WD-40 Company · NASDAQ:WDFC
WD-40 — Investor Presentation (April 2015)
62 slides from WD-40's investor presentation, April 2015
Slide 1: Corporate Overview
FY 2014 Corporate Overview Updated: April 2015
Slide 2: Forward-Looking Statements
Forward-Looking Statements 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 multi-purpose maintenance products (“MPMP”) under the WD-40®, 3-IN-ONE® and GT85® brand names. Cur
Slide 3: Who We Are
WHO WE ARE FY 2014 CO RPO RAT E O VERVIEW 3
Slide 4: What Does A Good Business Look Like?
What Does A Good Business Look Like? • 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 FY 2014 CO RPO RA
Slide 5: WD-40 Company's Origins
WD-40 Company’s Origins 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 (“MUP”). 1973 1995 - 2
Slide 6: Guiding Principles
Guiding Principles Vision Create positive lasting memories by solving problems in workshops, factories and homes around the world. Values • We value doing the right thing. • We value creating positive lasting memories in all our relationships. • We value making it better than it is today. • We value
Slide 7: People - Products - Passion
People - Products - Passion SERVANT LEADERSHIP WITH AN EDGE Results in a tribal culture that values: •Caring •Candor •Accountability © 2010 The Learning Moment Inc. All rights reserved. Do not duplicate. •Responsibility thelearningmoment.net FY 2014 CO RPO RAT E O VERVIEW 7
Slide 8: 2014 Employee Engagement Survey Results
2014 Employee Engagement Survey Results Question Result Average of all questions 93.7 I understand how my job contributes to achieving WD-40 Company’s goals. 99.7 I know what results are expected of me. 98.6 I love to tell people that I work for WD-40 Company. 97.6 I am clear on the company’s goals.
Slide 9: Strategic Initiatives
Strategic Initiatives 1. Grow WD-40 Multi-Use Maximize the WD-40 product line through geographic Product expansion and increased market penetration. More places, more people, more uses, more frequently. 2. Grow the WD-40 Specialist Leverage the WD-40 brand to grow specialist by Product Line developi
Slide 10: Our Brands
Our Brands MULTI-PURPOSE HOMECARE AND MAINTENANCE PRODUCTS CLEANING PRODUCTS WD-40 Multi-Use Product X-14 Spot Shot WD-40 Specialist 2000 Flushes 1001 3-IN-ONE Carpet Fresh Lava WD -40 Bike No Vac Solvol GT85 • Available in niche segments and • Currently make up over 85% of net geographies sales • G
Slide 11: Our End Users
Our End Users Maintenance, Construction & At-Home At-Home Repair & Overhaul Skilled Trades “Doer-Enthusiast” “Non-Enthusiast” • The majority of sales of multi- • 8 out of 10 U.S. households have at purpose maintenance products least one can of WD-40 Multi-Use come from end-users in workshops Product
Slide 12: The Opportunity
THE OPPORTUNITY FY 2014 CO RPO RAT E O VERVIEW 12
Slide 13: Global Opportunity
Global Opportunity WD-40 Company products are currently available in over 176 countries and territories worldwide 97% product Germany is the China is an awareness of second largest emerging market WD-40 MUP “DIY” market in with significant among U.S. males the world – brand long-term – expanded MUP
Slide 14: Unique Distribution Strategy
Unique Distribution Strategy “ACME” TOOLS One brand, one Multiple brands, multiple trade channel, trade channels, multiple multiple products products FY 2014 CO RPO RAT E O VERVIEW 14
Slide 15: Physical Awareness
Physical Awareness Make it EASY TO BUY by maximizing store placement and shelf space FY 2014 CO RPO RAT E O VERVIEW 15
Slide 16: Leveraging the Trust in the Brand
Leveraging the Trust in the Brand FY 2014 CO RPO RAT E O VERVIEW 16
Slide 17: WD-40 Specialist Product Line Examples
WD-40 Specialist Product Line Examples General Motor Bike Lawn and Garden Maintenance Our first line of specialty products worthy of wearing the WD-40 Shield FY 2014 CO RPO RAT E O VERVIEW 17
Slide 18: Investment Performance
INVESTMENT PERFORMANCE FY 2014 CO RPO RAT E O VERVIEW 18
Slide 19: 5-Year Comparison of Total Stockholder Return
5-Year Comparison of Total Stockholder Return Value of $100 Invested on August 31, 2009 $300 $280 $260 $240 $220 $200 $180 $160 $140 $120 $100 $80 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 WD-40 Company S&P 500 Russell 2000 *$100 invested on 8/31/09 in stock or index, including reinvestment of
Slide 20: What drove the performance?
