WD 40 (WDFC) Q4 2025 earnings call transcript

Thank you. Good afternoon, and thanks to everyone for joining us today. On our call today, our WD-40 company's president and chief executive officer, Steve Brass, and vice president and chief financial officer, Sarah Heiser.

In addition to the financial information presented on today's call, we encourage investors to review our earnings presentation, earnings press release, and form 10K to the period ending August 31, 2025. These documents will be made available on our investor relations website at investor. WD40company. com. A replay and transcript of today's call will also be made available shortly after this call.

On today's call, we will discuss certain non-GAP measures. The descriptions and recommendations of these non-GAP measures are available in our SEC filings as well as the earnings documents posted on our investor relations website.

As a reminder, today's call includes forward-looking statements about our expectations for the company's future performance. Actual results could differ materially.

The company's expectations, beliefs, and projections are expressed in good faith, but there can be no assurance that they will be achieved or accomplished.

Please refer to the risk factors detailed in our SEC filings for further discussions. Finally, for anyone listening to a webcast replay or reviewing a written transcript of this call, please note that all information presented is current only as of today's date, October 22, 2025. The company disclaims any duty or obligation to update any forward-looking information as a result of new information, future events, or otherwise.

With that, I'd now like to turn the call over to Steve.

Thank you, Wendy, and thanks to all of you for joining us this afternoon. The school year 2025 was marked by complexity and resilience, a tale of navigating global headwinds while making strategic progress.

Despite challenges ranging from geopolitical tensions to shifting economic policies, to many 40 companies seized opportunities and continued to build on the strong foundation that has supported our success for more than 72 years.

Today, I'll start with an overview of our sales results for the fourth quarter and fourth fiscal year 2025, and then provide an update on the progress we've made against our four-by-four strategic framework. Then share it will dive deeper into our financial performance, review our business model, keep an update on the divestiture of our home care and cleaning businesses, and share our outlook for fiscal year 2026.

After that, we'll open the floor for your questions. Today, we reported consolidated net sales of 163 million for the fourth quarter and 620 million for the fourth fiscal year, each reflecting approximately 5% growth compared to the prior year. This performance represented a record quarter for the company and underscored the continued strength of our brand and the resilience of our business.

As you know, maintenance products remain our primary strategic focus, accounting for approximately 95% of total net sales in both the fourth quarter and the fourth fiscal year.

Net sales for these products reached 156 million in Q4 and 591 million for the year, each reflecting a 6% year-over-year increase. This performance is consistent with our long-term growth target, amid the high single digits, and reinforced the strength of our core business.

In addition, I'm pleased to report that our growth margin continues to improve and has now surpassed our target of 55%. For the fourth fiscal year, we delivered a gross margin of 55.1%. Gross margin would have been 55.6% if we removed the financial impact of the assets held for sale.

For the fourth quarter, we delivered a gross margin of 54.7%, an impressive 730 basis point improvement from the fourth quarter of fiscal year 2021 when we hit our inflection point and our long-term gross margin recovery plan began to take hold. Sarah will share more details about gross margin in just a few minutes.

Now, let's talk about four quarter sales results in dollars by segment, starting with the Americas. On the left, otherwise noted, I will discuss net sales in a reported basis compared to the fourth quarter of last fiscal year. Sales in the Americas, which includes the United States, Latin America and Canada, decreased 2% to 1.7 million to 77 million compared to last year.

In reported, currency sales of maintenance products decreased 2% or 1.2 million to 74 million compared to last year. The decline was primarily driven by lower sales in Latin America, influenced by the impacts of foreign currency exchange fluctuations, the timing of customer orders and broader macroeconomic challenges, especially in Mexico. Sales of maintenance products in the United States and Canada were also down slightly primarily due to the timing of customer orders and in Canada, broader macroeconomic challenges.

