WD-40 Q2 Earnings Call Highlights

Key Points

• WD‑40 reported Q2 consolidated net sales of $161.7 million, up 11% year‑over‑year, driven by maintenance products which comprised ~97% of sales and rose 13% (≈6% on a constant‑currency basis) with notable strength in the U.S. and Asia‑Pacific.
• Gross margin improved to 55.6% (+100 bps) but management warned that recent Middle East developments have raised oil‑linked input costs that could pressure margins later in the year; the company reaffirmed fiscal 2026 guidance while noting profitability metrics are now expected to fall “within” their ranges and assumes crude at $95–$115/barrel.
• Strategic priorities gained traction—premiumization (premium SKUs ~50% of MUP sales, target >10% CAGR), WD‑40 Specialist up 19% YTD, and e‑commerce up 23%—and the company plans a Q2 launch of an 85% bio‑based multi‑use lubricant in Europe; the board also approved a $1.02 quarterly dividend and completed $8M of repurchases with ~$14M remaining.

WD-40 NASDAQ: WDFC reported fiscal second-quarter 2026 results that management said showed strengthening momentum after a slower start to the year, led by higher maintenance product sales and a continued push into premium formats and e-commerce.

Second-quarter sales rose 11% as maintenance products drove results

President and CEO Steve Brass said consolidated net sales were $161.7 million, up 11% from the prior-year quarter. Maintenance products remained the company’s core focus and represented roughly 97% of quarterly net sales, with maintenance product sales of $156.8 million up 13% year-over-year.

On a constant-currency basis, Brass said maintenance product sales increased 6%, which he characterized as “in line with our long-term growth expectations.” The company’s direct markets (about 80% of global sales) posted 14% growth in maintenance products, while sales through the marketing distributor network (about 20% of global sales) increased 9%, helped by a rebound in Asia-Pacific distributor markets after a softer first quarter.

Regional performance: U.S. strength, FX lift in EIMEA, rebound in Asia-Pacific

In the Americas, Brass reported sales of $71.8 million, up 10%. Maintenance products in the region increased 11% to $69.1 million, driven “nearly all” by the U.S., where maintenance product sales rose 15%. Brass said WD-40 Multi-Use Product sales in the U.S. increased by $5 million, or 15%, supported by higher volumes with select customers and online retailers, elevated promotional activity, and modest price increases implemented earlier in fiscal 2026. He also pointed to 17% growth for WD-40 Specialist in the Americas, aided by expanded distribution and higher online sales in the U.S.

Homecare and cleaning product sales in the Americas declined 13%, which Brass attributed to the company’s shift toward “higher-margin maintenance products” under its strategic framework. Brass said the company expects the Americas to deliver high single-digit to low double-digit growth for the full fiscal year, primarily driven by U.S. activity.

In EIMEA (Europe, India, Middle East, and Africa), sales were $64.9 million, up 9% on a reported basis. Brass said the increase was driven by favorable foreign exchange, while constant-currency sales were down 3%. He highlighted double-digit local-currency growth of WD-40 Multi-Use Product across several direct markets, including France (+16%), Iberia (+12%), and Benelux (+12%), “driven by successful promotional activities.” Those gains were offset by lower volumes in distributor markets, where sales were impacted in the Middle East due to the timing of customer orders following a distributor transition in a key country. Brass said the transition is complete and the company expects increased activity in the second half, “subject to further geopolitical disruption in the region.”

Brass also noted that the prior divestiture of the U.K. homecare and cleaning portfolio in fiscal 2025 reduced second-quarter sales by $1.5 million. Looking forward, he said the company expects mid-single-digit constant-currency growth in EIMEA for the fiscal year, and “high single digits” in reported currency based on current exchange rates.

In Asia-Pacific, sales increased 19% to $25 million, or 16% on a constant-currency basis. Brass said the growth was largely driven by China and Asia distributor markets, where maintenance product sales rose 25% and 19%, respectively. WD-40 Specialist sales in the region increased 55% year-over-year. In response to analyst questions, Brass said the Specialist increase was broad-based across China, distributor markets, and Australia and reflected “new distribution and promotions combined,” as well as continued innovation.

Margins and costs: gross margin improved; oil-linked inputs a developing risk

Vice President and CFO Sara Hyzer said second-quarter gross margin was 55.6%, up 100 basis points from the prior year. She attributed the improvement primarily to lower specialty chemical costs (+80 basis points) and higher average selling prices (+70 basis points), partially offset by higher miscellaneous input costs in EIMEA (-40 basis points). On an adjusted basis excluding assets held for sale, Brass said gross margin was 56%.