What drove the performance? SOLID FINANCIAL FOUNDATION FOCUSED ON CREATING VALUE • Strong balance sheet • High Returns on Invested Capital • Predictable free cash flow • ROIC was 22.3% in FY11, 23.5% in • Strong liquidity & access to capital FY12, 27.7% in FY13 and 28.2% in FY14 • Employee earned in
Slide 21: Strong Brands with a Global Reach
Strong Brands with a Global Reach Nearly doubled MPMP sales over the last 10 years despite macroeconomic challenges Largest GDP Global Largest ever Largest drop decline in financial turndown in in U.S. auto Eurozone crisis U.S. housing production history $338 $327 $280 $289 $263 $230 $217 $202 $186
Slide 22: Global MPMP Sales by Segment
Global MPMP Sales by Segment MPMP Sales by Segment $160 $140 $120 $100 $80 $60 $40 $20 $- FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Americas EMEA Asia-Pac 1) In millions – all years at FY14 foreign currency exchange rates FY 2014 CO RPO RAT E O VERVIEW 22
Slide 23: 50/30/20 Rule
50/30/20 RULE FY 2014 CO RPO RAT E O VERVIEW 23
Slide 24: The 50/30/20 Rule
The 50/30/20 Rule WD-40 Company’s business is guided by the 50/30/20 Rule – if gross margin is above 50% of net sales and cost of doing business is 30% or less, EBITDA will be above 20% Gross Margin 50 Above 50% of net sales Cost of Doing Business(1) - 30 At or below 30% of net sales Maintenance CAP
Slide 25: The "50" - Gross Margin
The “50” - Gross Margin • FY 2014 the Company achieved its highest annual gross margin in a decade at 52% compared to 51% FY 2013 FY14 • Continually focus on driving gross margin 52% improvement FY13 – New product development, innovations and 51% reformulations – Operational efficiencies FY12 – Prod
Slide 26: Crude Oil Trends
Crude Oil Trends 4-Year Crude Oil Price Trend $150 $140 $130 Our $120 considered $110 range in the planning $100 process for the cost of a $90 crude oil is $80 $85-$110 per barrel $70 $60 $50 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 Source: New York Mercantile Exchange - WTI Oil Futures CLF5 (1/
Slide 27: What Makes Up the Cost of a Can?
What Makes Up the Cost of a Can? Approximate Cost Breakdown of a Typical Can of WD-40 MUP Manufactured in the United States 3% Corrugate 21% Plastic We estimate only a small portion of the input costs associated with 30% Can petroleum- based specialty chemicals 12% Manufacturing Fees directly correl
Slide 28: The "30" – Cost of Doing Business
The “30” – Cost of Doing Business • FY 2014 cost of doing business was at 34% of Cost of Doing Business net sales compared to 35% FY 2013 • In FY 2014 cost of doing business came from three primary areas: – People – Marketing, advertising and promotion – Freight costs to get products to customers •
Slide 29: FY 2014 50/30/20 Results
FY 2014 50/30/20 Results 50/30/20 Business Model Target FY14 FY13 FY12 Gross Margin 50% 52% 51% 49% Cost of Doing Business 30% 34% 35% 33% EBITDA 20% 18% 17% 16% * See appendix for descriptions and reconciliations of these non-GAAP measures. Note: Percentages may not aggregate to EBITDA percentage d
Slide 30: Capital Allocation
CAPITAL ALLOCATION FY 2014 CO RPO RAT E O VERVIEW 30
Slide 31: Capital Allocation Strategy
Capital Allocation Strategy Long-term Growth & Return Targets 1 Drive revenue and earnings growth of 6-8% Target return on invested capital of >20% 2 Strongbalance Strong balancesheet Liquidity, Debt Liquidity, sheet&& available Debt && Cash Adequateliquidity Adequate liquidityto availablelines line
Slide 32: Cash Returns to Stockholders
Cash Returns to Stockholders Dividends 52% 50% 48% 48% 47% • Over $92.3 million in cash dividends paid $1.34 to shareholders over past five years $1.22 $1.08 $1.14 $1.00 • Paid dividends without interruption for over 40 years • Future increases expected to grow in-line with earnings over time FY10 F
Slide 33: FY 2014 Financial Results
FY 2014 FINANCIAL RESULTS FY 2014 CO RPO RAT E O VERVIEW 33
Slide 34: FY 2014 Financial Results
FY 2014 Financial Results Financial Results (As reported) FY14 FY13 Change Net Sales $383.0 $368.5 4% Gross Profit (%) 51.9% 51.3% 60 bps Operating Income $63.7 $56.6 13% Net Income $43.7 $39.8 10% EPS (Diluted) $2.87 $2.54 13% Financial Results (Constant currency basis) FY14 CC* FY13 Change Net Sal
