WD-40 Company

Operator: Good day. Welcome to WD-40 Company's third quarter fiscal year 2026 earnings conference call. Today's call is being recorded. All participants are currently in listen-only mode. Following the prepared remarks, we will open the call for questions. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star 1 again. I will now turn the call over to Wendy D. Kelley, Vice President, Stakeholder and Investor Engagement. Please go ahead. Wendy D. Kelley: Thank you, and good afternoon. Thank you for joining us today. On our call today are WD-40 Company's president and chief executive officer, Steven A. Brass and vice president and chief financial officer, Sara Hyzer. In addition to today's discussion, we encourage investors to review our earnings presentation, press release, and Form 10 Q for the period ending May 31, 2026. Available on our Investor Relations website at investor.wd40company.com. A replay and transcript of today's call will also be posted shortly. We will discuss certain non GAAP measures today. Reconciliations to GAAP results are available in our SEC filings and earnings material. Today's call also includes forward looking statements. Actual results may differ materially Please refer to the risk factors in our SEC filings for more information. Finally, please note that all information presented is current as of July 9, 2026. And we undertake no obligation to update forward looking statements. With that, I will turn the call over to Steven. Steven A. Brass: Thanks, Wendy, and thanks to everyone for joining us today. I will begin with an overview of our third quarter performance and progress against select areas of our 4-by-4 Strategic Framework. Sara will then review our financial results and outlook, and we will conclude with your questions. Third quarter consolidated net sales increased 24% year over year to $195 million. Maintenance products, which represented 97% of total net sales, increased 26% $190 million and were up 22% on a constant currency basis exceeding our long term growth expectations and setting a new record for the company. Sales of maintenance products in our direct markets increased 28% year over year while sales through our marketing distributor markets increased 18%. We will discuss the drivers of this performance in a moment. Gross margin increased 40 basis points year over year to 56.6%. We are encouraged by this momentum and remain focused on the levers within our control. Although we expect gross margin to experience some temporary pressure from external cost factors in the coming months, we are confident that the actions we have taken position us well for recovery thereafter. We will vigorously defend our gross margins and may need to take further action in this year, 2027 as required. Sara will provide additional perspective on our outlook in a moment. Now let's review third quarter sales results by trade block. Unless otherwise noted, I will discuss net sales on a reported basis compared to the third quarter of last fiscal year. Sales in The Americas increased 29% year over year to $101 million driven by a 31% increase in maintenance product to $98.3 million. This growth was driven primarily by increased sales of WD-40 Multi-Use Product in The US and Latin America, where sales increased $17.2 million and $2.6 million respectively. Strong performance of WD-40 Multi-Use product in The US was driven by several factors, including expanded distribution, robust ecommerce sales, and strong promotional activity, including a high impact promotional campaign featuring a limited edition can collaboration with Disney Entertainment and The Home Depot. In Latin America, sales increased across Brazil and Mexico, supported by higher sales volume in Brazil, and a combination of sales growth and favorable foreign currency translation in Mexico. WD-40 Specialist sales increased by 22% driven by higher US volumes, reflecting new distribution gains, strong placement with large retailers, and growth in online sales. Home care and cleaning product sales declined 9% reflecting our strategic focus on higher margin maintenance products. Sara will give an update on our US home care and cleaning business later in the call. Looking ahead, we expect low double digit growth in maintenance products. In The Americas for fiscal year 26. Turning to 17% year over year $66.6 million. Reflecting higher sales volume in both direct and distributor markets, as well as favorable foreign currency exchange rates On a constant currency basis, sales were up 10%. In our EMEA direct market, sales increased by $6.6 million driven by double digit growth in maintenance products across key markets, including Iberia and DACH, these regions, sales of maintenance products rose by $2.2 million and $1.5 million, respectively. Supported by strong commercial execution promotional activity, and merchandising. In our distributor market, sales increased by $4.4 million reflecting a strong rebound after several softer quarters and the positive impact of completed strategic distribution changes. Growth was driven by higher sales volumes across key markets, including Saudi Arabia, and The United Arab Emirates. Supported by the timing of customer orders, and increased inventory build within the region. In India, sales increased $1.6 million primarily due to favorable order timing and foreign currency impacts. Sales in the EMEA region also benefited from some advanced buying as customers proactively manage inventory levels amid uncertainty around product availability following geopolitical developments in The Middle East We also experienced some advanced buying ahead of price increases, which became effective in early Q4. As a result of both of these factors, a portion of fourth quarter demand shifted into the third quarter. WD-40 Specialist sales increased 31%, driven by growth across most of our direct and distributor markets, Growth was led by France and Iberia, by