Q3 2024 WD-40 Co Earnings Call

Ladies and gentlemen, thank you for standing by. Good day and welcome to the WD-40 Company third quarter fiscal year 2024 earnings conference call.

Operator: 3rd Quarter Fiscal Year 2024 Earnings Conference Call. Today's call is being recorded. At this time, all participants are in a listen-only mode.

Unknown Executive: company, Third quarter fiscal year 2024 earnings conference call. Today's call is being recorded. At this time, all participants are in a listen-only mode.

Today's call is being recorded. At this time, all participants are in a listen-only mode. At the end of the prepared remarks, we will conduct a question-and-answer session.

Unknown Executive: At the end of the prepared remarks, we will conduct a question-and-answer session. To register a question at any time during this call, please press star 1 on your telephone keypad. Please make sure your mute function 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 *0 on your telephone keypad.

Operator: At the end of the prepared remarks, we will conduct a question and answer session. To submit a question at any time during this call, please press star 1 on your telephone keypad. Please make sure your mute function is turned off to allow your signal to reach our equipment.

To register a question at any time during this call, please press star 1 on your telephone keypad. Please make sure your mute function 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 0 on your telephone keypad.

Operator: 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 the host for today's call, 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 President and Chief Executive Officer Steve Brass and Vice President and Chief Financial Officer Sara Hyzer.

Wendy Kelley: I would now like to turn the presentation over to the host for today's call, Wendy Kelley, Vice President, Stakeholder, and Investor Engagement. Please proceed.

Operator: 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 31st, 2024. These documents are available on our Investor Relations website at investor.wd40company.com. A replay and transcript of today's call will also be made available shortly after this call.

Speaker Change: I would now like to turn the presentation over to the host for today's call, Wendy Kelley, Vice President, Stakeholder, and Investor Engagement. Please proceed.

Unknown Executive: Thank you.

Wendy Kelley: Good afternoon, and thanks to everyone for joining us today. On our call today are WD-40 Co. President and Chief Executive Officer Steve Brass and Vice President and Chief Financial Officer Sara Hyzer.

Wendy D. Kelley: Thank you. Good afternoon and thanks to everyone for joining us today. On our call today are WD-40 Company's President and Chief Executive Officer Steve Brass and Vice President and Chief Financial Officer Sara Hyzer.

Wendy Kelley: 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-Qs for the period ending May 31, 2024. These documents are available on our Investor Relations website at investor.wd40company.com.

Speaker Change: In addition to the financial information presented on today's call, we encourage investors to review our earnings presentation, earnings press release, and Form 10-2 for the period ending May 31, 2024.

Speaker Change: These documents are available on our Investor Relations website at investor.wd40company.com. A replay and transcript of today's call will also be made available shortly after this call.

Wendy Kelley: A replay and transcript of today's call will also be made available shortly after this call. On today's call, we will discuss certain non-GAAP measures. The descriptions and recommendations of these non-GAAP measures are available in our SEC filings as well as the earnings documents posted on our Investor Relations website.

Wendy D. Kelley: 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 in the earnings documents posted on our Investor Relations website. As a reminder, today's call includes forward-looking statements about our expectations for the company's future performance, and actual results could differ materially.

Speaker Change: On today's call, we will discuss certain non-GAAP measures.

Speaker Change: The descriptions and reconciliations of these non-GAAP measures are available in our SEC filings, as well as the earnings documents posted on our Investor Relations website.

Wendy Kelley: As a reminder, today's call includes forward-looking statements about our expectations for the company's future performance. Actual results could differ materially. The company's expectations, beliefs, and projections are expressed in good faith, but there can be no assurance that they will be achieved or accomplished.

Speaker Change: As a reminder, today's call includes forward-looking statements about our expectations for the company's future performance.

Wendy D. Kelley: The company's expectations, beliefs, and projections are expressed in good faith, but there can be no assurance that they will be achieved or accomplished. Please refer to the risk factors detailed in our SEC filings for further discussion. Finally, for anyone listening to a webcast replay or reviewing a written transcript of this call, please note that all information presented is current only as of today's date, July 10th, 2024. The company disclaims any duty or obligation to update any forward-looking information as a result of new information, future events, or otherwise. With that said, I'd now like to turn the call over to Steve.

Speaker Change: Actual results could differ materially.

Speaker Change: 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.

Wendy Kelley: Please refer to the risk factors detailed in our SEC filings for further discussion.

Wendy Kelley: 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 10, 2024. The company disclaims any duty or obligation to update any forward-looking information as a result of new information, future events, or otherwise.

Speaker Change: 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 10, 2024.

Speaker Change: The company disclaims any duty or obligation to update any forward-looking information as a result of new information, future events, or otherwise. With that, I'd now like to turn the call over to Steve.

Steve Brass: With that, I now let to turn the call over to Steve. Thank you, Wendy, and thanks to all of you for joining us this afternoon. Today, I'll provide you with an overview of our thousands of results for the third fiscal quarter of 2024. I note that on our must-win battles, some progress we've made on certain strategic enablers.

Steven A. Brass: Thank you, Wendy, and thanks to all of you for joining us this afternoon. Today, I'll provide you with an overview of our sales results for the third fiscal quarter of 2024, an update on our must-win battles, and progress we've made on certain strategic enablers. After that, Sara will provide you with a brief update on the divestiture of our home care and cleaning business, an update on our business model, and an outlook for the remainder of fiscal year 2024. We'll then take your questions.

Steven A. Brass: Thank you, Wendy, and thanks to all of you for joining us this afternoon.

Steven A. Brass: Today, I'll provide you with an overview of our sales results for the third fiscal quarter of 2024, an update on our must-win battles, and progress we've made on certain strategic enablers.

Steve Brass: After that, Sarah will provide you a brief update and the divestiture of our home care and cleaning business, an update in our business model, and an outlook for the remainder of fiscal year 2024. We'll then take your questions. I'm happy to share with you that, for the third consecutive quarter, we saw sales growth across all three of our trade blocks. Today, we reported net sales of 155 million, an increase of over 9 percent, and a new record, of course, for the company. Excluding the favorable impact of currency, revenue grew 8 percent. In addition, sales of maintenance products grew over 10% for both the third quarter and year to date, which is in line with our long-term growth targets.

Steven A. Brass: After that, Sara will provide you a brief update on the divestiture of our home care and cleaning business, an update on our business model, and an outlook for the remainder of fiscal year 2024. We'll then take your questions.

Steven A. Brass: I'm happy to share with you that for the third consecutive quarter, we saw sales growth across all three of our trade blocs. Today we're reporting net sales of $155 million, an increase of over 9% and a new record quarter for the company. Excluding the favorable impact of currency, revenue grew 8%.

Steven A. Brass: I'm happy to share with you that for the third consecutive quarter we saw sales growth across all three of our trade blocks. Today we're reporting net sales of $155 million, an increase of over 9% and a new record quarter for the company.

Steven A. Brass: In addition, sales of maintenance products grew over 10% for both the third quarter and year-to-date, which is in line with our long-term growth target. We remain encouraged that the improvement in trends we experienced in the first half of fiscal year 2024 has carried into the third quarter. Sales volumes continue to improve, and in the third quarter, nearly all our sales growth was driven by volume, with currency and price impacts nearly cancelling one another.

Steven A. Brass: Excluding the favorable impact of currency, revenue grew 8%.

Steven A. Brass: In addition, sales of maintenance products grew over 10% for both the third quarter and year-to-date, which is in line with our long-term growth targets.

Steve Brass: We remain encouraged that the improved in trends we experience in the first half of the school year 2024 have carried into the third quarter. Sales volumes continue to improve, and in the third quarter nearly all our sales growth was driven by volume, but currency and price impacts nearly cancelling one another out. In addition, what leads to report to gross margin continues to improve, and is moving closer to our long-term target of 55%. In the third quarter, we reported gross margin of 53.1%, which is an improvement of 70 basis points sequentially and 250 basis points compared to the third quarter of last school year.

Steven A. Brass: We remain encouraged that the improvement in trends we experienced in the first half of fiscal year 2024 have carried into the third quarter.

Steven A. Brass: Sales volumes continue to improve, and in the third quarter nearly all our sales growth was driven by volume, with currency and price impacts nearly cancelling one another out.

Steven A. Brass: In addition, we're pleased to report that gross margin continues to improve and is moving closer to our long-term target of 55%. In the third quarter, we reported a gross margin of 53.1%, which is an improvement of 70 basis points sequentially and 250 basis points compared to the third quarter of last fiscal year.

Steven A. Brass: In addition, we're pleased to report that gross margin continues to improve and is moving closer to our long-term target of 55%.

Steven A. Brass: In the third quarter, we reported gross margin of 53.1%, which is an improvement of 70 basis points sequentially and 250 basis points compared to the third quarter of last fiscal year.

Steve Brass: Driving improvements to gross margin enables us to invest in critical areas of our business like our 4x4 strategic framework, which will help us to continue to drive faster top-line growth and improve operational efficiencies.

Steven A. Brass: Driving improvements in gross margin enables us to invest in critical areas of our business, like our four by four strategic framework, which will help us to continue to drive faster top-line growth and improve operation efficiency. Now, let me discuss third-quarter sales results by segment. Unless otherwise noted, I will discuss sales on a reported basis and compare them to the third quarter of last fiscal year.

Steven A. Brass: Driving improvements to gross margin enables us to invest in critical areas of our business like our 4x4 strategic framework which will help us to continue to drive faster top-line growth and improve operational efficiencies.

Steve Brass: Now let me discuss third quarter sales results by segment. Unless otherwise noted, I will discuss sales on a reported basis and compare to the third quarter of last school year. Sales in America, which includes the United States, Latin America, and Canada, grew approximately 6% over the prior year to 75.1 million. The bulk of this growth was driven by higher sales of W40 multi-use products, which increased 7% compared to the prior year. Much of this growth came from strong sales of W40 multi-use products in Latin America, which increased by 51% year over year. These increased sales were partially offset by lower sales of the W40 multi-use product in the United States and Canada.

Steven A. Brass: Now let me discuss third quarter sales results by segment. Unless otherwise noted, I will discuss sales on a reported basis and compare to the third quarter of last fiscal year.

Steven A. Brass: Sales in the Americas, which includes the United States, Latin America, and Canada, grew approximately 6% over the prior year to $75.1 million. The bulk of this growth was driven by higher sales of WD-40 multi-use products, which increased 7% compared to the prior year. Much of this growth came from strong sales of WD-40 multi-use product in Latin America, which increased by 51% year over year. However, these increased sales were partially offset by lower sales of WD-40 in the United States and Canada. Our Latin American market is comprised of our direct markets in Mexico and Brazil and all remaining Latin American countries, most of which are served by our marketing distributor partners in the region.

Steven A. Brass: Sales in the Americas, which includes the United States, Latin America and Canada, grew approximately 6% over the prior year to $75.1 million. The bulk of this growth was driven by higher sales of WD-40 multi-use product, which increased 7% compared to the prior year.

Steven A. Brass: Much of this growth came from strong sales of WD-40 multi-use product in Latin America, which increased by 51% year over year. These increased sales were partially offset by lower sales of WD-40 multi-use product in the United States and Canada.

Steve Brass: Our Latin America market is comprised of our direct markets in Mexico or Brazil, and all remaining Latin American countries, most of which are served by a marketing distributor partner in the region. Sales in Latin America was favorably impacted by our transition to a direct market model in Brazil. Early in the third quarter of fiscal year 2024, we acquired our Brazilian distributor and shifted from an indirect distribution model to one where we sell directly to retail customers. This distribution model shift favorably impacted net sales in Brazil by 2.7 million in the third quarter. In addition, sales in Mexico and other Latin American markets increased 2.8 million due to the time you have customer orders, successful brand-building programs, increased distribution of the W40 smart straw, and favorable impacts of changes in foreign currency exchange rates.

Steven A. Brass: Our Latin American market is comprised of our direct markets in Mexico and Brazil and all remaining Latin American countries, most of which are served by our marketing distributor partners in the region.

Steven A. Brass: Sales in Latin America were favorably impacted by our transition to a direct market model in Brazil. Early in the third quarter of fiscal year 2024, we acquired our Brazilian distributor and shifted from an indirect distribution model to one where we sell directly to retail customers. This distribution model shift favorably impacted net sales in Brazil by $2.7 million in the third quarter. In addition, sales in Mexico and other Latin American markets increased $2.8 million due to the timing of customer orders, successful brand building programs, increased distribution of the WD-40 Smart Straw, and favorable impacts of changes in foreign currency exchange rates. While end-user demand remained relatively constant in the United States, sales decreased by 2% compared to the prior year quarter.

Steven A. Brass: Sales in Latin America were favorably impacted by our transition to a direct market model in Brazil.

Steven A. Brass: Early in the third quarter of fiscal year 2024, we acquired our Brazilian distributor and shifted from an indirect distribution model to one where we sell directly to retail customers.

Steven A. Brass: This distribution model shift favorably impacted net sales in Brazil by 2.7 million in the third quarter.

Steven A. Brass: In addition, sales in Mexico and other Latin American markets increased $2.8 million due to the timing of customer orders, successful brand building programs, increased distribution of WD-40 Smart Straw, and favorable impacts of changes in foreign currency exchange rates.

Steve Brass: While end user demand remained relatively constant in the United States, sales decreased by 2% compared to the prior year quarter. This relatively flat performance in the US has been driven by several factors. Firstly, we are laughing in extremely strong US performance in our FY23 where the US experience exceptionally strong volume recovery. Post price increases grew by 17%. We also experienced strong declines in our long strategic household brands in the US, which decreased in Q3 by 15%. Our combined maintenance product sales in the US for Q3 declined by 2%, whereas year-to-date they have grown by 2%.

Steven A. Brass: While end-user demand remained relatively constant in the United States, sales decreased by 2% compared to the prior year quarter.

Steven A. Brass: This relatively flat performance in the U.S. is driven by several factors. Firstly, we're lapping an extremely strong U.S. performance in FY23, where the U.S. experienced exceptionally strong volume recovery post-price increases and grew by 17%. We also experienced strong declines in our non-strategic household brands in the US, which decreased in Q3 by 15%. Combined maintenance product sales in the US for Q3 declined by 2%, whereas year-to-date they've grown by 2%. And we expect modest growth for the full year. Our ERP implementation did not have a material impact on our U.S. results in the third quarter.

