070815 WDFC Corporate Overview FINALs21.q4cdn.com/612895086/files/doc_presentations/... · Historical financial and operating data in this presentation reflect the consolidated results

Corporate Overview

Updated: July 2015

Forward-Looking Statements

FY 2014 CORPORATE OVERVIEW 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 multi-purpose maintenance products (“MPMP”) 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 BIKETM 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 multi-purpose maintenance 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; 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, 2014, and in the Company’s Quarterly Report on Form 10-Q for the period ended February 28, 2015 which the Company filed with the SEC on July 9, 2015.

All forward-looking statements included in this press release should be considered in the context of these risks. All forward-looking statements speak only as of July 8, 2015, 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.

WHO WE ARE

3FY 2014 CORPORATE OVERVIEW

What Does A Good Business Look Like?

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

FY 2014 CORPORATE OVERVIEW

176

WD-40 Company’s Origins

5

In the 1950’s a chemist in San Diego set out tocreate a compound that would prevent rust andcorrosion. It took him 40 attempts to get the waterdisplacing formula right , but the end result becamethe original secret formula for WD-40 Multi-UseProduct (“MUP”).

1958WD-40 MUP makes its first 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

1993MUP sales reach $100 million in annual sales

1995 - 2000Acquired 3-in-ONE, Lava, Solvol, 2000 Flushes, X-14, Carpet Fresh, and Spot Shot

2008For the first time over 50% of net sales generated outside of the United States

In 2014…Over 61 years of growth, flagship WD-40 brand is more popular than ever, Company achieved over $383 million in net sales in FY2014 and its products are available in over

countries and territories worldwide

2011Introduced WD-40 Specialist product line

1953 - 1958WD-40 MUP is used by aerospace industry and on the SM-65 Atlas missile

1997Garry Ridge named president and CEO


Guiding Principles

6

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 succeeding as a tribe while excelling as individuals.

• We value owning it and passionately acting on it.

• We value sustaining the WD-40 Company economy.


7

People - Products - Passion

SERVANT LEADERSHIP WITH AN EDGE

© 2010 The Learning Moment Inc. All rights reserved. Do not duplicate.

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Results in a tribal culture that values:

•Caring

•Candor

•Accountability

•Responsibility


2014 Employee Engagement Survey Results

8

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. 97.1

I respect my supervisor. 97.1

I feel my opinions and values are a good fit with the WD-40 Company culture. 96.8

WD-40 encourages employees to continually improve in their job, to “make it better” 96.3

I am excited about WD-40 Company’s future direction. 95.6

“My definition of success is having the opportunity to enjoy what I do for a living and I have found that here. The achievement is attributable to its people and company values.”

- Nani Pham, Financial Systems Analyst


Strategic Initiatives

9

1. Grow WD-40 Multi-Use Product

Maximize the WD-40 product line through geographic expansion and increased market penetration. More places, more people, more uses, more frequently.

2. Grow the WD-40 SpecialistProduct Line

Leverage the WD-40 brand to grow specialist by developing new products and product categories within identified geographies and platforms.

3. Broaden Product and Revenue Base

Leverage the recognized strengths of WD-40 Company to derive revenue from new sources and brands.

4. Attract, Develop and RetainOutstanding Tribe Members

Succeed as a tribe while excelling as individuals.

5. Operational Excellence Continuous improvement by optimizing resources, systems and processes.


Our Brands

10

WD-40 Multi-Use Product

WD-40 Specialist

3-IN-ONE

WD -40 Bike

GT85

MULTI-PURPOSE

MAINTENANCE PRODUCTS

• Currently make up over 85% of net sales

• Core strategic focus and growth engine

X-14

2000 Flushes

Carpet Fresh

No Vac

Spot Shot

1001

Lava

Solvol

HOMECARE AND

CLEANING PRODUCTS

• Available in niche segments and geographies

• Generate positive cash flows but are not core strategic focus


11

WD-40 Multi-Use Product is Getting Flexible

• Patented new delivery system will be on select WD-40 Multi-Use Product SKUs

• Targeted at high volume end users - intended to make the product easier to use in workshops and factories

