AnnualMeeting
ofStockholders
December 13, 2016
Forward-Looking Statements
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 maintenance products (“MP”) 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 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, 2016 which the Company filed with the SEC on October 24, 2016.
All forward-looking statements included in this presentation should be considered in the context of these risks. All forward-looking statements
speak only as of December 13, 2016 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 forwardlooking statements.
2
WHOWEARE
3
WhatDoesAGoodBusinessLookLike?
•
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
4
WD‐40Company’sOrigins
In the 1950’s a chemist in San Diego set out to
create a compound that would prevent rust and
corrosion. It took him 40 attempts to get the water
displacing formula right, but the end result became
the original secret formula for WD-40 Multi-Use
Product (“MUP”).
1973
1958
1953
Rocket Chemical
Company
Incorporated
WD-40 MUP
makes its first
appearance on
store shelves in
San Diego
1953 - 1958
WD-40 MUP is used by
aerospace industry and
on the SM-65 Atlas
missile
1970
The name
WD-40
Company
was
adopted
WD-40 Company
goes public on
the NASDAQ;
stock increases
61% on first
trading day
1995 - 2000
2011
Acquired 3-in-ONE,
Lava, Solvol, 2000
Flushes, X-14,
Carpet Fresh, and
Spot Shot
Introduced WD40 Specialist
product line
1993
1997
2008
MUP sales
reach $100
million in
annual
sales
Garry
Ridge
named
president
and CEO
For the first time
over 50% of net
sales generated
outside of the
United States
In 2016…
Over 63 years of growth,
flagship WD-40 brand is more
popular than ever, achieved
$381 million in net sales and
products are available in over
176 countries and territories
worldwide
5
OurBrands
MAINTENANCE PRODUCTS
HOMECARE AND CLEANING PRODUCTS
WD-40 Multi-Use Product
WD-40 Specialist
3-IN-ONE
WD-40 Bike
GT85
•
Currently make up almost 90% of net sales
•
Core strategic focus and growth engine
X-14
2000 Flushes
Carpet Fresh
No Vac
Spot Shot
1001
Lava
Solvol
•
Available in niche segments and
geographies
•
Generate positive cash flows but are not
core strategic focus
6
People‐ Products– Passion– Purpose
SERVANT LEADERSHIP WITH AN EDGE
Results in a tribal culture
that values:
•Caring
•Candor
•Accountability
•Responsibility
© 2010 The Learning Moment Inc.
All rights reserved. Do not duplicate.
thelearningmoment.net
7
OurPurpose
Why
We exist to create positive lasting memories in
everything we do. We solve problems. We make
things work smoothly. We create opportunities.
How
We create positive lasting memories by cultivating a
tribal culture of learning and teaching which produces
a highly engaged workforce who live our company’s
values every day.
What
We deliver unique, high value and easy-to-use
solutions for a wide variety of maintenance needs in
workshops, factories and homes. We market and
distribute our brands across multiple trade channels
in countries all over the world.
“People don’t buy what you do,
they buy why you do it. And what
you do simply proves what you
believe.
- Simon Sinek, Optimist and Bestselling Author of
“Start With Why” and “Leaders Eat Last”
8
OurValues
9
CIRCLEOF
COMPETENCE
10
“You have to stick within what I call your
circle of competence. You have to know
what you understand and what you don’t
understand. It’s not terribly important
how big the circle is. But it’s
terribly important that you know where
the perimeter is.”
– Warren Buffett
11
WD‐40CompanyCircleofCompetence
Culture End Users Global Distribution 12
ThePoweroftheShield
13
Culture:2016TribeMemberEngagementSurvey
Question
Result
Average of all questions
92.8
I feel my opinions and values are a good fit with the WD‐40 Company culture.
99.1
I love to tell people that I work for WD‐40 Company.
98.4
I am clear on the company’s goals.
98.4
I understand how my job contributes to achieving WD‐40 Company’s goals.
97.9
I know what results are expected of me.
97.9
I respect my coach.
95.8
I am excited about WD‐40 Company’s future direction.
