Post on 27-May-2020
January 2019
2
Historical financial and operating data in this presentation reflect the consolidated results of WD-40 Company, its subsidiaries and its legal
entities. WD-40 Company markets maintenance products (“MP”) under the WD-40®, 3-IN-ONE® and GT85® brand names. Currently included
in the WD-40 brand are the WD-40 Multi-Use Product and the WD-40 Specialist® and WD-40 BIKE® product lines. WD-40 Company markets
the following homecare and cleaning (”HCCP”) brands: X-14® mildew stain remover and automatic toilet bowl cleaners, 2000 Flushes®
automatic toilet bowl cleaners, Carpet Fresh® and no vac® rug and room deodorizers, Spot Shot® aerosol and liquid carpet stain removers,
1001® household cleaners and rug and room deodorizers and Lava® and Solvol® heavy-duty hand cleaners.
Except for the historical information contained herein, this presentation contains “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements reflect the Company’s current expectations with respect to currently available
operating, financial and economic information. These forward-looking statements are subject to certain risks, uncertainties and assumptions
that could cause actual results to differ materially from those anticipated in or implied by the forward-looking statements.
Our forward-looking statements include, but are not limited to, discussions about future financial and operating results, including: growth
expectations for certain products; expected levels of promotional and advertising spending; plans for and success of product innovation, the
impact of new product introductions on the growth of sales; anticipated results from product line extension sales; the impacts of the “Tax Cuts
and Jobs Act”; and forecasted foreign currency exchange rates and commodity prices. Our forward-looking statements are generally
identified with words such as “believe,” “expect,” “intend,” “plan,” “could,” “may,” “aim,” “anticipate,” “estimate” and similar expressions.
The Company's expectations, beliefs and forecasts are expressed in good faith and are believed by the Company to have a reasonable basis,
but there can be no assurance that the Company's expectations, beliefs or forecasts will be achieved or accomplished.
Actual events or results may differ materially from those projected in forward-looking statements due to various factors, including, but not
limited to, those identified in Part I―Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the fiscal year ended August
31, 2018 which the Company filed with the SEC on October 22, 2018 and in the Company’s Quarterly Report on Form 10-Q for the period
ended November 30, 2018 which the Company filed with the SEC on January 9, 2019.
All forward-looking statements included in this presentation should be considered in the context of these risks. All forward-looking statements
speak only as of January 9, 2019 and we undertake no obligation to update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. Investors and prospective investors are cautioned not to place undue reliance on our forward-
looking statements.
4
• Simple and easy to understand business model
• Dominant in its industry
• Superior returns on capital
• Sustainable competitive advantage
• Significant cash flow generation
• Strong balance sheet
• Growth opportunities
• Proven management team
5
In the 1950’s a chemist in San Diego set out to
create a compound that would prevent rust and
corrosion. It took him 40 attempts to get the water
displacing formula right, but the end result became
the original secret formula for WD-40 Multi-Use
Product.
1958WD-40 Multi-Use
Product makes
appearance on
store shelves in
San Diego
1953Rocket Chemical
Company
Incorporated
1970The name
WD-40
Company
was
adopted
1973WD-40 Company
goes public on
the NASDAQ;
stock increases
61% on first
trading day
2008International
sales exceed
domestic
sales for the
first time in
Company’s
history
In 2018…Company celebrates 65th
anniversary, flagship WD-40
brand is more popular than
ever, achieved over $408
million in net sales and
products are available in over
176 countries and territories
worldwide
2011WD-40
Specialist
product line
successfully
launched
1953 - 1958WD-40 MUP is used by
aerospace industry and
on the SM-65 Atlas
missile
1997Garry
Ridge
named
president
and CEO
2005WD-40
Smart Straw
successfully
launched
2015WD-40 EZ-
REACH
successfully
launched
6
• Currently make up ~90% of net sales
• Core strategic focus and primary growth engine
• Available in niche segments and geographies
• Generate positive cash flows but are not core
strategic focus
7
8
9
11
12
The “shield” carries with it positive brand equity - the brand is memorable,
easily recognizable, and known for its superiority in quality and reliability.
