WD 40 (WDFC) Q4 2026 earnings call transcript

Good afternoon, and thank you for joining us today on our call today our deputy 40 companies president and chief executive officer Steve brass vice president and chief financial officer Sarah hyzer and Vice president global finance and incoming chief financial officer Keith Daufer in In addition to today's discussion we encourage investors to review our earnings presentation press release and form 10k for the period ending August 31, 2026 Available on our investor relations website at investor Wd40 company calm a Replay and transcript of today's call will also be posted shortly We will discuss certain non gap measures today Reconciliation to gap results are available in our SEC filings and earnings materials Today's call also includes forward-looking statements actual results may differ materially Please refer to the risk factors and our SEC filings for more information Finally, please note that all information presented is current as of October 21st 2026 and we undertake no obligation to update forward-looking statements with that I'll turn the call over to Steve Thanks Wendy and thanks to everyone for joining us today I'd like to welcome Keith Stauffer to his first deputy 40 company earnings call as people as he announced Keith joined the company in September and will assume that role of chief financial officer on November 2nd at that time Sarah will transition to her new role as division president of the Americas Sarah is joining us today for her final earnings call as CFO as we close out fiscal year 26 I'd like to thank Sarah for our outstanding leadership as chief financial officer and for her partnership in supporting this transition I'll begin with an overview of our fourth quarter and fiscal year results including progress against our four-by-four strategic framework Sarah will then review our financial performance Keith will discuss our outlook for fiscal year 27 and will conclude with your questions A W40 company resilience is rooted in the strength of our business model our iconic global brand discipline execution flexible global supply chain and strong financial foundation provide the durability to navigate changing market conditions while continuing to deliver growth Throughout fiscal year 26 we maintained a strong focus on executing our strategy and advancing our priorities even amid geopolitical and economic uncertainty Today we reported consolidated net sales of a hundred and seventy six point eight million for the fourth quarter and six hundred and eighty eight Million for the fourth fiscal year up eight percent and eleven percent respectively versus the prior year as a long-term value creator We focus less than any single quarter and more on our ability to deliver durable compounding growth over time That's why we measure our performance against our long-term maintenance product sales target of five to nine percent growth in constant currency In the fourth quarter maintenance product sales increased nine percent to a hundred and seventy point five million Bringing four-year maintenance product sales to six hundred and sixty five point nine million up thirteen percent versus the prior year on a constant currency basis maintenance product sales increased eight percent to 168.8 million in the fourth quarter and nine percent to six hundred and forty four point seven million for the full year in line with our long-term growth expectations Let's turn to gross margin while fourth quarter gross margin of fifty two point eight percent Reflected to temporary cost pressure.

We discussed last quarter full-year gross margin remained resilient at fifty five point three percent An increase of twenty basis points versus fiscal twenty five and in line with our guidance Protecting gross margin remains a key priority and we continue to take pricing and cost actions to offset cost Inflation and preserve the strength of our business model Based on what we know today We believe the fourth quarter marked the low point for gross margin and we expect sequential improvement Starting in the first quarter of fiscal 2027 For the full fiscal year 2027 were targeting gross margin of 54% to 55.5% Gently in line with our enduring business model Now, let's review fourth quarter sales results by trade vlog Unless otherwise noted I'll discuss net sales in a reported basis compared to the fourth quarter of fiscal twenty five Thousand the Americas increased five percent year over year to eighty one point three million Driven by a five percent increase in maintenance products to seventy seven point eight million This growth has driven primarily by increased sales of divvy 40 multi-use product in Latin America Where sales increased by two point seven million Reflecting strong performance across distributor markets including Argentina and Ecuador supported by enhanced inventory sourcing and distribution capabilities In the Americas to be 40 specialist sales increased seven percent Driven primarily by higher u. s. Volumes reflecting new distribution gains strong placement with large retailers and growth in online sales For the full fiscal year maintenance product sales in the Americas increased 13% to 313.7 million or 12% in constant currency Exceeding our long-term growth target for the segment turning to I mayor Thousand the fourth quarter increased 10% year over year to 69.2 million driven by a 14% increase in maintenance products Growth was supported by higher sales volumes across both direct and distributor markets while foreign currency had no meaningful impact on results in our I mayor direct markets maintenance product Sours increased 2.3 million driven primarily by strong sales of divvy 40 specialist Growth was layered by southern Europe.