94.2
My coach encourages me to find innovative solutions and opportunities for new and better ways
93.7
My coach encourages employees to continually improve in their job
93.6
"The strong values and culture at WD-40 Company allow me to feel
comfortable in many situations. They allow employees to flourish as tribe
members and individuals."
- Mike Starzman, Director Global Field Quality
14
Global:Infrastructure
Our products are currently available in 176 countries and territories worldwide
and in over 62 unique trade channels
•
HVAC
•
Industrial Supplies
•
Office Supplies
•
Aircraft Supplies
•
Lawn and Garden
•
Plumbing
•
Automotive
•
Grocery
•
Refrigeration
•
Bicycle
•
Big Box
•
Sporting Goods
•
Body Shop
•
Hardware
•
Appliance Repair
•
Building Supplies
•
Janitorial
•
Welding Equipment
•
Chemicals
•
Locksmith
•
Drug Store
•
Farming Equipment
•
Marine
•
Electrical Equipment
•
Motorcycle
The Company’s unique infrastructure enables it to take its products to more places,
with more people, who have more uses, more frequently.
15
Distribution:UniqueApproach
“ACME”
TOOLS
One brand, one
trade channel,
multiple products
Multiple brands, multiple
trade channels, multiple
products
16
EndUsers:FocusedandDeliberate
Maintenance, Repair & Overhaul
•
At‐Home Passionate Hobbyist
Construction & Skilled Trades
The majority of sales of maintenance
products come from end-users in
workshops and factories
•
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
Annual usage amounts vary dramatically among our end users
$70.00 per year
$0.40 per year
17
STRATEGIC
INITIATIVES
18
StrategicInitiatives
Target
1. Grow WD-40 Multi-Use Product
Maximize the product line through geographic expansion
and increased market penetration. More places, more
people, more uses, more frequently.
Double our WD-40 Multi-Use Product
net sales by the end of 2025
2. Grow the WD-40 Specialist Product Line
Leverage the WD-40 Specialist brand to grow specialist by
developing new products and product categories within
identified geographies and platforms.
Grow WD-40 Specialist to $125 million
in net sales by the end of 2025
3. Broaden Product and Revenue Base
Leverage the recognized strengths of WD-40 Company to
derive revenue from new sources and brands.
Continue to develop or acquire
maintenance products that fit well with
our unique multi-channel distribution
network
4. Attract, Develop and Retain Outstanding Tribe
Members
Succeed as a tribe while excelling as individuals.
Grow employee engagement to greater
than 95 percent
5. Operational Excellence
Continuous improvement by optimizing resources,
systems and processes as well as applying rigorous
commitment to quality assurance, regulatory compliance,
and intellectual property protection.
Execute the 55/30/25 business model
while safeguarding the “Power of the
Shield”
19
Premiumization
The evolution of the blue and yellow can with the little red top
WD‐40 Multi‐Use Product
WD‐40 Multi‐Use Product
WD‐40 Multi‐Use Product
Classic Can
Smart Straw
EZ‐Reach Flexible Straw
20
CategoryLeadership
Make it EASY TO BUY by maximizing store placement and shelf space
21
FocusedLeverageoftheTrustintheShield
Grow the core
Identify & establish geographic WD-40 Multi-Use Product end user base
Channel development – multi trade channel distribution – execute “The Secret”
WD-40 Multi-Use Prodect end user trust established with multi platform usage – “Memories” = EQUITY
Flanker & new category products – WD-40 Specialist product line
General
Maintenanc
e
Products
Lawn
&
Garden
Motorbike
&
Motorcycle
Grease
Degreasers
New
categories
to come…
Bundle
Bundle
Bundle
Bundle
Bundle
Bundle
Bundle
Bundle
Bundle
Bundle
Bundle
Bundle
Bundle
Bundle
Bundle
Bundle
Bundle
Bundle
22
WD‐40SpecialistProductBundles
General Maintenance
Lawn and Garden
Grease
General Maintenance
Lawn and Garden
Motorbike and Motorcycle
Degreasers
23
GrowthExpectationsforSelectMaintenanceProducts
FY 2006
FY 2016
FY 2025(1)
$191M
$295M
~$600M(1)
$22M
~$125M(1)
WD-40 Multi-Use Product Net Sales
1)
WD-40 Specialist Net Sales
Growth expectations for maintenance product net sales are projected by the end of FY2025 and are based on the Company's expectations, beliefs and forecasts. These
projections exclude sales of 3-IN-ONE, WD-40 Bike and GT 85. They are expressed in good faith and are believed by the Company to have a reasonable basis, but there can be
no assurance that they will be achieved or accomplished.
