Q3 2025 WD-40 Co Earnings Call
Unknown Executive: but there can be no assurance that they will be achieved or accomplished.
Insurance that they will be achieved or accomplished.
Unknown Executive: Please refer to the risk factors detailed in our SCC filings for further discussion.
Please refer to the risk factors detailed in our SEC filings for further discussion.
Unknown Executive: 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, 2025. The company disclaims any duty or obligation to update any forward-looking information as a result of new information, future events, or otherwise.
Finally for anyone listening to a webcast replay or reviewing a written transcript of this call. Please note that all information presented is current only as of todays date July 10th 2025.
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: With that, I'd now like to turn the call over to Steve. Thanks, Wendy, and thank you all for joining us today.
Steve: Thanks, Wendy and thank you all for joining us today.
Steve: Today I'll start with an overview of our sales results for the third fiscal quarter of 2025, along with updates on our must-win battles and key strategic enablers.
Steve: Today I'll start with an overview of our sales results for the third fiscal quarter of 2025, along with updates on our must win battles and key strategic enablers.
Sara: Then Sara will dive deeper into our third quarter performance, review our 55-30-25 business model, give a brief update on the expected divestiture of our home care and cleaning business, and share our updated outlook for fiscal year 25.
Steve: <unk> will dive deeper into our third quarter performance review, our 50 530 25 business model give a brief update on the expected divestiture of our homecare and cleaning business.
Steve: Our updated outlook for fiscal year 'twenty five.
Steve: After that, we'll open the floor for your questions. Today we reported third quarter net sales of $156.9 million, a 1% increase compared to the same period last year. This marks a record sales quarter for the company, reflecting continued progress and momentum. Changes in foreign currency exchange rates have continued to be a bit of a headwind for us. Adjusting for estimated translation impact of foreign currency, net sales would have been $158.6 million, reflecting an increase of 2% compared to the same period last year. We reported third quarter net sales of $150.4 million in maintenance products, our core strategic focus, reflecting a 2% year over year increase.
Steve: That will open the floor for your questions.
Steve: Today, we reported third quarter net sales of $156 9, million% to 1% increase compared to the same period last year.
Steve: Marks a record sales quarter for the company, reflecting continued progress and momentum.
Steve: Changes in foreign currency exchange rates have continued to be a bit of a headwind for us adjusting for estimated translation impact of foreign currency net sales would've been $168 6 million, reflecting an increase of 2% compared to the same period last year.
Steve: We reported third quarter net sales of $150 4 million in maintenance products.
Steve: Our strategic focus, reflecting a 2% year over year increase for.
Steve: While the quarter came in below our long-term growth targets for maintenance products, we remain confident in our growth trajectory. Year-to-date, net sales of maintenance products reach $435.2 million, representing a 6% increase and aligns with our mid- to high-single-digit long-term growth target.
For the quarter came in below our long term growth targets for maintenance products, we remain confident in our growth trajectory year to date net sales of maintenance products reached $435 2 million, representing a 6% increase and aligns with our mid to high single digit long term growth target.
Steve: We are also pleased to report a strong start to the fourth quarter, with June delivering robust performance across all three trade This positive momentum reinforces our confidence in concluding the fiscal year with solid growth.
Steve: We're also pleased to report a strong start to the fourth quarter with June delivering robust performance across all three trade blocks.
Steve: Positive momentum reinforces our confidence in concluding the fiscal year with solid growth.
Steve: Now let's talk about third quarter sales results in dollars by segment, starting with the American Sales in the Americas, which includes the United States, Latin America and Canada, increased 4% in the third quarter to $78.2 million compared to the same period last year. Adjusting for estimated translation impact of foreign currency, net sales in the Americas would have increased by 7% compared to the prior year fiscal quarter. Sales of maintenance products increased 4% in the third quarter to 75 million compared to the same period last year. The bulk of this growth was driven by higher sales of WD-40 multi-use product in the United States, which increased 7% driven by increased promotional activity and a timing of customer orders.
Steve: Now, let's talk about third quarter sales results by segment, starting with the Americas.
Steve: Sales in the Americas, which includes the United States, Latin America, and Canada increased 4% in the third quarter to $78 2 million compared to the same period last year.
Steve: Staying for estimated translation impact of foreign currency net sales in the Americas would have increased by 7% compared to the prior year fiscal quarter.
Steve: Sales of maintenance products increased 4% in the third quarter to 75 million compared to the same period last year.
Steve: Bulk of this growth was driven by higher sales of WD 40, multi use product in the United States, which increased 7% driven by increased promotional activity and the timing of customer orders.
Steve: Sales in Latin America remain constant. While distributor markets in the region experience a decline in volume, primarily due to reduced promotional activity and the timing of customer orders, this is largely offset by solid growth in Brazil, which continues to demonstrate strong market momentum. Higher sales in the United States were partially offset by lower sales in Canada, which decreased 6% compared to the prior year quarter due to changes in distribution and reduced promotional activity. In the Americas, sales of WD-40 Specialist increased 4% compared to the prior year fiscal quarter, primarily due to expanding distribution in the United States.
Steve: Sales in Latin America remained constant.
Steve: While distributor markets in the region experienced a decline in volume primarily due to reduced promotional activity and the timing of customer orders. This was largely offset by solid growth in Brazil, which continues to demonstrate strong market momentum.
Steve: Higher sales in the United States were partially offset by lower sales in Canada, which decreased 6% compared to the prior year quarter due to changes in distribution and reduced promotional activity.
Steve: In the Americas sales of WD, 40 specialist increased 4% compared to the prior year fiscal quarter, primarily due to expanded distribution in the United States.
Steve: Home care and cleaning product sales remain steady across periods, reflecting our strategic shift toward higher margin maintenance products in alignment with our 4x4 strategic framework.
Steve: <unk> and cleaning product sales remained steady across periods, reflecting our strategic shift towards higher margin maintenance products and alignment with our four by four strategic framework.
Steve: In total, our Americas segment set up 50% of our global business in the third quarter.
Steve: In total our Americas segment made up 50% of our global business in the third quarter.
Steve: Now let's take a look at ourselves in IMAN, which includes Europe, India, the Middle East and Africa. Total sales in IMEA declined 5% in the third quarter to 56.7 million compared to the same period last year. Foreign Currency Translation had no material impact on our third quarter results. Sales of maintenance products decreased 3% in the third quarter to $55.6 million compared to the same period last year. The decline was largely attributed to a 6% decrease in sales of WD-40 multi-use product, which came after strong performance during the same period last year. The decline in sales of WD-40 multi-use product was primarily driven by lower sales volumes to our marketing distributor customers, particularly in Turkey and the Middle East, resulting in a $3.9 million impact.
Steve: Now, let's take a look at ourselves in EMEA, which includes Europe, India Middle East and Africa.
Steve: Total sales in our EMEA declined 5% in the third quarter to $56 7 million compared to the same period last year.
Steve: Foreign currency translation had no material impact on our third quarter results.
Steve: Sales of maintenance products decreased 3% in the third quarter to $55 6 million compared to the same period last year.
Steve: The decline was largely attributed to a 6% decrease in sales of <unk> 40, multi use product, which came after strong performance. During the same period last year. The declining sales of WD 40, multi use product was primarily driven by lower sales volumes to our marketing distributor customers, particularly in Turkey, and the middle East, resulting in a $3 9 million.
Steve: Impact.