Similar to Coca-Cola, Kentucky Fried Chicken and Google, the formula for
WD-40 Multi-Use Product is a trade secret so protected that there was never
a patent filed for it.
13
Question Result
Average of all questions 93.3
I love to tell people that I work for WD-40 Company. 99.0
I feel my opinions and values are a good fit with the WD-40 Company culture. 98.1
I understand how my job contributes to achieving WD-40 Company’s goals. 97.9
I know what results are expected of me. 97.4
I am clear on the company’s goals. 97.2
I respect my coach. 96.4
WD-40 Company’s vision and mission motivates me to help the company succeed. 95.9
I feel like I am a valued member of my functional team. 94.5
I am excited about WD-40 Company’s future direction. 93.4
WD-40 Company encourages employees to continually improve in their job. 92.9
My definition of success is having the opportunity to enjoy what I do for a living
and I have found that here. I am inspired by every tribe member and our ability
to make a difference in our end-users’ life every day.”
- Claudia Fenske, Sales Director
14
Our products are currently available in 176 countries and territories worldwide
and in over 62 unique trade channels
The Company’s unique infrastructure enables it to take its products to more places,
with more people, who have more uses, more frequently.
• Aircraft Supplies
• Appliance Repair
• Automotive
• Bicycle
• Big Box
• Body Shop
• Building Supplies
• Chemicals
• Drug Store
• E-Commerce
• Electrical Equipment
• Farming Equipment
• Grocery
• Hardware
• HVAC
• Industrial Supplies
• Janitorial
• Lawn and Garden
• Locksmith
• Marine
• Motorcycle
• Office Supplies
• Plumbing
• Refrigeration
• Sporting Goods
• Welding Equipment
15
16
• 8 out of 10 U.S. households have at least
one can of WD-40 Multi-Use Product in their
home
• The majority of sales of maintenance
products come from end-users in workshops
and factories
Annual usage amounts vary dramatically among our end users
$70.00 per year $0.40 per year
18
1. Grow WD-40 Multi-Use Product
Maximize the product line through geographic expansion, increased
market penetration and development of new and unique delivery
systems. More places, more people, more uses, more frequently.
Grow WD-40 Multi-Use Product to $530
million in net sales by the end of 2025
2. Grow the WD-40 Specialist Product Line
Leverage the WD-40 Specialist line to create growth through
continued geographic expansion as well as by developing new
products and product categories within identified platforms.
Grow WD-40 Specialist to $100 million in net
sales by the end of 2025
3. Broaden Product and Revenue Base
Leverage the recognized strengths of WD-40 Company to derive
revenue from existing brands as well as from new sources and
products.
Continue to grow, nurture, develop or
acquire products that fit well with our unique
multi-channel distribution network and grow
to $70 million in net sales by the end of 2025
4. Attract, Develop and Retain Outstanding Tribe Members
Succeed as a tribe while excelling as individuals.Grow employee engagement to greater than
95 percent
5. Operational Excellence
Continuous improvement by optimizing resources,
systems and processes as well as applying rigorous commitment to
quality assurance, regulatory compliance, and intellectual property
protection.
Execute the 55/30/25 business model while
safeguarding the “Power of the Shield”
19
Anticipated Target
Anticipated targets for revenue are projected by the end of FY2025 and are based on the Company's expectations, beliefs and forecasts. They are expressed in good faith and are believed by the Company to
have a reasonable basis, but there can be no assurance that they will be achieved or accomplished.
20
21
1) FY18 presented as reported, all prior years presented on a constant currency basis using FY18 foreign currency exchange rates.
Our 2025 brands have grown at a compounded annual
growth rate of 5.3% over the last 10-years
2025 Brands Revenue(1)
(In millions)
$248
$278 $287 $298$326 $335 $342
$359$377
$397
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
$100China
India
Brazil
Russia
Germany
Mexico
Saudi
Arabia
Indonesia
Iran
South
Korea
Italy
Venezuela Eqypt
Algeria
Columbia
Nigeria
Thailand
Turkey
Spain Canada
$0
1) Based on Industrial Value Added (IVA) / Purchase Price Parity (PPP) third-party benchmarking. WD-40 Company’s estimated IVA/PPP figure is calculated using country GDP
(PPP) data, which is a country's GDP converted into ‘international dollars’ using the PPP index, then multiplied by the country's IVA (% GDP) figure.
