Let's talk for a minute about our strategic commissions.
Speaker 6: Our strategic initiatives are the continuing plan we have in place to achieve the company's long-term aspirations.
Speaker 6: Our strategic initives support our long-term revenue growth target, which is to drive net sales to between 65.7 billion by the end of fiscal 2020. -five.
Speaker 6: We strive to do so while following our 55 30, twentyfive business model.
Speaker 6: Steve and the tribe remain committed to the company's long-term aspirations and strategies. We have in place to get there.
Speaker 6: Strategic initiative number one is to build a business for the future.
Speaker 6: Found all under this initiative is to build an in doing business that we'll be proud to pass on to the next generation.
Speaker 6: The designired outcome for this strategic initives to fully integrate our ESG initiatives into the heart of our strategic planning process. We are making great progress in setting our ESG priorities and we expect to file our next ESG report Bill in fiscal 2023. in that report will be articulating our position and our progress on keyesg matters.
Speaker 6: We are in the early stages of determining what we need to do to reduce our greenhouse stat emissions to be in line with the Paris agreement.
Speaker 6: We'll also provide stakeholders with it.
Speaker 6: On our diversity equity, inclusion and belonging efforts.
Speaker 6: one of the biggest desires we have, and human beings, is to belong. That's why we've added and created ourown.
Speaker 7: ownacronym for this critical area: de by enby.
Speaker 6: acridym for this critical area. De by M B.
Speaker 7: Strategic conditition is: number two is to attract, develop and engage outstanding triagmemers.
Speaker 6: We believe that by building and nitoruring an inclusive and diverse purpose-driven learning and teaching organization, our trbe members will succeed together, while the accelerate individuals.
Speaker 6: Recently we shared that we've added some new tribe members at the Board level. Last month, Ed mcinni was appointed to our Board and will serve as a member of outles. He has significant senior leadership experience in manufacturing sustainability, supply chain and logistics.
Speaker 6: Additionally, we shared that Cynthia bergs has been nominated to stand for election at our next annual meeting. Cynthia most recently served that Senior Vice President and Chief people and cultural Officer at jimtech.
Speaker 6: Cynthia has.
Speaker 6: Strategy and that fundamental understanding that culture is a competitive of advantage which makes her a perfect set for the WD 40 company where if it really is all about the people.
Speaker 6: Strategic initiative number 3: strive for operational excellence.
Speaker 6: Our goal under this initiative is to fouster culture, continuous improvement, in which operational excellence and the responsibility of every triagenda.
Speaker 6: Our commitment to operational excellence continues to be an enormous asset process. We navigate the global economic challenges likely in front of us.
Speaker 6: Using our 55, 30- 25 business model as a frresh framework, we measure ourselves against this operational excellence initiative.
Speaker 6: Strategic initiative number four.
Speaker 6: Growing WD 40 multiuse product.
Speaker 6: Our goal under this initiative is to make the blue and yellow can with a little red top available more places to more people who will find more users more often.
Speaker 6: We will grow WD 40 -multiuse product line through continued geographic and digital expansion, increased market penetration, educating and users about new uses and through the development of new and unique delivery systems that make the product eas V the years.
Speaker 6: Although W 40? E moultius product sales were down 11% to ninety-to-two three thousand this quarter, we've seen strong P? Ch closer towards our 2025 aspiration.
Speaker 6: The dored outcome for the strategic additione is to grow sales of WD 40 multiuse product to approximately 525 million by 2020. -five.
Speaker 6: Strategic initiative number five is to grow W 40 Specialist product line. Our goal under this initiative is to leverage the W 40 brand by developing new products and categories which build and reinforce the core positioning and create growth through continued geographic and digital expansion. In the third quarter, sell that W 40 spealist increased 12% globally to 16.7 million. The desired outcome for this strategic initiative is to grow sales of W 40 specialists to approximately 125 million by 2020 -.fi: ve.