The devotee 40 brand sales increased by 3.9 million supported by strong commercial execution emotional activity and merchandise In our mayor distributed markets sales increased 6.2 million driven by strong divvy 40 multi-use Product sales and higher volumes across key markets India and the Middle East contributed the strongest growth with 2.4 million and 1.2 million of growth respectively Across I may add to be 40 specialist sales increased 27% driven by strong growth in France, Italy and Iberia Supported by effective marketing programs successful new products introductions and strong commercial execution As a reminder fourth quarter sales comparisons were impacted by the divestiture of the UK home care and cleaning portfolio in fiscal 25 Which reduced reported sales by 2 million?

We believe the strategic decision enhances the quality of our revenue base by increasing our focus on faster growing higher margin maintenance products For the full fiscal year maintenance product sales nine mayor increased 13% to 259.3 million On a constant currency basis sales grew 6% Despite a dynamic geopolitical and economic environment Reflecting the resilience of our business model and the strength of our global supply chain In Asia Pacific thousand the fourth quarter increased 13% year over year to 26.3 million And we're up 9% on a constant currency basis Reflecting broad base growth across the region led by China where sales increased by 1.8 million In China growth has driven by higher sales volumes Reflecting the successful execution of promotional marketing programs and expanded distribution across traditional and e-commerce channels Growth also benefited from some customer purchases ahead of a plan price increase Australia also delivered a strong quarter with sales increasing just under $1 million year over year In Asia Pacific to be 40 specialist sales increased 23% driven primarily by strong growth in China Higher sales volumes reflected the successful execution of promotional and marketing programs expanded distribution and continued growth across e-commerce channels For the full fiscal year maintenance product sales in Asia Pacific increased 11% to 92.9 million or 8% in constant currency Now let's turn to the strategic progress we made in fiscal year 26 against our four by four strategic framework Designed to drive profitable growth and long-term value creation The framework is built around four must win battles and four strategic enablers Our must win battles focus on the initiatives of drive sales growth and profitability Given their long-term nature our focus on four-year results Starting with must win battle number one lead geographic expansion Global sales of our flagship product in fiscal year 26 for 533 million Representing growth of 11% over prior year and 8% on a constant currency basis Sows of Debbie 40 multi-used product increased across all three trade blocks growing 13% in the Americas 10% in i-maire and 8% in Asia Pacific On a constant currency basis growth was 11% 4% and 6% respectively We made significant progress across many of our key priority markets this year With sales increasing 21.6 million in the United States 5.3 million in China 5.2 million in India 3.1 million in France and 2.5 million in Mexico What's most important to emphasize is that we still have significant room to grow Building on the success of our direct market transitions in Mexico and Brazil We recently made Japan a newest direct market Expanding our presence in one of the world's largest economies Japan is a compelling long-term growth opportunity It's a mature highly competitive market where building scale takes time and competing there will make us stronger The capabilities we build in Japan will support our long-term growth strategy W40 multi-use product remains the foundation of our growth strategy Our path forward is clear expand availability across more channels and geographies They'll brand awareness and put more cans into the hands of targeted end users Benchmarked against friends our highest penetration market We estimate the global attainable market at approximately 2.2 billion Having achieved only 24% of that potential We see a remaining growth opportunity of about 1.7 billion and a long runway for durable growth The updated benchmark reflects higher penetration in France and a modest foreign currency impact Next is not when battle number two accelerating premiumization premiumization remained an important driver of our growth strategy Products such as smart straw and easy reach reflect our focus on developing differentiated solutions that address and use This approach strengthens brand loyalty supports premium pricing and contributes to gross margin expansion Combined global sales of smart straw and easy reach in fiscal year 26 For 277.1 million an increase of 17 percent over the prior year With premiumized products representing 52 percent of doubly 40 multi-use product sales and 41 percent of units sold We believe significant opportunity remains to further increase penetration Over the last five years we've achieved a compound annual growth rate for net sales of premiumized products at 8.9 Supported by continued innovation increased consumer adoption and expanded manufacturing capacity We're targeting a compound annual growth rate for premiumized product sales have greater than 10 percent over the long term Our third must win battle is driving to be 40 specialists growth Debbie 40 specialists extends our iconic brand into adjacent categories Serving professional and industrial end users and opening new avenues for profitable growth In fiscal 26 global sales grew 21 percent in 99 million or 17 percent in constant currency Growth was double-digit in all three trade locks the Americas are of 15 percent Amaya 25 percent and Asia Pacific 26 percent Innovation remains a key driver in fiscal 26.