We estimate the potential global market opportunity for WD-40 Multi-Use Product to be ~$1.0B (1)
22
23
‘Premiumization’ of the blue and yellow can with the little red top creates
opportunities for revenue growth and gross margin expansion
CLASSIC CAN EZ-REACH
24
25
General Maintenance
Lawn and Garden
Make it EASY TO BUY by maximizing store placement and shelf space
26
Continue to derive revenue from existing brands as well as from new sources and products
27
$56M
$219M
28
FY 2008
Reported Revenue
$317M
Revenue Generated by Strategic Initiative #1
FY 2018
Reported Revenue
$408M
FY 2025
Anticipated Revenue Target
~$700M(1)
$314M
$52M
$31M
~$530M
~$100M
~$70M
Revenue Generated by Strategic Initiative #2 Revenue Generated by Strategic Initiative #3(2)
1) Anticipated targets for revenue are projected by the end of FY2025 and are based on the Company's expectations, beliefs and forecasts. They are expressed in good faith and are believed by the Company
to have a reasonable basis, but there can be no assurance that they will be achieved or accomplished. Historical revenue numbers have not been adjusted for changes in foreign currency exchange rates.
2) Strategic Initiative #3 includes WD-40 Company products under the following brands: 3-IN-ONE, GT85, WD-40 BIKE, no vac, Spot Shot, 1001, Lava and Solvol.
29
The Americas
~50% of global
sales
Targeting a
compound annual
growth rate of
2-5%
EMEA
~35% of global
sales
Targeting a
compound annual
growth rate of
8-10%
Asia-Pacific
~15% of global
sales
Targeting a
compound annual
growth rate of
10-12%
Total
Company
Targeting a
compound annual
growth rate of
~8%
Primary Growth Drivers:
• Increased penetration of WD-40 Multi-Use Product
• Increased penetration of WD-40 Specialist
• Conversion to Smart Straw delivery system
• Heightened focus on e-commerce and digital channels
• Increased penetration of WD-40 EZ-REACH
• Channel development opportunities
Anticipated targets for revenue are projected by the end of FY2025 and are based on the Company's expectations, beliefs and forecasts. They are expressed in good faith and are believed by the Company to
have a reasonable basis, but there can be no assurance that they will be achieved or accomplished.
31
Value of $100 Invested on August 31, 2013
$80
$100
$120
$140
$160
$180
$200
$220
$240
$260
$280
$300
$320
$340
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
WD-40 Company S&P 500 Russell 2000
*$100 invested on 8/31/13 in stock or index, including reinvestment of dividends.
Fiscal year ending August 31.
Copyright© 2018 Standard & Poor's, a division of S&P Global. All rights reserved.
Copyright© 2018 Russell Investment Group. All rights reserved.
32
EFFICIENT BUSINESS MODEL WITH
ASSET-LIGHT STRATEGY
• Average annual maintenance CAPEX needs
of about 1% to 2% of net sales
• Outsourced manufacturing and distribution
• Sales per employee of $0.85M in FY18
FOCUSED ON CREATING VALUE
• High Returns on Invested Capital
• ROIC was 27% in FY15, 33% in FY16,
32% in FY17 and 31% in FY18
• Employee earned incentives tied to EBITDA
growth
SOLID FINANCIAL FOUNDATION
• Strong balance sheet
• Predictable free cash flow
• Strong liquidity & access to capital
We invest in brands and people, not factories and warehouses
GROWTH PLATFORM SUPPORTED BY
STRONG BRANDS
• Brand portfolio includes many well-known
brands and products
• Global diversification reduces risk
• Long runway of growth ahead
$210
$241$254
$264
$298$308 $314
$333$352
$372
$
$50
$100
$150
$200
$250
$300
$350
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
33
1) FY18 presented as reported, all prior years presented on a constant currency basis using FY18 foreign currency exchange rates.
Maintenance product sales continue to increase despite
global macroeconomic challenges
Maintenance Product Sales (In millions)
34
MP Sales by Segment
1) FY18 presented as reported, all prior years presented on a constant currency basis using FY18 foreign currency exchange rates.