Steven A. Brass: This relatively flat performance in the U.S. was driven by several factors. Firstly, we're lapping an extremely strong U.S. performance in our FY23, where the U.S. experienced exceptionally strong volume recovery post-price increases and grew by 17%.

Steven A. Brass: We also experienced strong declines in our non-strategic household brands in the US, which decreased in Q3 by 15%.

Steven A. Brass: Our combined maintenance product sales in the U.S. for Q3 declined by 2%, whereas year-to-date they have grown by 2%, and we expect modest growth for the full year.

Steve Brass: We expect modest growth for the full year. Our RPRP implementation did not have a material impact on our US results in the third quarter, whereas we continue to experience some disruption. This lesson does the quarter progress to the extent that by the end of the quarter, we were approaching traditional customer service levels with order fill rates and on time and info delivery, also referred to as OTIP, deliveries well into the 90% level. Our plan for FY 24 in the Americas was always driven primarily by strong left and American growth, and that is playing out. South of W-40 multi-use product in Canada decreased 13% period over period, due to phasing associated with a discontinuation of our classic can delivery system and the implementation and conversion of smart-strawing Canada.

Steven A. Brass: Our ERP implementation did not have a material impact on our U.S. results in the third quarter.

Steven A. Brass: Whereas we continued to experience some disruption, this lessened as the quarter progressed to the extent that by the end of the quarter, we were approaching traditional customer service levels with order fill rates and on-time and in-full delivery, also referred to as OTIP, deliveries, well into the 90% level. A plan for FY24 in the Americas is always driven primarily by strong Latin American growth, and that is playing out. South of WD-40 multi-use product in Canada decreased 13% period over period due to phasing associated with the discontinuation of our classic CAN delivery system and the implementation and conversion of SmartStraw in Canada.

Steven A. Brass: Whereas we continue to experience some disruption, this lessened as the quarter progressed to the extent that by the end of the quarter, we were approaching traditional customer service levels with order fill rates and on-time and in-full delivery, also referred to as OTIB.

Steven A. Brass: Deliveries, well into the 90% level.

Steven A. Brass: A plan for FY24 in the Americas is always driven primarily by strong Latin American growth and that is playing out.

Steven A. Brass: South of WD-40 multi-use product in Canada decreased 13% period over period due to phasing associated with the discontinuation of our classic can delivery system and the implementation and conversion of smart straw in Canada.

Steve Brass: We have taken some short term pain in Canada to drive a very significant long term gain as we fully leverage our smart-strawing UD-reach formats. In America, the sales of W-40 specialists increased across most regions and were up 10% compared to the prior year, primarily due to new distribution and the timing of customer orders in the United States. In total, our America's segment made up 49% of our global business in the third quarter. Turning to our sales results in our mayor, which includes Europe, India, the Middle East, Africa, South, and I may have grew approximately 13% over the prior year to 59.4 million.

Steven A. Brass: We have taken some short-term pain in Canada to drive a very significant long-term gain as we fully leverage our SmartStraw and ED-REACH format. In America, sales of WD-40 Specialists increased across most regions and were up 10% compared to the prior year, primarily due to new distribution and the timing of customer orders in the United States. In total, our America segment made up 49% of our global business in the third quarter. Turning to our sales results in IMEA, which includes Europe, India, the Middle East, and Africa, sales in IMEA grew approximately 13% over the prior year to $59.4 million. Currency fluctuations positively impacted our sales in IMEA; then, on a constant currency basis, they would have increased 10%. The growth was driven in large part by higher sales As a reminder, volumes last year were unfavorably impacted by price increases we'd implemented, resulting in temporarily reduced demand as customers adjusted to these prices.

Steven A. Brass: We have taken some short-term pain in Canada to drive a very significant long-term gain as we fully leverage our smart straw and ED-REACH formats.

Steven A. Brass: In America, sales of WD-40 Specialists increased across most regions and were up 10% compared to the prior year, primarily due to new distribution and the timing of customer orders in the United States.

Steven A. Brass: In total, our Americas segment made up 49% of our global business in the third quarter.

Steven A. Brass: Turning to our sales results in IMEA, which includes Europe , India, the Middle East and Africa.

Steven A. Brass: Cells in IMEA grew approximately 13% over the prior year to 59.4 million. Currency fluctuations positively impacted our cells in IMEA, and on a constant currency basis, cells would have increased 10%.

Steve Brass: Current situation has positively impacted our South and I may have, and a constant currency basis sales would have increased 10%. The growth was driven in large part by higher sales of W-40 multi-use product, which increased 17%, and W-40 specialists, which increased 11%. As a reminder, volumes last year were unfavorably impacted by price increases with implemented, resulting in temporarily reduced demand, as customers adjusted to these prices. The combination of recovering volumes and increased selling prices resulted in higher sales across most regions in our mayor this quarter. In a third quarter, we saw double-digit growth of W-40 multi-use product in nearly all our major direct markets, with particularly strong growth in France and Italy, which increased 1.4 million and 1.2 million, respectively.

Steven A. Brass: The growth was driven in large part by higher sales of WD-40 multi-use products, which increased 17%, and WD-40 specialists, which increased 11%.

Steven A. Brass: As a reminder, volumes last year were unfavorably impacted by price increases we'd implemented, resulting in temporarily reduced demand as customers adjusted to these prices. The combination of recovering volumes and increased selling prices resulted in higher sales across most regions in RMEA this quarter.

Steven A. Brass: The combination of recovering volumes and increased selling prices resulted in higher sales across most regions in OMA this quarter. In the third quarter, we saw double-digit growth of WD-40 multi-use product in nearly all RMAA direct markets, with particularly strong growth in France and Italy, which increased $1.4 million and $1.2 million, respectively. In our AMEA distribution market, sales are up 14%, primarily due to recovering volumes and increased selling prices, resulting in higher sales across most regions.

Steven A. Brass: In the third quarter, we saw double-digit growth of WD-40 multi-use products in nearly all RMAA direct markets, with particularly strong growth in France and Italy, which increased $1.4 million and $1.2 million, respectively.

Steve Brass: In our mayor, the stability market sales are of 14%, primarily due to recovering volumes and increased selling prices, resulting in higher sales across most regions. Sales of W-40 specialists increased across most regions of our mayor, due to the combined impact of higher sales volume, due to increased distribution and stronger levels of demand, after customers adjusted to price increases. The growth in maintenance products was partly offset by a decline of 19% in home care and cleaning product brands, which are not a strategic focus for us, and are expected to decline due to our shift in focus on core operations during the ongoing sales process.

Steven A. Brass: In our AMEA distributing market, sales are up 14%, primarily due to recovering volumes and increased selling prices, resulting in higher sales across most regions.

Steven A. Brass: Cells of WD-40 specialists increased across most regions of Imer and were up 11% compared to the prior year due to the combined impact of higher sales volume due to increased distribution and stronger levels of demand after customers adjusted to price increases.

Steven A. Brass: Cells of WD-40 specialists increased across most regions of Imer and were up 11% compared to the prior year due to the combined impact of higher cells volume due to increased distribution and stronger levels of demand after customers adjusted to price increases.

Steven A. Brass: The growth in maintenance products is partly offset by a decline of 19% in home care and cleaning product brands, which are not a strategic focus for us and are expected to decline due to our shift in focus on core operations during the ongoing sales process. In total, our mass segment made up 38% of our global business in the third quarter, to Asia Pacific, which includes Australia, China, and other countries in the Asia region. South and Asia-Pacific grew by approximately 14% over the prior year to 20.5 million.

Steven A. Brass: The growth in maintenance products is partly offset by a decline of 19% in home care and cleaning product brands, which are not a strategic focus for us and are expected to decline due to our shift in focus on core operations during the ongoing sales process.

Steve Brass: In total, our mayor segment made up of 38% of our global business in the third quarter. So into Asia Pacific, which includes Australia, China and other countries in the Asia region, thousands of Asia Pacific grew approximately 14% over the prior year to 20.5 million. The growth was driven by a higher sales of W-40 multi-use products, which were up 11%; higher sales of W-40 specialists, which were up 30%; and higher sales of home care and cleaning product brands, which were up 28%. Cent. The growth of maintenance products in Asia Pacific was written in large part by higher sales of WD-40 Multi-Use Products and WD-40 Specialist in China.

Steven A. Brass: In total, our mass segment made up 38% of our global business in the third quarter.

Steven A. Brass: Turn to Asia-Pacific, which includes Australia, China, and other countries in the Asia region.

Steven A. Brass: South and Asia-Pacific grew approximately 14% over prior year to 20.5 million.

Steven A. Brass: The growth was driven by higher sales of WD-40 multi-use products, which were up 11%, higher sales of WD-40 specialists, which were up 30%, and higher sales of home care and cleaning product brands, which were up 28%. The growth of maintenance products in Asia Pacific was driven in large part by higher sales of WD-40 multi-use products and WD-40 specialists in China. In China, sales of maintenance products were up 29% primarily due to successful brand building programs and the timing of custom orders. On a constant currency basis, sales for China would have increased by 35%.

Steven A. Brass: The growth was driven by higher sales of WD-40 multi-use products, which were up 11%, higher sales of WD-40 specialists, which were up 30%, and higher sales of home care and cleaning product brands, which were up 28%.

Steven A. Brass: The growth of maintenance products in Asia-Pacific was driven in large part by higher sales of WD-40 multi-use products and WD-40 specialists in China.

Steve Brass: In China, thousands of maintenance products were up 29%, so I married you to successful brand building programs in the timing of custom orders. On a constant currency basis, South for China would have increased by 35%. We've consistently shown how effective brand building drives success in markets worldwide. Over the last few years, we've continued to invest like the higher levels of A&P in brand building activities in priority markets like China. If we push our A&P investment from 5% to 6% to 8% to 10% in disciplines brand building and sampling programs in such high growth target markets, we experience higher levels of growth in returns like we are experiencing in China.

Steven A. Brass: In China, sales of maintenance products were up 29%, primarily due to successful brand building programs and the timing of custom orders. On a constant currency basis, sales for China would have increased by 35%.

Steven A. Brass: We've consistently shown how effective brand-building drives success in markets worldwide. For the last few years, we've continued to invest slightly higher levels of A&P in brand-building activities in priority markets like China. If we push our A&P investment from 5% to 6% to 8% to 10% in disciplined brand building and sampling programs in such high-growth target markets, we experience higher levels of growth and returns like we are experiencing in China. We're regularly focused on building brand awareness through targeted sampling programs, or what we refer to internally as putting cans in the hands, and expanding our distribution network, a simple yet effective strategy that has worked for decades.

Steven A. Brass: We've consistently shown how effective brand building drives success in markets worldwide. Over the last few years, we've continued to invest slightly higher levels of A&P in brand building activities in priority markets like China.

Steven A. Brass: If we push our A&P investment from 5% to 6% to 8% to 10% in disciplined brand building and sampling programs in such high growth target markets, we experience higher levels of growth and returns like we are experiencing in China.

Steve Brass: We'll regularly focus on building brand awareness, who target sampling programs or what we refer to internally as putting cans in hand and expanding our distribution network, as simple yet effective strategies will work for decades. As a result, we continue to see strong growth in returns. In our Asia Pacific distributor market, sales are up 7%, primarily due to successful brand building programs in certain regions and the timing of customer orders. The growth has driven by higher sales of WD-40 multi-use products, which are up 5%, and higher sales of WD-40 specialists, which are 33%. In Australia, we experience a very strong quarter with solid sales of both WD-40 multi-use product and WD-40 specialists, which increased 6% and 40% respectively.

Steven A. Brass: We're regularly focused on building brand awareness through targeted sampling programs or what we refer to internally as putting cans in hand and expanding our distribution network, a simple yet effective strategy that has worked for decades. As a result, we continue to see strong growth and returns.

Steven A. Brass: As a result, we continue to see strong growth and return. In our Asia-Pacific distributor market, sales are up 7%, primarily due to successful brand building programs in certain regions and the timing of customer orders. The growth is driven by higher sales of WD-40 multi-use products, which are up 5%, and higher sales of WD-40 specialists, which are up 33%. In Australia, we experienced a very strong quarter with solid sales of both WD-40 multi-use products and WD-40 specialists, which increased 6% and 14%, respectively.

Steven A. Brass: In our Asia-Pacific distributor market, sales are up 7%, primarily due to successful brand building programs in certain regions and the timing of customer orders. The growth was driven by higher sales of WD-40 multi-use products, which were up 5%, and higher sales of WD-40 specialists, which were up 33%.

Steven A. Brass: In Australia, we experienced a very strong quarter with solid sales of both WD-40 multi-use products and WD-40 specialists, which increased 6% and 14% respectively.

Steve Brass: Recently, volumes have been unfavorably impacted by price increases, which were implemented in Australia, which resulted in temporarily reduced demand. The combination of recovering volumes and successful brand building programs have resulted in a strong quarter. In addition, home care and cleaning product sales increased by 28% in Australia. On Novak Carpet cleaning product portfolio, both the robust brand presence, the solid competitive edge, and significant growth opportunities. In addition, our home care and cleaning brands provide our Australian subsidiary economies of scale. On a constant currency basis, sales for Australia would have increased by 14%. In total, our Asia Pacific segment made up 13% of our global business in the third quarter.

Steven A. Brass: Recently, volumes had been unfavorably impacted by price increases we'd implemented in Australia, which resulted in temporarily reduced demand. The combination of recovering volumes and successful brand building programs has resulted in a strong quarter. In addition, home care and cleaning product sales increased by 28% in Australia. The Novac carpet cleaning product portfolio boasts a robust brand presence, a solid competitive edge, and significant growth opportunities.

Steven A. Brass: Recently, volumes have been unfavorably impacted by price increases we'd implemented in Australia, which resulted in temporarily reduced demand. The combination of recovering volumes and successful brand building programs have resulted in a strong quarter.

Steven A. Brass: In addition, home care and cleaning product sales increased by 28% in Australia. Our NOVAC carpet cleaning product portfolio boasts a robust brand presence, a solid competitive edge, and significant growth opportunities. In addition, our home care and cleaning brands provide our Australian subsidiary economies of scale.