strong marketing programs and new product introductions, supported higher sales. A reminder, the divestiture of The UK home care and cleaning portfolio in fiscal 25 reduced third quarter sales by $1.1 million. Despite ongoing uncertainty in The Middle East, we expect maintenance product sales in EMEA to increase by low to mid single digits in constant currency and high single digits in reported currency in fiscal year 26. In Asia Pacific, sales increased 24% year over year $27.3 million and were up 18% on a constant currency basis. Growth was broad based across the region, driven primarily by China and Asia distributor markets, which increased $3 million and $1.4 million respectively. In China, growth is driven by higher sales volume supported by promotional programs, Including online influencers, and expanding distribution across online retail and industrial channels. Sales also benefited from advanced buying ahead of planned price increases later in the year which shifted a portion of expected fourth quarter demand into the third quarter. In our Asia distributor market, sales increased driven by promotional programs, particularly in The Philippines, Indonesia, and Malaysia. WD-40 Specialist sales increased $1 million or 32% driven by growth across the region. With the strongest gains in China where higher volumes were supported by promotional and marketing programs and expanded distribution. Remain encouraged by regional momentum and expect high single digit to double digit growth in maintenance products in Asia Pacific for fiscal year 26. Let's talk about our Must-Win Battles. A core element of our strategy to accelerate revenue growth in maintenance products. Starting with Must-Win Battle number 1, lead geographic expansion, year to date sales of the WD-40 Multi-Use product increased 13% to $398 million driven by solid performance across all 3 trade blocks. We are seeing strong progress across key markets, with year to date growth of 20% in The US, 21% in China, and 27% in Iberia, we continue to execute from a proven playbook expanding distribution and sampling programs to build awareness with end users across 176 countries and territories and 62 trade channels. We estimate the attainable market for WD-40 Multi-Use product to be approximately $1.9 billion. With fiscal year 25 sales of $478 million, we believe there remains a significant long term growth opportunity. Next is Must-Win Battle number 2, accelerating premiumization. Year to date sales of WD-40 Smart Straw and EZ-REACH when combined increased 19% and now represent approximately 50% of WD-40 Multi-Use product sales. These premium formats strengthen brand loyalty, support gross margin expansion, and provide meaningful runway for continued growth. We continue to target annual growth of more than 10% in premiumized products. Our third Must-Win Battle is driving WD-40 Specialist growth. Year to date sales increased 22% $72.9 million. We estimate the attainable market for WD-40 Specialist approximately $665 million. With fiscal year 25 sales of $82 million, we are still in the very early stages of capturing this significant growth opportunity. Today, 90% of our WD-40 Specialist sales come from just 10 markets. Highlighting a significant opportunity to expand through geographic growth and product innovation. In the third quarter, we launched our first bio based lubricant across several European markets. Whilst it is still early, we are very encouraged by the initial results, look forward to rolling out the product across additional markets in the coming quarters. We continue to target annual growth of more than 10% for WD-40 Specialist as we expand our portfolio of purpose built maintenance solutions. Our fourth Must-Win Battle is the turbocharged digital commerce. Year to date, ecommerce sales increased 22% led by The United States and China. Ecommerce pure play remains 1 of our fastest growing channels. Across digital, we are strengthening execution on key platforms, our social media and video channels, are driving much of our digital reach, helping us connect with both new and existing end users in more engaging ways. As a result, we are reaching and engaging more end users than ever before. Digital commerce continues to support each of our Must-Win Battles by improving access to our products and increasing brand visibility and relevance. We will now move to our strategic enablers. Which support operational excellence across the business. Zig Ziglar once said, you do not build a business. You build people. And then the people build the business. That philosophy is core to WD-40 Company and is the foundation of our people first mindset. Our people are remarkably resilient, agile, and innovative. Over the past 5 years, they have navigated a series of external challenges from the global pandemic to geopolitical uncertainty while strengthening cost discipline implementing new systems, enhancing how we serve customers, and leveraging our globally decentralized supply chain network all in the face of significant uncertainty. Last month, we announced a planned leadership transition to build on the strong foundation we have in place. As part of this transition, we introduced new roles to strengthen alignment accelerate strategy execution ensuring we have the right structure and leadership in place to support continued growth. These new roles include chief strategy and innovation officer, and chief brand and marketing officer. And will be filled by experienced WD-40 company leaders transitioning from within the company. Newly created roles are designed to enhance collaboration, accelerate innovation, and proactively harness AI and digital technologies to drive growth and advance the company's long term strategy. We also announced that Sara Hyzer, transition to president of the President of our Americas division. Reflecting our commitment to developing leaders from within. Sara will continue to serve in her current