• Expected to be on select store shelves by late July 2015

• View our teaser campaign: www.wd40.com/ez


Our End Users

12

Maintenance,

Repair & Overhaul

Construction &

Skilled TradesAt-Home

“Doer-Enthusiast”

At-Home

“Non-Enthusiast”

• 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 multi-

purpose maintenance products

come from end-users in workshops

and factories


THE

OPPORTUNITY


Global Opportunity

14

WD-40 Company products are currently available in over 176 countries and territories worldwide

97% product awareness of WD-40 MUP

among U.S. males – expanded MUP sales nearly 2% in

FY 2014

Germany is the second largest “DIY” market in

the world – brand awareness around 65% – expanding distribution in the country is a key

focus area

The Company’s unique global infrastructure enables it to take its products to more places, with more people, who have more uses, more frequently.

China is an emerging market with significant

long-term opportunity -

expanded MUP sales over 5% in

FY 2014


Unique Distribution Strategy

15

One brand, one trade channel,

multiple products

“ACME” TOOLS

Multiple brands, multiple trade channels, multiple

products


Physical Awareness

Make it EASY TO BUY by maximizing store placement and shelf space


Leveraging the Trust in the Brand


WD-40 Specialist Product Line Examples

18

Our first line of specialty products worthy of wearing the WD-40 Shield

General

MaintenanceMotor Bike Lawn and Garden


INVESTMENT

PERFORMANCE


5-Year Comparison of Total Stockholder Return

20

*$100 invested on 8/31/09 in stock or index, including reinvestment of dividends.

$80

$100

$120

$140

$160

$180

$200

$220

$240

$260

$280

$300

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Value of $100 Invested on August 31, 2009

WD-40 Company S&P 500 Russell 2000


What drove the performance?

21

EFFICIENT BUSINESS MODEL WITH ASSET-LIGHT STRATEGY• Average annual CAPEX needs of ~1% of net

sales• Outsourced manufacturing and distribution• Sales per employee of $0.97M in FY 2014

FOCUSED ON CREATING VALUE• High Returns on Invested Capital

• ROIC was 22.3% in FY11, 23.5% in FY12, 27.7% in FY13 and 28.2% in FY14

• 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


Strong Brands with a Global Reach

22

1) In millions – all years at FY14 foreign currency exchange rates

Nearly doubled MPMP sales over the last 10 years despite macroeconomic challenges

$170 $186

$202 $217

$230

$263 $280 $289

$327 $338

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Global financial

crisis

Largest ever turndown in

U.S. housing

Largest GDP decline in Eurozone

history

Largest drop in U.S. auto production


Global MPMP Sales by Segment

23

1) In millions – all years at FY14 foreign currency exchange rates

$-

$20

$40

$60

$80

$100

$120

$140

$160

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Americas EMEA Asia-Pac

MPMP Sales by Segment


50/30/20 RULE


The 50/30/20 Rule

25

Gross MarginAbove 50% of net sales50

Cost of Doing Business (1)

At or below 30% of net sales- 30Maintenance CAPES & Regular Dividends

Maintenance CAPEX of between $2M to $4M per fiscal yearAnnual dividends targeted at ~50% of earnings or ~$20M= 20 EBITDA (1)

Above 20% of net sales

1) See appendix for descriptions and reconciliations of these non-GAAP measures.

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%


The “50” - Gross Margin

• FY 2014 the Company achieved its highest annual gross margin in a decade at 52% compared to 51% FY 2013

• Continually focus on driving gross margin improvement

– New product development, innovations and reformulations

– Operational efficiencies

– Product mix and market mix

– Pricing adjustments as needed to offset input cost increases

26

Gross margin can be impacted positively and negatively by things not under the Company’s control like changes in foreign currency exchange rates and changes in input costs

FY1452%

FY1351%

FY1249%


35%

12%

30%

21%

3%

What Makes Up the Cost of a Can?