Steven A. Brass: On a constant currency basis, sales for Australia would have increased by 14%.

Steven A. Brass: In total, our Asia-Pacific segment made up 13% of our global business in the third quarter.

Steve Brass: Now that we discussed the progress we've made against our Muslim battles and provide you with an update on the strategic enableers that support our 4x4 strategic framework. Our Muslim battles focus on what we do to increase sales and profitability. We look at these Muslim battles as long-term growth drivers, and therefore we'll focus our discussion on the year-to-date results of these battles. Starting with Muslim battle number 1 lead geographic expansion, the year-to-date global sales and WD40 multi-use product, the 334 million, representing growth of 11% over the prior year. To experience strong sales of our signature multi-use product brand, in all three trade blocks, with 18% growth in our man, 7% growth in the Americas, and 5% growth in Asia Pacific.

Steven A. Brass: In addition, our home care and feeding brands provide our Australian subsidiary with economies of scale. On a constant currency basis, sales for Australia would have increased by 14%. In total, our Asia-Pacific segment made up 13% of our global business in the third quarter. Now, let me discuss the progress we've made against our Muslim battles and provide you with an update on the strategic enablers that support our 4x4 strategic framework. Our Muslim Battles focus on what we do to increase sales and profitability. We look at these Muslim Battles as long-term growth drivers, and therefore, we'll focus our discussion on the year-to-date results of these battles. Starting with Muscle and Battle No.

Steven A. Brass: Now let me discuss the progress we've made against our Muslim battles and provide you with an update on the strategic enablers that support our 4x4 strategic framework.

Steven A. Brass: Our Muslim Battles focus on what we do to increase sales and profitability. We look at these Muslim Battles as long-term growth drivers, and therefore, we'll focus our discussion on the year-to-date results of these battles.

Steven A. Brass: 1, Lead Geographic Expansion, year-to-date global sales of WD-40 multi-use product were $334 million, representing growth of 11% over the prior year. We experienced strong sales of our signature multi-use product brand in all three trade blocks with 18% growth in IMEA, 7% growth in the Americas, and 5% growth in Asia Pacific. We've made excellent progress in many key markets, with strong sales growth of 32% in Latin America, 29% in Benelux, 28% in Iberia, 27% in France, 23% in the Middle East, 22% in Italy, 14% in our Daech region, and 9% in China. The strong growth in Latin America is partially attributable to the acquisition of our Brazilian marketing distributor, which was a strategic decision that aligned with this Muslim

Steven A. Brass: Starting with Muslim Battle No. 1 lead geographic expansion, year-to-date global sales of WD-40 multi-use product were $334 million, representing growth of 11% over the prior year.

Steven A. Brass: We experience strong sales of our signature multi-use product brand in all three trade blocks with 18% growth in IMEA, 7% growth in the Americas and 5% growth in Asia Pacific.

Steve Brass: We've made excellent progress in many key markets. It's strong sales growth of 32% in Latin America, 29% in Benelux, 28% in Iberia, 27% in France, 23% in the Middle East, 22% in Italy, 14% in our DAC region, and 9% in China. The strong growth in Latin America is partially attributable to the acquisition of our Brazilian marketing distributor, which was a strategic decision that aligns the business in battle. Much of our initial growth we've seen this quarter issued to the departure from our prior agreement with Turo marketing, which was based on a royalty model. Moving to a direct market provided us with an immediate benefit to our top line, which we're realizing this quarter.

Steven A. Brass: We've made excellent progress in many key markets, with strong sales growth of 32% in Latin America, 29% in Benelux.

Steven A. Brass: 28% in Iberia, 27% in France, 23% in the Middle East, 22% in Italy, 14% in our DAC region, and 9% in China.

Steven A. Brass: The strong growth in Latin America is partially attributable to the acquisition of our Brazilian marketing distributor, which was a strategic decision that aligned with this Muslim battle.

Steven A. Brass: Much of the initial growth we've seen this quarter is due to the departure from our prior agreement with Turon Marketing, which was based on a royalty model. Moving to a direct market provided us with an immediate benefit to our top line, which we're realizing this quarter. For the first 12 months of direct operation, we expect the Brazil market to contribute revenue growth of more than $10 million due to this transition. This is a substantial increase over the growth expected under the old royalty-based business model. Over the median term, which is approximately 3 to 5 years, we expect to turn Brazil into a $20 million plus market. Cell growth in Latin America is also attributable to increased sales in Mexico.

Steven A. Brass: Much of our initial growth we've seen this quarter is due to the departure from our prior agreement with Turo Marketing, which was based on a royalty model.

Steven A. Brass: Moving to a direct market provided us with an immediate benefit to our top line, which we're realizing this quarter. For the first 12 months of direct operation, we expect the Brazil market to contribute revenue growth of more than $10 million due to this transition.

Steve Brass: So the first 12 months of direct operation, we expect to Brazil market to contribute revenue growth of more than ten million dollars due to this transition. This is a substantially increased over the growth expected under the old royalty-based business model. Over the median term, which is approximately three to five years, we expect to turn Brazil into a $20 million-plus market. South growth in Latin America is also attributable to increased sales in Mexico. The year-to-date sales of WD-40 multi-use product in Mexico increased 25 percent over the prior year. As you may recall, we successfully shifted from a distributor model to a direct market in Mexico in May 2020, and our revenues in Mexico have tripled since making that shift and are expected to have virtually quadrupled by the end of this fiscal year.

Steven A. Brass: This is a substantial increase over the growth expected under the old royalty-based business model. Over the median term, which is approximately three to five years, we expect to turn Brazil into a $20 million-plus market.

Steven A. Brass: Year-to-date sales of WD-40 multi-use product in Mexico increased 25% over the prior year. As you may recall, we successfully shifted from a distributor model to a direct market in Mexico in May 2020. Our revenues in Mexico have tripled since making that shift and are expected to have virtually quadrupled by the end of this fiscal year. Very similar to our investment strategy in China, we've consistently invested in brand building and expanding our distribution network in Mexico, and our investments are paying off.

Steven A. Brass: Cells growth in Latin America is also attributable to increased sales in Mexico. Year-to-date sales of WD-40 multi-use product in Mexico increased 25% over the prior year.

Steven A. Brass: As you may recall, we successfully shifted from a distributor model to a direct market in Mexico in May 2020, and our revenues in Mexico have tripled since making that shift and are expected to have virtually quadrupled by the end of this fiscal year.

Steve Brass: Where we similar to our investment strategy in China, we've consistently invested in brand building and expanding our distribution network in Mexico. No investments are paying off. So very pleased with our positive stats in our new historic markets in Brazil, Mexico, we believe this later fact-resition of the Brazil market was a game-changing opportunity for us. We will continue to assess additional markets to uncover further game-changing opportunities ahead.

Steven A. Brass: Very similar to our investment strategy in China, we've consistently invested in brand building and expanding our distribution network in Mexico and our investments are paying off.

Steven A. Brass: We're very pleased with our positive starts in our newest direct markets in Brazil and Mexico. We believe this latest acquisition of the Brazilian market was a game-changing opportunity for us. We will continue to assess additional markets to uncover further game-changing opportunities ahead. Next is Muslim Battle No.

Steven A. Brass: We're very pleased with our positive starts in our newest direct markets in Brazil and Mexico. We believe this latest acquisition of the Brazil market was a game-changing opportunity for us. We will continue to assess additional markets to uncover further game-changing opportunities ahead.

Steve Brass: Next is Muslim battle number two, accelerating preliminization. The year-to-date global sales of WD-40 Smart Stroll and Easy Reach when combined, $175 million, not $21 million or 14 percent over the prior year. For us, preliminization is a major contributor to our revenue growth as well as gross margin expansion, and our preliminized products are loved by end users around the world. In addition, our preliminized delivery systems are a major driver of growth, rough flagship brand, and contributed 61 per cent of WD-40 multi-use product growth year-to-date. Our implementation of WD-40 Smart Stroll next-generation in the Americas and a multiple packages in the mayor is contributing to the sales growth of premiumized products. This growth aligns with our long-term net sales comparing your growth rate target of greater than 10 per cent in reported currency for premiumized products.

Steven A. Brass: 2, Accelerating Premiumization. Here today, global sales of WD-40 Smart Straw and Easy Reach, when combined, were $175 million, up $21 million or 14% over the prior year. For us, premiumization is a major contributor to our revenue growth as well as gross margin expansion, and our premiumized products are loved by end-users around the world. In addition, our premiumized delivery systems are a major driver of growth for our flagship brand and have contributed 61% of WD-40 multi-use product growth year-to-date.

Steven A. Brass: Next is Muslim Battle No. 2, Accelerating Preliminarization.

Steven A. Brass: Here today, global sales of WD-40 Smart Straw and Easy Reach, when combined, were $175 million, up $21 million, or 14% over the prior year.

Steven A. Brass: For us, premiumization is a major contributor to our revenue growth as well as gross margin expansion and our premiumized products are loved by end-users around the world.

Steven A. Brass: In addition, our premiumized delivery systems are a major driver of growth for our flagship brand and contributed 61% of WD-40 multi-use product growth year to date.

Steven A. Brass: Our implementation of WD-40 SmartScore Next Generation in the Americas and in multiple packages in EMEA is contributing to the sales growth of premiumized products. This growth aligns with our long-term net sales compound annual growth rate target of greater than 10% in reported currency for premiumized products. Our third must-win battle is to drive WD-40 specialist growth. Here today, sales of WD-40 specialist products were nearly 54 million, top 11%.

Steven A. Brass: Our implementation of WD-40 SmartStore Next Generation in the Americas and in multiple packages in eMayer is contributing to the sales growth of premiumized products. This growth aligns with our long-term net sales compound annual growth rate target of greater than 10% in reported currency for premiumized products.

Steve Brass: Our third Muslim battle is to drive the WD-40 specialist growth. The year-to-date sales of WD-40 Specialist products for nearly $54 million, top 11 percent. We saw growth of WD-40 Specialist products across all three trade blocks, with particularly strong growth in our Mayor and Asia Pacific, where sales grew 15 per cent each. In China, we experienced spectacular growth of WD-40 Specialist for 47 per cent due to expanding distribution, new WD-40 Specialist product introduction to the region, as well as successful brand building programs. We continue to target a net sales companion your growth rate of greater than 15 per cent in reported currency for WD-40.

Steven A. Brass: Our third must-win battle is to drive WD-40 specialist growth. Here today, sales of WD-40 specialist products were nearly 54 million, top 11%.

Steven A. Brass: We saw growth for WD-40 specialist products across all three trade blocs, with particularly strong growth in Omaea and Asia Pacific, where sales grew 15% each. In China, we experienced spectacular growth in WD-40 specialist of 47% due to expanding distribution, new WD-40 specialist product introduction to the region, as well as successful brand building programs. We continue to target a net sales compound annual growth rate of greater than 15% in reported currency for WD-40. Our fourth and final Muslim battle is to accelerate digital commerce.

Steven A. Brass: We saw growth for WD-40 specialist products across all three trade blocs, with particularly strong growth in Omaya and Asia Pacific, where sales grew 15% each.

Steven A. Brass: In China, we experienced spectacular growth in WD-40 specialists of 47% due to expanding distribution, new WD-40 specialist product introduction to the region, as well as successful brand building programs.

Steven A. Brass: We continue to target a net sales compound annual growth rate of greater than 15% in reported currency for WD-40 specialists.

Steve Brass: Specialist.

Steve Brass: Our fourth and final Muslim battle is to accelerate digital commerce. We see this as an accelerator for all our other Muslim battles as it improves brand awareness and online engagement, leading to an improved customer experience and sails across all our trade channels. Some of our key objectives within this Muslim battle are to build our brand digitally, grow and develop the e-commerce peer play channel, accelerate growth of the only channel, and continue capability building for our employees. The year-to-date e-commerce sails were of 18% with double-digit growth across all three trade blocks.

Steven A. Brass: We see this as an accelerator for all our other must-win battles, as it improves brand awareness and online engagement, leading to an improved customer experience and sales across all our trades. Some of our key objectives in this Muslim battle are to build our brand digitally, grow and develop the e-commerce PurePlay channel, accelerate growth of the Omni channel, and continue capability building for our employees. Year-to-date, e-commerce sales were up 18% with double-digit growth across all three traders.

Steven A. Brass: Our fourth and final mission battle is to accelerate digital commerce.

Steven A. Brass: We see this as an accelerator for all our other must-win battles, as it improves brand awareness and online engagement, leading to an improved customer experience and sales across all our trade channels.

Steven A. Brass: Some of our key objectives within this Muslim battle are to build our brand digitally, grow and develop the e-commerce PurePlay channel, accelerate growth of the Omni channel, and continue capability building for our employees.

Steven A. Brass: Year-to-date, e-commerce sales were up 18% with double-digit growth across all three trade blocs.

Steve Brass: Turning to the second element of our four-by-four strategic framework or strategic enablers, our strategic enablers focus on operational excellence and support how we will achieve our Muslim battles. Strategic enabler number one is about ensuring a people-first mindset that culture begins at the very top of our organisation with our board of directors. Last month we shared that Greg Sandfort will retire from our board as of our next annual meeting of stockholders in December. Our board intends to nominate Eric Hachard as non-executive chair following Greg's departure. I'm very pleased that the board intends to appoint Eric to this role.

Steven A. Brass: I now turn to the second element of our 4x4 strategic framework, our strategic enablers. Our strategic enablers focus on operational excellence and support how we will achieve our must-win battle. Strategic Enablement No. 1 is about ensuring a people-first mindset. That culture begins at the very top of our organization with our Board of Directors. Last month, we shared that Greg Sandfort will retire from our board as of our next annual meeting of stockholders in December. Our board intends to nominate Eric Etchart as non-executive chairperson following Greg's departure.

Steven A. Brass: Turning to the second element of our 4x4 strategic framework, our strategic enablers. Our strategic enablers focus on operational excellence and support how we will achieve our must-win battles.

Steven A. Brass: Strategic Enablement No. 1 is about ensuring a people-first mindset. That culture begins at the very top of our organisation with our Board of Directors.