Steve: Sales in Turkey were impacted by the timing of customer orders, reflecting the inherent variability we often experience in our distributor market. Sales in the Middle East were impacted by operational changes aligned with our long-term strategic objectives. As part of our commitment to manufacturing closer to end users, delivering both economic and environmental benefits, we recently onboarded a new manufacturing partner in the region. While this transition supports our long term goals, it has resulted in short term disruption as customers adapt to the new supply chain. However, we continue to see strong sales trends in most of our direct markets, where sales volumes of maintenance products remain strong.
Steve: Sales in Turkey were impacted by the timing of customer orders, reflecting the inherent variability, we often experience in our distributor markets.
Steve: Sales in the Middle East were impacted by operational changes align with our long term strategic objectives.
Steve: As part of our commitment to manufacturing closer to end users delivering both economic and environmental benefits. We recently on boarded a new manufacturing partner in the region for this transition and supports our long term goals. It has resulted in short term disruption as customers adapt to the new supply chain.
Steve: However, we continue to see strong sales trends in most of our direct markets, where sales volumes of maintenance products remained strong no.
Steve: Notably, sales of these products increased by 9% in France. 14% in debt. 13% in Iberia and 7% in the United Kingdom. In IMAEA, sales of WD-40 Specialist increased 15% compared to the prior year fiscal quarter, driven primarily by higher volumes resulting from strong demand across many of our direct markets, as well as increased promotional activity for our WD-40 Specialist bike line in the DAC region. Home care and cleaning product sales declined 1.2 million, primarily due to reduced demand in the UK, where lower levels of advertising and promotional activity impacted performance. This shift reflects our continued focus on driving growth in maintenance products in alignment with our 4x4 strategic framework.
Steve: Italy sales of these products increased by 9% in France.
Steve: 14% in deck.
Steve: 13% in Iberia, and 7% in the United Kingdom.
Steve: EMEA sales of WD 40 specialist increased 15% compared to the prior year fiscal quarter, driven primarily by higher volumes, resulting from strong demand across many of our direct markets as well as increased promotional activity productivity 40 specialist pipeline in the <unk> region.
Steve: Home care and cleaning products sales declined $1 2 million, primarily due to reduced demand in the UK for lower levels of advertising and promotional activity impacted performance.
Steve: This shift reflects our continued focus on driving growth and maintenance products.
Steve: <unk> with our four by four strategic framework.
Steve: In total, our EMEA segment made up 36% of our global business in the third quarter.
Steve: In total our EMEA segment made up 36% of our global business in the third quarter.
Steve: Now on to Asia Pacific. South and Asia Pacific which includes Australia, China and other countries in the Asia region increased 7% in the third quarter to 22 million compared to the same period last year. Adjusting for estimated translation impact of foreign currency and sales in Asia Pacific would have increased by 8% compared to the prior year fiscal quarter. Sales of maintenance products increased 9% in the third quarter to $19.8 million compared to the same period last year. This growth was driven by higher sales of WD-40 multi-use product in China and our Asia distributor markets, where sales increased 19% and 8% respectively.
Now onto Asia Pacific.
Steve: Sales in Asia Pacific, which includes Australia, China and other countries in the Asia region increased 7% in the third quarter to $22 million compared to the same period last year.
Steve: Adjusting for estimated translation impact of foreign currency net sales in Asia Pacific would have increased by 8% compared to the prior year fiscal quarter.
Steve: Sales of maintenance products increased 9% in the third quarter to $19 8 million compared to the same period last year. This growth was driven by higher sales of WD 40, multi use product in China.
Steve: Distributor markets, where sales increased 19% and 8% respectively.
Steve: In China, the increase is fueled by successful promotional programs, expanded marketing activities and broader distribution. In our Asia distributor markets, growth is supported by strong promotional execution and increased demand, particularly in Indonesia and Taiwan.
Steve: In China, the increase was fueled by successful promotional programs expanded marketing activities and broader distribution in our Asia distributor markets growth was supported by strong promotional execution and increased demand, particularly in Indonesia and Taiwan.
Steve: In Australia, sales of maintenance products remained relatively constant. Home care and cleaning product sales declined 9% primarily due to reduced promotional activity and the timing of customer orders. In Asia Pacific, sales of the WD-40 Specialist were up 6% in the third quarter due to higher sales volume from successful promotions and marketing efforts in our Asia distributor markets in China. In total, our Asia Pacific segment made up 14% of our global business in the third quarter.
Steve: In Australia sales of maintenance products remained relatively constant homecare and cleaning products sales declined 9%, primarily due to reduced promotional activity and the timing of customer orders.
Steve: In Asia Pacific sales of WD 40 specialist were up 6% in the third quarter due to higher sales volume from successful promotions and marketing efforts in our Asia distributor markets in China.
Steve: In total our Asia Pacific segment made up 14% of our global business in the third quarter.
Steve: Now let's talk about our must-win battles. Our must-win battles are centred on driving revenue growth in maintenance products and enhancing overall profitability. Execution across these priorities remains strong, with performance generally tracking in line with expectations and supporting our long-term value creation objectives.
Steve: Now, let's talk about our must win battles our must win battles are centered on driving revenue growth and maintenance products enhancing overall profitability execution across these priorities remains strong with performance generally tracking in line with expectations and supporting our long term value creation objectives.
Steve: Starting with must-win battle number one, Lead Geographic Expansion. Year to date global sales of WD-40 multi-use product reached 353 million reflecting a 6% increase compared to the same period last year. This performance aligns with our long-term growth objective driven by solid execution across key markets. In Imer, our flagship brand delivered 8% growth, while the Americas posted a 6% increase. Although South and Asia-Pacific were flat year-to-date, the region showed encouraging momentum with double-digit growth in the third quarter. We've made excellent progress here to date in many key markets with strong sales growth of 19% in Latin America, 12% in France, 40% in India, 12% in China, 15% in Iberia, and 21% in Benelux.
Steve: Starting with must win Battle number one lead geographic expansion.
Steve: Year to date global sales of <unk> 40, multi use product reached $353 million, reflecting a 6% increase compared to the same period last year. This.
Steve: This performance aligns with our long term growth objective driven by solid execution across key markets.
Steve: Our EMEA, our flagship brand delivered 8% growth for the Americas posted a 6% increase although sales in Asia Pacific were flat year to date the region showed encouraging momentum with double digit growth in the third quarter.
Steve: We've made excellent progress year to date in many key markets with strong sales growth of 19% and Latin America, 12% in France, 40% in India, 12% in China, 15% in Iberia and 21% in Benelux.
Steve: We estimate the global addressable market for WD-40 multi-use product to be approximately $1.6 billion based on benchmark sales potential. Our strategy to capture this opportunity remains focused and effective, expand product availability across channels and geographies, and increase penetration by placing more cans directly in the hands of our core end users worldwide.
Steve: We estimate the global addressable market for WD 40, multi use product to be approximately $1 6 billion based on benchmark sales potential.
Steve: Our strategy to capture this opportunity remains focused and effective expand productivity ability across channels and geographies and increased penetration by placing more cans directly in the hands of our core end users worldwide.
Steve: Next is must win battle number two accelerating premiumization. Our second must win battle is to accelerate the growth of premium formats of WD-40 multi-use product. Premiumization is a key driver of our strategy to enhance profitability and our premium offerings consistently deliver superior user experiences that foster strong brand loyalty and create positive lasting memories. Yet today, sales of WD-40 smarts draw an easy reach when combined, we're up 7% compared to the prior year period. On a go forward basis, we'll be targeting a compound annual growth rate for net sales of premiumised products of greater than 10%.
Steve: Next as must win battle number two accelerating premium amortization.