Note: Historical revenue numbers reflect net sales as reported and have not been adjusted for changes in foreign currency exchange rates.
24
INVESTMENT
PERFORMANCE
25
5‐YearComparisonofTotalStockholderReturn
Value of $100 Invested on August 31, 2011
$340
$320
$300
$280
$260
$240
$220
$200
$180
$160
$140
$120
$100
$80
FY 2011
FY 2012
FY 2013
WD-40 Company
FY 2014
S&P 500
FY 2015
FY 2016
Russell 2000
26
Whatdrovetheperformance?
SOLID FINANCIAL FOUNDATION
FOCUSED ON CREATING VALUE
•
•
•
•
Strong balance sheet
Predictable free cash flow
Strong liquidity & access to capital
•
High Returns on Invested Capital
• ROIC was 27.7% in FY13, 28.2% in
FY14, 27.2% in FY15 and 32.6% in
FY16
Employee earned incentives tied to EBITDA
growth
EFFICIENT BUSINESS MODEL WITH
ASSET-LIGHT STRATEGY
GROWTH PLATFORM SUPPORTED BY
STRONG BRANDS
•
•
Average annual CAPEX needs of ~1% to 2%
of net sales
•
•
•
One-time capital expense of ~$15 million
expected in FY17 for new San Diego facility
•
•
Brand portfolio includes many well-known
brands and products
Global diversification reduces risk
Long runway of growth ahead
Outsourced manufacturing and distribution
Sales per employee of $0.86M in FY16
We invest in brands and people, not factories and warehouses
27
StrongBrandswithaGlobalReach
Maintenance product sales continued to increase despite macroeconomic challenges
Maintenance Product Sales
(In millions)
Global
financial
crisis begins
Subprime
mortgage
crisis
$246
$191
FY07
1)
$203
$215
FY08
FY09
Continued
economic
instability in
Eurozone
Eurozone
debt crisis
begins
FY10
$260
$270
FY11
FY12
$305
$315
$320
FY13
FY14
FY15
$340
FY16
FY16 presented as reported, all prior years presented on a constant currency basis using FY16 foreign currency exchange rates.
28
GlobalMaintenanceProductSales
MP Sales by Segment
(In millions)
$180
$160
$140
$120
$100
$80
$60
$40
$20
$
FY07
FY08
FY09
FY10
Americas
1)
FY11
EMEA
FY12
FY13
FY14
FY15
FY16
Asia Pac
FY16 presented as reported, all prior years presented on a constant currency basis using FY16 foreign currency exchange rates.
29
THE55/30/25
BUSINESSMODEL
30
The55/30/25BusinessModel
WD-40 Company’s business is guided by the 55/30/25 business model
We target gross margin of 55%, cost of doing business of 30%, and an EBITDA of 25%
55
Gross Margin
55% of net sales
30
Cost of Doing Business(1)
30% of net sales
Maintenance CAPES & Regular Dividends
(1)
EBITDA
Maintenance CAPEX of between
$2M to $4M
per fiscal year
Annual dividends targeted 25%
at ~50%
of earnings
of net
sales or ~$20M
25
1)
See appendix for descriptions and reconciliations of these non-GAAP measures.
31
The“55”‐ GrossMargin
• In FY 2016 the Company achieved its highest
annual gross margin in over a decade at 56%
compared to 53% in FY 2015
FY16
56%
• Continued 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
FY15
53%
FY14
52%
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
32
WhatMakesUptheCostofaCan?