Speaker 6: Strategic initiative number 6: expand and support portfolio opportunities that help us grow. Our goal under this initiative is to expand and support brands that provide us protection and help us grow. Brands under this initiative include 3, one and GT 85, as well as our home care and cleaning brands. In the third quarter, sales included under this initformationative decrease 16%, equarly the 14.7 million. The desired outcome for this strategic initiative will be sales in the category of approximately 15 million by 2025. to reach that number, we expect sales growth.
Speaker 6: Of brands like three and one GP eighty-five thousand and one of knowvback. Many of our other home care cleaning product brands will most likely decline in sales over time, but they will continue to contribute heily accidents, supporting how strategic initiatives are our.
Speaker 7: blsu to B, C e O S.
Speaker 6: Steve brass, who will share an overview of our sales results and an update on our must-win balance.
Speaker 8: Thanks Gary, and good afternoon.
Speaker 8: As carry mentioned earlier, net sales were 123.7 million in the third quarter. There are 9% or 12.7 million, compared to the prior year.
Speaker 8: There are a couple of significant events that led to these declines, including severe lockdown measures instituted in Shanghai and the military action taken by Russia.
Speaker 8: In addition, we experienced decreased demand for our products in certain regions. That emayer compared to the record sales we reported in the third quarter of last year.
Speaker 8: Currency also negatively impacted in the third quarter, particularly any mayor.
Speaker 8: On a constant currency basis, net sales would have been 127.9 million in the third quarter, as 6% declineed from the prior year.
Speaker 8: However year-to-date net sales were up 4% compared to last year and we experienced strong sales in a month of June which we believe will position us to achieve sales growth for the full fiscal year but between 6% and 9% and.
Speaker 8: Clo to look at what's happening in our trade blocks So that we can get a better understanding of these impacts. We'll start with the Americas.
Speaker 8: Sales in the Americas, which include the United States, Latin America and Canada, were up 2% in the third quarter.
Speaker 8: Thousand maintenance product.
Speaker 8: Books increased 3% in the Americas.
Speaker 7: ueto increased sales in Canada and Latin America, which were of twenty-three.
Speaker 8: In Canada, weexperienced strong sales of the be 40 multi-used product, which increased 30%.
Speaker 9: Primarily due to increased promotional activities and a higher level of demand for our products in the industrial the channel.
Speaker 10: In Latin America. We also experienced strong sales of the B fullyty multiuse product, which increased 16%, primarily due to the positive momentum in Mexico from the shift we made in 2020 from a distributor model to a direct market, as well as the price increases that went into effect earlier this fiscal year.
Speaker 10: And United States, sales and maintenance products remain constant, which were completely offset by lower sales of dib 40 Multi-Use product.
Speaker 10: In the United States sales and maintenance products remain constant per, which were completely offset by lower sales of near ly 40, multi use product to be 40. especially sales were up seventy.
Speaker 10: But is our supply chain continues to strengthen. These sales increcruises were offset by lower sales of W 40 mul use product in the quarter due to the timing of customer orders.
Speaker 7: Code.
Speaker 10: And our global business in the third quarter. Over the long term, we anticipate sales within this segment will grow between 5% to 8% annually.
Speaker 10: Now one to emaya. Sales ea, which includes Europe , the Middle East, Africa and India, were down 16% in the third quarter to 49.5 million compared to last year.
Speaker 10: Sales and maintenance products also decreased by 16% in EMEA due to decrease sales in both our EMEA direct and our EMEA distributor markets, which decreased 13% and 21% response respectively. In our EMEA direct markets we experienced a 13% decrease in sales in the third quarter. However if we take currency into consideration, sales not direct.
Speaker 10: Markets only declined 5%. This decrease in sales is primarily attributable to reduced demand from our maintenance products compared to the prior period.
Speaker 10: In the third quarter of 2021. We experienced.
Speaker 10: Regions that he mayor in the third quarter.
Speaker 10: Of last year. This courtto sales are ea direct markets accounted to 71% of the region. salesourea distributor markets to experienced a 21% decrease in sales and maintenance products, primarily due to our suspension of sales in Russia, which resulted in decreased sales at three point six million compared to last.