Steve: Second must win battle is to accelerate the growth of premium formats of WD 40, multi use product premium amortization as a key driver of our strategy to enhance profitability and our premium offerings consistently deliver superior user experiences that fosters strong brand loyalty and create positive lasting memories.
Steve: Year to date, <unk>, <unk> 40, smart straw and EZ reach when combined were up 7% compared to the prior year period on a go forward basis, we'll be targeting a compound annual growth rate to net sales of premium products are greater than 10%.
Steve: Our third must-win battle is to drive WD-40 specialist growth. Through our WD-40 specialist product line, we're focusing on achieving category leadership and expanding market share by leveraging the strength and trust of our core brand. This approach allows us to extend our brand equity into adjacent categories while meeting the evolving needs of professional and industrial users. Year-to-date sales of WD-40 Specialist products were 59.8 million, up 11% compared to the same period last year. On a go-forward basis, we'll be targeting a compound annual growth rate for net sales of WD-40 Specialist of greater than 15%.
Steve: A third must win battle is to drive the <unk> 40 specialist growth throughout.
Steve: <unk> 40 specialist product line, focusing on achieving category leadership and expanding market share by leveraging the strengths and trust of our core brand. This approach allows us to extend our brand equity and to adjacent categories, while meeting the evolving needs of professional and industrial uses.
Steve: Year to date sales activity 40 specialist products with $59 8 million up 11% compared to the same period last year.
Steve: On a go forward basis, we'll be targeting a compounded annual growth rate for net sales to be 40 specialist of greater than 15%.
Steve: A fourth must-win battle is to turbocharge digital commerce. A digital commerce strategy is not solely focused on driving online sales. It plays a pivotal role in accelerating progress across all our must-win battles. eCommerce sales are up 11% year to date. The digital channel serves as far more than a transactional platform. It's a tool for building brand awareness and educating end users about the unique value of our product. By leveraging digital touchpoints, we deepen engagement, enhance product understanding and strengthen brand affinity across our global customer base.
Steve: Our fourth must win battle as to Turbocharge digital Commerce, our digital Commerce strategy is not solely focused on driving online sales. It plays a pivotal role in accelerating progress across all our must win battles.
Steve: E Commerce sales were up 11% year to date, the digital channel serves as far more than a transactional platform. It's a tool for building brand awareness and educating end users about the unique value of our products by leveraging digital touch points, we deepen engagement enhanced product understanding and strengthen brand affinity.
Steve: Across our global customer base.
Steve: Now let's move to the second element of our fall by fall strategic framework, our strategic enablers, which emphasize operational Today I'll provide an update on Strategic Enablers 1.2. Our first strategic enabler is to ensure a people first mindset. Today, I want to highlight one important outcome of that commitment, employee tenure. Longer employee tenure creates meaningful economic value by reducing turnover costs, preserving institutional knowledge, enhancing productivity, and strengthening stakeholder relationships, all of which contribute to sustained profitable growth. While the median employee tenure at U.S. companies is approximately four years, the average tenure at WD-40 company is double that, eight years.
Steve: Now, let's move to the second element of our four by four strategic framework, our strategic enablers, which emphasize operational excellence today I'll provide an update on strategic enablers one too.
Steve: Our first strategic enablers to ensure people first mindset today I want to highlight one important outcome of that commitment employee tenure.
Steve: Longer employee tenure creates meaningful economic value by reducing turnover costs, preserving institutional knowledge, enhancing productivity and strengthening stakeholder relationships all of which contribute to sustained profitable growth.
Steve: While the median employee tenure at U S companies is approximately four years. The average tenure at WD 40 company is double that eight years.
Steve: We take great pride in this distinction.
Speaker Change: Take great Pride in this distinction I want to take a moment to extend my deepest thanks to all our employees for your dedication hard work and passion.
Steve: I want to take a moment to extend my deepest thanks to all our employees for your dedication, hard work and passion. It's because of your unwavering commitment that WD-40 Company continues to achieve great things. Your contributions are the foundation of our success. We are truly grateful.
Speaker Change: Because of your unwavering commitment to WD 40 company continues to achieve great things Youll contributions are the foundation of our success and we are truly grateful.
Steve: Moving on to our second strategic enabler, which is to build an enduring business for the future. WD-40 company has long been committed to purpose driven growth, operating in a way that balances economic performance, environmental stewardship, and social responsibility to create and protect long term stakeholder value.
Speaker Change: Moving onto our second strategic enabler, which is to build an enduring business for the future.
740 company has long been committed to purpose driven growth operating in a way that balances economic performance and environmental stewardship, and social responsibility to create and protect long term stakeholder value.
Steve: Today, I want to highlight our commitment to social responsibility and share an update on our broader citizenship effort. For over 40 years, WD-40 company has supported communities by contributing to a wide range of nonprofit organizations and initiatives. Recently, we completed a re-evaluation of our social mission to ensure it reflects who we are today and where we're headed. Rooted in our people first culture values and brand mission. The purpose of our new citizenship framework is to empower doers around the world to build a better future. A new citizenship framework is anchored in three strategic pillars, training, preparation and restoration.
Speaker Change: Today, I want to highlight our commitment to social responsibility and share an update on our broader citizenship efforts.
Speaker Change: Over 40 years to be fully company has supported communities by contributing to a wide range of nonprofit organizations and initiatives.
Speaker Change: <unk>, we completed a reevaluation of our social mission to ensure reflects who we are today.
Speaker Change: We're headed.
Speaker Change: Rooted in our people first culture values and brand mission. The purpose of our new citizenship framework is to empower due as around the world to build a better future.
Speaker Change: Our new citizenship framework is anchored in three strategic pillars training preparation and restoration phase pillars aligned with our 2030 strategy reinforce our company's purpose and support the United Nations sustainable development goals in meaningful ways.
Steve: These pillars align with our 2030 strategy, reinforce our company's purpose and support the United Nations Sustainable Development Goals in meaningful ways. One way we're bringing the training pillar to life is through programs like Training the Trades. This program supports aspiring technicians and tradespeople around the world with the goal of developing the next generation of skilled professionals. By doing so, we help strengthen communities and address critical talent gaps in many of the regions where we operate.
Speaker Change: One way, we are bringing the training pillar to loyalty through programs like training. The trades. This program supports aspiring technicians and trades people around the world with the goal of developing the next generation of skilled professionals by doing so we help strengthen communities and address critical talent gaps in many of the regions, where we operate.
Sara: With that, I'll now turn over the call to Sara. Thanks, Steve. Today, I'll offer insights into our business model, highlight key takeaways from our third quarter performance, and provide a brief update on the planned divestiture of our home care and cleaning business in the Americas and the UK. I'll also share our updated outlook for fiscal year 2025.
Sarah: With that I'll now turn over the call to Sarah.
Sarah: Thanks, Steve today, I'll offer insights into our business model highlight key takeaways from our third quarter performance and provide a brief update on the planned divestiture of our homecare and cleaning business in the Americas and the U K.
Sarah: I'll also share our updated outlook for fiscal year 2025.
Sara: Let's start with a look at our business plan. Our 553025 business model remains a long term strategic guide In the near to midterm, we continue to evaluate each component of the model within a range, allowing us to adapt while staying aligned with our long-term objectives.
Sarah: Let's start with a look at our business model.
Sarah: Our 50, 530 25 business model remains a long term strategic guideposts.
Sarah: In the near to mid term, we continue to evaluate each component of the model within our range, allowing us to adapt while staying aligned with our long term objective.