In the Americas, sales ability 40 specialists remain constant compared to the same period last year. Reflecting our strategic shift toward higher margin maintenance products in alignment with our 4x4 strategic framework. In total, our America segment made up 47% of our global business in the fourth quarter.

For the full fiscal year, maintenance products out in the Americas total 277 million, reflecting a 4% increase compared to the prior year. Although this growth was slightly below our long-term target of 5% to 8% annual growth for the region, we remain confident in the trade blocks long-term growth potential.

Now let's take a look at sales in IMAIA, which includes Europe, India, the Middle East and Africa. Total sales grew 7% or 4.1 million to 63 million compared to last year. After adjusting for the impact of foreign currency translation, our may net sales room changed in the same quarter last year. And reported currency sales of maintenance products increased 8% or 4.6 million to 60.7 million compared to last year.

The strong growth is driven most significantly by higher sales volumes of Liberty 40 multi-use products in our direct markets. Sales increased most significantly in Dak, France and Benalox, which were up 20%, 19% and 23% respectively.

Strong sales in our direct market were offset by softer performance in our IMAIA distributor market, driven by the timing of customer orders and ongoing instability in certain regions.

In IMAIA, South of Liberty fully spat to this increased 18% compared to last year, driven primarily by increased demand and higher volumes across several direct markets, especially in Dak, France, where targeted promotional activity for key customers proved highly effective. Home care and cleaning product sales declined approximately 500,000 compared to the same period last year. In the fourth quarter, we completed the divestiture of our UK home care and cleaning product businesses, the Supreme Enforce Limited.

The strategic move allows us to sharpen our focus on higher growth, higher margin maintenance products, and reinforces our commitment to growing the blue and yellow brand with a little red top. In total, our IMAIA segment made up 38% of our global business in the fourth quarter.

For the fourth fiscal year, maintenance products, South and IMAIA total 230 million, and 9% increase compared to the prior year. This growth aligns with our long-term target of 8 to 11% annual growth.

Now turning to Asia Pacific. South and Asia Pacific, which includes Australia, China, and other countries in the Asia region, grew 28% or 5.1 million to 23 million compared to last year. Foreign currency translation had no material impact on our four quarter results.

South and maintenance products increased 30% or 4.8 million to 21 million compared to last year. This growth was primarily driven by a 44% increase in sale under the 40 multi-use products in our Asia distributor markets, where we saw strong demand across nearly all countries, particularly in Indonesia, Malaysia, Singapore, and the Philippines. Fuel by geographic expansion, broader distribution, and the timing of customer orders.

South and maintenance products also grew in Australia and China, increasing by 12% and 6% respectively, compared to the same period last year.

In Asia Pacific, sales of the 40 specialists increased 38% compared to last year, due to higher sales volume from successful promotions and marketing efforts in our Asia distributor markets in China. Sales of home care and cleaning products on those back carpet cleaners and sold on hand cleaners sold in Australia increased 15% or approximately 300,000 dollars compared to the same period last year.

Our home care portfolio in Australia benefits from brand recognition, a solid competitive position, and meaningful growth opportunities. In total, our Asia Pacific segment made up 15% of our global business in the fourth quarter. For the fourth fiscal year, maintenance products sales in Asia Pacific, so with the 84 million, a 6% increase compared to the prior year. Of its growth for short of our long-term target of 10% to 13% annual growth for the region, we remain confident in the strong fundamentals of this high growth trade bloc.

Now let's take a look at the strategic progress we made in fiscal year 2025 against our 4x4 strategic framework. As you recall, this framework was designed to drive profitable growth and sustainable value creation and is built around our four Muslim battles and four strategic enablers. Our Muslim battles focus on what we do to increase sales and profitability, since these are long-term growth drivers will focus on four-year results.

Starting with Muslim battle number one, the geographic expansion. Global sales have to be 40 multi-use products in fiscal year 25 for 478 million, representing growth of 6% over the prior year. We experienced solid sales of our signature multi-use product brand in all three trade blocs with 8% growth in IMAA, 4% growth in the Americas, and 6% growth in Asia Pacific.