Steven A. Brass: Last month we shared that Greg Sandfort will retire from our board as of our next annual meeting of stockholders in December . Our board intends to nominate Eric Etchart as non-executive chair following Greg's departure.

Steven A. Brass: I'm very pleased that the board intends to appoint Eric to this role. His breadth of international finance, marketing, board, and management experience will provide the company valuable insights as we seek to accelerate our geographic expansion and remain steadfast in our commitment to good corporate governance. Eric also has strong appreciation for our culture here and leadership experience in ESG. Which brings us to strategic enabler number two, building a sustainable business for the future.

Steve Brass: His breadth of international finance, marketing, board, and management experience will provide the company valuable insights as we seek to accelerate our geographic expansion and remain steadfast in our commitment to good corporate governance. Eric Gauss has a strong appreciation for our culture here and leadership experience in ESG.

Steven A. Brass: I'm very pleased that the Board intends to appoint Eric to this role. His breadth of international finance, marketing, board and management experience will provide the company valuable insights as we seek to accelerate our geographic expansion and remain steadfast in our commitment to good corporate governance.

Steven A. Brass: Eric also has strong appreciation for our culture here and leadership experience in ESG.

Steve Brass: Which brings us to strategic enabler number two: so the sustainable business for the future. We'll have a very robust update for your neighbour on our next earnings call because we intend to post our next ESG report in early Fiscal Year 2025. And our reports will be articulating our progress on key ESG matters. In addition, we continue to make great progress in our global repair and replace campaign. In 2021, there will be 40 company launches to repair challenge. An online contest that inspires millions of doers, makers, fixers, and builders across more than 40 countries to show how they extend the lifespan of their tools, water and down equipment, bicycles, cars, or just about anything else to keep them in circulation for longer.

Steven A. Brass: Which brings us to strategic enabler number two, build a sustainable business for the future.

Steven A. Brass: We'll have a very robust update for you on this enabler at our next earnings call because we intend to post our next CSG report in early fiscal year 2025. In that report, we'll be articulating our progress on key ESG matters. In addition, we continue to make great progress in our global repair and replace campaign. In 2021, WD-40 Company launched the Repair Challenge, an online content that inspires millions of doers, makers, fixers, and builders across more than 40 countries to show how they extend the lifespan of their tools, worn down equipment, bicycles, cars, or just about anything else to keep them in circulation for longer.

Steven A. Brass: We'll have a very robust update for you on this enabler at our next earnings call because we intend to post our next CSG report in early fiscal year 2025.

Steven A. Brass: In our report, we'll be articulating our progress on key ESG matters. In addition, we continue to make great progress in our global repair and replace campaign.

Steven A. Brass: To date, the Repair Challenge has created over half a billion marketing impressions with end users worldwide. Strategic enabler number three is achieving operational excellence in the supply chain. This strategic enabler is meant to continue our quest for operational excellence. To support this strategic enabler, we've established a set of global supply chain KPIs that are being utilized by all three trade blocs. This allows us to understand our operational performance at a deeper level in all regions. One important KPI is achieving on time and in full delivery.

Steven A. Brass: In 2021, WD-40 Co launched the Repair Challenge, an online contest that inspires millions of doers, makers, fixers and builders.

Steven A. Brass: across more than 40 countries.

Steven A. Brass: to show how they extend the lifespan of their tools, wool and bound equipment.

Steve Brass: To date, the repair challenge has created over half of a billion marketing impressions with end users worldwide.

Steven A. Brass: bicycles, cars, or just about anything else to keep them in circulation for longer. To date, the Repair Challenge has created over half a billion marketing impressions with end-users worldwide.

Steve Brass: Strategic enabler number three is achieving operational excellence in supply chain. This strategic enabler is meant to continue our quest for operational excellence. To support this strategic enabler with established a set of global supply chain KPIs that are being utilized by all three trade locks. This allows us to understand our operational performance at a deeper level in all regions. One important KPIs achieving on time and info delivery, and I'm happy to share with you the customer motive scores to have a 95% aggregate in third quarter. We've also been working on several key projects this year that support the strategic enabler.

Speaker Change: Strategic enabler number three is achieving operational excellence in supply chain.

Speaker Change: This strategic enabler is meant to continue our quest for operational excellence. To support this strategic enabler we've established a set of global supply chain KPIs that are being utilized by all three trade blocs. This allows us to understand our operational performance at a deeper level in all regions.

Steven A. Brass: And I'm happy to share with you that customer OTIV scores were over 95% in aggregate in the third quarter. We've also been working on several key projects this year that support the strategic enabler. Since we outsource all our manufacturing, it's crucial for us to take responsibility for and leadership in ensuring that our entire value chain, from raw materials to customers and end users, meets the highest standards we set for ourselves and our partner organizations. We are committed to ensuring that our products are manufactured and delivered in accordance with the highest ethical and professional standards. Good governance is the first step towards good social and environmental responsibility in the supply chain.

Speaker Change: One important KPI is achieving on-time and in-flow delivery, and I'm happy to share with you that customer OTIV scores were over 95% in aggregate in the third quarter.

Steve Brass: Since we outsourced all our manufacturing, it's crucial for us to take responsibility and leadership in ensuring that our internal value chain, from raw materials to customers and end users, meets the higher standards we set for ourselves and our partner organization. We are committed to ensuring that our products are manufactured and delivered in accordance with the highest ethical and professional standards. Good governance is the first step towards good social and environmental responsibility in the supply chain. Therefore, we have recently published a revised supply occurred of conduct and are currently working to develop and roll out a new responsible sourcing policy so we can more clearly communicate how the supply chain can positively contribute toward the areas of environmental and social responsibility.

Speaker Change: We've also been working on several key projects this year that support the Strategic Enabler.

Speaker Change: Since we outsource all our manufacturing, it's crucial for us to take responsibility and leadership in ensuring that our entire value chain, from raw materials to customers and end-users, meets the highest standards we set for ourselves and our partner organizations.

Speaker Change: We are committed to ensuring that our products are manufactured and delivered in accordance with the highest ethical and professional standards. Good governance is the first step towards good social and environmental responsibility in the supply chain.

Steven A. Brass: Therefore, we recently published a revised supplier code of conduct and are currently working to develop and roll out a new responsible sourcing policy so that we can more clearly communicate how the supply chain can positively contribute to the areas of environmental and social responsibility. And finally, Strategic Enablement No. 4 is to drive productivity via enhanced systems, of which Sara will provide an update. With that, I'll now turn the call over to Sara. Thanks, Steve.

Speaker Change: Therefore we've recently published a revised supplier code of conduct and are currently working to develop and roll out a new responsible sourcing policy so we can more clearly communicate how the supply chain can positively contribute toward the areas of environmental and social responsibility.

Steve Brass: And finally, Strategic and Aden no. 4 is to drive for activity byron and systems, which Sara will provide you an update on.

Speaker Change: And finally, Strategic Enablement No. 4 is to drive productivity via an Android system, which Sara will provide you an update on.

Sara Hyzer: With that, I'm now turn the call over to Sara. Thanks, Steve. I have several updates for you today, including some additional thoughts around the sale of the home care and cleaning business.

Sara Hyzer: I have several updates for you today, including some additional thoughts around the sale of the home care and cleaning business. But before I begin, I would like to provide an update on our ERP implementation, which has been a significant investment under our strategic enabler number four, which is to drive productivity via enhanced, In the second quarter, we went live with the first phase of our ERP system, which is now in place over a substantial portion of our business, including the U.S., Latin America, and Asia regional distributor businesses. Each month that goes by, we experience fewer and fewer issues.

Speaker Change: With that, I'll now turn the call over to Sara.

Sara: Thanks Steve. I have several updates for you today including some additional thoughts around the sale of the home care and cleaning business.

Sara Hyzer: So before I begin, I would like to provide an update on our ERP implementation, which has been a significant investment under our Strategic Enableer No. 4, which is to drive productivity via enhanced systems. In the second quarter, we went live with the first phase of our ERP system, which is now in place over a substantial portion of our business, including the US, Latin America, and Asia regional distributor businesses. Each month that goes by, we experience fewer and fewer issues. And although we did experience some minor disruptions in the third quarter, I am pleased to share that most of the critical issues have subsided by the end of the quarter.

Sara Hyzer: And although we did experience some minor disruptions in the third quarter, I am pleased to share that most of the critical issues have subsided by the end of the quarter. We are currently phasing some of our functional teams out of hypercare, which is an indication of the stability of the system. This is a very positive sign and a significant milestone for our ERP team. We know there is still work to do and have several enhancements that are already being worked on, which is not unexpected at this phase of the project. Most importantly, we have gained numerous learning moments from this implementation, allowing us to make process improvements and become more proactive.

Sara: But before I begin, I would like to provide an update on our ERP implementation, which has been a significant investment under our strategic enabler number four, which is to drive productivity via enhanced systems.

Sara: In the second quarter, we went live with the first phase of our ERP system, which is now in place over a substantial portion of our business, including the U.S., Latin America, and Asia regional distributor businesses.

Sara: Each month that goes by, we experience fewer and fewer issues. And although we did experience some minor disruptions in the third quarter, I am pleased to share that most of the critical issues have subsided by the end of the quarter.

Sara Hyzer: We are currently facing some of our functional teams out of hypercare, which is an indication of the stability of the system. This is a very positive sign and a significant milestone for our ERP team. We know there's still work to do and have several enhancements that are already being worked on, which is not unexpected at this phase of the project. Most importantly, we have gained numerous learning moments from this implementation, allowing us to make process improvements and become more proactive.

Sara: We are currently phasing some of our functional teams out of hypercare, which is an indication of the stability of the system. This is a very positive sign and a significant milestone for our ERP team.

Sara: We know there is still work to do and have several enhancements that are already being worked on, which is not unexpected at this phase of the project. Most importantly, we have gained numerous learning moments from this implementation, allowing us to make process improvements and become more proactive.

Sara Hyzer: I want to acknowledge and thank our employees for their ongoing diligence in managing through this implementation. Our Strategic Enabler No. 4 is much more than an ERP system. We are making foundational investments in systems and data that will allow us to grow faster. For example, we have rolled out Salesforce in the US and will be expanding that further in the near term, driving sales efficiencies and effectiveness and helping us reduce operating costs. We also know that use of data analytics and automated tools leveraging data is increasing and can be a real enabler for the business.

Sara Hyzer: I want to acknowledge and thank our employees for their ongoing diligence and management through this implementation. Our strategic enabler number four is much more than an ERP. We are making foundational investments in systems and data that will allow us to grow faster. For example, we have rolled out Salesforce in the U.S., and we'll be expanding that further in the near term, driving sales efficiencies and effectiveness and helping us reduce operating costs.

Sara: I want to acknowledge and thank our employees for their ongoing diligence in managing through this implementation.

Sara: Our strategic enabler number four is much more than an ERP system.

Sara: We are making foundational investments in systems and data that will allow us to grow faster.

Sara: For example, we have rolled out Salesforce in the U.S., and we'll be expanding that further in the near term, driving sales efficiencies and effectiveness and helping us reduce operating costs.

Sara Hyzer: We also know that the use of data analytics and automated tools leveraging data is increasing and can be a real enabler for the business. The foundational work we are doing now around data governance, centralizing our data architecture, and data quality management will allow our people to leverage our data quicker and drive better decisions.

Sara: We also know that use of data analytics and automated tools leveraging data is increasing and can be a real enabler for the business.

Sara Hyzer: The foundational work we are doing now around data governance, centralizing our data architecture and data quality management will allow our people to leverage our data quicker and drive better decision making.

Sara: The foundational work we are doing now around data governance, centralizing our data architecture, and data quality management will allow our people to leverage our data quicker and drive better decision making.

Sara Hyzer: We are making progress on the sale of our US and UK home care and cleaning product ramps. As a reminder, this business represents only approximately 4% of our total sales. Post-civests to share, WD-40 Company will be a more focused company with a higher sales growth and growth margin profile. We have engaged an investment bank, and they are currently in discussions with potential suitors on our behalf. While there are no certainties on identifying a buyer when going to the market, our expectation is that we will likely complete the divest share of these brands during fiscal year 2025.

Sara Hyzer: We are making progress on the sale of our U.S. and U.K. home care and cleaning product brands. As a reminder, this business represents only approximately 4% of our total sales. Post-divestiture, WD-40 Company will be a more focused company with higher sales growth and gross margin. We have engaged an investment bank, and they are currently in discussions with potential suitors on our behalf.

Sara: We are making progress on the sale of our U.S. and U.K. home care and cleaning product brands.

Sara: As a reminder, this business represents only approximately 4% of our total sales.

Sara: Post-divestiture, WD-40 Company will be a more focused company with a higher sales growth and gross margin profile.

Sara: We have engaged an investment bank and they are currently in discussions with potential suitors on our behalf.

Sara Hyzer: While there are no certainties about identifying a buyer when going to the market, our expectation is that we will likely complete the divestiture of these brands during fiscal year 2025. We will provide further updates on the divestiture process as appropriate. And now for an update on our business model. Our asset-light and dynamic business model has helped the company maintain a healthy financial position and generate strong returns for our stockholders for many years. And it continues to be our guiding light.

Sara: While there are no certainties on identifying a buyer when going to the market, our expectation is that we will likely complete the divestiture of these brands during fiscal year 2025.

Sara Hyzer: We will provide further updates on the divestiture process as appropriate.

Sara Hyzer: And now for an update on our business model. Our asset light and dynamic business model has helped the company maintain a healthy financial position and generate strong returns for our stockholders for many years. And it continues to be our guiding light. Our 55-30-25 business model is a long-term beacon that we will move toward and align with over time. In the short in the term, we think about each critical component of the model in a range.

Sara: We will provide further updates on the divestiture process as appropriate.

Sara: And now for an update on our business model.

Sara: Our asset light and dynamic business model has helped the company maintain a healthy financial position and generate strong returns for our stockholders for many years. And it continues to be our guiding light.

Sara Hyzer: Our 55-30-25 business model is a long-term beacon that we will move toward and align with. In the short and midterm, we think about each critical component of the model in a range. Let's start with our third quarter gross margin performance. We target a range of 50 to 55% for gross margin, and we have made significant progress to perform well within this range. In the third quarter, our growth margin was 53.1%, compared to 50.6% last year.