Sara: I'll kick off with an overview of our third quarter gross margin performance. We target a range of 50 to 55% for gross margin, and we have made excellent progress on gross margin recovery. In the third quarter, our growth margin was 56.2%, up from 53.1% last year, representing an improvement of 310 base Gross margin improved due to several favorable factors. 110 basis points from higher average selling prices, including the impact of premiumization. 80 basis points from lower specialty chemical costs and 60 basis points from reduced can costs. There were no material unfavorable impacts to growth margin this quarter.
Sarah: I'll kick off with an overview of our third quarter gross margin performance.
Sarah: We target a range of 50% to 55% for gross margin and we have made excellent progress on gross margin recovery.
Sarah: In the third quarter, our gross margin was 56, 2% up from 53, 1% last year.
Sarah: Presenting an improvement of 310 basis points.
Sarah: Gross margin improved due to several favorable factors.
Sarah: 110 basis points from higher average selling prices, including the impact of pigmentation.
Sarah: 80 basis points from lower specialty chemical costs, and 60 basis points from reduced can cost.
Sarah: There were no material unfavorable impacts to gross margin this quarter.
Sara: We're also pleased to report that growth margin improved across all three trade blocks this quarter compared to the same period last year. Gross margin in the Americas was 360 basis points from 50.6 to 54.2%. driven by lower specialty chemical costs and higher average selling price. Gross margin in IMEA increased 290 basis points from 54.8 to 57.7%, driven by higher average selling prices, favorable shifts in sales and market mix, and lower input costs. gross margin in Asia Pacific rose 140 basis from 57.6 to 59% primarily due to higher average selling price. As a reminder, gross margin recovery has been a central focus for senior leadership who are incentivized to recover gross margin to 55% and beyond.
Sarah: We're also pleased to report that gross margin improved across all three trade blocks this quarter compared to the same period last year.
Sarah: Gross margin in the Americas Rose 360 basis points.
Sarah: <unk> 56 to 54, 2% driven.
Sarah: Driven by lower specialty chemical costs and higher average selling prices.
Sarah: Gross margin in EMEA increased 290 basis points from $54 eight to 57, 7% driven by higher average selling prices favorable shift in sales and market mix and lower input costs.
Sarah: Gross margin in Asia Pacific Rose 140 basis points from 57, 6% to 59% primarily due to higher average selling prices.
Sarah: As a reminder, gross margin recovery has been a central focus for senior leadership, who are ill.
Sarah: <unk> to recover gross margin to 55% and beyond.
Sara: year to date our gross margin was 55.2 up from 53.1% last year. It is great to see our supply chain initiatives having an impact on our overall gross margin results. For the full fiscal year, we currently project growth margin will be between 55 and 56%. One year ahead of our original time. While risks remain, including cost volatility, tariffs, the timing of supply chain cost initiatives and progress on our asset divestiture, we're closely monitoring these factors. Gross margin has strengthened steadily in recent quarters, giving us confidence in exceeding our 55% long term objectives this fiscal year.
Sarah: Year to date, our gross margin was 55, 2% up from 53, 1% last year.
Sarah: It is great to see our supply chain initiatives, having an impact on our overall gross margin result.
Sarah: For the full fiscal year. We currently project gross margin will be between 55% and 56% one year ahead of our original timeline.
Sarah: While risks remain including cost volatility tariffs the timing of supply chain cost initiatives and progress on our asset divestitures. We are closely monitoring these factor.
Sarah: Gross margin has strengthened steadily in recent quarters, giving us confidence in exceeding our 55% long term objectives. This fiscal year.
Sara: Now turning to our cost of doing business, which we define as total operating expenses, less adjustments for certain non-cash expenses. Our cost of doing business is primarily driven by three key areas. strategic investments in our people, global brand building efforts, and freight expenses associated with delivering products to our While our long term goal is to manage cost of doing business within the 30 to 35% range, we continue to make thoughtful, strategic investments to support long term growth. These include initiatives and brand building, technology, ESG, innovation, and regulatory compliance. This quarter, our cost of doing business is 38% of net sales, up from 34% in the same period last year.
Sarah: Now turning to our cost of doing business, which we define as total operating expenses less adjustments for certain non cash expenses.
Sarah: Our cost of doing business is primarily driven by three key areas.
Sarah: Strategic investments in our people global brand building effort and freight expenses associated with delivering products to our customers.
Sarah: While our long term goal is to manage cost of doing business within the 30% to 35% range. We continue to make thoughtful strategic investments to support long term growth. These include initiatives and brand building technology.
Sarah: <unk> innovation and regulatory compliance.
Sarah: This quarter, our cost of doing business was 38% of net sales up from 34% in the same period last year.
Sara: In dollar terms, our cost of doing business increased $5.9 million, or 11%, of which $2.9 million was driven by timing differences for our incentive compensation accrual this quarter as compared to the prior year. Increases were also driven by higher employee related expenses, including additional headcount to support our sales growth initiatives outlined in our strategic framework, as well as staffing to enhance our information system. Advertising and promotional expenses remained relatively constant year over year. As a percentage of net sales, A&P spend was 5.8% this quarter, compared to 6% in the same period last year. While we are currently tracking below our full year guidance of 6% of net sales, we have several brand building initiatives planned for the remainder of the fiscal year, which we expect will bring A&P investment in line with our guidance.
Sarah: In dollar terms, our cost of doing business increased $5 9 million or 11%.
Sarah: Of which $2 9 million was driven by timing differences for incentive compensation accrual this quarter as compared to the prior year.
Sarah: Increases were also driven by higher employee related expenses, including additional head count to support our sales growth initiatives outlined in our strategic framework as well as staffing to enhance our information system.
Sarah: Advertising and promotional expenses remained relatively constant year over year.
Sarah: As a percentage of net sales A&P spend was five 8% this quarter compared to 6% in the same period last year.
Sarah: While we are currently tracking below our full year guidance of 6% of net sales. We have several brand building initiatives planned for the remainder of the fiscal year, what should we expect will bring A&P investment in line with our guidance.
Sara: We expect to see improvements in our cost of doing business metric over time as sales grow, which is the most important factor in managing our cost of doing business towards our long term target of 30 to 35%.
Sarah: We expect to see improvements in our cost of doing business metric over time as sales graph, which is the most important factor in managing our cost of doing business towards our long term target of 30% to 35%.
Sara: Turning now to Adjusted EBITDA. We believe adjusted EBITDA as a percentage of sales is a valuable metric for assessing both profitability and operational efficiency. Our long term target is a range of 20 to 25% and we've made solid progress towards achieving this aspiration. In the third quarter, our adjusted EBITDA margin was 20% compared to 19% in the same period last year. We believe looking at adjusted EBITDA in dollar terms can also be useful for assessing absolute performance. In the third quarter, our adjusted EBITDA was $30.7 million, up 3% from prior quarter. Adjusted EBITDA is a critical component of our business model.
Sarah: Turning now to adjusted EBITDA.
Sarah: We believe adjusted EBITDA as a percentage of sales as a valuable metric for assessing both profitability and operational efficiency.
Sarah: Our long term target is a range of 20% to 25% and we've made solid progress towards achieving this aspiration.
Sarah: In the third quarter, our adjusted EBITDA margin was 20% compared to 19% in the same period last year.
Sarah: We believe looking at adjusted EBITDA in dollar terms can also be useful for assessing absolute performance in the third quarter. Our adjusted EBITDA was $30 7 million up 3% from prior quarter.
Sarah: Adjusted EBITDA is a critical component of our business model.
Sara: With our low-debt, capital-like structure, much of it converts to free cash flow, enabling consistent stockholder returns and long-term value creation.
Sarah: With our low debt capital like structure much of it converts to free cash flow, enabling consistent stockholder return and long term value creation.