Speaker 9: Year in early March we made the values-guided decision to suspend sales of our products to our marketing distributor customers in Russia and belllar rus, and this had an unfavorable impact on ourselves in this region. This quarter, in a third quarter, Sal are in a distributor markets accounted for 29% of the region sales.
Speaker 8: In total, remea segment made up 40% of our global- between 8% to 11% annually.
Speaker 8: I on to Asia Pacific souales, Asia Pacific, which includes Australia, China and other countries, eight million.
Speaker 8: In our Asia Pacific distributor market sales the three.
Speaker 8: two thousand in the third quarter, down 56% compared to last year by the pandemic. The product sell in our Asia Pacific distributor markets is sourced from a third-party point manufacturer in Shanghai.
Speaker 10: Those in the Asia Pacific distributor.
Speaker 8: Out the third quarter. howeverwe were unable to replenish inventories due to the severe lockdown measuresin.
Speaker 10: Instituted in Shanghai, which significantly impacted our ability to ship product to our marketing distributors.
Speaker 8: The severe lockdown measures also impacted China.
Speaker 9: Were sales were three point three million into the third quarter, down 25% compared to last year.
Speaker 8: Locked down measures in Shanghai were listited on duee first. Subsequent to that date, we resumed shipping.
Speaker 9: Product to our customers in Asia and in China, barring any further supply chain disruptions. We expect we will ship most of what we were unable to ship in the third quarter in the fourth quarter.
Speaker 8: In Australia sales a six point two million in the third quarter, of 4% compared to February . We continue to see strong sales of diy- 40 specialists in Australia.
Speaker 8: In total, or ange bar global business in the third quarter.
Speaker 8: Over the long term. We anticipate sales within this segment will grow annually.
Speaker 9: Our brief update number win.
Speaker 8: attandthe sun battles are the primary areas of action that enabled us to deliver against ourll revenue.
Speaker 7: New growth aspirations to drive sales between 65.7 billion by the end of fiscal year 2020. -five and.
Speaker 8: These hyperfocused actions are the key drivers of revenue growth.
Speaker 11: Our largest growth opportunityand first muslimwin battle is a geographic expansion, as the blue and yellow can with a little red top. We continue to experienced growth ofourflagship brand, with global sales of the be 40 multi use product up 6% yalers. We've identified a list of priority markets but show the highest potential for growth and we're focusing our time, talents and treasure on these high potential we are operating in. We've experienced year to date growth in priority markets like China, Mexico and India.
Speaker 10: ninepercent and 16 percentrespectively. We will continue to invest in building our flagship brand markets around the world.
Speaker 8: immization of duouly 40 Multi-Use product.
Speaker 10: Body smiles, strra- an easy reach whencombined. Represented 47% of global cells. Of the, the 40 multi use product are objective.
Speaker 8: Would premiumize products to greater than 60% by 2020. -five.
Speaker 8: For a long time we have assumed that, due to price point concerns, emerging markets couldn't be easily premiumized. We recently conducted some extensive market research with fantastic markets around premiumization.
Speaker 8: We believe that there is a significantpremiized products to both developed and emerging markets.
Speaker 7: thir year-to-date sales of the B twenty.
Speaker 10: Were up 15% compared to last year. We saw solid cells growth to.
Speaker 10: On the capacity constraints we have been experienced in our us supply chain. In addition, we have recently conducted research.
Speaker 9: Now have evidence to support what we already knew. The new packaging and brand architecture improved the sell-through of our W 40 Specialist brand products.
Speaker 9: yeah.
Speaker 9: He easy to access learunabout and Co.
Speaker 10: Our brands in the first nine months of fiscal year 2022: globally e-commerce.
Speaker 9: Cells with down 13%. For us, digital isn't just about handley units. We sell in pure play digital channels. It's about embracing digital transformation of the orginity ahead of us in the digital space. That means complex to market share. That is there for the taking for the full year. We expect ceales in the e-commerce channel.