We launched a defaulty specialist by a lubricant multi-use Our first bio based lubricant across eight European markets Early results met our expectations and a product burned the 2026 glee new product award in the UK We plan to launch it in the Americas in fiscal 27 France is also our benchmark market on w40 specialist Their specialists sales reach 43 percent of multi-use product sales and several other markets are getting close including australia at 38 And it'll be at 34 percent We estimate the global attainable market for w40 specialist at approximately 962 million With only 10 percent realized to date we see a remaining opportunity of about 863 million Over the last five years. We've achieved a compound annual growth rate for net sales of the 40 specialist at 18.4 That gives us confidence we can grow to be 40 specialist at a compound annual growth rate of more than 10 percent of the long term Our fourth muscle in battle is to turbocharged digital commerce In fiscal 26 global pure play e-commerce sales increased 19 to 66.7 million With double digit growth in all three trade locks Pure play e-commerce now accounts for 13 percent of global direct market maintenance product sales While we are pleased with this growth we viewed digital commerce as more than a sales channel It is a strategic capability that enables us to reach consumers wherever they choose to shop Strengthen engagement within users and accelerate the execution of our must-win battles around the world Looking ahead.

We believe artificial intelligence will play an increasingly important role in our consumers discover evaluate and purchase brands As AI powered search and recommendation tools continue to evolve one of our key priorities in fiscal 27 Will be ensuring our brands are easy to find they remain trusted and relevant across digital commerce search and AI driven platforms Over the last five years. We've achieved a compound annual growth rate for net sales in the pure play e-commerce channel of 13.1 We expect e-commerce three million one of our fastest growing channels in fiscal 27 and beyond and we're targeting long term Compan annual growth rate of more than 10 percent More broadly we've viewed digital commerce as a strategic capability that drives engagement with end users online and accelerates progress across each of our must-win battles Turning to our strategic enablers while our must-win battles drive top-line growth our strategic enablers strengthen the capabilities that make that growth more durable over time They support operational excellence and hands the resilience of our business and provide the foundation for long-term value creation Strategic enabler number one is ensuring a people first mindset are 753 employees across 19 countries for one of our most durable competitive advantages Their ability to learn adapt and innovate drives our strategy This year despite a dynamic operating environment our teams strengthened cost discipline and used our decentralized supply chain to navigate disruption serve customers and support profitable growth Though this year we announced several leadership transitions Designed to build on our strong foundation and support continued growth In addition to the CFO transition I mentioned earlier Patricia also will become chief strategy and innovation officer and Claudia fenska will take on the newly created role of chief brand and marketing officer These changes reflect our commitment to developing talent from within They also strengthen alignment accelerate innovation and expand our ability to leverage AI and digital technologies Strategic enabler number two is to build an enduring business for the future For more than seven decades.