Sara: Let's turn to other key measures of our financial performance, operating income and earnings per share. Operating income improved to $27.4 million in the third quarter, an increase of 1% over the prior period. Deluded earnings per common share were $1.54 in the third quarter, compared to $1.46 last year, reflecting an increase of 5%. Our diluted EPS reflects 13.6 million weighted average shares outstanding.
Sarah: Let's turn to other key measures of our financial performance.
Sarah: Operating income and earnings per share.
Sarah: Operating income improved to $27 4 million in the third quarter, an increase of 1% over the prior period.
Sarah: Diluted earnings per common share were $1 54 in the third quarter compared to $1 46 last year reflected an increase of 5%.
Sarah: Our diluted EPS reflects $13 6 million weighted average shares outstanding.
Sara: Next, let's review our balance sheet and capital allocation strategy. Our financial position and liquidity remain strong, supporting a balanced capital allocation strategy that invests in long-term growth while delivering meaningful returns to stockholders. Maintaining a disciplined and balanced capital allocation approach remains a priority for For the foreseeable future, we expect maintenance capex of between 1 and 2% of sales per fiscal year, which is in line with our asset life strategy. Our cash flows from operations this quarter was $35 million. And we elected to use approximately $20 million of that cash to pay down a portion of our short term higher interest rate bar.
Sarah: Next let's review, our balance sheet and capital allocation strategy.
Sarah: Our financial position and liquidity remains strong.
Sarah: Supporting a balanced capital allocation strategy that invest in long term growth, while delivering meaningful returns to stockholders.
Sarah: Maintaining a disciplined and balanced capital allocation approach remains a priority for us.
Sarah: For the foreseeable future, we expect maintenance capex of between one and 2% of sales per fiscal year, which is in line with our asset light strategy.
Sarah: Our cash flows from operations this quarter was $35 million.
Sarah: And we elected to use approximately $20 million of that cash to pay down a portion of our short term higher interest rate borrowings.
Sara: Our intent is to continue to pay down higher interest borrowings under the current interest rate environment. We continue to return capital to our stockholders through regular dividends and buyback. Annual dividends will continue to be our priority and are targeted at greater than 50% of earn On June 17, our Board of Directors approved a quarterly cash dividend of $0.94 per share. During the third quarter, we repurchased approximately 12,750 shares of our stock at a total cost of approximately $3 million under our current share repurchase plan. On June 16, our Board of Directors approved an amendment to extend the current share repurchase plan for an additional year, resulting in a new expiration date of August 31, 2026.
Sarah: Our intent is to continue to pay down higher interest borrowings under the current interest rate environment.
Sarah: We continue to return capital to our stockholders through regular dividends and buyback.
Sarah: Annual dividends will continue to be our priority and our targeted at greater than 50% of earnings.
Sarah: On June 17th our board of Directors approved a quarterly cash dividend of <unk> 94 per share.
Sarah: During the third quarter, we repurchased approximately 12750 shares of our stock at a total cost of approximately $3 million under our current share repurchase plan.
Sarah: On June 16th our board of Directors approved an amendment to extend the current share repurchase plan for an additional year, resulting in a new exploration date of August 31 2026.
Sara: We plan to remain active in the market and expect to repurchase at least enough shares to offset shares issued. Our goal is to return capital to stockholders in the most accretive way possible.
Sarah: We plan to remain active in the market and expect to repurchase at least enough shares to offset shares issued.
Sarah: Our goal is to return capital to stockholders in the most accretive way possible.
Sara: Finally, before I move to guidance, I would like to provide a brief update on the household divestiture. Our investment bank continues active discussions with multiple potential buyers both in the United States and in the United Kingdom. Although there's no certainty of a deal, we remain optimistic and I will provide further updates as appropriate.
Sarah: Finally, before I move to guidance I would like to provide a brief update on the household divestiture.
Sarah: Our investment Bank continues active discussions with multiple potential buyers both in the United States and in the United Kingdom.
Sarah: Although there is no certainty of a deal we remain optimistic and I will provide further updates as appropriate.
Sara: So let's turn to FY 25 guidance, which we have made revisions to reflect our current view of the business. As a reminder, we issued this year's guidance on a pro forma basis, excluding the financial impact of the home care and cleaning brands we have classified as assets held for sale. Given that the timing of the transaction remains uncertain, we continue to believe this approach provides investors with clarity on the direction of the core business and helps minimize the noise surrounding the transaction. In addition, this guidance excludes the release of a non-cash one-time uncertain tax position that generated a favorable income tax adjustment, which we disclosed in the second quarter of fiscal year 2025.
Sarah: So, let's turn to FY 'twenty five guidance, which we have made revisions to reflect our current view of the business.
Sarah: As a reminder, we issued this year's guidance on a pro forma basis, excluding the financial impact of homecare and cleaning brands, we have classified as assets held for sale.
Given that the timing of the transaction remains uncertain. We continue to believe this approach provides investors with clarity on the direction of the core business and helps to minimize the noise surrounding the transaction.
Sarah: In addition, this guidance excludes the release of a noncash onetime uncertain tax position that generated a favorable income tax adjustment, which we disclosed in the second quarter of fiscal year 2025.
Sara: I encourage investors to review our third quarter fiscal year 2025 earnings presentation, which includes a pro forma view. With only one quarter to go, we are pleased with the outlook for the full year, and as Steve indicated, we are seeing a strong start to our fourth quarter.
Sarah: I encourage investors to review our third quarter fiscal year 2025 earnings presentation, which includes a pro forma view.
Sarah: With only one quarter to go we are pleased with the outlook for the full year and as Steve indicated we are seeing a strong start to our fourth quarter.
Sara: With that, our updated guidance for fiscal year 2025 is projected as follows. Net sales growth from the pro forma 2024 results have been narrowed to be between six and nine percent with net sales between 600 and 620 million after adjusting for translation impacts of foreign currency. We continue to expect full year growth margin to be in the range of 55 to 50 Advertising and promotion investment continues to be around 6% of net sales. Operating income has been increased to be between 96 and 101 million now representing growth of between 7 and 12 percent over the pro forma 2024 results.
Sarah: With that our updated guidance for fiscal year 2025 is projected as follows.
Sarah: Net sales growth from the pro forma 2024 results have been narrowed to be between six and 9% with net sales between 600 and $620 million after adjusting for translation impacts of foreign currency.
Sarah: We continue to expect full year gross margin to be in the range of $55 to 56%.
Sarah: Advertising and promotion investment continues to be around 6% of net sales.
Sarah: Operating income has been increased to be between 96 and $101 million.
Sarah: Now representing growth of between seven and 12% over the pro forma 2020 results.
Sara: The provision for income tax is expected to continue to be around 22 and a half percent. And we are increasing our diluted earnings per share guidance, primarily due to the impact of foreign currency exchange rate fluctuations and changes in non-operating items. It is now expected to be between 530 and 560, which is based on an estimated 13.5 million weighted average shares outstanding. This range now represents growth of between 12 and 18% over the pro forma 2024 results. This guidance assumes no major changes to the current economic environment. Unanticipated inflationary headwinds, foreign currency exchange fluctuations, changes in trade tariffs, and other unforeseen events may further affect the company's financial results.
Sarah: The provision for income tax is expected to continue to be around 22, 5%.
Sarah: And we are increasing our diluted earnings per share guidance, primarily due to the impact of foreign currency exchange rate fluctuations and changes in non operating items.
Sarah: It is now expected to be between $5 30, and $5 60, which is based on an estimated $13 5 million weighted average shares outstanding.