We saw solid sales growth this year, 4% in Latin America, 10% in China, 14% in France, and 20% in India. But what's most important to emphasize is that we still have significant room to grow. Geographic expansion is our most significant long-term growth opportunity.

At the last five years, we've achieved a compound annual growth rate for net sales of 50-40 multi-use products at 9.4%. Our path forward is clear. We're expanding availability across more channels and geographies, while deepening product penetration by increasing brand awareness through sampling and putting more cans in the hands of their users around the world. We estimate the global attainable market for the 40 multi-use product to be approximately $1.9 billion.

Based on our updated benchmark sales potential, and today we've achieved only 25% of our benchmark growth potential, leaving a growth opportunity of approximately $1.4 billion. Our second Muslim battle is accelerating premiumization. Innovation is at the core of this strategy. We develop products like Smart Straw and Easy Reach with our end users at the center of every decision.

Their needs drive our product development efforts, enabling us to deliver high-performance solutions that solve real-world problems. It then uses focused innovation, bosses brand loyalty, and contributes to growth margin expansion and differentiated offerings. In fiscal year 25, global sales of Smart Straw and Easy Reach when combined were up 7% over the prior year. Premiumized products currently account for approximately 50% of the 40 multi-use product sale and 40% of units sold, leaving considerable room for continued growth.

Over the last five years, we've achieved a compound annual growth rate for net sales of premiumized products at 9.4%. On a go-forward basis, we'll be targeting a compound annual growth rate for net sales of premium format products at greater than 10%. Our third Muslim battle is the drive growth into B40 specialists. This product line is a strategic extension of our trusted core brand designed to meet the evolving needs of professionals and industry users.

When we introduced a B40 specialist alongside the B40 multi-use product, we're not just adding variety, we're strengthening our brand, capturing new segments, and offering end users more choice without diluting what makes our core brand iconic.

By leveraging the strength of the B40 brand, we're driving category leadership and expanding market share in adjacent segments. In fiscal year 25, global sales of the B40 specialist products were 82 million, up to 11% over the prior year. Once again, we saw growth of the B40 specialist products across all three trade blocks with growth of 6% in the Americas, 15% in IMAA, and 12% in Asia Pacific.

Over the last five years, we've achieved a compound annual growth rate for net sales of the B40 specialist at 14.4%. On a go-forward basis, we'll be targeting a compound annual growth rate for net sales of the B40 specialist of greater than 10%. The B40 specialist has matured, and its market base has expanded. We've recalibrated our long-term growth expectations to reflect the product line's evolution within its lifecycle. We estimate the global attainable market for the B40 specialist to be approximately 665 million, based on our updated benchmark sales potential. And today, we've achieved only 12% of our benchmark growth potential, leaving a growth opportunity for approximately $53 million.

Our fourth and final Muslim battle is to accelerate digital commerce. Our digital commerce strategy is a catalyst to growth across the business, not merely a channel to online sales. It plays a vital role in advancing each of our Muslim battles by increasing brand visibility, improving accessibility, and driving deeper engagement than users across global markets. In fiscal year 25, e-commerce sales increased 10%, reflecting strong momentum in our digital strategy.

For digital is more than a transactional platform. It's a powerful engine for brand building and education. For example, the digital space serves as a dynamic environment for product discovery. It allows us to showcase new applications for our products, our fostering peer-to-peer learning. And yet these insights originate from our end users and sales, who continually uncover innovative ways to use our products, often in ways we hadn't imagined.

By leveraging digital touch points, we're deep in engagement, enhancing product understanding, and strengthening brand affinity across the globe. Turning to the second element of our 4x4 strategic framework, our strategic enablers. Our strategic enablers focus on operational excellence, and they collectively underpin and drive the success of our Muslim battles. Strategic enabler number one is ensuring a people-first mindset.

