The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Daniel Rizzo - Jefferies LLC - Analyst
: Hey, everyone, thanks for taking my questions. 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. I was wondering, if there's things there that could go wrong to maybe go towards the low end or frankly,
overall, why it's kind of wide given what's happening?
Question: Daniel Rizzo - Jefferies LLC - Analyst
: Thanks. That's helpful. And then so we're doing great with gross margin. You're at 55% to 56%. But the long-term 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?
Sara Hyzer - WD-40 Co - Chief Financial Officer, Vice President - Finance, Treasurer
Yeah, I mean I think, obviously, we're very pleased with where margin has held throughout the course of the year and believe we'll be in line with
that 55% to 56%. 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 we're pleased with where 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. But if the cost stays stable, then those supply chain initiatives would likely be accretive to us.
Question: Daniel Rizzo - Jefferies LLC - Analyst
: That's correct.
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Question: Daniel Rizzo - Jefferies LLC - Analyst
: 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 the eight weeks
left, should we think about it as maybe a small benefit in the fourth quarter or how should we think about that?
Sara Hyzer - WD-40 Co - Chief Financial Officer, Vice President - Finance, Treasurer
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 pulled 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 sitting here today compared to Q4 of last year, I would expect that to be a positive for us, albeit the Mexican and the
Brazilian currencies have been our biggest headwinds for the full year, and that could will likely continue into the fourth quarter.
Question: Daniel Rizzo - Jefferies LLC - Analyst
: Thank you very much guys.
Sara Hyzer - WD-40 Co - Chief Financial Officer, Vice President - Finance, Treasurer
Thank you.
Question: Michael Baker - D.A. Davidson & Co - Analyst
: Okay. Hi, thanks. I guess just kind of a follow-up on the guidance question, but I am a little curious what so you narrowed the range for the full year.
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? Just why is that midpoint down a little bit? And then the sort of opposite question on the profitability, you increase that. So what's the
mindset there? Is that a function of what you've seen year-to-date or the confidence in what you're seeing in the fourth quarter?
Question: Michael Baker - D.A. Davidson & Co - Analyst
: Got it. Makes sense. Thanks. If I could ask one other question. It's interesting. I think in some of the revenue 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
Question: Michael Baker - D.A. Davidson & Co - Analyst
: Excellent. Makes sense. Thank you.
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