role during the transition until a successor is named. These changes are designed to support continued growth and position the business for long term success. With that, I will now turn the call over to Sara. Sara Hyzer: Thanks, Steven. I appreciate the opportunity to take on my new role. And I am excited about what lies ahead for our Americas business. In the meantime, I remain fully focused on my current responsibilities and on delivering value for our stakeholders. Today, I will review our third quarter performance against our business model. Introduce enhancements we are making to further strengthen it, provide an update on the divestiture of our Americas home care and cleaning business. And discuss our fiscal year 26 guidance and key assumptions. We were encouraged by our third quarter performance with net sales up 24% and operating income growing 47%. Reflecting the benefits of scale in our business. The difference between those growth rates highlights the leverage in our business model, as higher revenue flowed through to profitability. As expected, results strengthened as the year progressed, with improvement across both the top and bottom line. Turning to our business model. Which expresses gross margin, cost of doing business, and adjusted EBITDA as a percentage of revenue. This quarter, we are seeing the benefits of higher revenue and scale reflected across the model. Starting with gross margin, performance remains strong. Third quarter gross margin was 56.6%, up 40 basis points year over year. This increase was driven by 80 basis points from lower aerosol cans and fill fees, as well as 60 basis points from favorable sales mix and other miscellaneous mix. Partially offset by 60 basis points of increases in other input costs. Third quarter gross margin performed as expected. Despite external cost pressures driven by recent geopolitical developments. Reflecting the benefit of higher inventory levels entering the quarter. We expect those costs to move through our production and inventory cycles over the next several months. In response, we have already implemented pricing and cost saving initiatives across many regions. Positioning the business to realize the benefits of these actions. With most of the impact expected, in fiscal year 27. As these actions take hold, and the external environment stabilizes, we anticipate gross margin improvement over the course of fiscal year 27. While the exact timing and pace of that recovery are difficult to forecast, we believe we are well positioned to navigate the environment strengthen profitability, and drive continued progress. Turning to cost of doing business. Represents operating expenses adjusted for certain noncash items. It decreased to 34% of net sales from 38% last year, reflecting operating leverage from higher revenue and scale. Advertising and promotional investment increased to 6.1% of net sales. From 5.8% last year. Driven primarily by higher promotional activity in The US. We still anticipate being around 6% of net sales for the full year, which is in line with our guidance. Finally, adjusted EBITDA margin increased to 23%. From 20% last year. Reflecting operating leverage from higher revenue and scale. Now I would like to provide an update on the home care and cleaning divestiture. Last fiscal year, we announced our intent to sell these brands in The Americas and The UK. We successfully completed the divestiture of The UK Home Care and Cleaning brands in August of 2025. After extensive engagement with potential buyers, it became clear that the current macro environment was not conducive to divest of these brands as a bundle. As a result, we are no longer actively marketing these brands, for the foreseeable future. And have reclassified these assets as held for use. We continue to view these home care and cleaning brands as noncore. We will remain open and opportunistic and are evaluating each brand individually should the right opportunity present itself. For the time being, we will manage these as harvest brands, expecting gradual top line decline while continuing to generate attractive returns. As a reminder, the Americas household brands combined represent $12 million in annual sales. Less than 2% of our global revenue. Consistent with accounting guidance, we resumed amortization and recorded a $1.3 million expense during the quarter related to prior periods when these assets were classified as held for sale. Given the onetime nature of this catch up expense, we are including this as a non GAAP adjustment to help investors better evaluate the underlying performance of the business. Additionally, this decision will impact our reporting in 2 other ways. First, we issued fiscal year 26 guidance on a pro forma basis. Excluding the home care and cleaning businesses. To provide clear visibility into the performance of the core business. With the reclassification to held for use, our fiscal year 26 guidance now includes associated sales and earnings from these assets. Which favorably impacts elements of our outlook. I will discuss in more detail when I walk through our updated guidance for the year. Second, our decision to retain the home care and cleaning business prompted us to reassess and sunset our long standing 25 business model. As part of this reassessment, we developed our new enduring business model. Which provides a disciplined framework for how we manage the business and create long term value. It is anchored in 4 key drivers. Maintenance product sales growth targeted at mid to high single digits, gross margin targeted above 55%, Adjusted EBITDA growing faster than net sales. And an asset light model that requires minimal capital investment. Together, these drivers support strong outcomes, including returns on invested capital above 25%, strong free cash flow conversion and a balanced capital allocation approach that prioritizes organic growth, dividends and share repurchases. The enduring