Approximate Cost Breakdown of a Typical Can of
WD-40 MUP Manufactured in the United States
3%
Corrugate
22%
Plastic
30%
Can
14%
Manufacturing Fees
31%
We estimate only
a small portion of
the input costs
associated with
petroleumbased specialty
chemicals
directly correlate
to the price of a
barrel of crude oil
Petroleum-Based
Specialty Chemicals
Data as of August 2016. 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.
33
The“30”– CostofDoingBusiness
Cost of Doing Business
• FY 2016 cost of doing business was at 36% of
net sales up from 34% compared to FY 2015
• In FY 2016 cost of doing business came from
three primary areas:
• People costs, including earned incentive
accruals
• Marketing, advertising and promotion
• Freight costs to get products to customers
• Additional investments in research and
development, brand protection, and regulatory
and quality assurance remain a high priority
People
A&P Investment
Freight
Other
Revenue growth is the most important factor in achieving the “30” target
34
FY1655/30/25Results
55/30/25 Business Model
Gross Margin
Cost of Doing Business
EBITDA
Target
55%
30%
25%
FY16
Actuals
56%
36%
21%
FY15
Actuals
53%
34%
19%
FY14
Actuals
52%
34%
18%
* See appendix for descriptions and reconciliations of these non-GAAP measures.
Note: Percentages may not aggregate to EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on the Company’s
consolidated statement of operations are not included as an adjustment to earnings in the Company’s EBITDA calculation.
35
CAPITAL
ALLOCATION
36
CapitalAllocationStrategy
Long-term Growth & Return Targets
Target revenue and earnings growth of 6-8%
Aim for return on invested capital of >25%
1
2
3
4
Liquidity, Debt
Debt &
& Cash
Cash Objectives
Objectives
Liquidity,
Adequate liquidity
liquidity to
to support
support growth
growth strategy
strategy
Adequate
Strong
balance
sheet
&
available
lines
of
credit
cash
debt in
in neutral
neutral position
position
Strong balance sheet & available lines of credit - cash && debt
Long-term Growth & Return Targets
Drive revenue and earnings growth of 6-8%
Target returnCAPES
on invested
capitalDividends
of >20%
Maintenance
Regular
Maintenance
CAPEX &&Regular
Dividends
Maintenance
CAPEX
of between
to net
$4Msales
per fiscal
yearyear
Maintenance
CAPEX
of between
1% to$2M
2% of
per fiscal
Annual
dividends
targeted
at
~50%
of
earnings
or
~$20M
Annual dividends targeted at ~50% of earnings
Excess Capital Allocated to the Highest Return Alternative
Organic
Growth Initiatives*
Acquisitions
Share Repurchases
* FY2017 includes a one-time capital expense of ~$15 million expected in FY17 for purchase of new San Diego facility
37
CashReturnstoStockholders
Dividends
52%
48%
$1.14
FY12
49%
47%
$1.22
FY13
$1.48
$1.34
FY14
FY Dividend per Share
FY15
•
Paid dividends without interruption
for over 40 years
•
Dividend increased 52% over past
five years
•
Future increases expected to grow
in-line with earnings over time
•
Current share repurchase plan
provides authorization to acquire up
to $75 million in shares through
August 2018
•
Company repurchased 317,000
shares at a total cost of $32.1 million
during FY16
•
Over the last five years Company
has repurchased over $176 million
in shares
$1.64
45%
FY16
Dividend Payout Ratio
Share Repurchases
(in millions)
$42.8
$39.8
$31.4
FY12
FY13
$30.3
FY14
FY15
$32.1
FY16
Share Repurchases
38
FY16
FINANCIAL
RESULTS
39
FY16Results
FY16
FY15
% Change
Net Sales
$380.7
$378.2
1%
Gross Profit (%)
56.3%
52.9%
340 bps
Operating Income
$71.3
$65.4
9%
Net Income
$52.6
$44.8
17%
EPS (Diluted)
3.64
3.04
20%
• Top-line sales growth was impacted by foreign currency exchange
rates in FY16
• When you take both translation (or “constant currency”) and
transaction exposure into consideration, the impacts of foreign
currency exchange rates reduced our total net sales by approximately
$11.7 million
40
FINAL
THOUGHTS
41
WhatDoesAGoodBusinessLookLike?