Sara: Our 55-30-25 business model is a long-term beacon that we will move toward and align with over time.

Sara: In the short and midterm, we think about each critical component of the model in a range.

Sara Hyzer: Let's start with our third quarter growth margin performance. We target a range of 50 to 55 percent for growth margin. And we have made significant progress to perform well within this range. In the third quarter, our growth margin was 53.1 percent, compared to 50.6 percent last year. This represents an improvement of 250 basis points, which was driven by a few factors. Growth margin benefited 160 basis points from favorable sales mix and other miscellaneous mix. Lower costs associated with specialty chemicals also positively impacted growth margin by 110 basis points. We are pleased to see that, for now, the inflationary environment has stabilized.

Sara: Let's start with our third quarter gross margin performance.

Sara: We target a range of 50 to 55% for gross margin, and we have made significant progress to perform well within this range.

Sara: In the third quarter, our gross margin was 53.1%, compared to 50.6% last year. This represents an improvement of 250 basis points, which was driven by a few factors.

Sara Hyzer: This represents an improvement of 250 basis points, which was driven by a few factors. Gross margin benefited 160 basis points from favorable sales mix and other miscellaneous. Lower costs associated with specialty chemicals also positively impacted growth margins by 110 basis points. We are pleased to see that, for now, the inflationary environment has stabilized. Gross margin was also positively impacted by 70 basis points from lower warehousing, distribution, and freight costs, primarily on the Americas side.

Sara: Growth margin benefited 160 basis points from favorable sales mix and other miscellaneous mix.

Sara: Lower costs associated with specialty chemicals also positively impacted growth margins by 110 basis points.

Sara Hyzer: Growth margin was also positively impacted by 70 basis points from low-aware housing, distribution, and freight costs, primarily in the America's segment. We have continued to reduce our inventory levels in the U.S., which is having a positive impact to our growth margin. Growth margin improved over prior year across all trade blocks. Within the Americas, growth margin improved 240 basis points over prior year to 50.6 percent. I may add, continues to expand growth margin, improving 280 basis points over prior year to 54.8 percent. And Asia-Pacific, again, turned in a strong growth margin performance, improving 130 basis points over the prior year to 57.6 percent.

Sara: We are pleased to see that, for now, the inflationary environment has stabilized.

Sara: Gross margin was also positively impacted by 70 basis points from lower warehousing, distribution, and freight costs, primarily in the America segment. We have continued to reduce our inventory levels in the U.S., which is having a positive impact to our gross margin.

Sara Hyzer: We have continued to reduce our inventory levels in the U.S., which is having a positive impact on our growth margin. Gross margin improved over the prior year across all trade blocks. Within the Americas, gross margin improved 240 basis points over the prior year to 50.6%. IMAEA continues to expand gross margin, improving 280 basis points over the prior year to 54.8%, and Asia Pacific again turned in a strong gross margin performance, improving 130 basis points over the prior year to 57.6%.

Sara: Gross margin improved over prior year across all trade blocks.

Sara: Within the Americas, growth margin improved 240 basis points over prior year to 50.6%.

Sara: IMAEA continues to expand gross margin, improving 280 basis points over prior year to 54.8%.

Sara: And Asia Pacific again turned in a strong gross margin performance, improving 130 basis points over the prior year to 57.6%.

Sara Hyzer: I am very pleased with how growth margin has held up through the duration of fiscal year 2024. And at this point, with less than one quarter to go, we do believe we will come in closer to the high end of the guidance range for growth margin.

Sara Hyzer: I am very pleased with how gross margin has held up through the duration of fiscal year 2024. And at this point, with less than one quarter to go, we do believe we will come in closer to the high end of the guidance range for gross margin. Based on the current trajectory, cost environment, and macro environment, we are targeting to achieve a gross margin of 55% by the end of fiscal year 2026. Now, turning to our cost of doing business, which we define as total operating expenses plus adjustments for certain non-cash expenses.

Sara: I am very pleased with how Gross Margin has held up through the duration of fiscal year 2024, and at this point, with less than one quarter to go, we do believe we will come in closer to the high end of the guidance range for Gross Margin.

Sara Hyzer: Based on the current trajectory, cost environment, and macro environment, we are targeting to achieve a growth margin of 55 percent by the end of fiscal year 2026.

Sara: Based on the current trajectory, cost environment, and macro environment, we are targeting to achieve gross margin of 55% by the end of fiscal year 2026.

Sara Hyzer: Now turning to our cost of doing business, which we define as total operating expenses less adjustments for certain non-tash expenses, and is primarily comprised of investments in our employees, investments in our brand, and freight expense. As we continue to grow our top line, we also remain focused on operating efficiently, and sustaining the WD-40 Company economy. As we get more operational leverage, we expect the cost of doing business to perform within our targeted range of 30 to 35 percent over time. For the third quarter, our cost of doing business was 34 percent, as compared to 32 percent in the prior year.

Sara: Now turning to our cost of doing business, which we define as total operating expenses plus adjustments for certain non-cash expenses, and is primarily comprised of investments in our employees, investments in our brand, and freight expense.

Sara Hyzer: And it's primarily comprised of investments in our employees, investments in our brand, and freight expenses. As we continue to grow our top line, we also remain focused on operating efficiently and Sustaining the WD-40 Company Economy. As we get more operational leverage, we expect the cost of doing business to perform within our targeted range of 30 to 35% over time. For the third quarter, our cost of doing business was 34% as compared to 32% in the prior year. The increase was primarily driven by increases in employee-related costs due to higher accrued incentive compensation, annual compensation increases, and higher headcount.

Sara: As we continue to grow our top line, we also remain focused on operating efficiently.

Sara: and Sustaining the WD-40 Company Economy.

Sara: As we get more operational leverage, we expect the cost of doing business to perform within our targeted range of 30 to 35 percent over time.

Sara: For the third quarter, our cost of doing business was 34%, as compared to 32% in the prior year.

Sara Hyzer: The increase was primarily driven by increases in employee-related costs due to higher accrued incentive compensation, annual compensation increases, and higher headcounts. We also experienced increased and professional services, including costs associated with our ERP implementation and the acquisition of our Brazilian distributor. Investments in advertising and promotional activities or AMP increased over the prior year quarter as we continue to invest in brand building activities and make investments that support long-term profitable growth. As a percentage of sales, AMP investments was 6%, compared to 5.4% in the prior year. Our AMP investments are always impacted by phasing between quarters, and we still expect the full year to be within our guidance of 5% to 6%.

Sara: The increase was primarily driven by increases in employee-related costs due to higher accrued incentive compensation, annual compensation increases, and higher headcounts.

Sara Hyzer: We also experienced an increase in professional services, including costs associated with our ERP implementation and the acquisition of our Brazilian distributor. Investments in Advertising and Promotional Activities, or AMP, increased over the prior year quarter as we continue to invest in brand building activities and make investments that support long-term profitable growth. As a percentage of sales, A&P investments were 6% compared to 5.4% in the prior year. However, our A&P investments are always impacted by phasing between quarters, and we still expect the full year to be within our guidance of five to six percent.

Sara: We also experienced increase in professional services, including costs associated with our ERP implementation and the acquisition of our Brazilian distributor.

Sara: Investments in Advertising and Promotional Activities, or AMP, increased over the prior year quarter as we continue to invest in brand building activities and make investments that support long-term profitable growth.

Sara: As a percentage of sales, A&P investments was 6% compared to 5.4% in the prior year. Our A&P investments are always impacted by phasing between quarters, and we still expect the full year to be within our guidance of 5 to 6%.

Sara Hyzer: Turning now to adjusted EBITA margin, while adjusted EBITA margin has been under pressure due to the inflationary environment and the strategic investments we are making, we continue to target an EBITA margin range of between 20 and 25% over the longer term. For the third quarter, adjusted EBITA margin was 19%, which was relatively constant compared to the prior year.

Sara Hyzer: Turning now to Adjusted EBITDA Margin. While adjusted EBITDA margin has been under pressure due to the inflationary environment and the strategic investments we are making, we continue to target an EBITDA margin range of between 20 and 25% over the longer term. For the third quarter, adjusted EBITDA margin was 19%, which was relatively constant compared to the prior year.

Sara: Turning now to adjusted EBITDA margin. While adjusted EBITDA margin has been under pressure due to the inflationary environment and the strategic investments we are making, we continue to target an EBITDA margin range of between 20 and 25 percent over the longer term.

Sara: For the third quarter, adjusted EBITDA margin was 19%, which was relatively constant compared to the prior year.

Sara Hyzer: Now let's discuss net income in EPS. Net income of 19.8 million improved to approximately 1 million, or 5%, from prior year. On a constant currency basis, net income would have increased 4% compared to the prior year. Our net income reflects the provision of income tax rate of 23.2%. Deluted earnings per common share for the quarter were $1.46 compared to $1.38 in the prior year. Deluted EPS reflects 13.6 million weighted average shares outstanding this quarter, which was essentially flat compared to the prior year.

Sara Hyzer: Now let's discuss Net Income and EPS. Net income of $19.8 million improved by approximately $1 million or 5% from the prior year. On a constant currency basis, net income would have increased 4% compared to the prior year. Our net income reflects a provision of income tax rate of 23.2%. Adjusted earnings per common share for the quarter were $1.46 compared to $1.38 in the prior year.

Sara: Now let's discuss net income and EPS.

Sara: Net income of $19.8 million, improved approximately $1 million, or 5% from prior year.

Sara: On a constant currency basis, net income would have increased 4% compared to the prior year.

Sara: Our net income reflects a provision of income tax rate of 23.2%.

Sara: Deluded earnings per common share for the quarter were $1.46 compared to $1.38 in the prior year.

Sara: Diluted EPS reflects 13.6 million weighted average shares outstanding this quarter, which was essentially flat compared to the prior year.

Sara Hyzer: Now we'll discuss the word about our balance sheet and capital allocation strategy. The company's financial condition and liquidity remain strong. And our capital allocation strategy includes the comprehensive approach to balance investing in long-term growth while providing strong returns to our stockholders. We continue to return capital to our stockholders through regular dividends and buybacks. Annual dividends will continue to be our priority and are targeted at greater than 50% of earnings. On June 18, our Board of Directors approved a quarterly cash dividend of $0.88 per share. During the third quarter, we repurchased 11,250 shares of our stock under our current share repurchase plan at a total cost of approximately $2.8 million.

Sara Hyzer: Diluted EPS reflects 13.6 million weighted average shares outstanding this quarter, which was essentially flat compared to the prior year. Now we'll discuss the word about our balance sheet and capital allocation strategy. The company's financial condition and liquidity remain strong, and our capital allocation strategy includes a comprehensive approach to balance investing and long-term growth while providing strong returns to our stockholders. We continue to return capital to our stockholders through regular dividends and buybacks. Annual dividends will continue to be our priority and are targeted at greater than 50% of earnings. On June 18, our Board of Directors approved a quarterly cash dividend of $0.88 per share.

Speaker Change: Now we'll discuss the work about our balance sheet and capital allocation strategy.

Speaker Change: The company's financial condition and liquidity remain strong, and our capital allocation strategy includes a comprehensive approach to balanced investing and long-term growth while providing strong returns to our stockholders.

Speaker Change: We continue to return capital to our stockholders through regular dividends and buybacks.

Speaker Change: Annual dividends will continue to be our priority and are targeted at greater than 50% of earnings.

Speaker Change: On June 18th, our Board of Directors approved a quarterly cash dividend of $0.88 per share.

Sara Hyzer: During the third quarter, we repurchased 11,250 shares of our stock under our current share repurchase plan at a total cost of approximately $2.8 million. We will continue to be active in the market and expect to repurchase at least enough shares to offset shares issued for equity compensation. We continue to make progress in lowering our inventory levels, which we had invested in to stabilize our supply chain in prior years. Our inventory levels peaked in the first quarter of fiscal year 2023, and since then, we have reduced our inventory by nearly $43 million, or 36%. Our cash flow from operations year-to-date for fiscal year 2024 was approximately $65 million, and we elected to use approximately $12 million of that cash to pay down a portion of our short-term, higher interest rate borrowing.

Speaker Change: During the third quarter, we repurchased 11,250 shares of our stock under our current share repurchase plan at a total cost of approximately $2.8 million.

Sara Hyzer: We will continue to be active in the market and expect to repurchase at least enough shares to offset shares issued for equity compensation. We continue to make progress in lowering our inventory levels, which we had invested in to stabilize our supply chain in prior years. Our inventory levels peaked in the first quarter of fiscal year 2023, and since then we have reduced inventory by nearly $43 million, or 36%. Our cash flow from operations year to date for fiscal year 2024 was approximately $65 million, and we elected to use approximately $12 million of that cash to pay down a portion of our short-term higher interest rate borrowings.

Speaker Change: We will continue to be active in the market and expect to repurchase at least enough shares to offset shares issued for equity compensation.

Speaker Change: We continue to make progress in lowering our inventory levels, which we had invested in to stabilize our supply chain in prior years.

Speaker Change: Our inventory levels peaked in the first quarter of fiscal year 2023, and since then, we have reduced inventory by nearly $43 million, or 36%.

Speaker Change: Our cash flow from operations year to date for fiscal year 2024 was approximately $65 million and we elected to use approximately $12 million of that cash to pay down a portion of our short-term higher interest rate borrowings.

Sara Hyzer: Our intent is to continue to pay down higher interest rate borrowings under the current interest rate environment in the near future.

Sara Hyzer: Our intent is to continue to pay down higher interest rate borrowings under the current interest rate environment in the near term. That concludes my discussion of our reported results. Let me now provide an update on our guidance. We are pleased that the business is performing in line with our expectations. We continue to believe our current guidance is our best estimate.

Speaker Change: Our intent is to continue to pay down higher interest rate borrowings under the current interest rate environment in the near term.

Sara Hyzer: I conclude my discussion on our reported results.

Sara Hyzer: And for that reason, we are reiterating our outlook for fiscal year 2024 today. Net sales growth is projected to be between 6% and 12%, with net sales between $570 million and $600 million at constant current. Gross margin is expected to be between 51.5 and 53%. However, as I mentioned earlier, we do believe we will come in closer to the high end of the guidance range. Advertising and promotion investment is projected to be between 5 and 6% of net sales. The provision for income tax is expected to be between 23 and 24%.