business model was designed to drive leverage and long term returns for stockholders. Better reflecting our strength as a perpetual compounder. We will continue to report under the 25 model through fiscal year 26. And transition to the enduring business model in fiscal year 27 to better align our metrics with our long term strategy. Turning now to other key measures of financial performance. Let's review operating income, net income and earnings per share for the third quarter. Operating income increased 47% $40.3 million with foreign currency being a tailwind for us. On a constant currency basis, operating income increased by 42%, primarily driven by higher sales and improved gross margin, partially offset by increased operating expenses. Excluding amortization expense related to the reclassification of our home care and cleaning brands, Non GAAP net income was $31.5 million up 50% from the prior year. On a non GAAP basis, diluted earnings per common share were $2.33, up from $1.54 in the prior year quarter. Turning from how we measure performance to how we deploy capital. Our balance sheet remains strong, and supports a disciplined approach to investing in organic growth, and returning value to stockholders. Our capital allocation strategy remains a consistent foundation. On June 15, 2026, our board of directors authorized a new share repurchase program of up to $100 million. The program has no expiration date, and the timing and amount of repurchases will be determined based on market conditions and other factors. So let's turn to fiscal year 26 guidance. As a reminder, our fiscal year 26 guidance was originally provided on a pro forma basis. Excluding The Americas home care and cleaning business that was classified as assets held for sale. Following the reclassification of these assets, to held for use, the business has been incorporated back into our guidance, and I will walk through the specific impact to our guidance to help bridge those changes. We have also narrowed our guidance ranges based on our year to date performance and outlook. In addition, our guidance is provided on a non GAAP basis, and excludes the onetime amortization catch up expense of $1.3 million recorded in the third quarter. For fiscal year 26, we now expect net sales in constant currency to be between $652 million and $667 million representing growth of 6% to 9%. Compared to pro forma fiscal year 25 net sales of $614 million. This outlook includes approximately $12 million in net sales, from assets recently reclassified as held for use. It also reflects a narrower guidance range, providing a more refined view of our expected performance for the remaining part of the fiscal year. Based on current exchange rates, we expect reported net sales to be between $675 million and $690 million representing growth of 10% to 12% compared to pro forma fiscal 2025 net sales. Gross margin is now expected to be between 54% and 55.5%. This revised outlook incorporates a 40 basis point adjustment due to the reclassification of home care and cleaning brands. Along with an additional 60 basis points from higher than expected cost increases. The company has implemented pricing actions and cost saving initiatives, with the majority of the expected benefit as anticipated in fiscal year 27. Advertising and promotion investment remains projected to be approximately 6% of net sales. We now expect non GAAP operating income to be between $107 million and $113 million representing growth of 5% to 11% compared to pro forma fiscal 25 results. This outlook includes approximately $2.9 million in operating income related to those assets recently reclassified as held for use. Our provision for income tax is now expected to be around 22.5%. Finally, we expect non GAAP diluted earnings per share to be between $6.05 and $6.35 based on an estimated 13.5 million weighted average shares outstanding. This outlook includes approximately $0.17 per share, related to the assets recently reclassified as held for use. And represents growth of 6% to 11% compared to pro forma fiscal 25 results. Our guidance reflects a euro to US dollar exchange rate assumption of approximately $1.17 in the fourth quarter. Actual results may vary as conditions evolve. That completes the financial overview. Now I would like to turn the call back to Steven. Steven A. Brass: Thank you, Sara. In summary, what did you hear from us today? You heard that we delivered 24% net sales growth and 47% operating income growth. Demonstrating the operating leverage inherent in our business model. You heard that third quarter sales benefited from advanced buying due to market uncertainty as well as planned price increases later in the year. Which shifted a portion of expected fourth quarter demand into the third quarter. You heard that our Must-Win Battles continue to perform well, with solid double digit year to date growth in geographic expansion, WD-40 Specialist, premiumized products, and ecommerce. You heard that our people first mindset remains central to how we operate. Supported by leadership changes that strengthen alignment and support long term growth. You heard gross margin was strong at 56.6%, up 40 basis points from last year. While higher input costs are expected to pressure margins in the near term. Pricing and cost optimization actions are underway, and we expect margin recovery of those benefits are realized. We will vigorously defend our gross margins and may need to take further action in FY 2027 as required. You heard that we decided to no longer actively market our home care and cleaning brands and have reclassified these assets as held for use. You heard that we are introducing our enduring business model framework designed to drive leverage and long term returns to stockholders by better reflecting our strength. As a perpetual compounder. And you heard that we are updating our guidance to incorporate the home care and cleaning business into our outlook and to narrow our guidance ranges based on our year to date performance and outlook. Thank you for joining our call today. We would now be pleased to answer your questions. Operator: We will now open the call for questions. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please ensure your mute function is turned off. 1 moment, please, for the first question. Your first question comes from the line of Aaron Reed from Northcoast Research. 1 moment. Your line is open. Please go ahead. Aaron Reed: Congratulations on that front. I guess my first question really is, I was wondering if you could speak to how sustainable do you think margins being above 55% are? It seems like something that obviously, you are shooting towards that, but I would like your 2 cents on 2 cents on, you know, what is the sustainability or how would you kind of speak to that? Sara Hyzer: Hi, This is Sara. Thanks for that question. You know, we had indicated at the end of Q2 that we believed our margins were going to hold. In the third quarter, and they did hold. But that we did anticipate some cost increases as we were, as a result of the disruption in The Middle East. And so those cost increases did happen in the month Subsequent to Q2. Had enough inventory on the balance sheet to sustain our margin in the third quarter, but we do anticipate those cost increases to begin to flow through in the fourth quarter. That said, we did also implement price increases, as Steven and those price increases will begin to take effect, really, starting in fiscal year FY 27. So we will start to mitigate some of those cost increases that we anticipate to see or cost increases impacting our P and L that we anticipate in the fourth quarter. So those actions have already been taken. We have also taken some cost reduction actions as well to help mitigate the exposure in the fourth quarter. But that said, we are really pleased with where the full year is gonna land. You know, between 54.5% and 55.5%. Know, considering what is happening around the world, we feel really good about where the year is landing. Aaron Reed: Okay. Great. And I guess 1 other question is a follow-up to that. When you rolled out the price increases, and I am not sure if you know, the price of oil was a component to it. I know it is a small piece of that. But did oil return to $70 faster than you anticipated? Or when you are modeling that, what did you expect in terms of, you know, input cost normalization? Sara Hyzer: Yeah. So when we look at the what the rate that the cost increases went up so if we look at the know, kind of the range of the 95 to $1.15, that was indicating about a 40% increase. The reality is we did experience decoupling. So the input cost of the specialty chemicals and the base oils that we buy did go up in excess of the 40%. So in some cases, it was 50. In some cases, it was double. So we saw, really, significant price increases in those in those 3 months. The good news is in June, we have started to see some of that pullback. So the reality is the pace of the while we have seen the spot pricing on the commodity pricing come back down within that $70 range, you are not seeing that the pacing of the cost decreases on the input cost come down at the same rate. And we are seeing them pull back about 20% to 25% in the month of June, and we do anticipate it to be a slower step down. it is just the nature of the environment. The costs go up pretty fast, and then there is a slower pace for it to step down. That said, you know, assuming things do not escalate further in The Middle East, we do anticipate that pacing back down to the levels that we would that we saw prewar. Aaron Reed: Okay. Great. Thank you very much. I will turn it back over. Steven A. Brass: Thanks, Aaron. Operator: Your next question comes from the line of Michael Baker from D.A. Davidson. Your line is open. Please go ahead. Michael Baker: Thanks. Alright. So I guess just to follow-up on that question. Can you just talk about your the fourth quarter outlook, the sort of implied guidance, if you will? it is just the math, if you do the math from the full year guidance plus what you have earned year to date, it does seem like the sales are in line with consensus. Earnings a little bit lower. I guess my question to you is your fourth quarter outlook now better, worse, or the same as it was 3 months ago? My assumption is same in the top line, maybe a little bit worse in the margins because of how, the oil is playing out. But I guess, just how are you looking at the fourth quarter now versus where you thought it was 3 months ago? Sara Hyzer: Hi. Hi, Mike. it is Sara, again. Hi. So the fourth quarter outlook it changed a little bit in the sense that there is some phasing, right, that we saw Q3 and Q4. So there was a little bit more that was pulled into the third quarter. than was in the fourth quarter. But when you look at the 2 quarters combined, we are landing in that mid to higher end of our guidance range. And so, was really more timing that impacted ultimately the fourth quarter outlook. We, you know, we feel good about the fourth quarter. it is gonna actually be the second strongest quarter of the year. We knew going into the second half of the year that the majority of the growth this year was gonna be in the back half. And the phasing of that just, you know, really the timing of that fell more in the third quarter than it did into the fourth quarter. You did mention, you know, in the gross margin, there is a little bit more of a pullback than what we had anticipated. Coming out of Q2, and that was just you know, it was really hard to anticipate the cost increases. But to be able to hold guidance you know, within 50 to 60 basis points as to where we were a few months ago considering the environment. I think we feel really good about that. And, again, always a reminder that whatever pullback we get on, you know, those cost increases, there is an offset