•
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
42
THANKYOU!
43
APPENDIX
44
ForeignCurrencyImpact
Translation
Impact
Reporting currency
As a U.S. based company
the reporting currency of
WD-40 Company is the
U.S. dollar
Translation
from
functional
currency to
WD-40
Company’s
reporting
currency
Transaction
Impact
Functional currency “(FC)”
Main currency in which
subsidiaries conduct
business; typically the same
as that of the country in
which the subsidiary is
headquartered
Subsidiary - FC
UK – GBP
CANADA- CAD
AUSTRALIA- AUD
CHINA- CNY
Conversion
from
transaction
currency to
subsidiaries’
functional
currency
Transaction currency
Currency in which sales,
costs, expenses are
transacted; typically the
same as that of the country in
which the sales transaction
takes place
Subsidiary- non FC
UK – USD & Euro
45
FY16ForeignCurrencyExchangeImpact
FY16 Net Sales
(In millions)
Translation Impact
Reporting Currency
Translation and
Transaction Impact
(Functional Currency)
In total
changes in FX
rates reduced
net sales by
~$11.7M in
FY16
$395.9
$380.7
$3.5
$15.2
$392.3
FY16 Net Sales at FY16 FX Rates
(as reported)
Reported Net Sales
FY16 Net Sales at FY15 FX Rates
(constant currency)
Translation Impact
FY16 Net Sales at FY15 FX Rates
(constant currency plus transaction impacts)
Transaction Impact
46
ForeignCurrencyTranslationImpactor
“ConstantCurrency”– FY16
($ in millions; except % change and EPS)
Financial Results
FY16
FY15
% Change
Net Sales
$380.7
$378.2
1%
Gross Profit (%)
56.3%
52.9%
340 bps
Operating Income
$71.3
$65.4
9%
Net Income
$52.6
$44.8
17%
EPS (Diluted)
3.64
3.04
20%
FY16 CC*
FY15
% Change
Net Sales
$395.9
$378.2
5%
Operating Income
$74.8
$65.4
14%
Net Income
$55.4
$44.8
24%
EPS (Diluted)
$3.83
$3.04
26%
As reported
Financial Results
Constant currency basis
FY16 results translated at FY15 foreign currency exchange rates
47
Non‐GAAPReconciliation– FY16
(1) This presentation contains certain non-GAAP (accounting principles generally accepted in the United States of America) measures, that our
management believes provide our stockholders with additional insights into WD-40 Company’s results of operations and how it runs its business. Our
management uses these non-GAAP financial measures in order to establish financial goals and to gain an understanding of the comparative performance
of the Company from year to year or quarter to quarter. The non-GAAP measures referenced in this presentation, which include EBITDA (earnings before
interest, income taxes, depreciation and amortization) and the cost of doing business, are supplemental in nature and should not be considered in isolation
or as alternatives to net income, income from operations or other financial information prepared in accordance with GAAP as indicators of the Company’s
performance or operations. Reconciliations of these non-GAAP financial measures to the WD-40 Company financials as prepared under GAAP are as
follows:
Cost of doing business:
Total operating expenses - GAAP
Amortization of definite-lived intangible assets
Depreciation (in operating departments)
Cost of doing business
Net sales
Cost of doing business as a percentage of net sales
EBITDA:
Net income - GAAP
Provision for income taxes
Interest income
Interest expense
Amortization of definite-lived intangible assets
Depreciation
EBITDA
Net sales
EBITDA as a percentage of net sales
Twelve Months Ended
8/31/2016
8/31/2015
$
143,021
$
134,788
(2,976)
(3,039)
(2,744)
(2,664)
$
137,301
$
129,085
$
380,670
$
378,150
36%
34%
$
$
$
52,628
20,161
(683)
1,703
2,976
3,489
80,274
380,670
21%
$
$
$
44,807
18,303
(584)
1,205
3,039
3,425
70,195
378,150
19%
Note: Percentages may not aggregate to EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on the Company’s
consolidated statement of operations are not included as an adjustment to earnings in the Company’s EBITDA calculation.
48