Sara Hyzer: Let me now provide an update on our guidance. We are pleased that the business is performing in line with our expectations. We continue to believe our current guidance is our best estimate, and for that reason, we are reiterating our outlook for fiscal year 2024 today. Net sales growth is projected to be between 6 and 12 percent, with net sales between 570 million and 600 million in constant currency. Gross margin is expected to be between 51.5 to 53 percent; however, as I mentioned earlier, we do believe we will come in closer to the high end of the guidance range.

Speaker Change: That concludes my discussion on our reported results. Let me now provide an update on our guidance.

Speaker Change: We are pleased that the business is performing in line with our expectations.

Speaker Change: We continue to believe our current guidance is our best estimate, and for that reason, we are reiterating our outlook for fiscal year 2024 today.

Speaker Change: Net sales growth is projected to be between 6 and 12 percent with net sales between 570 million and 600 million in constant currency.

Speaker Change: Gross margin is expected to be between 51.5 to 53%. However, as I mentioned earlier, we do believe we will come in closer to the high end of the guidance range.

Sara Hyzer: Advertising and promotion investment is projected to be between 5 and 6 percent of net sales. The provision for income tax is expected to be between 23 and 24 percent. Net income is expected to be between 67.7 million and 71.8 million, and diluted earnings per share is expected to be between $5.530, which is based on an estimated 13.6 million weighted average shares outstanding. Also, as a reminder, this guidance assumes no major changes to the current economic environment.

Speaker Change: Advertising and promotion investment is projected to be between 5% and 6% of net sales.

Speaker Change: The provision for income tax is expected to be between 23 and 24%.

Sara Hyzer: Net income is expected to be between $67.7 million and $71.8 million, and diluted earnings per share is expected to be between $5 and $5.30, which is based on an estimated 13.6 million weighted average shares outstanding. Also, as a reminder, this guidance assumes no major changes to the current economic environment. However, unanticipated inflationary headwinds and other unforeseen events may affect our view of fiscal year 2024. That completes the financial overview. Now I would like to turn the call back to you. Thank you, Sara, for that update.

Speaker Change: Net income is expected to be between $67.7 million and $71.8 million, and diluted earnings per share is expected to be between $5.00 and $5.30, which is based on an estimated $13.6 million weighted average shares outstanding.

Speaker Change: Also, as a reminder, this guidance assumes no major changes to the current economic environment. Unanticipated inflationary headwinds and other unforeseen events may affect our view of fiscal year 2024.

Sara Hyzer: Unanticipated inflationary headwind and other unforeseen events may affect our view of Fiscal Year 2024.

Sara Hyzer: That completes the financial overview.

Steve Brass: Now I would like to turn the call back to Steve. Thank you, Sarah, for that update. I'm pleased with both the top line and the bottom line results we've experienced this quarter.

Speaker Change: That completes the financial overview. Now I would like to turn the call back to Steve.

Steven A. Brass: I'm pleased with both the top line and the bottom line results we've experienced this quarter. While I'm always happy to see a strong quarter, what's more important are the long-term trends. As a reminder, our long-term growth target is to increase maintenance product sales in the Americas by 5-8%, within IMEA by 8-11%, and within Asia-Pacific by 10-13%. For full fiscal year 2024, all three of our trade blocs are expected to perform at or above these levels. In summary, what did you hear from us on this call?

Steven A. Brass: Thank you, Sara, for that update. I'm pleased with both the top line and the bottom line results we've experienced this quarter.

Steve Brass: While I'm always happy to see a strong quarter, what's more important is long-term trends. As a reminder, our long-term growth target is to increase maintenance product sales in the Americas by 5 to 8 percent, within I may add by 8 to 11 percent, and within Asia-Pacific by 10 to 13 percent. For full fiscal year 2024, all three of our trade blocks are expected to perform at or above these levels.

Steven A. Brass: While I'm always happy to see a strong quarter, what's more important is long-term trends.

Steven A. Brass: As a reminder, our long-term growth target is to increase maintenance product sales in the Americas by 5-8%, within IMEA by 8-11%, and within Asia-Pacific by 10-13%.

Steven A. Brass: For full fiscal year 2024, all three of our trade blocks are expected to perform at or above these levels.

Steve Brass: In summary, what did you hear from a journalist called? You heard that for the third quarter reported consolidated net sales of 155 million, an increase of either 9 percent over the prior year, and a new record for the company. You heard the volumes continued to improve, and in the third quarter nearly all our sales growth was driven by volume. You heard that sales of maintenance products grew over 10 percent in both the third quarter and year-to-date, which is in line with our long-term growth targets. You heard that we're making good progress on the sale of our US and UK on-care and cleaning product brands.

Steven A. Brass: You heard that for the third quarter, we reported consolidated net sales of 155 million, an increase of over 9% over the prior year and a new record for the company. You also heard that volumes continued to improve, and in the third quarter, nearly all our sales growth was driven by volume. You heard that sales of maintenance products grew over 10% in both the third quarter and year-to-date, which is in line with our long-term growth target.

Steven A. Brass: In summary, what did you hear from us on this call? You heard that for the third quarter, we reported consolidated net sales of $155 million, an increase of over 9% over prior year, and a new record for the company.

Steven A. Brass: You heard that volumes continued to improve, and in the third quarter nearly all our sales growth was driven by volume.

Steven A. Brass: You heard that sales of maintenance products grew over 10% in both the third quarter and year-to-date, which is in line with our long-term growth targets.

Steven A. Brass: You heard that we're making good progress on the sale of our U.S. and U.K. home care and cleaning product brands.

Steve Brass: You heard that we continued to execute, and I must say in battles, sales of W-40 multi-use product and W-40 Specialist for both of 11 percent year-to-date, criminalization sales grew by 14 percent, and at year-to-date digital commerce sales grew by 18 percent. You heard that our new historic market in Brazil is off to a strong start, and that would believe the acquisition of the Brazil market was a game-changing opportunity for us. You heard that gross margin continues to improve, and that we believe will come in closer to the high end of the guidance range for gross margin this fiscal year.

Steven A. Brass: You heard that we're making good progress on the sale of our US and UK home care and cleaning product brands. You heard that we continue to execute and are fighting battles; sales of WD-40 multi-use products and WD-40 specialists were both up 11% year-to-date, premiumization sales grew by 14%, and year-to-date digital commerce sales grew by 18%. You heard that our newest direct market in Brazil is off to a strong start and that we believe the acquisition of the Brazilian market was a game-changing opportunity for us.

Steven A. Brass: You heard that we continue to execute non-muscle-in battles, sales of WD-40 multi-use products and WD-40 specialists were both up 11% year-to-date, premiumization sales grew by 14% and at year-to-date digital commerce sales grew by 18%.

Steven A. Brass: You heard that our newest direct market in Brazil is off to a strong start and that we believe the acquisition of the Brazil market was a game-changing opportunity for us.

Steven A. Brass: You heard that gross margin continues to improve and that we believe it will come in closer to the high end of the guidance range for gross margin this fiscal year. You heard that we continue to make progress in lowering our inventory levels and that we have reduced them by nearly 36% since peak levels. You heard that for the full fiscal year 2024, all three of our trade blocks are expected to perform at or above our long-term growth targets for maintenance product sales.

Steven A. Brass: You heard that gross margin continues to improve and that we believe will come in closer to the high end of the guidance range for gross margin this fiscal year.

Steve Brass: You heard that we continue to make progress in lowering our inventory levels, and that we have reduced them by nearly 36 percent since peak levels. You heard it for the full fiscal year 2024; all three of our trade blocs are expected to perform at or above our long-term growth targets for maintenance products sales.

Steven A. Brass: You heard that we continue to make progress in lowering our inventory levels and that we have reduced them by nearly 36% since peak levels.

Steven A. Brass: You heard that for the full fiscal year 2024, all three of our trade blocks are expected to perform at or above our long-term growth targets for maintenance product sales.

Steve Brass: Thank you, Heather, that we're reiterating our guidance for fiscal year 2024.

Steven A. Brass: And you heard that we're reiterating our guidance for fiscal year 2024. Thank you for joining us on our call today. We'd now be pleased to answer your questions. Ladies and gentlemen, if you would like to register a question, please press star one on your telephone keypad. Please make sure your mute function is turned off to allow your signal to reach us. If your question has been answered and you would like to withdraw your registration, please press the pound. One moment, please, for the first question. Our first question comes from the line of Linda Bolton-Weiser with D.A. Davis.

Unknown Executive: Thank you for joining our call today. We'd now be pleased to answer your question.

Speaker Change: Thank you, Herbert. We're reiterating our guidance for fiscal year 2024.

Speaker Change: Thank you for joining our call today. We'd now be pleased to answer your questions.

Unknown Executive: Ladies and gentlemen, if you would like to register a question, please press star one on your telephone keypad. Please make sure your mute function is turned off to allow your signal to reach our equipment. If your question has been answered and you would like to withdraw your registration, please press the pound key.

Speaker Change: Ladies and gentlemen, if you would like to register a question, please press star 1 on your telephone keypad. Please make sure your mute function is turned off to allow your signal to reach our equipment.

Speaker Change: If your question has been answered and you would like to withdraw your registration, please press the pound key.

Unknown Executive: One moment, please, for the first question.

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

Speaker Change: One moment, please, for the first question.

Speaker Change: Our first question comes from the line of Linda Bolton-Weiser with DA Davidson. Please proceed with your question.

Linda Ann Bolton: Please proceed with the request. Hello, congratulations on a nice quarter. So, I was wondering, um... If you could just give us a little bit of color on the Gross Margin Outlook, I guess in the shorter term, would it be fair to say that, for FY 25, it would continue on at least at the point at which gross margin ends for FY 24. So if you end with a 53% gross margin, that would carry over at least at that level. Is that the right way to think about it for FY 25? Hi Linda, this is Sara.

Sara Hyzer: Hello, I'm congratulations on a nice quarter. So I was wondering if you could just give us a little bit of color on the growth margin outlook. I guess in the shorter term, would it be fair to say that for FY25, it would continue on at least at the point at which growth margin ends FY24. So if you end over 53% growth margin, that would carry over at least at that level. Is that the right way to think about it for FY25?

Linda Ann Bolton: Hello, congratulations on a nice quarter.

Linda Ann Bolton: So I was wondering if you could just give us a little bit of color.

Linda Ann Bolton: I guess in the shorter term, would it be fair to say that

Speaker Change: For FY 25, it would continue on at least at the point at which gross margin ends FY 24. So if you end over 53% gross margin, that would carry over at least at that level. Is that the right way to think about it for FY 25?

Sara Hyzer: Hi, Linda, this is Sarah. So yes, we are right now tracking towards the high end of our range for FY24. We haven't really given; we don't really give guidance on FY25 until we get to the end of the year. But I think, as we've indicated, we are targeting to get back up to the 55% by the end of FY26. And so, obviously, we have to make some of that up in FY24, and we have a number of initiatives that we're working towards to help move the needle from where we believe we will end the year, which is going to be at the high end of the range to the 55 at the end of FY26.

Sara Hyzer: So yes, we are right now tracking towards the high end of our range for FY 24. We haven't really given guidance on FY 25 until we get to the end of the year. But I think, as we've indicated, we are targeting to get back up to 55% by the end of FY 26. And so, you know, obviously, we have to make some of that up in FY 24.

Sara Hyzer: Hi Linda, this is Sara.

Speaker Change: So yes, we are right now tracking towards the high end of our range for FY24. We haven't really given, we don't really give guidance on FY25 until we get to the end of the year. But I think as we've indicated, we are

Speaker Change: targeting to get back up to the 55% by the end of FY26. And so, you know, obviously, we have to make some of that up in FY24. And we have a number of initiatives that we're working towards to help move the needle from where we believe we will end the year, which is going to be at the high end of the range to the 55 at the end of FY26.

Sara Hyzer: And we have a number of initiatives that we're working towards to help move the needle from where we believe we will end the year, which is going to be at the high end of the range to 55 at the end of FY 26. So I'm just curious about that slightly longer-term target. What gives you confidence that you can project that because you do have a lot of moving pieces that affect your gross margin, in particular your input costs.

Sara Hyzer: So I'm just curious on that slightly longer-term target. What gives you confidence that you can project that because you do have a lot of moving pieces that affect your growth margin. In particular, the input cost is it just that you have so many things in the pipeline of different initiatives you can do? Can you give us a flavor for just a couple touch on maybe a few of those things that give you confidence? Sure.

Speaker Change: So I'm just curious on that slightly longer term target.

Speaker Change: What gives you confidence that you can project that? Because you do have a lot of moving pieces that affect your gross margin.

Sara Hyzer: Is it just that you have so many things in the pipeline of different initiatives you can do? Can you give us a flavor for just a couple, and touch on maybe a few of those things that give you confidence?

Speaker Change: in particular the input costs. Is it just that you have so many things in the pipeline of different initiatives you can do? Can you give us a flavor for just a couple, touch on maybe a few of those things that give you confidence?

Sara Hyzer: Sure. So when we look at the roadmap to getting back to up to 55%, it really breaks down into about three buckets. The first one is what we've talked about in the past around premiumization and sales mix. So selling more in our growing faster in our markets where we are, where we earn a higher margin is part of that, and also expanding on our premiumization. So selling more SmartStrop, an easy reach and specialist in many regions. So that's the first bucket.

Sara Hyzer: So when we look at the roadmap to getting back to the 55%, it really breaks down into about three buckets. The first one is what we've talked about in the past around premiumization and sales mix. So selling more in our growing faster in our markets where we are where we earn a higher margin is part of that and also expanding on our premiumization. So selling more smart strap, but easy reach and specialist in many regions. So that's the first bucket.

Speaker Change: Sure. So when we look at the roadmap to getting back to up to the 55%, it's really

Speaker Change: rks down into about three buckets. The first one is what we've talked about in the past around premiumization and sales mix. So

Speaker Change: Selling more and are growing faster in our markets where we are, where we earn a higher margin is part of that and also expanding on our premiumization. So selling more smart straps, but easy reach and specialist in many regions.