to that with our reward program that helps protect the bottom line. And so really, when we look at the full year, we are increasing bottom line guidance both in operating income and EPS as a result of being able to reduce some of our discretionary spending in fourth quarter to help protect the bottom line. Michael Baker: Okay. So that was an-- just to follow up on that as my second question. Just because there is a lot of moving parts in questions. Tough to do the math, but what you are saying is your guidance is up not just on now, including the HTCP Americas business, but you are increasing your guidance on that but also some things within the business, i.e., cost savings. As you just mentioned. Sara Hyzer: Yeah. So I will give an example. Michael, it is-- if I look at the operating income of where we were in Q2, we guided to 01/2003 to $1.10. And if you add in the 2.9, that would have put us at $105.9 million to $112.9 million. We are guiding to $107 million to $113 million. So we are upping our bottom end by about $1.1 million, and we are pretty tight on the top end. So the narrowing that we have mentioned is really raising the bottom end of both our top end and our sorry. Top line revenue and our operating income and EPS In all 3 scenarios, the bottom is coming up. Michael Baker: Understood. Alright. Thank you. Appreciate the color. Sara Hyzer: Okay. Thank you. Operator: Your next question comes from the line of David Shachno from William Blair and Company. Please go ahead. David Shakno: Hey. This is David Shakno on for John Anderson. 2 quick questions for me. First, you announced about a month ago or so. A promotion, a king of the hill promotion at a large retailer. I just wanted to understand any early reads there and just how the performance there has been. Steven A. Brass: Sure. King of the Hill, yeah, the promotion in partnership with Disney and with The Home Depot. it is 1 of the largest promotions we have ever run-in our history. If you walk into our Home Depot store, you are gonna see some beautiful displays of WD-40 out there. it is been in the market for about a month. it is got a few months to go. We are in the process of ramping up our marketing And so I believe in the month of July, we are gonna be hitting about 80 million consumers across The US in terms of targeting. And so, yeah, it is really driving really strong incremental sales. it is proving to be after 1 month about 75% incremental. So there is very little cannibalization from the promotion. And so, yeah, we are very pleased. it is a major promotion for us. 1 of many promotions. Right? it is not the only act we have got in The US. there is lots of things going on in The US, coupled with strong distribution gains. We have got very strong WD-40 Specialist growth. Very strong ecommerce growth. But this and a couple of other meaningful promotions are really helping drive the results you have got in The US. David Shakno: Got it. Thank you. And then just wanted to follow-up on-- I know you talked about pricing a little bit earlier, but just wanted to understand more if you could help us with the magnitude at all of pricing. And, also, any you know, I realize most of the impact's gonna be in fiscal 27, so it is probably hard to see any kind of elasticities there. But I wanted to understand if there is been any pushback from retailers so far? Just what is their the response has been in general. Steven A. Brass: Sure. And so the price increases we have executed are Asia Pacific and Europe. If you recall or maybe you do not, we actually launched price increases in the first quarter in The US earlier in the fiscal year. And so we will review situation in The US next year as well. But these price increases have been pretty well implemented across most of Europe and Asia Pacific. Where the bulk of kind of the impact has been felt. Mid to high single digits in terms of the scale of the increases a little bit more on our bulk products, which have felt a little bit more pressure. And they were implemented between June and July Some of that stretching perhaps into August. But the main impact of the price increases. And so going in, you know, you will see that coming in the back half of Q4 and into Q1, you will feel the full benefit. We did have a little bit of pull-forward as well as some disruption. Right? We talked about pull forward That was probably about a $3 million amount of business that was pulled forward globally. Between you know, countries like India, which were concerned about security of supply and that they just placed larger orders for inventory on hand. And then places like China, where we had a little bit of a kind of advanced buy in, as well as some of our European countries. So about $3 million in magnitude for the for the whole impact. David Shakno: Great. Awesome. I will pass it on. Thank you. Steven A. Brass: Thank you. Operator: Your next question comes from the line of Daniel Rizzo from Jefferies. Please go ahead. Daniel Rizzo: Hi, everyone. Thanks for taking my questions. Just a couple of things. 1, I am sorry. Did you say that it is a 20% contribution from home care for the year? US home care for the year now? Is it that is how we kind of think about it going forward? Sara Hyzer: Yeah. that is pretty close. If you look at the 12 million on the top line and then the operating income, Daniel, is just shy of $3 million. Daniel Rizzo: Okay. I just wanna make sure that I had that right. And then so, you know, you are kinda changing the way you are presenting things You know, you walk away from some of the things we have done in the past. The regional sales kind of goals for The Americas for that you have talked about in the past, are we are not really on anymore either? Is it kind of more holistic? Is that something that is still kind of where we guide towards? Steven A. Brass: No. Absolutely. That stays the same. That does not change. The 1 area that really changes with the enduring