27

Approximate Cost Breakdown of a Typical Can ofWD-40 MUP Manufactured in the United States

Data as of May 2015. 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.

We estimate only a small portion of

the input costs associated with

petroleum-based specialty

chemicals directly correlate to the price of a

barrel of crude oil

Petroleum-Based Specialty Chemicals

Manufacturing Fees

Can

Plastic

Corrugate


The “30” – Cost of Doing Business

• FY 2014 cost of doing business was at 34% of 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

• Additional investments in brand protection, new product development, and regulatory and quality assurance remain a high priority

28

Revenue growth is the most important factor in achieving the “30” target

Cost of Doing Business

People A&P Investment Freight Other


FY 2014 50/30/20 Results

29

50/30/20 Business Model Target FY14 FY13 FY12Gross 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 due to rounding


CAPITAL

ALLOCATION


Capital Allocation Strategy

31

Long-term Growth & Return TargetsDrive revenue and earnings growth of 6-8%Target return on invested capital of >20%

Liquidity, Debt & Cash ObjectivesAdequate liquidity to support growth strategy

Strong balance sheet & available lines of credit - cash & debt in neutral position

Maintenance CAPES & Regular DividendsMaintenance CAPEX of between $2M to $4M per fiscal year

Annual dividends targeted at ~50% of earnings or ~$20M

Long-term Growth & Return TargetsDrive revenue and earnings growth of 6-8%Target return on invested capital of >20%

Liquidity, Debt & Cash ObjectivesAdequate liquidity to support growth strategy

Strong balance sheet & available lines of credit - cash & debt in neutral position

Maintenance CAPEX & Regular DividendsMaintenance CAPEX of between $2M to $4M per fiscal year

Annual dividends targeted at ~50% of earnings or ~$20M per fiscal year

Excess Capital Allocated to the Highest Return Alte rnative

1

2

3

4

Organic Growth Initiatives Acquisitions Share Repurchases


Cash Returns to Stockholders

32

• Over $92.3 million in cash dividends paid to shareholders over past five years

• Paid dividends without interruption for over 40 years

• Future increases expected to grow in-line with earnings over time

• Current $75 million share repurchase plan became effective March 1, 2015

• Provides authorization to acquire up to $75 million of the Company’s outstanding shares through the plan’s end date of August 2016.

• Company repurchased 136,000 shares at a total cost of $11.3 million during Q3 FY15

$41,399 $39,840

$31,437

$42,773

FY11 FY12 FY13 FY14

Share Repurchases

Share Repurchases

$1.00 $1.08 $1.14 $1.22 $1.34

48%

50%52%

48% 47%

FY10 FY11 FY12 FY13 FY14

FY Dividend per Share Dividend Payout Ratio

Dividends


FY 2014

FINANCIAL

RESULTS


FY 2014 Financial Results

ANNUAL MEETING 2014 34

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(As reported)

FY14 CC* FY13 Change

Net Sales $377.7 $368.5 2%

Operating Income $62.7 $56.6 11%

Net Income $43.0 $39.8 8%

EPS (Diluted) $2.84 $2.54 11%

Financial Results(Constant currency basis)

*FY 2014 results translated at FY 2013 foreign currency exchange rates


FY 2014 Net Sales

35

Total Net Sales FY 2012 FY 2013 FY 2014$342.8 $368.5 $383.0

$56.3 $47.6 $45.2

$286.5 $320.9 $337.8

FY12 FY13 FY14

Sales by Product Group

Multi-Purpose

Maintenance

Homecare and

Cleaning

Sales by Segment

Americas EMEA Asia-Pacific

$48.5 $50.6 $50.8

$116.9 $137.4 $151.4

$177.4 $180.5 $180.8

FY12 FY13 FY14


LAST WORD


What Does A Good Business Look Like?