A deadly sort of company, our most powerful, competitive advantage is a commitment of our 714 employees. We've long said we're a purpose-driven values-guided organization, and that's not just a tagline. Our values are the foundation of our culture. They shape how we lead, how we collaborate, and how we make decisions every day. In our February 2025 Global Engagement Survey, 94% of our people reported being engaged in their work, more than four times Gallup's global average of 21%.

90% said they feel a strong sense of belonging, and 95% expressed pride in our purpose, mission, and values. This deep connection to who we are, and what we stand for, translates directly into growth and opportunity. Nearly 40% of our people experience career progression, but in their first five years of the company. To our employees, thank you for consistently showing what it means to live our purpose, to create positive lasting memories in everything you do. What our investors and stakeholders see in our performance is a direct reflection of your commitment to doing meaningful work the right way.

Strategic Enable Number 2 is to build an enduring business for the future. A doubly 40 company, long-term value creation means operating with a clear commitment to balance in economic growth, environmental responsibility, and social impact. One of our primary objectives under this strategic enegler is to lead our category with high performing products designed for environmental sustainability.

I'm excited to share that in the upcoming fiscal year, we'll introduce a new innovation under the Liberty 40 specialist product line, which will be our first bio-based format of our multi-used product. Our latest maintenance product is designed to reduce our environmental impact, but to have a reduced carbon footprint, utilizing either standard 14 067, while still delivering the trusted performance expected from the Liberty 40 brand products.

The product will launch and select European markets later this fiscal year, and we look forward to sharing updates with you in the quarter to the head.

Strategic Enable Number 3 is achieving operational excellence in our supply chain. Profitable growth at the Liberty 40 company depends on the supply chain and optimize high performing and resilient. Since this will year 25, the strategic enable update of vital role in protecting gross margins. We delivered several million dollars in economic value through cost reduction initiatives, such as packaging enhancements, logistics efficiencies, and strategic sourcing.

These efforts helped offset the financial impact of tariffs, underscoring the importance of this enabler. Operationally, in fiscal year 2025, we achieved global on-time delivery of 96.4%, above our current target, and also inventory levels of 99 days on hand, coming closer to our target of 90 days.

Strategic Enable Number 4 is to drive productivity to enhanced systems. At Liberty 40 company, technology is a key enabler of productivity and resilience. We're building a scalable digital infrastructure designed to support global growth and enhance operational agility, accelerating our strategic execution. By partnering with leading technology companies, we're investing in proven AI enabled systems, such as D365 and Salesforce. So we believe will drive future gains in productivity.

While we're taking a pragmatic approach to adopting AI across our organization, we've already identified several promising use cases that will help us to boost employee productivity, build our brand more effectively around the world, and accelerate learning and improve collaboration within our global community.

With that, I'll now turn the call over to Sarah.

Thanks, Steve, for that overview of our sales results and strategic framework. I'm pleased to share that we delivered a strong fourth quarter performance, culminating in an excellent bottom line finish to fiscal year 2025.

Today, I'll walk through how we performed against our fiscal year 2025 guidance, share insights into our business model, and highlight key takeaways from our fourth quarter financial results. I'll also provide an update on the divestiture of our home care and cleaning business in the UK and close with our outlook for fiscal year 2026.

Let's start with a discussion about how we performed against our fiscal year 2025 guidance. As a reminder, we issued our guidance and fiscal year 2025 on a pro form of basis. I encourage investors to review our earnings presentation, which includes a pro form of view. Since we issued our fiscal year 2025 guidance on a pro form of basis, I will provide the following summary on the non gap pro form of basis.

We expected net sales growth adjusted for currency to be between six and nine percent with net sales of between 600 and 620 million over our pro form of 2024 results. Today, we reported pro form of net sales adjusted for currency of six hundred and three million of six percent increase over the 2024 pro form of results. If they include the assets help for sales consolidated net sales adjusted for currency for six hundred and twenty two million in fiscal year 2025.