(In millions)
$
$20
$40
$60
$80
$100
$120
$140
$160
$180
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
Americas EMEA Asia Pac
36
Gross Margin
55% of net sales55
Cost of Doing Business(1)
30% of net sales30Maintenance CAPES & Regular Dividends
Maintenance CAPEX of between $2M to $4M per fiscal year
Annual dividends targeted at ~50% of earnings or ~$20M25 EBITDA(1)
25% of net sales
1) See appendix for descriptions and reconciliations of these non-GAAP measures.
WD-40 Company’s business is guided by the 55/30/25 business model
We target gross margin at or above 55%, cost of doing business of 30%, and an EBITDA of 25%
37
Gross margin can be impacted positively and negatively by things not under the
Company’s control like changes in foreign currency exchange rates and input costs
52%
53%
56% 56%
55%
FY14 FY15 FY16 FY17 FY18
5-Year Gross Margin Trend
55% Gross Margin Target
• In FY18 the Company achieved gross margin of 55.1% down
from 56.2% in FY17
• Changes in petroleum-based specialty chemicals and aerosol
cans in all three segments (-1.3pp)
• Warehousing and distribution costs (-0.2pp)
• Higher discounts given to our customers (-0.1pp)
• Price increases in EMEA (+0.5pp)
• Continued focus on driving gross margin improvement over the
long-term
• New product development, innovations and reformulations
• Operational efficiencies
• Product mix and market mix
• Pricing adjustments, as needed, to offset input cost increases
3%
38
Approximate Cost Breakdown of a Typical Can of
WD-40 MUP Manufactured in the United States
Data as of September 2018. Represents average input costs over 6-month period of a typical 12 ounce can of WD-40 Multi-Use Product manufactured in the United States.
Current manufacturing and input costs typically take approximately 90-120 days to be reflected in the Company’s consolidated statement of operations due to production and
inventory life cycles.
Petroleum-Based
Specialty Chemicals
Manufacturing Fees
Can
Plastic
Corrugate
30%
19%
35%
13%
39
• FY 2018 cost of doing business was at 34% of net
sales down from 35% compared to FY 2017
• In FY 2018 cost of doing business came from three
primary areas:
• People costs, including earned incentive accruals
• Marketing, advertising and promotion
• Freight costs to get products to customers
• Additional investments in research and
development, brand development and protection,
as well as regulatory and quality assurance remain
a high priority
Revenue growth is the most important factor in achieving the “30” target
Cost of Doing Business
People A&P Investment Freight Other
40
* See appendix for descriptions and reconciliations of these non-GAAP measures.
Note: Percentages may not aggregate to EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on the Company’s
consolidated statement of operations are not included as an adjustment to earnings in the Company’s EBITDA calculation.
55/30/25 Business Model Target FY18
Actuals
FY17
Actuals
FY16
Actuals
Gross Margin 55% 55% 56% 56%
Cost of Doing Business 30% 34% 35% 36%
EBITDA 25% 21% 22% 21%
42
43
• Paid dividends without interruption
for over 40 years
• 2018 represents the ninth
consecutive year the Company has
raised its annual dividend
• Future increases expected to grow
in-line with earnings over-time
• Current share repurchase plan
provides authorization to acquire up
to $75 million in shares through
August 2020
• Company repurchased ~175K
shares at a total cost of $22.6 million
during FY18
• Over the last five years Company
has repurchased nearly $160 million
in WDFC stock
Share Repurchases(in millions)
$42.8
$30.3 $32.1 $31.1
$22.6
FY14 FY15 FY16 FY17 FY18
Share Repurchases
$1.33 $1.48
$1.64
$1.89 $2.11
46%
49%
45%
51%
45%
FY14 FY15 FY16 FY17 FY18FY Dividend per Share Dividend Payout Ratio
Dividends
FY18 FY17 % Change
Net Sales $408.5 $380.5 7%
Gross Profit (%) 55.1% 56.2% -110 bp
Operating Income $78.6 $75.9 4%
Net Income $65.2 $52.9 23%
EPS (Diluted) $4.64 $3.72 25%
45
• Overall, changes in foreign currency exchange rates had a favorable impact on net sales
in FY18.