We've created value through strong relationships with employees and users customers suppliers Stockholders and our communities Sustainability is an increasingly important part of that work Consumers want safe sustainable products and many of our largest customers have environmental goals They expect suppliers to support As a category leader we believe meeting these needs strengthens our competitive position In fiscal 26 We owned a bronze medal in our first company wide echo vardess assessment We scored 65 out of 100 which ranked as in the top 35 percent of companies assessed over the prior 12 months In the near term we will publish our 2026 the s t report from purpose to progress action-delivering results which highlights two years of progress in our future objectives Strategic enabler number three is operational excellence in the supply chain a critical competitive advantage and driver of predictable profitable growth In fiscal 26 global on time delivery exceeded our target at more than 96 Inventory felt in 95 days on hand moving closer to our 90 day goal The supply chain also helped protect gross margin delivering more than seven million dollars in cost reductions Through packaging enhancements logistic efficiencies and strategic sourcing We achieved these results despite growing global volatility A decentralized supply chain gives us the agility to navigate economic and geopolitical uncertainty While serving customers reliably During the year we added a new manufacturing partner in europe Together with strategic inventory investments this reduced risks support service levels and gives us more flexibility to manage cost volatility Thanks to our global sourcing and supply chain team our supply chain is stronger than ever Strategic enable number four is to drive productivity through and end systems Technology strengthens a durability scalability and resilience of our business model We are transforming WD-40 company from a collection of decentralized systems Into a connected global enterprise on shared digital platforms in fiscal 26 We expanded our erp platform into two more direct markets and advanced the adoption of shared AI enable systems These investments improve visibility decision-making and collaboration across markets Common systems data and processes create a scalable foundation that lets us leverage AI more effectively Accelerate execution and support profitable growth That is an increasingly important competitive advantage as we execute our four by four strategic framework With that i'm now turn the call over to Sarah Thanks, Steve It's hard for me to believe that today is my final earnings call as cfo However, I remain in my current role through november 1st when I will pass the baton to keith He and I have worked closely together over the last several weeks to ensure a seamless transition His financial expertise growth mindset and leadership styles make him an excellent fit for our company and culture He also has a deep appreciation for the qualities that make WD-40 company special a resilient business model Durable competitive advantages strong cashflow generation and disciplined capital allocation I am confident that he will help build on that foundation in the years ahead Now, let's start with a discussion about how we performed against our fiscal year 2026 guidance Overall we delivered results that were in line with our guidance ranges across key financial metrics Constant currency net sales increased 8% to 666 million near the high end of our guidance range and in line with our long-term growth objective Reported net sales increased 11% to 688 million also near the high end of guidance Growth margin was 55.3% within our guidance range While advertising and promotion investment was 6.5% of net sales As we continued to invest behind our brands and growth initiatives Non-gap operating income increased 6% to 110.3 million While non-gap diluted EPS rose 6% to $6 and 18 cents Both within our guidance range Our effective tax rate was 22.7%.

These results demonstrate the resilience of our business model The strength of our execution and our continued investment in the strategic capabilities that will drive future growth Turning to our business model Last quarter we announced our decision to sunset our longstanding 55 30 25 business model and introduced our new enduring business model Our enduring business model provides a disciplined framework for how we manage the business and create values for stockholders It is anchored in four key drivers Maintenance product sales targeted at 5 to 9 growth Growth margin targeted at 55 or above Adjusted EBITDA growth that exceeds maintenance product sales growth and an asset life operating model requiring minimal capital investment This framework better reflects the characteristics that have long defined wd40 company as a high quality business Durable growth strong profitability disciplined capital allocation and long term value creation Collectively these qualities positioned wd40 company to continue creating value as a perpetual compounder for years to come Let's take a closer look at growth margin Fourth quarter growth margin was 52.8 percent down 190 basis points from the prior year Their decline was primarily driven by approximately 370 basis points of higher specialty chemical and raw material costs These pressures were partially offset by approximately 170 basis points of benefit from lower aerosol can costs and lower field fees resulting from supply chain enhancements implemented primarily in IMAF While fourth quarter growth margin reflected the temporary cost pressures we are currently experiencing Full-year growth margin remained resilient at 55.3 percent above our long-term target We expect these pressures to persist in the near term However based upon what we know today, we believe fourth quarter growth margin is likely to represent the low point of the cycle As pricing actions and ongoing cost optimization initiatives begin to take effect over the next one to two quarters We expect growth margin to improve sequentially throughout fiscal year 2027 Was recovery accelerating in the second half of the year?