We expected full year growth margins to be in the range of fifty five to fifty six percent. Today, we reported growth margin of fifty five point six percent in line with our expectations.

We expected our advertising and promotion investment to be around six percent of net sales. Today, we reported an investment of six percent.

We expected operating income to be between ninety six and a hundred and one million dollars. Today, we reported operating income of ninety eight point one million in line with our expectations. We expected diluted EPS of between five thirty and five sixty. Today, we reported diluted EPS of five fifty in line with our expectations.

I'm pleased to the resilience and performance of our business in what has been a volatile and uncertain environment. Throughout fiscal year 2025, we navigated a range of challenges from Paris and macro economic instability to geopolitical tensions and shifting policy landscape. Despite these headwinds, we grew our top line expanded margin and delivered solid bottom line growth.

Thank you to all our employees for their focus, adaptability and commitment to delivering meaningful results for our stakeholders. Let's start with a look at our business model. Our business model is a strategic tool we use to guide our business. The model is built around three core areas, growth margin, cost of doing business and adjusted EBITDA.

Let's look at our fourth quarter growth margin performance. In the fourth quarter, our growth margin was fifty four point seven percent compared to fifty four point one percent last year, which represents an improvement of sixty basis points and was most significantly impacted by the following favorable factors. 110 basis points from lower specialty chemical costs, 110 basis points from higher average selling prices, including the impact of premiumization and 60 basis points from lower input costs.

Off setting those benefits to growth margin were a few unfavorable factors, 140 basis points from unfavorable sales mix and other miscellaneous mix impacts. And 60 basis points from higher warehousing distribution and freight costs, primarily in the Americas.

I'm happy to share that gross margin performance this quarter was strong across all three trade blocks. With results, either exceeding our stated target or showing year over year improvement. In the Americas, gross margin increased by 70 basis points compared to the prior year fourth quarter, reaching 53.2%. I may have helped study at 55.5% remaining above our target.

And in Asia Pacific, gross margin increased by 110 basis points compared to the prior year fourth quarter, reaching 57.5%. For the full fiscal year, gross margin was 55.1% compared to 53.4% last year, which represents an improvement of 170 basis points. As Steve mentioned earlier, we're very encouraged by the consistent improvement to gross margin we've seen over the past three years.

Today, we're proud to report full fiscal year gross margin over the high end of our targeted range of 50 to 55%. Recovering our gross margin a year ahead of schedule and marking a significant milestone in our recovery journey.

It's important for stakeholders to understand that while certain external risks, such as cost volatility, tariff uncertainty, and inflationary pressures will always be part of the operating environment. We're actively pursuing a range of initiatives designed to help us mitigate those risks and strengthen gross margin over time.

These include supply chain cost reduction projects, cost optimization efforts, progress on asset divestitures, new product introductions, premiumization strategies, and geographic expansion. Each of these levers contributes positively to gross margins and reinforces our confidence in its long-term potential.

Backed by our current performance and strategic initiatives, the confidence in our ability to sustain gross margin above 55% in fiscal year 2026. In addition, gross margin enhancement remains a key priority for senior leaders who continue to be incentivized to drive further improvements.

Now, turning to our cost of doing business, which we defined as total operating expenses, less adjustments for certain non-cash expenses. Our cost of doing business is primarily driven by three key areas. Strategic investments in our people, global brand building efforts, and freight expenses associated with delivering products to our customers.

In the fourth quarter, our cost of doing business is 36% compared to 38% in the prior year quarter. In dollar terms, our cost of doing business remains relatively stable period over period.

For the full fiscal year, cost of doing business is 37% compared to 36% last year. In dollar terms, our cost of doing business increased 19 million or 9% period over period.

In the fourth quarter, advertising and promotion expenses increased 1.6 million or 15% period over period. At the percentage of net sales, A&P investment was 7.6% this quarter, compared to 7% in the same period last year.