Sarah: This range now represents growth of between 12 and 18% over the pro forma 2024 results.
Sarah: This guidance assumes no major changes to the current economic environment.
Sarah: Unanticipated inflationary headwinds foreign currency exchange fluctuation change.
Sarah: Changes in trade tariff and other unforeseen events may further affect the Companys financial results.
Sara: In the event we are unsuccessful in divesting the assets currently held for sale, our guidance would be positively impacted by approximately $20 million in net sales, $6 million in operating income and 33 cents, and diluted EPS on a full-year basis.
Sarah: In the event, we are unsuccessful in divesting the assets currently held for sale our guidance will be positively impacted by approximately $20 million in net sales.
Sarah: $6 million in operating income and <unk> 33.
Sarah: And diluted EPS on a full year basis.
Unknown Executive: That completes the financial overview.
Sarah: That completes the financial overview.
Unknown Executive: Now I would like to turn the call back Thank you, Sara.
Steve: Now I would like to turn the call back to Steve.
Steve: Thank you Sarah.
Steve: In summary, what did you hear from us on this call? You heard that the third quarter was a record sales quarter for the company, reflecting continued progress and momentum. You heard that sales of our maintenance products are up 6% year to date, and that this performance aligns with our long term growth target. You heard that we're pleased to report a strong start to the fourth quarter with June delivering robust performance across all three trade You heard that sales of WD-40 multi-use product were up 6% year to date. You heard that sales of WD-40 specialists were up 11% year to date.
Steve: In summary, what did you hear from us on this call.
Steve: The third quarter was a record sales quarter for the company, reflecting continued progress and momentum.
You heard that sales of our maintenance products were up 6% year to date under this performance aligns with our long term growth targets.
Steve: You heard that we're pleased to report a strong start to the fourth quarter with June delivering robust performance across all three trade blocks.
Steve: You heard that sales of WD 40, multi use product were up 6% year to date.
Steve: You heard that sales of WD 40 specialist were up 11% year to date.
Steve: You heard that sales in the eCommerce channel are up 11% year to date. You heard that while the U.S.
Steve: Sales in the E Commerce channel were up 11% year to date.
Steve: You heard that while the U S median employee tenure is four years to be fully company averages eight twice as long.
Steve: median employee tenure is four years, WD-40 Company averages eight, twice as long.
Steve: You heard that we're launching a renewed citizenship platform designed to empower doers around the world to build a better future. You heard that in the third quarter, our gross margin was 56.2%. And we believe we will end fiscal year 2025 within our guidance range of 55 to 56%. You heard that we narrowed our net sales guidance and now expect net sales growth of between 6 and 9% in fiscal year 25, which aligns with our mid to high single digit long term growth target. And you heard that we made an upward revision to our full fiscal year 25 operating income and EPS guide.
Steve: You heard that we're launching a renewed citizenship platform designed to empower to us around the world to build a better future.
Steve: You heard it in the third quarter, our gross margin was 56, 2% and we believe we will end fiscal year 2025 within our guidance range of 55% to 56%.
Steve: Heard that we narrowed our net sales guidance and now expect net sales growth of between six and 9% in fiscal year, 2005, which aligns with our mid to high single digit long term growth targets.
Steve: We made an upward revision to our full fiscal year 'twenty five operating income and EPS guidance. Thank.
Unknown Executive: Thank you for joining our call today.
Steve: Thank you for joining our call today, we'd now be pleased to answer your questions.
Unknown Executive: We'd now be pleased to answer any questions. 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 your equipment. If your question has been answered and you would like to rejoin your registration, please press the pound. One moment, please, for the first question.
Steve: Ladies and gentlemen, if you would like to Register Register for a question. Please press star one on your telephone keypad. Please make sure your mute function is throwing off to allow your signal to reach our equipment.
Steve: If your question has been answered and you would like to withdraw your registration. Please press the pound key.
Steve: One moment please for the first question.
Daniel Rizzo: Our first question comes from the line of Daniel Rizzo with Jeffries. Please proceed to your. Hey, everyone. Thanks for taking my questions. So it looks like you said it was a strong June and it was a really solid Q3. But maybe I'm wrong, but it seems like the Q4 guidance is kind of wide.
Daniel Rizzo: Our first question comes from the line of Daniel Rizzo with Jefferies.
Speaker Change: Please proceed with your question.
Speaker Change: Hey, everyone. Thanks for taking my questions. So.
Speaker Change: You said it was a strong June and it was a really solid Q3.
Speaker Change: Maybe I'm wrong, but it seems like the Q4 guidance is kind of wide I was wondering if there's things there that could go wrong can maybe go towards the low end or frankly overall why its kind of wide Kevin given what's happening.
Steve: I was wondering if there's things there that could go wrong to maybe go towards a low end or frankly, overall, why it's kind of wide given given what's happened. I'll kick off with that, Daniel. And Sara, you feel free to chime in. And so yeah, our guidance, I mean, obviously, we're now only eight to 10 weeks out to the year end. And so we have a much clearer view of where we're headed. So we did narrow the guidance slightly. And just to reflect our latest estimate, which is fully within our, you know, historical kind of targets of six to 9% maintenance products.
Kevin: I'll kick off with that Daniel and Sarah you feel free to chime in.
Speaker Change: And so our guidance I mean, obviously, we would know.
Speaker Change: Eight to 10 weeks out till the year end and so we have a much clearer view of where we're headed so we did narrow the guidance slightly.
Speaker Change: Just to reflect our latest estimate.
Speaker Change: Is fully within our historical kind of targets of 6% to 9% maintenance products and so.
Steve: And so You know, we feel that obviously, the third quarter, we were a little lighter in terms of revenue growth, albeit delivering a record sales quarter, up against the tough comparable. And the fourth quarter is also quite a tough comparable compared to prior year. And so we feel good about where we're targeting the revenue numbers.
Speaker Change: We feel that.
Speaker Change: Obviously, the third quarter, we were a little lighter in terms of revenue growth, albeit delivering a record sales quarter.
Speaker Change: Hope against a tough comparable in the fourth quarter results a quarter tough comparable compared to prior year and so we feel good about where were targeting the revenue number. Several do you have anything to add just that.
Sara: Sara, do you have anything to add? Just that, hi, Daniel. A lot of times, the promotional activity as we get to the end of a quarter or the end of the year can swing it from one direction if something gets pulled forward or if something gets pushed out. And so sometimes that is out of our control, along with the timing of when, especially in our marketing distributor markets, if, you know, an order or two slips, even just a couple days, that actually can have a decent impact, because those orders tend to be fairly sizable. So it's one of the reasons why we kept a decent range, but also felt that it was appropriate to narrow it just where we're where we think the year is going to land.
Speaker Change: Hi, Daniel.
Speaker Change: A lot of times the promotional activity as we get to the end of a quarter at the end of the year can swing it.
Speaker Change: From from one direction as something gets pulled forward or if something gets pushed out and so sometimes that is out of our control along with the timing of when especially in our marketing distributor markets.
Speaker Change: An order or two slips even just a couple of days that actually can have a decent impact because those orders tend to be fairly sizable. So it's one of the reasons why we cafe.
Speaker Change: A decent range, but also felt that it was appropriate to narrow at just where we think the year, it's going to land.
Steve: Thanks, that's helpful. And then so we're doing great with growth margin, you know, you're at 55 to 56%. But the long term target is target is 55. So does that suggest maybe some give back next year, or at the very least slower growth? Or how should we think about it? I'm not asking for, I guess, for guidance per se, but just how we should think about it after this fourth quarter here. Yeah, I mean, I think, obviously, we're very pleased with where margin has held throughout the course of the year, and believe will be in line with that 55 to 56%.