Slide 35: FY 2014 Net Sales
FY 2014 Net Sales Total Net Sales FY 2012 FY 2013 FY 2014 $342.8 $368.5 $383.0 Sales by Product Group Sales by Segment $180.5 $180.8 $177.4 $286.5 $320.9 $337.8 $137.4 $151.4 $116.9 $56.3 $47.6 $45.2 $48.5 $50.6 $50.8 FY12 FY13 FY14 FY12 FY13 FY14 Multi-Purpose Homecare and Americas EMEA Asia-Pacifi
Slide 36: Last Word
LAST WORD FY 2014 CO RPO RAT E O VERVIEW 36
Slide 37: What Does A Good Business Look Like?
What Does A Good Business Look Like? • 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 FY 2014 CO RPO RA
Slide 38: Appendix
APPENDIX FY 2014 CO RPO RAT E O VERVIEW 38
Slide 39: Non-GAAP Reconciliation
Non-GAAP Reconciliation (1) This presentation contains certain non-GAAP (accounting principles generally accepted in the United States of America) measures, that our management believes provide our shareholders with additional insights into WD-40 Company’s results of operations and how it runs its b
Slide 40: Investment Snapshot
Investment Snapshot GLOBAL, DIVERSE BUSINESS ASSET-LIGHT STRATEGY FOCUSED ON CREATING VALUE • Products available in over 176 • Average annual CAPEX needs • ROIC emphasis - ROIC was countries and territories of ~1% of net sales 22.3% in FY11, 23.5% in FY12, worldwide • Outsourced manufacturing and 27
Slide 41: Q2 FY15 Earnings Results
Q2 FY15 Earnings Results April 8, 2015
Slide 42: Forward-Looking Statements
Forward-Looking Statements 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 multi-purpose maintenance products (“MPMP”) under the WD-40®, 3-IN-ONE® and GT85® brand names. Cur
Slide 43: Q2 FY15 Highlights
Q2 FY15 Highlights “We are pleased • Net sales for the second quarter were $97.3 million, an increase of 3 with the solid percent compared to the prior year fiscal quarter performance of • Net income for the second quarter was $11.3 million, an increase of 10 percent compared to the prior year fisca
Slide 44: Sales Results
¢@ SALES RESULTS bi
Slide 45: Foreign Currency Landscape
Foreign Currency Landscape Transaction currency Functional currency Currency in which sales, Main currency in which Reporting currency costs, expenses are subsidiaries conduct As a U.S. based company transacted; typically the business; typically the same the reporting currency of WD- Conversion Tran
Slide 46: Translation Impacts
Translation Impacts Transaction currency Functional currency Currency in which sales, Main currency in which Reporting currency costs, expenses are subsidiaries conduct As a U.S. based company transacted; typically the business, typically the same the reporting currency of WD- same as that of the co
Slide 47: Conversion Impacts
Conversion Impacts Transaction currency Functional currency Currency in which sales, Main currency in which Reporting currency costs, expenses are subsidiaries conduct As a U.S. based company transacted; typically the business; typically the same the reporting currency of WD- Conversion Translation
Slide 48: Net Sales by Product Group
Net Sales by Product Group Second Quarter Sales by Product Group ($M) Second Quarter Global Product Group Sales Mix $94.2 $97.3 Homecare and cleaning product sales 11% $83.8 $86.6 Multi-purpose maintenance product sales $10.4 $10.7 89% Q2 FY14 Q2 FY15 Multi-Purpose Maintenance Product Sales Year-to-
Slide 49: Net Sales by Segment
Net Sales by Segment Second Quarter Sales by Segment ($M) Americas Second Quarter Year-to-Date Americas (Total) ↓ -1% ↔ 0% $94.2 $97.3 United States ↓ -1% ↓ -1% Latin America ↓ -6% ↑ 7% $45.2 $44.7 Canada ↓ -1% ↓ -7% $38.1 $38.7 EMEA Second Quarter Year-to-Date $10.9 $13.9 EMEA (Total) ↑ 1% ↓ -2% Q2
Slide 50: Financial Results
FINANCIAL RESULTS 50
Slide 51: Gross Margin Results
Gross Margin Results Q2 Gross Margin up 1.00 pp YTD Gross Margin up 0.3 pp Q2 FY15 GM of 52.6% vs. Q2 FY14 GM of 51.6% YTD FY15 GM of 52.1% vs. YTD FY14 GM of 51.8% • Changes in petroleum-based specialty chemicals • Changes in petroleum-based specialty chemicals and aerosol cans (+1.3pp) and aerosol
Slide 52: What Makes Up the Cost of a Can?