Speaker 9: Will remain relatively constant compared to the prior fiscal year. More importantly, we will continue to leverage this critical channel that's an integral part of our growth story going forward.
Speaker 10: In the third quarter we were up against very strong sales comparisons and we are managing through several global disruptiion disruptions that have negatively impacted our top line results.
Speaker 11: Despite the disruption: 19 million to five hundred.
Speaker 10: Than 32 million, which reflects year-over-year growth of between six per and 9%.
Speaker 10: Now I'll turn the call over to Jay, who will provide you with a financial update.
Speaker 7: From the business Thank you Steve to begin with I would also win if you may recall that in late.
Speaker 6: Thousand and 20, I announced my intention to retire. Since that time, the internal and external.
Speaker 6: Job it gives me great pleasureto.
Speaker 6: Great pleasure toperson.
Speaker 6: I've n fair, for he had nam their reins to such a clay.
Speaker 6: Will enjoy and appreciate working.
Speaker 6: Will enjoy and appreciate workingsarah as much as I have.
Speaker 6: We're now onto the results. The challenging inflationarywe continue to impact our reported.
Speaker 6: Results unfortunately, we don't see any near-term reliase insight and expect the operating environment to continue to remain challenging.
Speaker 6: Results unfortunately we don't see any near-term reef inssight and expect the operating environment to continue to remain challenging. However.
Speaker 6: 25 business model and are focused on managing our business so that we can restore gross margin to our target of 55% and.
Speaker 6: But that said, we're not sticking our head in the city.
Speaker 6: andin ignoring the macroeconomic geopolitical to fly chain and in.
Speaker 6: flation concerns that exist in the market today. We continue to actively manage our supply chain as we implement various initiatives to increase the capacity and flexibility of our supply chain for the long term.
Speaker 6: In tandem with these efforts, we have been implementing strategic fituture experience.
Speaker 11: In times like these, I M.
Speaker 6: Forest through the treats, but I mean by that is, even though we're underwhelmed by our third quarter results, I am as confident as I've ever been about the long term.
Speaker 6: As Gary mentioned earlier.
Speaker 6: Strong moat diversified across 62 trafits countries around the world.
Speaker 6: Generates steady cash flows and.
Speaker 6: Continue to return capital to our Investor.
Speaker 6: Have a long track record of both top line and bottom line growth and a high degree of confidence in the future growth and evidence byred.
Speaker 6: Very strong end user ofue taking pricing.
Speaker 6: proactions as needed to offset inflation now there results relating to our.
Speaker 6: five 30, twenty five business model, the long-term target which, you may recall, the 55 represent.
Speaker 6: growross margin which.
Speaker 11: Target to be at, or above, 55% of net sales.
Speaker 11: To be at, or above, 55% of net salesthe.
Speaker 9: 30 represents our cost of doing business, which is our total operating expenses.
Speaker 6: Excluding depreciation and amortization. Our goal is to drive our cost of doing business over time to our 30% of net sales.
Speaker 6: And finally the 25 represents our long-term target for EBITDA. Let's start with it was 48% compared to 53% and.
Speaker 9: In the same period last year. This represents a decline of 540 basis points due primarily to the challenging inflationary environment year experiencing.
Speaker 6: The continued constraints related to the pandemic a resulted the impact.
Speaker 12: In the third quarterexchanges in specialty chemical costs and aerosol cans were the primary drivers of our margin decline.
Speaker 6: theimpacted our gross margin by.
Speaker 6: Our gross margin by, centered in 20 basis.
Speaker 6: Chemical costs negatively impacted our gross margin by 400 different basis points. Other remainy.
Speaker 12: Came from. The higher costhigher warehousing, distribution and freight costs, primarily due to supply chain constraints, negatively impacted our gross margin by one hundred and fifty.
Speaker 6: Big market labor shortages increased demand for distribution services particularly in.
Speaker 6: Continued to impact our freight and distribution costs.
Speaker 11: Gross margin was also negatively impacted by 130 basis points from higher filling pay Aid to our architectures, primarily in the Americas.