business model, Daniel, is really the commitment from the business to drive EBITDA growth ahead of revenue growth. And so that is a significant change. it is a commitment we want to make. And the reason we are making that is you know, over the past few years, we have had to make significant investments in things like IT and sustainability, and innovation. Those kind of a lot of those big investments are now incremental. And so we are in a position you know, having recovered our gross margins as well, largely to really you know, drive the bottom line faster than the revenue. So that is a commitment from leadership to achieve that going forward. Daniel Rizzo: Okay. Excellent. that is that is actually that is great too. Okay. And then with the recently announced price hike, assuming things kind of-- and this is a big assumption. Things kind of do not go crazy again. What you have already done in price hikes, will that ultimately and then cost cutting too. That will all only offset the higher input costs that we are seeing now. With everything being the same. So I mean, by the end of next year, you would kind of be back to where you were. right, before the war started, frankly. Steven A. Brass: So, yeah, we have guided to, you know, a midpoint of 55% gross margin, including the Household Brands revenue, which brings down the margin by about 40 basis points. Globally for this fiscal year. I think it would be unwise for us to guide the next fiscal year given the volatility of the situation at the moment. Our stated goal, and I did talk to it in my script, is to vigorously defend our gross margins. And so you may have a couple of quarters going, you know, where it is reestablished the gross margin you know, from here on in. But then the aim would absolutely be to defend our gross margin subject to the limitations of what is possible in the external environment. Daniel Rizzo: Okay. Thanks. And then final question. In the past, you kind of had to hold more inventory, but this was a-- that was a unique situation with logistics. But I was wondering, given the current volatility, if you are gonna keep your inventories a little elevated just to make sure you can meet demand. Like, we have seen that and we saw, really, during the post COVID issues. Sara Hyzer: No. I think from a inventory Balance standpoint, I mean, we were carrying higher inventory levels in Q2. That has started to right size A lot of that inventory shipped during the quarter. So we are we are back you know, closer. I would not say we are at our 90 days. But we are closer to the 90 days. We still have a target and believe that even in this environment, getting back to 90 days is a good goal of ours. And can still supply the demand at that level. Daniel Rizzo: Alright. Thank you very much. Sara Hyzer: Thank you. Steven A. Brass: Thanks, Daniel. Operator: Your next question comes from the line of Linda Bolton Weiser from Water Tower. Please go ahead. Linda Bolton Weiser: Yes. Hi. How are you? So I wanted to ask about the pricing action. We had you took pricing in your the previous cycle a few years ago, when costs spiked quite a bit, and I think the price increases were in the, I do not know, even 15 to 25% range. You did lose, I think, some customers. I think it was mostly in Europe. Do you see things transpiring differently this time around in terms of your ability to keep customers versus lose them versus the last cycle? Is there anything that you can talk to that is different this time around? Thanks. Steven A. Brass: Sure. Hey, Linda. it is good to good to hear from you, Steven. Yeah. I think this is a very different set of circumstances. The price increases we are putting through are nothing like the scale of what we had to put through before or Obviously, that can change going forward. And so, you know, we have made some initial moves. Now quickly. We will have to assess the situation and see what we would need to do perhaps going into next fiscal year depending on what happens out there in the world. But, yeah, the scale of the increases and so the you know, resulting kind of pushback, if you like, from partners has been significantly less, and the price increases has been you know, adopted across the world. And you know, because of the scale, more limited scale, you know, quite easily, I think, this time. Linda Bolton Weiser: Okay. Is there is there any, anything going on in your with customers about this the fact that the spikes or the volatility in oil we are seeing are event driven. That make it harder in some way to put the price increases through? Because they could argue that it is temporary and event driven. Is there anything going on like that type of conversation? Steven A. Brass: And so I think we always try you know, we do not rush into making these decisions. We try and take a view on, you know, what is likely to happen, beyond kind of events and what is gonna happen kind of, you know, multi month and over kind of the period of the next 12 to 18 months. So we take that kind of view. And so the price increases we put through now do not fully you know, represent the scale of the cost increases we have seen. We have assumed some reduction, right, month by month as Sara kinda highlighted. And so that is why we will have to take another look in early 27 to see whether we need further action as well. Linda Bolton Weiser: Okay. And then just finally on that topic, of gross margin, Sara, I think you said something like we should expect in f y 27 progressive improvement. So I guess I sort of read that to mean gross margin down year over year, but down less year over year as the year progresses. Is that kind of what you meant when you were talking about that? Sara Hyzer: It is hard, Linda, at this point for us to comment too far out into next fiscal year. We do expect there, right? I mean, based on what we are sitting on our balance sheet, we know that there will be some impact to our gross margin