Speaker Change: Thanks, that's helpful. And then so we're doing great with group gross margin youre at 55% to 56%, but the long term margin target is 55. So does that suggest maybe some give back next year or so.
The slower growth or how should we think about it I'm not asking for.
Speaker Change: I guess for guidance per se, but just how we should think about it after this fourth quarter here.
Speaker Change: Yes, I mean, I think obviously, we're very pleased with where our margin has held throughout the course of the year and believe will be in line with that 55% to 56% I think.
Steve: I think we've indicated, right, we necessarily won't be stopping at 55%. We do have a number of supply chain initiatives in the pipeline, that we think could potentially be accretive if we don't encounter additional inflationary headwinds. And so, you know, we're pleased at where margin is, obviously, the stability of the input costs has been in our favor this year. And if we do encounter any inflationary headwinds going into next year, I think we're pretty confident that we have enough supply chain initiatives in the pipeline to offset those. If the costs stay stable, then those supply chain initiatives would likely be accretive to us.
Speaker Change: Indicated rate, we necessarily wont be stopping at 55%, we do have a number of supply chain initiatives in the pipeline that.
Speaker Change: That we think could potentially be accretive if we don't encounter additional inflationary headwinds.
Speaker Change: So.
Speaker Change: We're pleased that our margin is obviously the stability of the input cost has been in our favor this year and if we do encounter any inflationary headwinds going into next year I think we're pretty confident that we have enough supply chain initiatives in the pipeline to offset those.
Speaker Change: If there if the cost stay stable.
Speaker Change: Supply chain initiatives, what would likely be accretive to us.
Sara: Okay. And then just kind of going down. So then, it seems to the last few years, if I look through my model that that G&A costs generally rise by double digits, I know you don't really guide to that, but is that how we should think about that too? As you know, into 26, and just over the long term that given the promotional activity and some of the well, some of the things you're doing with the different activities you have that we should think about that growing, I don't know, like low double digits. From an SG&A perspective, Daniel?
Speaker Change: Okay.
Speaker Change: And then just kind of going down. So then it seems as if I look through my model that.
Speaker Change: G&A costs generally rise by double digits I know you don't really guide does that how we should think about that too.
Speaker Change: Going into 2006, and just over the long term, but given the promotional activity as well some of the things you're doing with the <unk>.
Speaker Change: Activities you have that we should think about that growing.
Speaker Change: Like low double digits.
Daniel Rizzo: From an SG&A perspective, Daniel that's correct.
Sara: That's correct. Yeah, so obviously, we've been making we've talked about the investments that we've been making over the past couple years, specifically around it, ESG, in particular, and then some of the org design work that we that we've implemented a few years ago, you know, we are focused on the cost side of things. And so I don't think double digits is necessarily what I would be guiding to for next year. We're obviously just in the early stages of our plan for next year, but we're very much focused on coming out next year with a with with costs, not at the at the same at the same rate that you've seen in the last couple years.
Daniel Rizzo: So obviously, we've been making we've talked about the investments that we've been making over the past couple of years specifically around it.
Daniel Rizzo: ESG in particular, and then some of the Org design work that we that we implemented a few years ago and we are focused on the cost side of things and so I don't think double digits is necessarily what I would be guiding to for next year. We're obviously just in the early stages of our plan for next year, but we're very much focus.
Daniel Rizzo: Stan.
Daniel Rizzo: Coming out next year with a with costs not at the at the same at the same rate that you've seen in the last couple of years.
Steve: Okay. And then for FX, it was kind of it was a little bit of a mixed bag with more of a headwind in Q3. But as we sit here now, with eight weeks left, should we think about it as maybe a small benefit in the fourth quarter? Or how should we think about that? Yeah, I think we'll continue if you look at on a global basis, right, the biggest headwind we had for FX was in the second quarter, that pullback a little bit in the third quarter actually was finally thought flip positive for us in Europe in particular, which is where we have the biggest impact of currency.
Daniel Rizzo: Okay.
Daniel Rizzo: And then for FX. It was kind of a it was a little bit of a mixed bag with more of a headwind in Q3, but as we sit here now.
Daniel Rizzo: We slept how should we think of it as maybe a small benefit in the fourth quarter or how should we think about that.
Daniel Rizzo: Yes, I think we'll continue if you look at on a global basis right. The biggest headwind we had for FX was in the second quarter.
Daniel Rizzo: That pull back a little bit in the third quarter actually was finally thought flip positive for us in Europe in particular, which is where we have the biggest impact of currency. If we sit here with the rates are sitting here today compared to Q4 of last year I would expect that to be a positive for us, albeit.
Steve: If we sit here with the rates sitting here today compared to Q4 of last year, I would expect that to be a positive for us, albeit, you know, the Mexican and the Brazilian currencies have been have been our biggest headwinds for the full year. And that could will likely continue into the fourth quarter. Okay. And then one final question. I know tariffs aren't really having a major impact on you guys.
Daniel Rizzo: The Mexican and Brazilian currencies have been have been our biggest headwinds for the full year and that will likely continue into the fourth quarter.
Speaker Change: Okay and then one final question I know tariffs aren't really having a major impact on you guys, but I was wondering if it is.
Steve: But I was wondering if it's a, if it's having, I don't know, just with all the announcements, a couple of different things, if it's having an effect on customer order trends, or even distributor order trends, whether there was some pull forward before Liberation Day or after or, I don't know if it's just just causing lumpiness, frankly. Not really, Dan, you know, we've kind of made the statement last quarter that, you know, we are relatively, we're not immune from tariffs, and particularly in our America's business, we do have some exposure. But no, there's no kind of real lumpiness around ordering patterns, I wouldn't say.
Speaker Change: If it's having I don't know just with all the announcements copper different things if it's having an effect on customer order trends were or even distributor order trends, whereas there was some pull forward before liberation day or after or.
Speaker Change: So if you just just closing.
Speaker Change: Peanuts frankly.
Speaker Change: Not really.
Speaker Change: <unk> made the statement last quarter that we are relatively immune from tariffs and particularly in our Americas business business. We do have some exposure, but no. There is no kind of real lumpiness around ordering patterns I wouldn't say and we do have substantial supply chain initiatives, which are largely offsetting the impact of tariffs and so where there is particularly.
Steve: And we do have substantial supply chain initiatives, which are largely offsetting the impact of tariffs. And so where there is, particularly within our America's region, some tariff exposure, particularly around steel cans, with the tariffs, you know, we are managing to offset that globally in terms of countermeasures from supply chain initiatives, making it virtually a wash globally for us. Thank you very much. Thank you.
Speaker Change: Our Americas region has some tariff exposure, particularly around steel cans with the tariffs.
Speaker Change: We are managing to offset that globally in terms of countermeasures from supply chain initiatives, making it virtually awash globally for us.
Speaker Change: Thank you very much guys.
Speaker Change: Thank you.
Mike Baker: Our next question comes from the line of Mike Baker with DA Davidson. Please proceed with your Okay, hi, thanks. I guess it's kind of a follow up on the guidance question. But I am a little curious what so you narrow the range for the full year? What change in the top line? Is it a function of what you saw in the third quarter? What you expect to see in the fourth quarter? Is it FX? Just just, you know, what, why is that midpoint down a little bit? And then the sort of opposite question on the, on the profitability, you increase that.
Speaker Change: Our next question comes from the line of Mike Baker with D. A Davidson. Please proceed with your question.
Mike Baker: Okay, Hi, thanks.
Mike Baker: I guess, it's kind of a follow up on the guidance question, but I am a little curious what.