Speaker 6: And finally, gross margin was negatively impacted by 90 basis points due to product mix and other higher miscellaneous costs incurred during the quarter.
Speaker 7: On a positive note.
Speaker 7: On a positive noteplanans is beginning to help.
Speaker 7: These negative factors were partially offset by a benefit of from sales price increases which have been implemented this year.
Speaker 12: To offset impacts of inflation. There have been implementing. Sales price increases are nearly.
Speaker 11: All of our products worldwide this year. However, keep in mind that we have yet to see the financial impact of the price increases that we've implemented in some of our largest markets.
Speaker 12: For example, in late Q3 of this year we implemented a 25% price increase in the United States.
Speaker 12: In late Q3 of this year we implemented a 25% price increase in the United statesthat the impact evfect.
Speaker 11: Price increase will not flow into our financialsuntil the fourth quarter.
Speaker 12: We are also implementing significant price increases in Europe to summer.
Speaker 11: As a result, we'll continue to see the benefitefits from price increases in future quarters.
Speaker 13: Our trial members are doing a great job executing pricing actions to continue to offset inflationary impacts. howing.
Speaker 11: Make no mistake, we will continue to take measures and implement price increases to offset rising input costs.
Speaker 12: As I said earlier, we remain focused and committed to vanaging our business so that we can reigly address the 30 S.
Speaker 6: Our cost of doing business.
Speaker 11: In the third quarter our constit utdoing business was approximately thirty-onepercent.
Speaker 11: A third quarter cost of doing business was approximately 31 centtwo percent last year.
Speaker 11: For the third quarter, approximately 71% of our cost of doing business came from three areas: people costs or the investments we make in marketing, advertising and promotion. As a percent of net sales, our Amp investment was 5%. And finally.
Speaker 6: sgna expensedecreased by approximately four and a half million dollars compared to last year's per incentive compensation accrual.
Speaker 6: S ga expensedecreased by approximately four and a half million dollars compared to last year for incentive compensation accrual as a result of.
Speaker 6: Current estimate, which is projecting that we will. There will be lower D.
Speaker 11: These lower employee related cutoffs were partially possibleable and meeting expense due.
Speaker 12: The resumption of travel as the pendbeen lifted.
Speaker 12: nowthis brings us back to EBITDA, the last of our 55 30 to 25 measures.
Speaker 12: Even it was 17% of net sales this the quarter, which was down from 21% compared to last year.
Speaker 12: Now our cost of business was down the pressure.
Speaker 6: We experiencing on gross margin, together with the reported sales decline, put pressure on EBITDA this quarter.
Speaker 12: Well that completes the discussion on our business model. Now let's discuss some of the items that fall below the EBITDA line.
Speaker 13: The provision of income taxas was 21% this quarter, compared to 22% last year.
Speaker 12: And we expect that our effective tax rate will be approximately 20% to 21% for the full fiscal year, compared to 21 million dollars last year.
Speaker 11: eliluted earnings per common share for the quarter were a dollar and seven cents, compared to a dollar 52 cents in the same period last year.
Speaker 11: Now a word about our balance sheet and capital allocation strategy.
Speaker 13: The company remain strong. Our capital allocation strategy includes a comprehensive approach.
Speaker 13: While providing stronger terms.
Speaker 13: While providing strong retermsour shareholders.
Speaker 12: We continue to return capital to our shareholders to regulative twenty-first or Board ofin payment of 78 cents per.
Speaker 13: Share amable on.
Speaker 13: Share payable onrecord at the close of business.
Speaker 6: During the third quarter, we repurchased approximately 23 thousand shares of approximately $4.2 million.
Speaker 12: Continue to expect willthat's approximately fifteen.
Speaker 12: The majority of which will bebefore the machinery and equipment we are using to manufacture our next systems.
Speaker 6: That I would like to bring to your attention is the recent increases in our inventory levels.
Speaker 12: As we continue to work to improve the resilience of our.
Speaker 12: We continue to work to improve the resilience of ourcomponents and finish goods that.