in the fourth quarter. And going into next fiscal year. The length of how long it progressively or the pace of it progressively coming back up really does depend on how the next few months go from a cost reduction standpoint. And if we continue to see kind of the pacing of those costs reducing, which can change daily, frankly, based on what continues to be happening over in The Middle East. So it is just given the environment, it is it is hard to comment on that at this point in time. Linda Bolton Weiser: Okay. And then my last question, just has to do with the revenue line. I think you said earlier last quarter or and maybe you mentioned again that you have like some new distribution in The US I forgot why you said maybe dollar store channel or something. That combined with the really successful promotion you have this year, does that create really like, unusually hard comparisons for next year? Like, was there some channel fill related to the new customer? Anything like that we should be aware of? As we think about next year? Steven A. Brass: I think, you know, sort of the new distribution you are referring to was a single point of new distribution where we had about 7 thousand new outlets. So it is a major new customer for us in our 2.75-ounce product. So driving incremental sales and that will ramp up over a 2 year period as we expand distribution into all of those stores. And so more growth from that particular initiative next year, And, you know, in terms of promotion, it is just been 1 of those years for The US where a lot of things went right. We have had promotions across multiple channels. Across agriculture, across hardware, Yeah. The scale of this 1, certainly the king of the hill is very significant. When you think about it, I mean, we can we can do that because of the iconic nature of our brand and so when you take that formula of brand partnerships between the likes of you know, WD-40, and, you know, Disney and the Home Depot that is a powerful formula. it is a repeatable formula going forward. And so I think we have tapped into something, you know, which can really leverage the power of the brand going forward and which is absolutely repeatable. Whether it is 1 big chunk or multiple smaller chunks going forward, leveraging the brand with these sort of brand partnerships is a powerful formula. Linda Bolton Weiser: Okay. Thank you so much, and congratulations, Sara, on your new appointment. Sara Hyzer: Oh, thank you, Linda. Operator: Your next question comes from the line of Aaron Reed from Northcoast Research. Please go ahead. Aaron Reed: I am back. I got 1 last question here for you. And that is, can you tell us a little bit more about where you are finding success with the Specialist. I feel like this is something that is been adopted a little bit faster than I would have anticipated. Was wondering if you could go into a little bit more what segments are you seeing the adoption in, What channels is it going through? If you can just kinda speak to that a little bit more. Steven A. Brass: Sure. Absolutely. So, Aaron, yeah, I mean, the WD-40 Specialist is growing very strong double digits all across the world, and so we are very pleased. And so 1 of the things we have done you know, with the mentor of kind of learn faster to grow faster is really leverage you know, global teams to exchange best practice and look at what is working around the world. And so we very much have a focused concentration on the best selling items within that range. And getting those out into distribution, consistently executing around the biggest selling items. We have 6 products that do about 80% of sales in the specialist range. And so, you know, that kind of disciplined execution and learning you know, is really driving sales. So you look at places like China where specialist is growing fantastically well. I mean, even The US, we are in high single digits now, about 18%, 19%. For the year to date. And in Europe, continues to grow very, very well on WD-40 Specialist. You then layer over that, you know, new product innovation and so Europe had a couple of big ones this year. With degrees of products doing very, very well, for example. And then the new BIOLUBE formula formulation in Europe is going very, very well as well. And so we are really pleased in France, which was our initial launch country for the BIOLUBE product, which will be launched globally over the coming 18 months or so. The BIOLUBE item has gone straight to 1 of the top selling items on WD-40. And so a combination of simply expanding distribution but also a little bit of innovation driving. We did also say that you know, 90% of our WD-40 Specialist sales come from 10 countries only. And so we are only just really getting going. We have a very, very significant runway for growth on specialists around the world. And we are really starting to pick up the pace. Aaron Reed: Great. Thank you very much. And our last follow-up question and then I am done, is that are the distributors fairly receptive to the Specialist products as well too? Are they really much more focused on the multipurpose product? Steven A. Brass: No. what is-- but you have gotta look at it both together. So WD-40 Specialist and WD-40 Multi-Use product together. You know, really help us have a category approach. And so we are helping retailers you know, with their category approach, so, really, you are looking at both of them acting together. And so yeah, the specialist range helps you know, protect and gain shelf space for the overall brand. And so it is kind of like a virtuous circle of you know, helping protect the core brand. But also leveraging specialists to take-- take market share on those items which may be newer to us. Aaron Reed: Great. That makes sense. Thank you much. Steven A. Brass: Thank you. Operator: At this time, there are no further questions. This concludes today's call. Thank you all for attending. You may now disconnect.