What Makes Up the Cost of a Can? Approximate Cost Breakdown of a Typical Can of WD-40 MUP Manufactured in the United States 3% Corrugate 21% Plastic We estimate only a small portion of the input costs associated with 30% Can petroleum- based specialty chemicals 12% Manufacturing Fees directly correl
Slide 53: 50/30/20 Results
50/30/20 Results 50/30/20 Business Model Target Q2 FY15 Q2 FY14 Q2 FY13 Gross Margin 50% 53% 52% 51% Cost of Doing Business 30% 34% 34% 33% EBITDA 20% 18% 18% 19% * See appendix for descriptions and reconciliations of these non-GAAP measures. Note: Percentages may not aggregate to EBITDA percentage
Slide 54: Selected Financial Results
Selected Financial Results Second quarter (1) ($ in millions; except % change and EPS) Q2 FY15 Q2 FY14 % Change Selling, general and administrative $27.4 $26.7 3% Advertising and sales promotion $5.5 $6.0 -9% Amortization $0.8 $0.7 16% Total operating expenses $33.6 $33.3 1% (2) Other expenses $1.5
Slide 55: Selected Financial Results
Selected Financial Results Year to date (1) ($ in millions; except % change and EPS) YTD FY15 YTD FY14 % Change Selling, general and administrative $54.8 $53.4 3% Advertising and sales promotion $11.4 $11.6 -2% Amortization $1.5 $1.2 22% Total operating expenses $67.7 $66.2 2% (2) Other expenses $1.
Slide 56: Condensed Balance Sheet
Condensed Balance Sheet (1) ($ in millions; except % change) Q2 FY15 Q4 FY14 % Change Cash and cash equivalents $43.7 $57.8 -24% Short-term investments $42.1 $45.1 -5% Other assets $252.0 $244.8 3% Total assets $337.7 $347.7 -3% Revolving credit facility $103.0 $98.0 5% Other liabilities $74.2 $80.3
Slide 57: Guidance
GUIDANCE 57
Slide 58: Updated Fiscal Year 2015 Guidance
Updated Fiscal Year 2015 Guidance* Sales Growth Between 1% and 4% Net Sales Between $387 and $400 million Gross Margin Better than 52% A&P Investment In the range of 6.0% to 7.0% of net sales Net Income Between $45.1 and $46.0 million Diluted EPS Between $3.07 and $3.13 based on 14.7 million shares
Slide 59: Appendix
APPENDIX 59
Slide 60: Foreign Currency Translation Impact or Constant Currency - Q2 FY15
Foreign Currency Translation Impact or “Constant Currency” - Q2 FY15 ($ in millions; except % change and EPS) Financial Results As reported Q2 FY15 Q2 FY14 % Change Net Sales $97.3 $94.2 3% Gross Profit (%) 52.6% 51.6% 100 bps Operating Income $17.6 $15.3 16% Net Income $11.3 $10.3 10% EPS (Diluted)
Slide 61: Foreign Currency Translation Impact or Constant Currency – YTD
Foreign Currency Translation Impact or “Constant Currency” – YTD ($ in millions; except % change and EPS) Financial Results (As reported) YTD FY15 YTD FY14 % Change Net Sales $193.7 $189.7 2% Gross Profit (%) 52.1% 51.8% 30 bps Operating Income $33.2 $32.0 4% Net Income $22.1 $21.8 1% EPS (Diluted)
Slide 62: Non-GAAP Reconciliation
Non-GAAP Reconciliation (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 b