The saving of our A&P investments are not evenly distributed over the course of a year. And in recent years, our brand building activities have been more heavily weighted in the second half of the year. For the full fiscal year, our A&P investment remains within our annual expectations.

While our long term goal is to manage cost of doing business within the 30 to 35% range, we continue to make thoughtful strategic investments to support long term growth. WD-40 company has long been committed to operating with discipline and efficiency. A commitment reflected in our ability to manage the business with just 714 employees, each generating approximately $860,000 in revenue.

This level of productivity speaks volumes about the strength of our culture, the effectiveness of our operating model, the awareness of our brand, and the value we deliver across our global footprint. What continues to evolve is our need to operate at the global business, an increasingly complex, uncertain environment. To reduce risk and drive top line growth, we've implemented a number of structural changes in recent years to strengthen and sustain our business for the future.

We're investing with discipline across technology, sustainability, innovation, research and development, legal risk management, brand building to strengthen our foundation, build brand awareness, and ensure long term resilience and growth. We also need time to absorb the loss of revenues associated with the home care and cleaning divestitures. These investments have pushed our cost of doing business above our target range.

However, we believe they've strengthened the business, enhanced its resilience, and positioned us to deliver sustainable long term value to our stakeholders. Turning now to adjusted EBITDA margin, we believe adjusted EBITDA as a percentage of sales is a valuable metric for assessing those profitability and operational efficiency. It reflects our operating performance and cash generating ability, providing the clearest view of our company's underlying financial health.

Our 25% target for adjusted EBITDA margin is a long term aspiration. However, we continue to believe we can move adjusted EBITDA margin back to our midterm target range of 20 to 22%. Once we have absorbed the loss of revenues associated with the home care and cleaning divestitures.

In the fourth quarter, our adjusted EBITDA was 30.5 million at 16% from the same period last year. Our adjusted EBITDA margin this quarter was 18% compared to 17% in the same period last year. For the full fiscal year, our adjusted EBITDA was 114.4 million, up 8% from the same period last year. Adjusted EBITDA margin this year was 18%, which is the same as last year.

Now let's turn to other key measures of our financial performance. Operating income, net income, and earnings per share in the fourth quarter.

Operating income improved to 28 million in the fourth quarter, an increase of 17% over the prior period. Net income improved to 21.2 million in the fourth quarter, an increase of 27% compared to the prior period.

Deluded earnings per common share for the quarter for $1.56 compared to $1.23 in the prior period, reflecting an increase of 27% over the prior period. Our diluted EPS reflects 13.6 million weighted average shares outstanding.

Now let's review our balance sheet and capital allocation strategy. We maintain a strong financial position and healthy liquidity, enabling a disciplined capital allocation approach that both fuels long-term growth and generates significant value for our stockholders.

Maintaining a disciplined and balanced capital allocation approach remains a priority for us. For the foreseeable future, we expect CAPEX of between 1% and 2% of sales per fiscal year, which is in line with our asset-like strategy.

Our cash flow from operations is quarter with 30 million, and we elected to use approximately 9.5 million of that cash to pay down a portion of our short-term higher interest rate borrowing. Although our usual target for debt to adjusted EBITDA is one to two times, we are currently slightly below that range. This provides us with strategic flexibility as we explore opportunities to return capital to stockholders and drive long-term growth.

We continue to return capital to our stockholders to regular dividends and buybacks. Annual dividends will continue to be our priority and are targeted at greater than 50% of earnings. On October 9, our Board of Directors approved a quarterly cash dividend of 94 cents per share.

During fiscal year 2025, we've repurchased approximately 50,000 shares of stocks at a total cost of $12.3 million under our share repurchased plans. We have approximately $30 million remaining under our current repurchased plan, which is set to expire at the end of this fiscal year.

Looking ahead, we intend to accelerate our buyback activity and fully utilize the remaining authorization, underscoring our strong conviction in the long-term fundamentals of the business. We're focused on a creative capital return that reflects our confidence in the long-term value of our stock.