Speaker 11: Apply and approve andof our ability to meet market demandnow let's turn to fiscal 2022 guidance. If it adjust, is our guidance.
Speaker 11: Apply and approve, and of our ability to meet market demandnow let's turn to fiscal 2022 guidance. If it adjustedis our guidancecurrent view of the business.
Speaker 13: As Steve mentioned earlier, we expect net sales growth to be between six and nine perteen, 590 milliondollars and $532 million.
Speaker 13: Gross margin for the full year is expected to be around 50%. Advertising and promotion investment is projected to be between five percentand 5% point a 5% of net sales.
Speaker 13: The provision per income tax is expected to be between 20%, 21% and.
Speaker 13: And net income is projected to be between sixty-nine million.
Speaker 6: And $70.1 million.
Speaker 11: Bend's diluted earnings per common share is expected to be betweenfive dollars in two cents and $5 in 10 cents, based on an estimated 13.7 million weighted average shares outstanding.
Speaker 12: Guidance is based on any of it's current view of anticipated results and does not inclve in any future.
Speaker 11: Additional provid'. nineteen-related bock-downs to China and other unforeseen events may further impact the company's financial results. Complete the financial overview. Now back to Gary.
Speaker 11: Additional to 19, related bockdowns to China and other unforeseen events may further impact the company's financial results. Complete the financial overview. Now back to Gary. Thanks K.
Speaker 11: With 19 related bockdowns to China, and other unforeseen events may further impact the company's financial results. complette the financial overview. Now back to Gary thanks kay in summary.
Speaker 13: You hear from us on this call. You heard that Steve is going to be joined by Sarah highburden will be the next CFO of wb 40 company, effected November one 2020 -two.
Speaker 12: You have heard that, despite the fact that the third quarter sales results were down, we continue to believe we are positioned to achieve sales growth for the full fiscal year, which will represent a record sales results for our company. You have heard that we continue to be a business with a very strong moat, diversified across many trade channels and countries around the world. We have a strong balance sheet, generateatessteady cash flow and continue to return capital to the sales of govery: 40 specments up 12% in the third quarter and we continue to experienced strong momentum due to the increased production caparo. We have been experiencing pressure on.
Speaker 12: Gross margin from the challenging inflationary environment. We have a solid, good gross margin restoration plan in place.
Speaker 13: You heard that some of the significant price increases we implemented in the third quarter, particularly in our Americas trading block, were implemented at the end of the quarter and the positive impact has yet to flow through.
Speaker 13: Of the significant price increases we implemented in the third quarter, particularly in our Americas trading block, were implemented at the end of the quarter and the positive impact has yet to flow through. You heard that we have.
Speaker 12: The our guidance for fiscal year 2022 and believe that earnings per share will be between five.
Speaker 12: The guidance for fiscal year 2022 and believe that earnings per share will be between fivedollars in two cents and $5 in centives.
Speaker 12: In closing today i'dpast. It's about learning to Dance.
Speaker 12: In clo.sing today i'dpast. It's about learning to dancewho are joining us today.
Speaker 9: Thank your question. Ladies and gentlemen, if you would like to register a question, Please pst star one on your telephone keypad. Please make sure your mute function.
Speaker 2: Being answered and you would like to withdraw your registration again. Press star 1, one moment Please for the first question.
Speaker 2: Our first question comes from the line of Daniel Rio with jeffreys. Please proceed with your question.
Speaker 14: Hello everyone, Thank you. Thank you for taking a question. You mentioned, I think, a $1 billion market. I think you highlight F for the multiuse product. I was wondering if that market worldwide includes premiization or its premiumization is something that you're holding separate, which is a separate market that could add to that?
Speaker 6: Hey Daniel. Yet a billion dollar would include premiumization: half a billion dollars worth of growth. It's not a billion.
Speaker 8: Plus actuallybased about one point two.
Speaker 8: yeah the top post, geographies around the world and our benchmark, So it would include.
Speaker 8: premiumization- but it's actually about one point two billion in total- and growth opportunity.
Speaker 14: We're on the digital platform state. I want to that I.