While the pace of improvement may vary quarter to quarter our objective remains unchanged Protecting growth margin and returning to our long-term target range of greater than 55 Now let's turn to adjusted EBITDA in the fourth quarter As a reminder our objective is to grow adjusted EBITDA at a rate that exceeds maintenance product sales growth over time Fourth quarter adjusted EBITDA reflected the temporary cost pressures impacting growth margin As well as continued investments in our people brands and strategic capabilities that we believe will support durable growth over the long-term Selling general and administrative expenses increased 9.4 million to 58.2 million Or 8.7 million in constant currency This quarter we were impacted by the timing of accruing for our incentive compensation program Which increased by approximately 3.8 million on a constant currency basis compared to prior year Because our incentive plan is directly linked to business performance and applies to every employee across the organization We are pleased to recognize the contributions that helped drive our fiscal year 2026 results We also incurred higher freight costs of approximately 1.5 million on a constant currency basis Particularly in IMA as we navigated middle east related supply chain disruptions to maintain product availability for customers Investment in talents to advance our must-and-battles and strategic enablers contributed to a 1.2 million increase in employee costs on a constant currency basis In addition SG&A expenses increased by approximately $800,000 from higher software license and fees and bad debt expense Investments in advertising and promotion or AMP were 15.8 million up 26% compared to the prior year The increase reflects our continued investment in promotional activities to support brand growth primarily in the US As a percentage of sales AMP investment was 8.9% Compared to 7.6% in the prior year period Higher AMP spending in the fourth quarter is consistent with our historical spending pattern AMP investment for the full year was 6.5% compared to 6% in the prior year The increase was driven by both foreign currency headwind and higher level of promotional programs particularly in the US While these investments pressured fourth quarter results Full year adjusted EBITDA increased 6% to 120.8 million Reflecting the underlying resilience of our business model and progress against our long-term growth strategy Free cash flow for the year was 97.6 million Resulting in free cash flow conversion of 117% of non-gap adjusted net income This strong cash generation reflects the strength of our asset-like business model and disciplined working capital management That completes the financial overview Before I hand over the call, I would like to express my sincere gratitude for the opportunity to serve as WD-40 companies CFO While this is my final earnings call of CFO I remain deeply committed to the company's future And I am energized by the opportunity to help drive our next chapter of growth as division president of the americas I want to thank everyone who has been a part of this journey with me With that, I would like to now turn the call over to keith for a review of our fiscal year 2027 outlook Thanks, Sarah and thank you for the warm introduction I'm excited to officially begin my role on November 2nd I'm honored to join WD-40 company This is a high quality business and its consistency and resilience have created significant value for stockholders over time I look forward to helping compound that value in the years ahead In my first few weeks, I visited each of our trading blocks and met our key leaders around the world I've also gotten a strong sense of the culture and operating discipline behind the company's success I'm excited about the opportunities ahead Our four by four strategic framework gives us a clear roadmap for sustainable growth Our enduring business model guides how we allocate capital balancing strong performance today with investments that build value over time Maintaining a disciplined and balanced approach to capital allocation will remain a priority for me at CFO This strategy has served the company well for many years We will maintain a strong balance sheet invest behind our strategic priorities and deploy capital with discipline to drive long term returns for stockholders Consistent with our asset light business model We expect capital expenditures to remain between 1 and 2 percent of net sales annually We also remain committed to returning capital to stockholders through a combination of dividends and share repurchases Dividends continue to be our first priority With annual dividend payments targeted at approximately 50 percent of earnings In addition under our new share repurchase program Which became effective on September 1st, 2026 We are authorized to repurchase up to 100 million of our outstanding shares We will continue to allocate capital in a disciplined manner Focusing on opportunities that are creative and reflect our confidence in the long term value creation potential of wd 40 company In fiscal year 2026 Our return on invested capital was 28.6 percent Improving from 26.9 percent in fiscal year 25 And well ahead of our target of 25 Following exceptional top line growth in fiscal year 26 We are targeting net sales growth in line with our long term goals The timing of activities will be a little different this year Which will affect how growth unfolds quarter to quarter Similar to recent prior years We expect net sales to be higher in the second half than in the first half But because we're comparing against a very strong second half of fiscal 26 We expect more of our year-over-year growth to occur in the first half of the year We are encouraged by the start of this new fiscal year and have seen strong revenue and sequential growth margin improvements thus far For fiscal year 27 We expect the following Number one Net sales growth of four to seven percent With net sales of 715 million to 735 million on a constant currency basis Number two gross margin of 54 to 55.5 percent Generally in line with our long-term target of 55 percent But also reflecting caution given the current geopolitical and economic uncertainty Number three Advertising and promotion investment of approximately six percent of net sales in line with historical performance Number four operating income of 114 to 120 million Representing an increase of five to ten percent compared to fiscal year 26 At the midpoint operating income is expected to increase at a faster rate than net sales Consistent with our enduring business model Number five and effective tax rate of 22.5 to 23.5 percent and number six Deluded earnings per share of six dollars and 40 cents to six dollars and 70 cents Representing year-over-year growth of approximately five to ten percent Our outlook assumes no material changes in the current economic environment It also assumes crude oil prices remain near current levels through the first half of fiscal 27 Before moderating in the second half Unanticipated inflationary pressures or other unforeseen events could impact our results Again, I'm very excited to be a part of this great company And I look forward to providing an update on our progress during our first quarter call in january Now back to steve Thank you sarah and keith In summary, what did you hear from us today?

