WD 40 CO 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations As used in this report, the terms “we,” “our,” and “us” and “the Company” refer to WD-40 Company and its wholly-owned subsidiaries, unless the context suggests otherwise. Amounts and percentages in tables and discussions may not total due to rounding. The following information is provided as a supplement to, and should be read in conjunction with, the unaudited condensed consolidated financial statements and notes thereto included in Part I—Item 1 of this Quarterly Report and the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, which was filed with the Securities and Exchange Commission (“SEC”) on October 23, 2023. Use of Non-GAAP Constant Currency In order to show the impact of changes in foreign currency exchange rates on our results of operations, we have included constant currency disclosures, where necessary, in the Overview and Results of Operations sections which follow. Constant currency disclosures represent the translation of our current fiscal year revenues, expenses and net income from the functional currencies of our subsidiaries to U.S. Dollars using the exchange rates in effect for the corresponding period of the prior fiscal year. Results on a constant currency basis are not in accordance with accounting principles generally accepted in the United States of America (“non-GAAP”) and should be considered in addition to, not as a substitute for, results prepared in accordance with U.S. GAAP. We use results on a constant currency basis as one of the measures to understand our operating results and evaluate our performance in comparison to prior periods in order to enhance the visibility of the underlying business trends, excluding the impact of translation arising from foreign currency exchange rate fluctuations. Management believes this non-GAAP financial measure provides investors with additional financial information that should be considered when assessing our underlying business performance and trends. However, reference to constant currency basis should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP. Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. This report contains forward-looking statements, which reflect our current views with respect to future events and financial performance. These forward-looking statements are generally identified with words such as “believe,” “expect,” “intend,” “plan,” “project,” “could,” “may,” “aim,” “anticipate,” “target,” “estimate” and similar expressions. These 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; anticipated input costs for manufacturing and the costs associated with distribution of our products; 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; expected tax rates and the impact of tax legislation and regulatory action; changes in the political conditions or relations between the United States and other nations; the impacts from inflationary trends and supply chain constraints; changes in interest rates; and forecasted foreign currency exchange rates and commodity prices. We undertake no obligation to revise or update any forward-looking statements. 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 our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, and in Part II—Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q. Overview The Company WD-40 Company based in San Diego, California, is a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories and homes around the world. We own a wide range of well-known brands that include maintenance products and homecare and cleaning products: WD-40® Multi-Use Product, WD-40 Specialist®, 3-IN-ONE®, GT85®, X-14®, 2000 Flushes®, Carpet Fresh®, no vac®, Spot Shot®, 1001®, Lava® and Solvol®. 21 Table of Contents Our products are sold in various locations around the world. Maintenance products are sold worldwide in markets throughout North, Central and South America, Asia, Australia, Europe, India, the Middle East and Africa. Homecare and cleaning products are sold primarily in North America, the United Kingdom (“U.K.”) and Australia. We sell our products primarily through hardware stores, automotive parts outlets, industrial distributors and suppliers, mass retail and home center stores, value retailers, grocery stores, online retailers, warehouse club stores, farm supply, sport retailers, and independent bike dealers. Highlights The following summarizes the financial