Speaker 14: Surprising in giving it's still somewhat new platform and I thought it was going best.
Speaker 9: Yes in terms of So digital commerise, we have been, we have been catching up, So a lot of there has been.
Speaker 8: To our Americas' region and out of stocksit's, absolutely roaring back in the last few months. So overall over down 13%.
Speaker 8: But that is improving with every montha quarter three for example. thebecause it was actually up 42% over prior year. So we are beginning to catch up and a lot of that was linked to.
Speaker 6: Thank you. And then finallyyouobviously I mean closer or an issue, but I mean it just seems. Are that side towing or is it just an ununding?
Speaker 14: Missing up browns orning's any sign of light at the end of columnen.
Speaker 15: Yes that in Thank youokate that the margin issue is absolutely a timing issue if you look at.
Speaker 9: This year in total in Q1 pricing out of one hundred and twenty basis points, in Q2 pricing out of two hundred base, which was offsetting the increases that were coming through, primarily not from necessarily oil, because oil is fluctuating in that range, But from arissol, cans and other.
Speaker 9: Is each quarter. The pricing action we're taking is starting to offset.
Speaker 16: The embedded costs of our raw materials, as we mentioned in this call. The pricing increase that we've just taken in the Americas, or in the U's in fact, of about 25%, will not show up until Q4 totally.
Speaker 16: The embedded costs of our raw materials, as we mentioned in this call. The pricing increase that we just taken in the Americas or in the U's in fac of about 25% will not show up until Q4. Totally all can convinced.
Speaker 16: That we will get back to 55 or greadater over time. Just it CAn't happen all at once. But thank you very muchyour next question comes in the line of at Linda bolton, liicer with da Davidson. Please proceed with your question.
Speaker 17: Yes I goodsoshould. I just ask you what mayium.
Speaker 18: sortof losing track of things here but I thought that when you last reported in early.
Speaker 18: And maybe I'm mistaken. But I thought we try to do a situation and in fact the analysts and investors were more likely looking like talking to when they might be lifted. So.
Speaker 17: I guess I mean not sort of changed with regardto the situation that you weren't foreseen kind of back in April like I guess if people have explained more about that.
Speaker 10: By surely the lockdown that what we're talking about, which started in main fact?
Speaker 12: Shanghai was locked out for I thinknearly six weeksall of the shipments out of Shanghai was suspended. People couldn't go to work.
Speaker 16: And you probably observe that in the media or whatever.
Speaker 16: I don't know that we understood what the longer was going to go on for all the severity of it, but it certainly shut. It did shut it down the operation. We ship all of our Asia distributors and all of our China local business out of packages in Shanghai.
Speaker 9: And we could not ship a case of product during that time. Those have subsequently been lifted as Steve said in early June and we're starting and we 've.
Speaker 9: Started to ship again, So it was absolutely a surprise and something that we couldn't have anticipated.
Speaker 17: Okay So then the trend of business sort of in the may quarter would have been.
Speaker 18: Much better in March and April and then really got bad in May. Is that how kind of how it turnedrened through the quarter?
Speaker 10: Speed I don't have that in front of you but I you going to be that the.
Speaker 8: Certainly for the Asia distributor market. It was just a question of not being able to ship right. So in market, in local markets, and we're able to service their markets. All that happened was in M the shipments that didn't.
Speaker 8: For the Asia distributor market. It was just a question of not being able to ship right. So in market, in local markets, and we're able to service their markets. All that happeneding was immig, the shipment that didn'tship in April .
Speaker 19: Ship in the fourth quarter. So we went out to loss any revenues in those markets, or very little. It will just move from Q3 celles into Q4 celles and you heard us talk about a very strong June and that was partially reflected by significantly increase shipments to our Asian distributor markets. Now some of the lockdown in China economic activity, factory closures complete lockdowns in some cities there will be loss of Chinese person.
Speaker 8: From from that period. To add to that Linda, how I closed down, kindof.
Speaker 8: From that period. To add to that, lindai closed down kind of late.