You heard that fiscal 2026 sales grew 11 To 688 million and maintenance products sales grew 9 percent in constant currency at the top of our long-term target range You heard that we see a long runway for durable growth With only 24 percent of its benchmark potential realized W40 multi-use product still has about 1.7 billion of opportunity ahead And wd40 specialists adds another 863 million You heard that four-year growth margin remained resilient at 55.3 percent above our long-term target And that we believe the fourth quarter marked the low point For fiscal 27 we're targeting gross margin of 54 to 55.5 Even in the current cost environment You heard that our globally decentralized supply chain continues to be a competitive advantage, especially in challenging times It helped us navigate volatility keep on time delivery above 96 and deliver more than seven million dollars in cost savings You heard that we remain confident in our ability to deliver durable growth Our resilient business models strong cashflow and discipline capital allocation Make w40 company a high quality business built to compound value for stockholders over time And you heard that we are encouraged by the start of this new fiscal year and have seen strong revenue growth and sequential gross margin improvements Thank you for joining our call today.

Um for what happens in japan Hey mike is steves and and so yeah, I mean you're familiar with our moves we've made over the past five or six years with mexico and and brazil Where we've achieved you know game-changing growth In mexico and then brazil more recently Also, and so japan will probably be a bit more of a slow build It's it's a more conservative kind of market And so you should expect kind of more steady pace growth as we build and a longer term kind of development over five to ten years Having said that in our first year, we do expect to somewhere between two x and four x what were quite moderate thousand rfi 26 And so it's our first direct market move in Asia-Pacific for for 20 years since we took china direct in 2006 and so we're very excited We have a team of five now based out of tokyo And who are already in the business of writing orders and shipping and so yeah very excited about the future in the world's fourth largest economy Excellent.

Yeah, correct and so continued Yeah, 8.9. I believe was the exact number and so one of the changes we've made over the past year is in implementing Smart store capacity and manufacturing capacity in Asia-Pacific And so you're already beginning to see an acceleration in Asia-Pacific and I believe over the next Four or five years Asia have very very ambitious plans for really driving premiumization across Asia and so if you look at today Asia, you have premiumization kind of penetration numbers across You know the Americas are around 60% in Europe.