Mike Baker: So you've narrowed the range for the full year.
Mike Baker: What changed in the top line is it a function of what you saw in the third quarter, what you expect to see in the fourth quarter is it FX.
Mike Baker: Why is that midpoint down a little bit and then the sort of opposite question on the on the profitability you increased that so whats the mindset. There is that a function of what you've seen year to date or the.
Sara: So you know, what's the mindset there? Is that a function of what you seen here today, or the confidence in what you're seeing in the fourth quarter?
Mike Baker: Confidence in what you're seeing in the fourth quarter.
Sara: Yeah, hey, Mike. So I think it's, you know, as you get further into the year, and you're, you know, you're eight, 10 weeks away from the year end, you know, you get a clearer picture on how things are tracking. And so, yeah, 10, eight, 10 weeks away, you know, this, this kind of guidance of six to 9%, which is where we guide to long term is kind of where we see it from today's vantage point. And so we're narrowing the guidance. And, you know, you see this sort of the sort of comparable numbers were lapping now in Europe for the third and fourth quarter.
Mike Baker: Yeah, Hey, Mike So I think it's.
Mike Baker: Further into the year in Europe.
Mike Baker: Eight to 10 weeks away from the year and you get a clearer picture on how things are tracking and so yeah.
Mike Baker: Yes.
Mike Baker: Eight to 10 weeks away.
Mike Baker: This kind of guidance of 6% to 9%, which is where we guide to long term is kind of where we see it from today's vantage point and so we're narrowing the guidance.
Mike Baker: You see this sort of the sort of comparable numbers, we're lapping now in Europe for the third and fourth quarter. That's that's a part of it we did talk to some kind of slowdown within our middle Eastern region and so therefore, that's the structural reasons.
Steve: That's, that's a part of it. We did talk to some kind of slowdown within our Middle Eastern region. And so therefore, that's the structural reasons. We've implemented a new manufacturing partner in Dubai. And so what's happened there is our local partners are reduced, that's reduced the inventory needs. And so whereas they were sourcing before, by by a sea shipment, and it was taking a month, they're now able to get product within five days or seven days. And so the need for inventory is considered to be less than that. And so there we have a one off kind of change that we weren't quite sure when in the year we're going to be implementing.
Mike Baker: We've implemented a new manufacturing partner in Dubai, and so whats happened there is a local partners reduced to reduce the inventory needs and so whereas they were sourcing before.
Mike Baker: But see shipment that he was taking a month and that we're able to get product within five days or seven days and so the need for inventory is considerably less and so there we have a one off kind of change that we weren't quite sure when in the year, we're going to be implementing so that has a material impact.
Sara: So that has a had had a material impact. We also spoke about, you know, Turkey, you know, this is one of those emerging markets where one year you can grow at 66%, like we did last year. And this year, we're declining by almost 40%. So the long term story is still extremely positive. But some of these emerging markets are more volatile. And that does lead to some unpredictability. And then, Mike, maybe if I can just add on a little bit. So the the sales guidance that we put out is is on a constant currency basis.
Mike Baker: In fact, we also spoke about Turkey. This is one of those emerging markets, where one year you can grow at 66% like we did last year and this year were declining by almost 40%. So the long term story is still extremely positive, but some of these emerging markets are more volatile and that does lead disciplined predictability.
Mike Baker: And then Mike maybe if I can just add on a little bit so the the.
Mike Baker: Sales guidance that we put out is on a constant currency basis, and so we try to take that kind of the currency.
Sara: And so we try to take the cost or the currency out of that six to 9% growth. What you're seeing then on the change for the operating income and the EPS is that when we were sitting here at Q2, the euro in particular was at a much lower rate, it has since improved and held and we're using more current rates, so we're seeing a positive impact actually, to our operating income and EPS. And then, you know, just one or two other non operating items that are positive in our favor. But all in all, I think when we put out guidance at the beginning of the year, kind of where we're landing at the end of the year, you know, the business is actually pretty in line with where we expected it with some some currency noise in the first half of the year, then being, you know, coming back and giving us a little bit of tailwind in the back half of the year.
Mike Baker: That 6% to 9% growth what you're seeing on the change for the operating income and the EPS is that when we were sitting here at Q2. The euro in particular was at a much lower rates. It has since improved and held and were using more current rates. So we're seeing a positive impact actually.
Mike Baker: Operating income and EPS and then just one or two other nonoperating items that are positive in our favor but I'll.
Mike Baker: All in all I think when we put out guidance at the beginning of the year kind of where we're landing at the end of the year. The business is actually pretty in line.
Mike Baker: With where we expected it with some some currency noise in the first half of the year than being coming back and giving us a little bit of a tailwind in the back half of the year.
Mike Baker: Got it. Makes sense. Thanks.
Mike Baker: Got it.
Steve: If I could ask one other question. It's interesting, I think in some of the revenue, some we talked about some of the regions, you talked about promotions, helping drive business as well as in some of the products. So if you could talk about the promotional activity that you're seeing, and I guess within the context of the idea that even though you're talking about promotional activity, driving businesses, your promotions as a percentage was actually down year to date a little bit. So just just trying to square that circle. Yeah, I think you have to differentiate between promotions and brand building, right?
Mike Baker: Makes sense. Thanks, if I could ask one other question.
Mike Baker: It's interesting I think in some of the revenue when you talk about some of the regions you talked about promotions.
Mike Baker: Hoping drive business as well as in some of the products. So if you could talk about the promotional activity that you're seeing and I guess within the context of the idea that even though you are talking about promotional activity driving businesses.
Mike Baker: Your promotions as a percent of that was actually down year to date, a little bit so just trying to square that circle.
Mike Baker: Yes, I think you have to differentiate between promotions and brand building right and so most of our marketing investments are in terms of brand building and things simple marketing programs like sampling we've spoken about the sampling programs, we put out across the world, particularly in places like China, and India to bring in new end users and so that's kind of part of that.
Steve: And so most of our marketing investments are in terms of brand building and things, simple marketing programs like sampling, we've spoken about, you know, the sampling programs we put out across the world, particularly in places like China and India, to bring in new end users. And so that's kind of part of that. The other aspect is then with our big kind of box retailers, particularly in the Americas, you know, whether a promotion lands, so, you know, it isn't always a price promotion, it can be an offshell promotion or whatever, you know, whether that lands in one particular quarter in the next can be down to a matter of days.
Mike Baker: The other aspect is then with our big box retailers, particularly in the Americas.
Mike Baker: Whether whether a promotion lens so.
Mike Baker: It isn't always a price promotion it can be an offshore promotional or whatever whether that lens in one particular quarter and the next can be down to a matter of days and so they can be pretty substantial chunks of business. We have a very strong promotional programs, particularly in our U S business as we look at the Q.
Steve: And so they can be pretty substantial chunks of business. We have a very strong promotional program, particularly in our US business, as we look at the Q4. And so we're very confident about the US business, which performed well in Q3. And going into Q4, we believe are well set up for a strong year, you know, with modest single digit growth within the US market. Excellent. Makes sense. Thank you.
Mike Baker: Q4, and so we're very confident about the U S business, which performed well in Q3 and going into Q4. We believe we are well set up for a strong year.
Mike Baker: With modest single digit growth within the U S market.
Mike Baker: Excellent makes sense. Thank you.
Mike Baker: Thank you.
Unknown Executive: 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
Speaker Change: 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 lines.
Mike Baker: Yeah.
Mike Baker: Okay.
Mike Baker: Okay.
Mike Baker: Okay.
Mike Baker: Yes.