Sara Hyzer: The second bucket is really driven by operational efficiency in the supply chain. So there are a number of, you know, smaller projects that we have in the pipeline that we believe are going to help decrease our costs over time. And that will take, you know, those those projects do expand over the next couple years. And then the third thing is that there will still be some movement on price. So, you know, we haven't moved on price this year, and we don't really have any immediate intentions to move on price in the near term.

Sara Hyzer: The second bucket is really driven by operational efficiency in the supply chain. So there are a number of smaller projects that we have in the pipeline that we believe are going to help decrease our costs over time and that will take those projects to expand over the next couple of years.

Speaker Change: So that's the first bucket. The second bucket is really driven by operational efficiency in the supply chain. So there are a number of, you know, smaller projects that we have in the pipeline that we believe are going to help decrease our costs.

Speaker Change: over time. And that will take, you know, those those projects do expand over the next couple years.

Sara Hyzer: And then the third is there still will be some movement on price. So we haven't moved on price this year, and we don't really have any immediate intentions to move on price in the near term, but there will be some pockets. We believe as we get out into the later half of FY25 maybe an into FY26 of just more targeted tactical price increases at a much smaller scale, but that will also help us get back up to the 55%. You are correct; input costs can fluctuate, and we don't necessarily have control over those. But we believe, based on the current cost environment, that the initiatives we have in place will get us back to the 55%.

Speaker Change: And then the third is there still will be some movement on price. So we you know, we haven't moved on price.

Sara Hyzer: But there will be some pockets, you know, we believe as we get out into the later half of FY 25, maybe and into FY 26, of just more targeted tactical price increases at a much smaller scale, but that will also help us get back up to 55%. You are correct, input costs, you know, can fluctuate, and we don't necessarily have control over those. But we believe, based on the current cost environment, that the initiatives we have in place will get us back to 55%. And then, um, I was just wondering about that.

Speaker Change: this year and we don't really have any immediate intentions to move on price in the near term, but there will be some pockets, you know, we believe as we get out into the later half of FY25 maybe and into FY26 of just more targeted tactical price increases at a much smaller scale, but that will also help us get back up to the 55%.

Speaker Change: You are correct. Input costs, you know, can fluctuate, and we don't necessarily have control over those, but we believe, based on the current cost environment, that the initiatives we have in place will get us back to the 55%.

Sara Hyzer: Okay. And then I was just wondering about, I mean, it sort of looks from the numbers that your prior year comparison on sales growth was much harder in the third quarter and easier in the fourth quarter, but I think that has to do with some of the cadence having to do with the impact from stuff in China or the pandemic or something. So like maybe you can just give us some color on like is that fourth quarter prior year comp really easier or is it just normal? And how do you feel about, like, where along that range for the sales for the year?

Speaker Change: Okay, and then, um...

Sara Hyzer: I mean, it sort of looks from the numbers that your prior year comparison on sales growth was much harder in the third quarter and easier in the fourth quarter. But I think that has to do with some of the cadence, having to do with the impact of stuff in China or the pandemic or something. So, maybe you can just give us some color on, like, is that fourth quarter prior year comp really easier? Or is it just normal?

Speaker Change: I was just wondering about...

Speaker Change: I mean, it sort of looks from the numbers that your prior year comparison on sales growth was much harder in the third quarter and easier in the fourth quarter, but I think that has to do with

Speaker Change: Some of the cadence.

Speaker Change: having to do with the impact from stuff in China or the the pandemic or something so

Sara Hyzer: And how do you feel about where along that range for the sales for the year you are most comfortable? Like, are you most comfortable toward the lower end, the middle, or the higher end? Is there any color you can give?

Speaker Change: Like, maybe you can just give us some color on, like, is that fourth quarter prior year comp really easier, or is it just normal? And how do you feel about, like, where along that range for the sales for the year?

Sara Hyzer: Like, are you most comfortable toward the lower end, middle, higher end? Is there any color you can give? Thank you.

Steve Brass: So, in terms of the third, the kind of saving by quarter. So what you've seen this year, Linda, that's kind of been kind of abnormal recovery, right? It's been the volume recovery in Europe and in Latin America. So we talked about it the start of the year. So you saw that really strong volume recovery in the America, certainly in the US, last year. You've seen that continue through; there is a specific dynamic in Q4 with Asia Pacific, which had a very weak quarter last year. So I think the number last year in Asia Pacific 15 million or something.

Speaker Change: Are you most comfortable toward the lower end, middle, higher end, is there any color you can give? Thank you.

Sara Hyzer: So in terms of the third, the kind of phasing by quarter, so what you've seen this year, Linda, that's kind of been a kind of abnormal recovery, right, volume recovery in Europe and in Latin America. So we talked about it at the start of the year. So where you saw that really strong volume recovery in the Americas, certainly in the US last year, you've seen that continue through. There is a specific dynamic in Q4 with Asia Pacific, which had a very weak quarter last year. So I think the number last year in Asia Pacific was 15 million or something.

Speaker Change: So in terms of the third

Speaker Change: The kind of phasing by quarter. So what you've seen this year Linda that's kind of been

Speaker Change: [inaudible]

Sara Hyzer: And so we have a very soft comparable number for Q4 in Asia Pacific. But I think the reason you're seeing such big continued strong growth, what was driving the entire company, has been Latin America coming back, if you like, and then we may have very, very strong volume recoveries, especially in those direct markets we highlighted. Okay, so then, following up on what you said about the Asia-Pacific comparison. I mean, if it is indeed easy in the fourth quarter, then growth should be sort of strong in the fourth quarter of this year. Is that the way to think about it?

Speaker Change: You've seen that continue through. There is a specific dynamic in Q4 with Asia-Pacific, which had a very weak quarter last year, so...

Steve Brass: And so we have a very soft comparable number for Q4 in Asia Pacific. But I think the reason you're seeing such good, big, continued strong growth. What was you driving the entire company has been Latin America come back to be like and then you may have very, very strong volume recovery, especially in those direct markets we highlight.

Speaker Change: I think the number last year in Asia-Pacific is 15 million or something, and so we have a very soft comparable number for Q4 in Asia-Pacific.

Speaker Change: I think the reason you're seeing such big continued strong growth, what was driving the entire company has been Latin America come back, if you like, and then we may have very, very strong volume recoveries, especially in those direct markets we highlighted.

Steve Brass: Okay, so then to following up on what you said about the Asia Pacific comparison.

Speaker Change: Okay, so then, just following up on what you said about the Asia-Pacific comparison.

Steve Brass: I mean, if it is indeed easy in the fourth quarter, then growth should be sort of strong in the fourth quarter of 24, or is that the way to think about it? Well, so we guided towards Asia Pacific being within the traditional range of growth between 10 and 13% and not there today. So yeah, we're expecting a strong Q4 in Asia Pacific.

Speaker Change: I mean, if it is indeed easy in the fourth quarter, then growth should be sort of strong in the fourth quarter of 24. Is that the way to think about it?

Sara Hyzer: Well, we guided towards Asia Pacific being within the traditional range of growth between 10 and 13%, and it's not there today. So yeah, we're expecting a strong Q4 in Asia. Okay, thank you. And then, Again, I know you don't want to get too much into the next fiscal year, of course, but I'm just wondering if there's any quantification of maybe some unusual costs that were related to the ERP implementation or some other projects that might dissipate in the next fiscal year that would create a favorable comparison. Is there anything like that that you're kind of aware of in a general sense?

Speaker Change: Well so we guided towards Asia-Pacific being within the traditional range of growth between 10 and 13 percent and it's not there today so yeah we're expecting a strong Q4 in Asia-Pacific.

Steve Brass: Okay, thank you.

Sara Hyzer: And then again, I know you don't want to get too much into the next fiscal, of course, but I'm just wondering if you could, if there's any quantification of maybe some unusual costs that were related to ERP implementation or some other projects that might dissipate in the next fiscal year that would create a favorable comparison. Is there anything like that that you're kind of aware of in a general sense? I mean, we have been spending higher this year as a result of the timing of the go live for the ERP. So if we look at our general IT investments for this year, they are going to be trending higher than they have compared to the prior years.

Speaker Change: Okay, thank you and then

Speaker Change: Again, I know you don't want to get too much into the next fiscal, of course, but I'm just wondering if you could, if there's any quantification of maybe some unusual costs that were related to ERP implementation or some other projects that might dissipate in the next fiscal year that would create a favorable comparison. Is there anything like that that you're kind of aware of in a general sense?

Sara Hyzer: I mean, we have been spending more this year as a result of the timing of the go live for the ERP. So if we look at our general IT investments for this year, they are going to be trending higher than they have compared to the prior years. We are in the current budget cycle right now. So we're working on, you know, taking a look at where we are going to land next year from an IT investment standpoint and other investments.

Speaker Change: I mean, we have been spending higher this year as a result of the timing of the go live for the ERP. So if we look at our general IT investments for this year, they are going to be trending higher than they than they have compared to the prior years. We are in the current budget cycle right now. So we're working on, you know, taking a look at where where are we going to land next year from an IT investments standpoint and other investments, but that's probably the biggest area that when you look at the past few years, that has has trended up as a result of us getting closer to our go live date.

Sara Hyzer: We are in the current budget cycle right now, so we're working on, you know, taking a look at where are we going to land next year from an IT investments standpoint and other investments, but that's probably the biggest area that when you look at the past few years that has trended up as a result of us getting closer to our go live date. We are continuing to invest in IT, though. I mean, we do have that wave two coming around, but we don't believe the cost of the wave two is going to be at the same level as the current wave that we just pushed out earlier in the year.

Sara Hyzer: But that's probably the biggest area that, when you look at the past few years, has trended up as a result of us getting closer to our go-live date. We are continuing to invest in IT, though. I mean, we do have that wave two coming around, but we don't believe the cost of wave two is going to be at the same level as the current wave that we just pushed out earlier in the year. Okay. I think that's probably all I have. Thank you very much. Thanks, Linda.

Speaker Change: We are continuing to invest in IT, though. I mean, we do have that wave two coming around, but we don't believe the cost of the wave two is going to be at the same level as the current wave that we just pushed out earlier in the year.

Unknown Executive: Okay.

Unknown Executive: I think that's probably all I have. Thank you very much. Thanks, Linda.

Speaker Change: Okay, I think that's probably all I have. Thank you very much.

Daniel Rizzo: Our next question comes from the line of Daniel Rizzo with Jeffries. Please proceed with your question. Good afternoon, and thanks for taking my questions. I may have missed this, but you mentioned the ERP rollout in the Americas in Asia. I was thinking that's going to be doing you're going to be doing over the next several quarters. So it's not incurred, and it's not happened in Europe.

Daniel Rizzo: Our next question comes from the line of Daniel Rizzo, with Jeffries. Please proceed with your question. Good afternoon, and thanks for taking my questions. I may have missed this, but you mentioned the ERP rollout in the Americas and Asia. Did that already happen in Europe, or is that something that you're going to be doing over the next several quarters?

Speaker Change: Thanks, Linda.

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

Daniel Rizzo: Please proceed with your question. Good afternoon, and thanks for taking my questions. I may have missed this, but you mentioned the ERP rollout in the Americas and Asia. Did it already occur in Europe , or is that something that you're going to be doing over the next several quarters?

Sara Hyzer: So we went live, impacting our US business, our Latin America business, and our Asia regional distributors, which represents about 50 percent of our revenues. So we still have about 50 percent of our revenues. The majority of that is in Europe. That's on another system.

Speaker Change: So it did not incur and

Sara Hyzer: So we went live impacting our US business, our Latin America business in our Asia, regional distributors, which represents about 50% of our revenues. So we still have about 50% of our revenues. The majority of that is in Europe; that's on another system.

Speaker Change: This did not happen in Europe .

Speaker Change: So we went live impacting our US business, our Latin America business, and our Asia regional distributors, which represents about 50% of our revenues. So we still have about 50% of our revenues.

Sara Hyzer: And then we have two other really small systems for a couple of our other international locations. So you're going to be merging the European system with this system, is that, I mean, ultimately, is that the goal? So our wave two right now is targeted towards two of our smaller locations that are still on the old system that we just came off of. So our first priority is to get off of that old system; these other two locations are individually less than 5% of our revenue. So they're much smaller implementations.

Sara Hyzer: And then we have two other really small systems for a couple of our other international locations.

Speaker Change: The majority of that is in Europe . That's on another system. And then we have two other really small systems for a couple of our other international locations.

Sara Hyzer: So you're going to be merging the ERP system with the systems that I mean ultimately, is that the goal? So our wave two right now is targeted towards two of our smaller locations that are still on the old system that we just came off of. So our first priority is to get off of that old system. These other two locations are individually less than 5 percent of our revenues. So they're much smaller implementations. And then we are working on, obviously, bringing Brazil in through the acquisition. So that's the priority for us. And then we are looking at our roadmap beyond that next phase.

Speaker Change: So you're going to be merging the European system with this system? I mean, ultimately, is that the goal?

Speaker Change: So our wave two right now is targeted towards two of our smaller locations that are still on the old system that we just came off of.

Speaker Change: So our first priority is to get off of that old system. These other two locations are individually less than 5% of our revenue, so they're much smaller implementations. And then we are working on obviously bringing Brazil in through the acquisition. So that's a priority for us. And then we are looking at our roadmap beyond that next phase. But that next phase is our immediate priority. And then we are, Daniel, looking at

Sara Hyzer: And then we are working on obviously bringing Brazil in through the acquisition. So that's a priority for us. And then we are looking at our roadmap beyond that next phase, but that next phase is our immediate priority. And then we are Daniel looking at what, you know, is it appropriate for us to bring everybody else on to the one system? asked. With, I mean, you can get to 55% if things stay the same. Is there a certain ban that oil, tin plate, and plastic has to stay in for you to hit that?

Sara Hyzer: But that next phase is our immediate priority.

Sara Hyzer: And then we are Daniel looking at what would you know, is it appropriate for us to bring everybody else onto the one system? Okay. Thanks for that.

Daniel Rizzo: What do we, you know, is it appropriate for us to bring everybody else on to the one system?

Sara Hyzer: And then just kind of following up on the questions that they were just asked with, I mean you can get to 55 percent if things stay the same.