Thanks Yeah, we try not to wander too far into quarterly prognosis because you can go wrong, right? But we already kind of talked about September being a very strong start We're in the double digits already in September out of the gate With good growth across all three trading blocks and so we're very encouraged by that And so you know high single digits into double digits for for Q1 Continued growth in Q2 Q3 is obviously a big one to lab But we do see growth there will be it may be modest growth and so hopefully that gives you enough of a picture of for the year Absolutely does appreciate it.

Thanks so much Okay, john, maybe i'll jump in really quick first and just do a little bit of a rundown of the q4 price volume Appreciating that you all don't have the details in the 10k yet So from a from in the fourth quarter of volume was still a strong Lever from a from a growth standpoint. It was the predominant one After you adjust out of adjust for currency and the divestiture of the home care and cleaning products from the prior year Roughly 75 of our of our growth in the quarter still came from volume Price is starting to make a larger contribution in the fourth quarter and we do expect that to Continue into the first first few quarters.

Well really into fy 27 as we as those Price actions begin to take us back and then maybe i'll let Steve kind of jump in on the on the future If we talk about kind of like just going around the trading blocks kind of expectations And so obviously starting with the america's you know the u. s. That's such a strong year in fy 26 You know lapping that is is you know is obviously a challenge right with the one that we're up for But for the u. s. You know you should expect kind of modest Single-digit growth for the year as we lack that very high level of activity. We had an fy 26 that will be Accompanied by very strong growth.

We see in latin america And in canada as well. And so overall the america's you know will probably be heading for kind of the lower edge of our typical guidance range And then the slack will be picked up largely we believe by europe and asia pacific And so we've already seen a very strong start to the year in the early part of the year in both of those regions Actually quite spectacular in agia pacific Um china just keeps on doing this thing on the back of a 26 percent growth number in fy 26 We expect continued civil-digit growth in china which drove a large part of of the growth in asia pacific in fy 26 Um japan's new to the game and so that's going to drive incremental growth for agia pacific as well And so yeah stronger growth across europe and asia pacific you will see well you should see Um, it's hard to guarantee the middle east but the middle east bouncing back somewhat in fy 27 We did have a decline in us dollars of around 10 percent in in fy 26 And already we're seeing a bounce back you saw it in q4 We reported on that but also in the early part of fy 27 We're seeing a bounce back in the middle east and we have found work around The logistics to get product to our customers across the middle east And then your final kind of point about consumers and economic sensitivity I mean, I think that's true right and so in more difficult times and people do um, they're they're repairing Uh, you know repairing uh holes machinery or tools or equipment as opposed to buying new Tools machinery equipment and so that does favoring us.

I think another trend around the world is agian infrastructure, right? I mean, you've got the the car fleet is is aging. I think we're at 13 years now 12.8 years or so in the us And that's a trend that's playing out around the world and so You know lots of older equipment doesn't need more maintenance around and hi john.

This is Keith Look forward to meeting you. Uh, I think you had a second part of your question related to the oil price assumptions and I would just say there are a lot of variables that that impact the the final input our final input costs and so our working assumption is that the currently prevailing Uh cost of the various oil prices and inputs is what we that's what we are assuming for the first half that they that they continue and then that they They decline gradually over the course of the rest of the year. So That's that that's as much as we're we're providing right now again. It's like quite complex in terms of crude oil And and various other oil prices, but uh currently prevailing is is kind of the way we're characterizing that And just to add to that if things weren't to change or were to change sorry significantly in the second half a year We would take further action to support gross margin.

This is this is Keith. Look forward to meeting you as well and uh So there are various headwinds and tailwinds in our margin assumptions for the year So I think you generally have it right in terms of how you're thinking about the oil prices But we obviously do have our pricing actions that we That we are undertaking that are That steve noted are already starting to have an impact and will continue to have more of an impact as we move through this new year Uh, steve also noted in his prepared remarks that Last year we we had quite An achievement in terms of cost savings the seven million was the number we have a equally robust pipeline of uh cost savings initiatives underway that will Uh have a similar impact to uh fy 27 and then we also have our typical trends in terms of premiumization and um and our must win battles that will be A creative to to the margin as we move forward and then finally the uh, the trading block mix uh, given uh steve's earlier answer around the america's being uh Relatively less of the growth in in fy 27 and i mia and Asia pacific being more that that margin structure is also favorable So those are some of the moving parts within our than our guidance has removed through the year Okay, super helpful.

