WD-40 Co Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Daniel Rizzo - Jefferies - Analyst : I was just looking at -- through the [Q] and stuff like that. I was looking at operating income and noticed that the Americas was down 11% year over year and is partially due, I guess, to EBITDA margin contraction. I was wondering what that's attributed to, if there was something special there, or just any color you can provide. Sara Hyzer - WD-40 Co - Chief Financial Officer, Vice President - Finance, Treasurer Hi, Daniel. This is Sara. So yes, there's a couple of things that are impacting that. First is the timing. If you look at the timing of the A&P spend in Q1 this year compared to last year, we are ahead of our pace in the Americas for Q1. In addition, I mentioned on my -- on the call that there was a bankruptcy with one of our customers, and 100% of that which was about $800,000 hit the Americas trading bloc. So those two are the bigger items, and then we also have a timing of our growth reward program accruing at a higher rate in Q1 compared to the prior year.

Question: Linda Weiser - D.A. Davidson - Analyst : So I was wondering -- you gave some of the details about your year-over-year increase in SG&A expense. I'm not sure I caught all the details, but it did seem like a big increase of 14% year over year. So I'm curious, is that the run rate to expect for the whole year? Or was there something in the quarter that's going to change and go away or something remaining quarters of the year? Sara Hyzer - WD-40 Co - Chief Financial Officer, Vice President - Finance, Treasurer Hi, Linda. So there was the bankruptcy that we had with one of our customers in the Americas. So that is a one-time that's hitting the Q1. We are also accruing at a higher growth reward program going into this year than we were going into last year. So there is expected increased expenses in that, but that is built into our guidance for this year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Linda Weiser - D.A. Davidson - Analyst : Can you quantify the one-time effect in millions of dollars that that bankruptcy had on the quarter? Sara Hyzer - WD-40 Co - Chief Financial Officer, Vice President - Finance, Treasurer The bankruptcy for the quarter was approximately $800,000.

Question: Linda Weiser - D.A. Davidson - Analyst : And then I think there was some mention in your 10-Q of US promotion in the quarter. It sounded like maybe that benefited the Multi-Use Product sales in the quarter. Can you give more color on that? And would you regard that as a shifting of some sales from the second quarter into the first quarter?

Question: Linda Weiser - D.A. Davidson - Analyst : Okay. And then, just in terms of the cadence -- I know you don't want to get into quarterly type guidance at all, but the cadence -- I mean, you actually have an easy seeming -- easier comparison prior year comparison in the second quarter. And I can't quite remember what that was because of -- was that when you have the little bubble related to SAP implementation? I can't quite remember, but it does seem like there's an easier kind of comparison, both on sales and a little bit on profit growth. Can you just remind us what that was? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Linda Weiser - D.A. Davidson - Analyst : So then theoretically, you would have a higher -- so if you're your US growth rate or, I don't know, your overall sales growth was -- what was in the quarter -- 9%. So theoretically, it would be higher even in the second quarter because you have that easy comparison, all else being equal. Is that the way to think about it?

Question: Linda Weiser - D.A. Davidson - Analyst : That's very helpful. And then just to clarify, if you do not sell the cleaning business by the end of the second quarter, will it be removed because you're restating to have it discontinued ops? Or is it going to be in there if you don't sell it? Sara Hyzer - WD-40 Co - Chief Financial Officer, Vice President - Finance, Treasurer No. It will still be in there if we don't sell it. So it's not a big enough of a strategic shift for us to qualify for discontinued ops. So if it's still not sold by the end of the second quarter, it will still be in our reported results. And we'll have -- we would have a similar reporting mechanism, and we'll try to be very transparent with so you can do it with and without DO.