• Translation of our foreign subsidiaries’ results from their functional currencies to
U.S. dollars increased total net sales by approximately $10.5 million.
• Unfavorable transaction-related impacts slightly offset these favorable translation
impacts by approximately $0.2 million.
• Net income and diluted earnings per share were positively impacted by the U.S. Tax Cuts
and Jobs Act in FY18.
($ in millions; except EPS, gross profit and % change)
47
• Continue to live our values and enrich our tribal culture
• High levels of employee engagement
• Steady growth of WD-40 Multi-Use Product across all markets
• Growth of WD-40 Specialist product line
• Innovation and development to support growth
• Maintain gross margin of 55% or greater
• Manage cost of doing business as a % of revenue towards 30%
• Protect “the power of the shield” and mitigate regulatory impact
48
• Not continuing to live our values or enriching our tribal culture
• Loss of focus – not executing against our strategic drivers
• Overwhelming complexity of operating a business that operates in 176
countries and 62 trade channels
• Misaligned compensation – moving away from ‘pay for performance’
• Not being deliberate and focused – deviating away from best-in-class
products that generate positive lasting memories for our end-users
• Temptation to ‘di-worsify’ – bad capital allocation
• Developing products that need more support than our business model allows
• Targeting end-users that don’t fit our existing distribution model
• Global volatility, uncertainty, complexity, ambiguity
FY18 CC* FY17 % Change
Net Sales $398.0 $380.5 5%
Operating Income $76.1 $75.9 0%
Net Income $63.3 $52.9 20%
EPS (Diluted) $4.51 $3.72 21%
FY18 FY17 % Change
Net Sales $408.5 $380.5 7%
Gross Profit (%) 55.1% 56.2% -110 bp
Operating Income $78.6 $75.9 4%
Net Income $65.2 $52.9 23%
EPS (Diluted) $4.64 $3.72 25%
Financial ResultsAs reported
Financial ResultsConstant currency basis
*FY18 results translated at FY17 foreign currency exchange rates
($ in millions; except EPS, gross profit and % change)
50
(1) This presentation contains certain non-GAAP (accounting principles generally accepted in the United States of America) measures, that our
management believes provide our stockholders with additional insights into WD-40 Company’s results of operations and how it runs its business. Our
management uses these non-GAAP financial measures in order to establish financial goals and to gain an understanding of the comparative performance
of the Company from year to year or quarter to quarter. The non-GAAP measures referenced in this presentation, which include EBITDA (earnings before
interest, income taxes, depreciation and amortization) and the cost of doing business, are supplemental in nature and should not be considered in isolation
or as alternatives to net income, income from operations or other financial information prepared in accordance with GAAP as indicators of the Company’s
performance or operations. Reconciliations of these non-GAAP financial measures to the WD-40 Company financials as prepared under GAAP are as
follows:
Note: Percentages may not aggregate to EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on the Company’s
consolidated statement of operations are not included as an adjustment to earnings in the Company’s EBITDA calculation.
51
Total operating expenses - GAAP $ 146,659 $ 137,976 $ 143,021
Amortization of definite-lived intangible assets (2,951) (2,879) (2,976)
Depreciation (in operating departments) (3,725) (2,789) (2,744)
Cost of doing business $ 139,983 $ 132,308 $ 137,301
Net sales $ 408,518 $ 380,506 $ 380,670
Cost of doing business as a percentage of net sales - non-GAAP 34% 35% 36%
EBITDA:
Net income - GAAP $ 65,215 $ 52,930 $ 52,628
Provision for income taxes 9,963 21,692 20,161
Interest income (454) (508) (683)
Interest expense 4,219 2,582 1,703
Amortization of definite-lived
intangible assets 2,951 2,879 2,976
Depreciation 4,849 3,890 3,489
EBITDA $ 86,743 $ 83,465 $ 80,274
Net sales $ 408,518 $ 380,506 $ 380,670
EBITDA as a percentage of net sales - non-GAAP 21% 22% 21%
Fiscal Year Ended August 31,
2018
2017 20162018
Fiscal Year Ended August 31,
2017 2016