Yeah, I'll take that one as well It will be gradual throughout the year. So The 52.8 in q4 we mentioned was the we believe it's the low point Uh, we also mentioned it that uh, we've already seen the rebound in september Uh, that will continue we believe in in q1 and then progressively Get better as we move through the year Uh, where in the back half of the year again assuming the all across assumption that we talked about first half second half then we should be um Approaching above our our target of the 55 if there's assumptions hold true Okay, great and then just one last question here and i'm getting a fair amount of anytime anybody brings up france I know that was a pretty good Market for you right now Any meaningful concerns about the disruption in france or is that kind of just you know, just smoking it'll just dissipate and really won't impact Do you think?

Well, let's hope that situation resolves itself quickly I mean you've got um, you know, these protests hopefully it's a short led event and that uh, yeah, frances are as an important market for us and so So there's been no disruption to our business so poor and a material disruption to our business so far so let's hope the situation gets resolved I appreciate it.

What I would say is that we're at the stage of experimenting We have an extremely powerful brand and so we are we have a partnership that we're exploring and so Um, you know, leveraging key players like dilute trading to To experiment with with licensing in a couple of agreed areas, but it's small It's not overly material and so we're learning as we kind of progress and so we'll keep investors updated as we progress on that Okay, and then um, can you just kind of update us?

I can I can take that one. So we successfully went live with two new locations this year One of which was supporting the Geographic expansion with a go-to-rect move in japan So it was really excited to be able to support that effort with a with a system implementation We do have um a couple more in the pipeline and fy 27 You know, the the big area that's going to take us a few years to work through is really bringing um, I maya online and so that is a You know a sizable implementation and so that's one that the team will be working on Along with a number of the smaller locations that we still need to bring on So we still need to bring on mexico And china are the are two of the other locations beyond Um this year we have brazil and we have another small location and in the pipeline.

Sure, so a big part of it was actually activating the king of the hill promotion in the u. s And so that partnership we had a lot of Activity and we actually created some like 1.2 billion impressions Through that campaign and so or else that is more than we typically great in the whole fiscal year And so that was a very concentrated effort against a you know quite a sizable promotion Um in the u. s And so that was a big part of it plus some generating cats If you've seen over the past few years, I think That kind of trend as as we activate our global kind of campaigns Um You know things like repair replace and the sampling programs we put out globally It has tended to be kind of like back half focused and so you do see Amp kind of phasing higher in the back half of the year and there's also some caution always for our general managers We hit the year You know seeing how things are going and so people are You know very cautious to phase kind of amp standing in line with our business before I might just add like that Just for context the that back half waiting that steve mentioned is fairly consistent with our historical investment patterns this quarter It was 35 percent of our total spend was in the fourth quarter.

Yeah, so it's a key growth area obviously within the I believe it's growing like 15 percent a year already off a very large number And so that is absolutely a very strong growing youth case use case And you know most of those facilities are kind of brand new right and so as they age they will need more maintenance That's for sure, but um, yeah many of our products several of our products we manufacture things like do we put him on to use product? We also contact cleaners white lithium greases, etc You know I have significant use in in those kind of areas and so Yeah, they're growth areas for the for the category and uh, yeah, we're on it in terms of developing the business Okay.

This is key Uh, yes, so a great great question and and you hit on it and it's really has to do with freight. So, uh, and we did explain that that's already impacted us Uh in our fourth quarter Uh, and and that is expected to continue forward as well. So so really just it's the it's the oil inputs And it's the freight that are the main elevated costs, uh, and we're kind of taking the same assumptions Uh for both, uh, that we outlined earlier around first half and second half assumptions this year Thank you.