Speaker 13: March the government at that time said they thought it would last. A week on, aroundthe full lockdown happened in shanghaiand that continued when the return to normal was announced by the officials.
Speaker 9: Okay all right, think in that and this from the whole on the commodity side or specialty chemical side of things you know I thought you had.
Speaker 17: exsaid that your guidance for the fiscal year included that planning a asfunction of oil ost for barrel and since you lap reported.
Speaker 18: I all is down. I mean it T it a high of 120 ll around that around there, but now it's.
Speaker 9: It's more close to 100. So it just seems to me that the situation maybe has not gotten significantly worse, and we've seen that 10 and plastic residi playate, implastic residence have actually come down into just T a spot prices in the market. So I guess I'm just wondering like, like it just seems like a surprising that the gth margin guidance could be lowered, even though the commodities are within range maybe of what your planning.
Speaker 13: So number 1: we have seen no decrease in the price our our osol cans. We had a 60% increase which we shared in their osasol cans. That's been embedded and flowing through our costs of different times. So even though spot rates are moving, it has no impact whatsoever on the price of our osol cans.
Speaker 16: And the real issue here is, as I've, as we've shared, is the timing of the flow through of the cost of goods and the offset of price increases. Yes, oil has been fluctuating between 120 the lind, as you know well, it takes a lot- 90 to 120 days to any impacts of oil to flow throughout 105 today. So in this, in this scenario, oil is not the thing that's had the biggest impact in the short term over the last few months.
Speaker 16: It's the impact of the cost of our resu, the cost of filling fees, all of which a float, have float being flowing into our supply chain.
Speaker 16: it'sthe impact of the cost of are the cost of filling fees, all of which a float. Have float being flowing into our supply chainvarying places from vary impackages?
Speaker 16: A timing issueokay, thanks for that. And then on the model yet, but I spe, I think the growth margin guidance for the year it implies that growth margin would be up sequentially in the fiscal fourth quarter and my thinking of that kind of correctly.
Speaker 16: A timing issueokay say for that. And then on the model yet, but I spe it. I think the growth margin guidance for the year it implies that growth margin would be up sequentially in the fiscal fourth quarter. Am my thinking of that kind of correctly? It has to.
Speaker 18: yeah okay okay, this one to make sure about that. Ok, and I guess you know you had mentioned on the call last time that there was on new product that you were standning on launching. It sound a kind of interesting. Maybe it was some kind of clean or green product, I can' quite remember. Is that something that is still on track and is that something that could you know be something that's important?
Speaker 12: Yes it's in. That product is in final stages of stability and quality testing and once it's through that we would be expecting to announce full details of it in the upcoming quarters. But it's still on track and we're excited about it. It is a product.
Speaker 16: Will be very, I think, seen as being a product that's bg friendly and yes, it's on track and it'll be coming.
Speaker 20: okayand then finally, you know.
Speaker 17: We've heard from various retailers about wanting to workdown inventory and you supply a bunch of different channels but even a mon like say, industrial distributors and things like that. Are you seeing any kind of workdown in inventory that they're trying to do because of any kind of slow down stage? You want to cover up on that?
Speaker 8: Yes no, knowing up. Basically, I mean it may be ahead of us, we knows where things headed, but we haven't seen that yet. I mean we've got trade channels continue to grow strongly. Our industrial sales we reported last quarter were globally very strong. We still up 25% in the industrial market globally. We've talked about our e-commerce which is kind of going to be flat this year. We've still getting good the and any kind of boost we gotard from e-commerce and di y. it's where it's kind of flattened for uschannels.
Speaker 8: We're continuing to grow very nicely around the world in automotive hardware and industries So we haven't seen those inventory kind of control measures coming.
Speaker 8: Very nicely around the world in automotive hardware and industries, So that we haven't seen those inventory kind of control measures comingin yet.
Speaker 21: Ok always that they are done. Thank you very much. Thank you, lindaladiesandgentlemen. That does conclude a lot of time for questions. We thank you for your participation on today's conference call and ask that you please disconnect your life.