37

• 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


APPENDIX


Non-GAAP Reconciliation

39

(1) This presentation contains certain non-GAAP (accounting principles generally accepted in the United States of America) measures, that ourmanagement believes provide our shareholders with additional insights into WD-40 Company’s results of operations and how it runs its business. Ourmanagement uses these non-GAAP financial measures in order to establish financial goals and to gain an understanding of the comparative performanceof the Company from year to year or quarter to quarter. The non-GAAP measures referenced in this presentation, which include EBITDA (earnings beforeinterest, income taxes, depreciation and amortization) and the cost of doing business, are supplemental in nature and should not be considered in isolationor as alternatives to net income, income from operations or other financial information prepared in accordance with GAAP as indicators of the Company’sperformance or operations. Reconciliations of these non-GAAP financial measures to the WD-40 Company financials as prepared under GAAP are asfollows:

Cost of doing business:Total operating expenses - GAAP $ 135,116 $ 132,526 $ 116,753

Amortization of definite-lived intangible assets (2,617) (2,260) (2,133) Impairment of definite-lived intangible assets - (1,077) - Depreciation (in operating departments) (2,218) (1,850) (1,597)

Cost of doing business $ 130,281 $ 127,339 $ 113,023 Net sales $ 382,997 $ 368,548 $ 342,784 Cost of doing business as a percentage of net sales 34% 35% 33%

EBITDA:Net income - GAAP $ 43,746 $ 39,813 $ 35,485

Provision for income taxes 19,213 17,054 15,428 Interest income (596) (506) (261) Interest expense 1,002 693 729 Amortization of definite-lived intangible assets 2,617 2,260 2,133 Depreciation 3,243 3,009 2,736

EBITDA $ 69,225 $ 62,323 $ 56,250 Net sales $ 382,997 $ 368,548 $ 342,784 EBITDA as a percentage of net sales 18% 17% 16%

8/31/2014 8/31/2013 8/31/2012 Fiscal Years Ended


176GLOBAL, DIVERSE BUSINESS• Products available in over

countries and territories worldwide

• More than half of revenues were outside the U.S.

• Brands sold in multiple channels: retail, industrial, institutional

• Portfolio of 11 brands

Investment Snapshot

40

EFFICIENT OPERATION• 395 employees as of 8/31/14• Sales per employee of $0.97M

ASSET-LIGHT STRATEGY• Average annual CAPEX needs

of ~1% of net sales• Outsourced manufacturing and

distribution

CURRENT AND LONG-TERM RETURN TO SHAREHOLDERS• Dividend yield of 2.0%* • Dividend payout ratio of 47%• Dividend increases every year

since fiscal year 2011• Share repurchases of $40M in

FY12, $31M in FY13, and $43M in FY14

• Two share repurchase plans in place through August 2016

FOCUSED ON CREATING VALUE• ROIC emphasis - ROIC was

22.3% in FY11, 23.5% in FY12, 27.7% in FY13 and 28.2% in FY14

• Employee earned incentives tied to EBITDA targets

PRIORITY IN NEW PRODUCT DEVELOPMENT (NPD) INVESTMENT• NPD has touched every brand• NPD priority is MPMP category

SMALL MARKET CAP• Approximately $1.2 billion*• 14.6M shares outstanding*

Ownership**• Insiders: 4%• Institutions: 73%• Institutions holding 5% or more

shares: Parnassus Investments, Blackrock Institutional Trust, Vanguard Group, Kayne Anderson Rudnick

Statistics as of FY14 unless noted otherwise*as of 11/25/2014 Source: Nasdaq Online

**13F Report 12/31/14

FINANCIAL FOUNDATION• Strong balance sheet • Strong free cash flow• Strong liquidity & access to

capital


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070815 WDFC Corporate Overview FINALs21.q4cdn.com/612895086/files/doc_presentations/... · Historical financial and operating data in this presentation reflect the consolidated results