Speaker Change: Okay, thanks for that. And then just kind of following up on the questions that were just asked.

Sara Hyzer: Is there a certain band that that oil template and plastic has to stay in for you to hit that? I mean, if there's a spike, then that kind of changes the dynamics. Correct? Particularly the same. Go ahead. I would say if there's a spike and it's temporary, right? That's what we just ride that wave. If there is a spike of, let's say, 20 to 25 to 30 dollars. And it stays there for an extended period of time. That's when we would have to take a look and see if we want to do. There are other levers that we would want to pull to try to offset that.

Speaker Change: With, I mean, you can get up to 55% if things stay the same. Is there a certain band that oil, tin plate, and plastic has to stay in for you to hit that? I mean, if there's a spike, then that kind of changes the dynamics, correct?

Sara Hyzer: I mean, if there's a spike, then that kind of changes the dynamics, correct? I would say if there's a spike, and it's temporary, right, that's what we just ride that wave. If there is a spike of, let's say, $20 to $25 to $30, and it stays there for an extended period of time, that's when we would have to take a look and see if we want to do anything, if there are other levers that we would want to pull to try to offset that.

Speaker Change: Yeah. It's okay. Thank you. Thank you.

Speaker Change: and

Speaker Change: I would say if there's a spike and it's temporary, right? That's what we just ride that wave. If there is a spike of let's say $20 to $25 to $30 and it stays there for an extended period of time, that's when we would have to take a look and see if we want to do, if there are other levers that we would want to pull to try to offset that. But usually, you know, if it fluctuates within $20,

Sara Hyzer: But usually, you know, if it fluctuates within $20 directionally one way or the other, and we tend to ride that wave over time. Okay, and then my final question is just kind of for maintenance. If I look at unallocated expenses, I think it's been a little bit higher than what it had been previously and maybe higher than when I was modeling. I was wondering if what you're doing now is kind of the run rate going forward for the next couple of years, which is roughly, I don't know, I'll call it I think what, 40 48 million. Yeah, the unallocated expenses.

Sara Hyzer: But usually you know if it fluctuates within 20 dollars directionally one way or the other, and we tend to ride that wave over time. Okay.

Speaker Change: directionally one way or the other. And we tend to ride that wave over time.

Sara Hyzer: And then my final question is just kind of from maintenance. If I look at like unallocated expenses, I think it's been a little bit higher than what had been previously and maybe higher than when I was modeling. I was wondering if what you're doing now is kind of the run rate going forward for the next couple of years, which is roughly, I don't know, I'll call it, I think what 48 million? Yeah, the unallocated expenses. So one of the biggest drivers of that that's ticked up is associated with the ERP. So we funded that as the corporate expenses, and so that's sitting in the unallocated corporate.

Speaker Change: Okay, and then my final question is just just kind of for maintenance. If I look at like unallocated expenses, I think it's been a little bit higher than what had been previously and maybe higher than when I was modeling. I was wondering if what you're doing now is kind of the run rate going forward for the next couple years, which is roughly, I don't know, I'll call it, I think, what, 40...

Sara Hyzer: So one of the biggest drivers of that that's ticked up is associated with the ERP. So we've funded that out of corporate expenses. And so that's sitting in the unallocated corporate. So that's probably been the biggest driver, Daniel, that you'll see there from a trend perspective. And that's going to be rolling off. I mean, as you focus now on smaller systems than on Brazil, that's the same as it would be less than, correct?

Speaker Change: 48 million.

Speaker Change: Yeah, the unallocated expenses. So one of the biggest drivers of that that's ticked up is associated with the ERP. So we've funded that out of the corporate expenses. And so that's sitting in the unallocated corporate. So that's, that's probably been the biggest driver, Daniel, that you'll see there from a trend perspective.

Sara Hyzer: So that's probably been the biggest driver, Daniel, that you'll see there from a trans perspective. And that's going to be rolling off. So I think our trajectory is not going to be at the same trajectory that it was this year, but it will not drop down to nothing. I mean, we will still be investing, as we have to roll out those other ways.

Speaker Change: And that's going to be rolling off.

Speaker Change: I mean, as we focus now on smaller systems than on Brazil, that's going to be, that's just seems that it would be less than, correct?

Sara Hyzer: So I think our trajectory is not going to be the same trajectory that it was this year, but it will not drop down to nothing. I mean, we will still be investing as we have to roll out those other waves. Okay, thank you very much.

Speaker Change: So I think our trajectory is not going to be the same trajectory that it was this year, but it will it will not drop down to nothing. I mean, we will still be investing as we have to roll out those other waves.

Unknown Executive: Gotcha. Okay.

Unknown Executive: Thank you very much.

Rosemarie Morbelli: Our next question comes from the line of Rosemarie Morbelli with Gabelli Funds. Please proceed with your question. Thank you.

Rosemarie Jeanne Morbelli: Our next question comes from the line of Rosemarie Morbelli with Gabelli Funds. Please proceed with your question. Thank you. Good afternoon, everyone.

Speaker Change: Gotcha. Okay, thank you very much.

Speaker Change: Our next question comes from the line of Rosemarie Morbelli with Gabelli Funds. Please proceed with your question.

Sara Hyzer: Good afternoon, everyone. Following up on Linda and actually Dan's question regarding IT spending. Are you sharing the amount you have spent towards that new ERP system? What was your IT spending in 2023? What is it in 2024, and what are we looking at for 25 and 26 if you can share those numbers?

Rosemarie Jeanne Morbelli: Following up on Linda and actually Dan's question regarding IT spending, are you sharing the amount you have spent on that new ERP system? What was your IT spending in 2023? What was it in 2024? And what are we looking at for 2025 and 2026, if you can share those numbers? Hello, Rosemarie. How are you?

Rosemarie Jeanne Morbelli: Thank you. Good afternoon, everyone.

Rosemarie Jeanne Morbelli: Following up on Linda and actually Dan's question regarding IT spending, are you sharing the amount you have spent towards that new ERP system?

Rosemarie Jeanne Morbelli: What was your IT spending in 2023? What is it in 2024? And what are we looking at for 2025 and 2026, if you can share those numbers?

Sara Hyzer: Hello, Rosemarie, how are you? We have not disclosed the individual year that we've within the individual years how much we have been spending on IT. We did disclose that the total cost of what we went live and what we placed in what we went live with in Q2 was approximately $10 million, and we will be amortizing that over 10 years. And so we did disclose the total cost of that first wave that was sitting on the balance sheet, but there were other costs that did not qualify for capitalization, and we really incurred those costs over roughly about four, maybe four and a half years to give some perspective.

Sara Hyzer: We have not disclosed the individual years that we've within the individual individual years how much we have been spending on IT. However, we did disclose that the total cost of what we went live with and what we placed in, and what we went live with in Q2 was approximately $10 million. And we will be amortizing that over 10 years. And so we did disclose the total cost of that first wave that was sitting on the balance sheet. But there were other costs that did not qualify for capitalization.

Speaker Change: Hello Rosemarie, how are you?

Speaker Change: We have not disclosed the individual year that we've within the individual individual years how much we have been spending on it. We did disclose that the total cost

Speaker Change: of what we went live and what we placed in and what we went live with in Q2 was approximately $10 million. And we will be amortizing that over 10 years. And so we did disclose the total cost of that, that first wave that was sitting on the balance sheet. But there were other costs that did not qualify for capitalization. And we really incurred those costs over

Sara Hyzer: And we really incurred those costs over roughly about four, maybe four and a half years to give some perspective. So if we look at, if we don't look at IT spending specifically, but look at your CAPEX level, so how much is your CAPEX and what do you expect the CAPEX to be this year and then next year? So there is a nuance about the cloud-based costs that were capitalized, because those are actually not in CapEx.

Sara Hyzer: So if we look at, if we don't look at IT spending specifically, but look at your capex level. So is it in capex and what for what do you expect the capex to be this year and then next year? So there is a nuance about the cloud-based costs that were capitalized. Those are actually not in CapEx. So those costs are sitting on our balance sheet and other long-term assets and do not show up in our investing cash flow mine items. And so there is there's a counting rules that require us to present the cost that we capitalize for the for the new system because it's cloud-based differently than normal capital expenditures.

Speaker Change: roughly about four, maybe four and a half years to give some perspective.

Speaker Change: So if we look at, if we don't look at IT spending specifically, but look at your CapEx level, so is it in CapEx and what do you expect the CapEx to be this year and then next year?

Sara Hyzer: So those costs are sitting on our balance sheet and other long-term assets and do not show up in our investing cash flow line items. And so there are accounting rules that require us to present the cost that we capitalize for the new system differently than normal capital expenditures. So our normal capital expenditure, where we are right now in maintenance mode, we expect that to be between our normal one and 2% of our revenue levels.

Speaker Change: So the there is a nuance about the cloud based costs that were capitalized. Those are actually not in CapEx. So those costs are sitting on our balance sheet and other long term assets.

Speaker Change: And do not show up in our investing cash flow line items. And so there is...

Speaker Change: There's accounting rules that require us to present.

Speaker Change: The cost that we capitalized for the for the new system because it's cloud based.

Sara Hyzer: So our normal capital expenditure, where we are right now in maintenance mode, we expect that to be between our normal one to two percent of our revenue levels, and that's what we're trending at this year. So the place to really look on our balance sheet to look at the capital to look at the ERP cost specifically is the increase in our long-term asset over time.

Sara Hyzer: And that's what we're trending at this year. So the place to really look on our balance sheet to look at the capital, to look at the ERP cost specifically is the increase in our long-term asset over time, which obviously is one of your must-win categories. Within that category, are there specific products, product lines, and applications that are growing faster than others? And by the same token, are there some which you don't think are going to do very well, and you might consider eliminating them from, you know, the category of specialist products? Thank you, Rosemarie. So, I mean, yes, we have around six SKUs, six products around the world. They're pretty consistent.

Speaker Change: differently than normal capital expenditures. So our normal capital expenditure where we are right now in maintenance mode, we expect that to be between our normal one to 2% of our revenue levels. And that's what we're trending at this year. So the place to really look on our balance sheet to look at the capital to look at the ERP cost specifically, is the increase in our long term asset over time.

Unknown Executive: Okay, thanks.

Sara Hyzer: We haven't disclosed what those products are, but those products account for around 80% of WD-40 specialist sales. And so, you know, as a global learning organization, we share, we have teams that get together and share best practices for building those brands across the world. And so, yeah, very much focused on those core products within the specialist range. And that's what's driving expanding distribution and then putting samples in the right people's hands around the world. It's driving the growth, the double-digit growth of WD-40 specialists.

Sara Hyzer: And then, if I may, you are showing good growth for the specialist category, which obviously is one of your most win categories. Within that category, are there specific product lines or applications that are growing faster than others?

Speaker Change: Okay, thanks.

Speaker Change: And then if I may, you are showing good growth for the specialist category, which obviously is one of your...

Speaker Change: Most win category

Speaker Change: within that category.

Speaker Change: Are there specific product lines, applications that are growing faster than others?

Sara Hyzer: And by the same token, are there some which you know you don't think are going to do very well, and you might consider eliminating them from, you know, the bracket of specialist product. Thank you, Rosemarie. So, I mean, yes, we have around six schools, six products around the world. They're pretty consistent. We haven't disclosed what those products are, but those products account for around 80% of W-40 specialist sales. And so, you know, as a global learning organization, we share; we have teams that get together and share best practice approaches to building those brands across the world.

Speaker Change: And by the same token, are there some which, you know, you don't think are going to do very well and you might consider eliminating them from, you know, the bucket of specialist products?

Speaker Change: Thank You Rosemarie. So I mean yes we have we have around six SKUs, six products.

Speaker Change: around the world. They're pretty consistent. We haven't disclosed what those products are, but

Speaker Change: Those products account for around 80% of WD-40 specialist sales and so, you know, as a global learning organization we share, we have teams that get together and share best practice approaches to building those brands across the world and so

Sara Hyzer: And so, yeah, very much focused on those core products. Within the specialist range, and that's what's driving expanding distribution. And then putting samples in the right people's hands around the world is what's driving the growth of double-digit growth at the ready for the specialist.

Speaker Change: Yeah, very much focused on those core products within the specialist range, and that's what's driving expanding distribution and then putting samples in the right people's hands around the world is what's driving the growth, the double-digit growth of the WD-40 specialists.

Sara Hyzer: And then on the other side, yes, if, you know, products will not perfect.

Sara Hyzer: And then on the other side, yes, if, you know, products are not perfect. And so if products come out that don't perform, they get called and replaced with more promising options. Okay, eventually, you will give us a better feel for the different categories. So, I mean, if you look at the longest-running products in our portfolio, then, you know, that's because they've been around the longest; we started most places, the likes of silicones, pellet penetrants, white lithium greases, etc. That's kind of where we started with WD-40 Specialist, and they're some of the, you know, key sellers.

Sara Hyzer: And so, if products come out that don't perform, they get cool and replace with more promising options.

Speaker Change: And then on the other side, yes, if products were not perfect, and so if products come out that don't perform, they get culled and replaced with more promising options.

Sara Hyzer: Okay, eventually you will give us a better feel for the different categories. So, I mean, if you look at the longest, the longest kind of running products in our portfolio, then, you know, that's because they've been around the longest. We started most places, the likes of silicones, pellet penetrons, whitety increases, et cetera. That's kind of where we started with WD-40 Specialist, and there are some of the key sellers.

Speaker Change: Okay, eventually you will give us a better feel for the different categories.

Speaker Change: So, I mean, if you look at the longest kind of running products in our portfolio, then

Speaker Change: Because they've been around the longest, we started most places the likes of silicones, pellet penetrants, white lithium greases, etc. That's kind of where we started with WD-40 specialists and they're some of the key sellers.

Unknown Executive: All right, thank you very much.

Sara Hyzer: All right. Thank you very much. Good luck and congratulations. Thank you. Ladies and gentlemen, that does conclude our allotted time for questions. We thank you for your participation in today's conference call and ask that you please disconnect your line.

Unknown Executive: Good luck and congratulations. Thank you.

Speaker Change: All right. Thank you very much. Good luck and congratulations.

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

Speaker Change: Thank you.

Speaker Change: 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.