Hyzer cautioned that, subsequent to quarter-end, geopolitical developments in the Middle East contributed to higher costs for certain petroleum-based specialty chemicals and other inputs. She said the company typically sees a 90- to 120-day lag before raw material changes affect cost of goods sold due to production and inventory cycles. Based on current inventory levels, Hyzer said WD-40 does not expect gross margin to be “significantly impacted” until the fourth quarter of fiscal 2026.

Cost of doing business (operating expenses adjusted for certain non-cash items) was 38% of net sales, unchanged as a percentage of sales. In dollar terms, Hyzer said costs increased $7 million, or 13%, including a $3 million impact from foreign exchange. She cited higher employee-related expenses (including headcount to support initiatives) and higher advertising and promotional spending. Advertising and promotion expense was 5.5% of net sales versus 5.1% a year earlier; Hyzer said the company still expects full-year A&P investment of about 6% of net sales.

Operating income rose 13% to $26.3 million, while net income was $20.3 million compared with $29.6 million a year ago. Hyzer said the prior-year quarter included a non-recurring, non-cash tax benefit of $11.9 million; excluding that benefit, she said net income would have increased 13%. Diluted EPS was $1.50 compared with $2.19 in the prior-year quarter.

Strategy updates: premiumization, Specialist innovation, and digital growth

Brass outlined progress under the company’s “Must-Win Battles,” including:

• Premiumization: Year-to-date combined sales of WD-40 Smart Straw and EZ-REACH increased 9%. Brass said premiumized products represent about 50% of WD-40 Multi-Use Product sales and that the company targets premiumized product net sales CAGR of >10%.
• WD-40 Specialist: Year-to-date sales were $44.9 million, up 19%.
• Digital commerce: Year-to-date e-commerce sales increased 23%, driven mainly by the U.S. and China.

Brass also announced a planned second-half launch of a bio-based multi-use lubricant in several European markets, formulated with 85% bio-based ingredients. In Q&A, he said the product is launching across “seven or eight” European countries and could roll out globally next fiscal year, while cautioning it will take “multiple years” to become meaningful revenue and could ultimately reduce dependence on oil if successful.

Capital allocation, divestiture update, and reaffirmed 2026 guidance

Hyzer said the board approved a quarterly cash dividend of $1.02 per share on March 16. The company repurchased 38,175 shares for $8 million during the quarter, with about $14 million remaining under the authorization that expires at the end of the fiscal year. Hyzer said WD-40 increased the pace of repurchases and intends to utilize the remaining authorization.

On the planned sale of its Americas homecare and cleaning brands, Hyzer said the company continues to advance the divestiture process with its investment banking partner, though “there can be no assurance that a transaction will be completed.”

Management reaffirmed full-year fiscal 2026 guidance on a pro forma basis excluding assets held for sale, while Hyzer noted that with heightened oil-cost risk, the company now expects metrics below the top line to fall “within” their ranges rather than trending to the mid-to-high end. In response to an analyst question, Hyzer confirmed the key change is that revenue is still expected to land in the mid-to-high end of the range, but profitability metrics are expected to be within range due to oil-related uncertainty.

Guidance assumptions include crude oil prices of $95 to $115 per barrel and an average euro-to-dollar exchange rate of about 1.15 in the back half. Hyzer said the prior guidance assumption for oil was closer to $65 to $85.

For fiscal 2026, WD-40 expects:

• Net sales (constant currency): $630 million to $655 million (up 5% to 9% vs. pro forma 2025)
• Net sales (reported): $650 million to $680 million at current exchange rates, excluding assets held for sale
• Gross margin: 55.5% to 56.5%
• Operating income: $103 million to $110 million
• Diluted EPS: $5.75 to $6.15, based on 13.4 million weighted average shares

Hyzer added that if the Americas homecare and cleaning divestiture is not completed, guidance would be positively impacted by about $12.5 million in net sales, $3.6 million in operating income, and $0.20 in diluted EPS for the full year.

About WD-40 NASDAQ: WDFC

WD-40 Company, headquartered in San Diego, California, is best known for its flagship WD-40® Multi-Use Product, a water-displacing spray used for lubrication, rust prevention and cleaning. Since its introduction in 1953 by the Rocket Chemical Company, the WD-40 brand has become a household and industrial staple. Over time, the company has broadened its portfolio to include complementary maintenance and cleaning brands such as 3-IN-ONE® oils, Lava® hand cleaners, Solvol® solvents, Spot Shot® stain removers and X-14® cleaning products.

WD-40 Company distributes its products in more than 176 countries through retail, industrial and automotive channels.

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