In fiscal year 2025, excluding the positive impact of the one-time, non-tashed income tax adjustment, our return on invested capital was 26.9%. Improving from 25.5% last fiscal year and ahead of our target of 25%.

In September, we announced the sale of our 1,001 and 1,000-on-one corporate fresh brands in the UK to Supreme Import Limited, a Manchester-based consumer products company. The all-cash transaction values at up to $7.5 million was completed in the fourth quarter of fiscal year 2025.

WD40 company is providing limited transition services for up to three months. This infrastructure reflects our continued focus on optimizing our portfolio and directing resources toward areas that drive long-term value. We continue to make progress on the sale of our America's home care and cleaning product brands. Our investment base continues active discussions with multiple potential buyers. Although there's no certainty of a deal, we remain optimistic and I will provide further updates as appropriate.

Now moving to FY26 guidance. Given the anticipated divestiture of our America's home care and cleaning brands, we are continuing to present this year's guidance on a pro-forma basis, excluding the financial impact of the assets held for sale. We're also providing a pro-forma view of fiscal year 2025, excluding the brands we divested in the UK in the fourth quarter.

The brands currently held for sale and the impact of the one-time tax benefit recorded in the second quarter to help with modeling and period over period comparisons. Please refer to our fourth quarter and full year earnings presentation on our investor relations website for those details.

Now with that backdrop, let's take a closer look at our guidance for fiscal year 2026. We're excited about what lies ahead in fiscal year 2026. By balancing strong performance today with thoughtful investments for tomorrow, we're building a foundation for lasting growth and long-term value creation.

For fiscal year 2026, we expect net sales growth from the pro-forma 2025 result is projected to be between 5 and 9% with net sales between 630 and 655 million after adjusting for foreign currency impact.

Growth margin is expected to be between 55.5 and 56.5%. Advertising and promotion investment is projected to be around 6% of net sales.

Operating income is expected to be between 103 and 110 million, representing growth of between 5 and 12% from the pro-forma 2025 results. The provision for income tax is expected to be between 22.5 and 23.5%. And diluted earnings per share is expected to be between 575 and 615, which is based on an estimated 13.4 million weighted average shares outstanding. This range represents growth of between 5 and 12% over the pro-forma 2025 results.

This guidance assumes no major changes to the current economic environment. Unanticipated inflationary headwinds and other unforeseen events may affect our view of fiscal year 2026.

In the event we are unsuccessful in the divestiture of the America's home care and cleaning brands, our guidance would be positively impacted by approximately 12.5 million in net sales, 3.6 million in operating income, and 20 cents in diluted EPS on a full year basis.

That completes the financial overview. Now I'd like to turn the call back to speed.

Thank you, Sarah, for that update. As we close another fiscal year at the 40-40 company, I'm reminded how fortunate we are to lead such a remarkable business. We have a world-class brand with a sustainable competitive advantage, a highly diversified global footprint, and a long runway for growth. Our capital-like efficient business model generates significant cash, providing a strong financial foundation that allows us to invest in growing our future leaders while continuing to prioritize the turning capital to our investors.

And if that's not enough, what did you hear from us on this call? You heard that we reported, currency adjusted, proforma net sales of $63 million, a 6% increase over FY24 results, and right in line with our expectations.

You heard that sales of our maintenance products were up 6% in both the four quarter and fiscal year, and that this performance aligns with our long-term growth target. You heard that we estimate the benchmark sales opportunity for the 40 multi-use product to be approximately $1.9 billion, and that we've achieved only 25% of that benchmark opportunity. You heard that we estimate the benchmark sales opportunity for the 40 specialists to be approximately $665 million, and that we've achieved only 12% of that benchmark opportunity.

You heard that we sold our UK home-guarantining product brands. You heard that the four fiscal year would live at a gross margin of 55.1% or 55.6% if we removed the financial impact of the assets held for sale. You heard that the four quarter would live at a gross margin of 54.7%, an impressive 730 basis-point improvement from the four quarter of fiscal year 2021.

You heard that supported by current performance and our strategic initiatives who believe will well positioned to target a gross margin of about 55% in FY26. You heard that by looking ahead to fiscal year 26, we intend to accelerate our buyback activity and fully utilize the remaining authorization on the scoring of our strong conviction and the long-term fundamentals of the business.

And you heard that we're issuing guidance for fiscal year 26 on a pro-forma basis, excluding the brands we expect to buy back this year. Thank you for joining our call today. We'd now be pleased to answer your questions.

Hi, Daniel. Yes. So in the press release and in the 10Q, you'll see those include them, obviously, because those are reported on a gap basis or a U. S. gap basis. In the investor deck on every quarter, we showed a pro-forma view so that you could back out those sales. In our footnotes, because we do break out the HCCP sales in both the Americas and the IMA regions.

But the pro-forma view went a step further to take you all the way down in the P&L. So you could actually see the impact down to EPS.

That's correct.

Thank you for that.

Oh, on the gross margin from a tailwind for the year?

Well, I think the mixed, so maybe it wasn't clear, the mixed is a sales mix and other miscellaneous sales or other miscellaneous mixed impacts. So, yeah, so the premiumisation, if you look at it for the full year, actually, it's more for the quarter, the impact for the quarter, the sales mix and other miscellaneous mixed impacts had a headwind of about 140 basis points.

It's a mix. So, yes, it's a mix of both how the markets play out, so direct and distributors, but then it is also a mix of product. So, creation of that, but also bulk and specialist and mop. It's just a general product sales mix in addition to the market mix.

Hey, Dan, Steve. And so, specialist, the specialist, you know, the whole specialist line, you know, sells at a higher gross margin as well. So, effective letter is a premium. Every kind of W40 specialist we sell is margin accretive. And so, that is a separate form of premiumisation. Having said that, we already, you know, in several countries around the world, we've also launched particularly easy reach and deliver system on things like our penitentering product, which you have in the US, one or two other countries around the world. And so, and certainly smart straw, we leverage as part of our specialist premiumisation strategy. So, yet it applies to both the core product and to handle specialist as well, Dan.

Thank you.

Hi, Keegan. This is Sarah. So, so yes, I would say in our, in our guidance, we have, you know, we have built in both headwinds and tailwinds. We are, we are seeing stability from a cost input standpoint. And when you look at what we've built into our gross margin guidance, if oil stays at the levels that they're at right now, that could be a small tailwind for us. We've tried to be a little bit conservative in what we've built in for an oil assumption because you just never really know which direction that is going to go.

But there are a number of cost-saving initiatives that we have in the pipeline based on actions that we've taken in FY 25 that will feed into FY 26 along with new actions that we've built around. Cost supply chain optimization and continuation of the efforts that we've had in FY 25 on the sourcing side. We had a lot of success this year from a global sourcing standpoint and exceeded our cost savings expectations that we had this year. Some of those will then benefit our margin going into FY 26.

Sure. It's a very, very long runway. And so China also had a good, well, all three areas of rock. So Australia, I believe, was up 6% for the year. China was up in double digits. And then, yes, for the fourth quarter in particular, we had a very strong comeback in distributor markets. And so, you know, as we look at all of those markets, it's a very, very long runway for growth. In places like Indonesia, where we've introduced our new kind of hybrid business model, you know, has been growing at a keg of around 20% over the past few years.

You know, many of those other key markets across the Asia region have a very, very long run rate for growth. And so improved performance in the back half in Asia. And then maybe some kind of impact in terms of, of course, the distributors are a little more lumpy, right? So going into the first quarter, you may see some kind of pullback. That's just really kind of inventory management in Asia for Q1. But beyond that, we see a really strong rebound in Asia Pacific later in the fiscal year.

Welcome.