and operational highlights for our business during the six months ended February 29, 2024: • Consolidated net sales increased $24.4 million, or 10%, compared to the corresponding period of the prior fiscal year. Increases in sales volume favorably impacted net sales by approximately $9.9 million from period to period. Increases in the average selling price of our products positively impacted net sales by approximately $7.7 million from period to period, primarily due to sales price increases implemented in certain regions during the prior fiscal year. Changes to net sales attributable to volumes and average selling price of our products are impacted by differences in sales mix related to products, markets and distribution channels from period to period. In addition, changes in foreign currency exchange rates from period to period had a favorable impact of $6.8 million on consolidated net sales for the first three months of fiscal year 2024. On a constant currency basis, net sales would have increased by $17.6 million, or 7%, from period to period. This favorable impact from changes in foreign currency exchange rates mainly came from our EIMEA segment, which accounted for 37% of our consolidated sales for the six months ended February 29, 2024. • Gross profit as a percentage of net sales increased to 53.1% compared to 51.1% for the corresponding period of the prior fiscal year. • Consolidated net income increased $2.5 million, or 8%, compared to the corresponding period of the prior fiscal year. Changes in foreign currency exchange rates from period to period had a favorable impact of $1.2 million on consolidated net income for the first half of fiscal year 2024. Thus, on a constant currency basis, net income would have increased $1.3 million, or 4%, from period to period. • Diluted earnings per common share were $2.42 versus $2.23 in the prior fiscal year period. 22 Table of Contents Results of Operations Three and Six Months Ended February 29, 2024 Compared to Three and Six Months Ended February 28, 2023 Operating Items The following table summarizes operating data for our consolidated operations (in thousands, except percentages and per share amounts): Three Months Ended February 29/28, Six Months Ended February 29/28, 2024 2023 Change from Prior Year 2024 2023 Change from Prior Year Dollars Percent Dollars Percent Net sales: WD-40 Multi-Use Product 107,234 100,261 6,973 7 % $ 214,911 $ 194,849 $ 20,062 10 % WD-40 Specialist 16,817 15,274 1,543 10 % 33,659 30,680 2,979 10 % Other maintenance products 7,188 6,569 619 9 % 14,814 12,887 1,927 15 % Total maintenance products 131,239 122,104 9,135 7 % 263,384 238,416 24,968 10 % HCCP (1) 7,866 8,089 (223) (3) % 16,137 16,670 (533) (3) % Total net sales 139,105 130,193 8,912 7 % 279,521 255,086 24,435 10 % Cost of products sold 66,164 64,115 2,049 3 % 131,027 124,753 6,274 5 % Gross profit 72,941 66,078 6,863 10 % 148,494 130,333 18,161 14 % Operating expenses 52,000 43,925 8,075 18 % 103,369 89,501 13,868 15 % Income from operations $ 20,941 $ 22,153 $ (1,212) (5) % $ 45,125 $ 40,832 $ 4,293 11 % Net income $ 15,536 $ 16,526 $ (990) (6) % $ 33,018 $ 30,523 $ 2,495 8 % EPS – diluted $ 1.14 $ 1.21 $ (0.07) (6) % $ 2.42 $ 2.23 $ 0.19 9 % Shares used in diluted EPS 13,583 13,608 (25) 0 % 13,583 13,608 (25) 0 % (1) Homecare and cleaning products (“HCCP”) Net Sales by Segment The following table summarizes net sales by segment (in thousands, except percentages): Three Months Ended February 29/28, Six Months Ended February 29/28, 2024 2023 Change from Prior Year 2024 2023 Change from Prior Year Dollars Percent Dollars Percent Americas $ 63,507 $ 62,890 $ 617 1 % $ 127,582 $ 120,904 $ 6,678 6 % EIMEA 54,313 46,809 7,504 16 % 103,067 87,581 15,486 18 % Asia-Pacific 21,285 20,494 791 4 % 48,872 46,601 2,271 5 % Total $ 139,105 $ 130,193 $ 8,912 7 % $ 279,521 $ 255,086 $ 24,435 10 % 23 Table of Contents Americas Sales The following table summarizes net sales by product line for the Americas segment, which includes the U.S., Canada and Latin America (in thousands, except percentages): Three Months Ended February 29/28, Six Months Ended February 29/28, 2024 2023 Change from Prior Year 2024 2023 Change from Prior Year Dollars Percent Dollars Percent WD-40 Multi-Use Product $ 49,043 $ 48,405 $ 638 1 % $ 97,554 $ 91,562 $ 5,992 7 % WD-40 Specialist 7,090 6,875 215 3 % 14,198 13,700 498 4 % Other maintenance products 4,003 3,846 157 4 % 8,129 7,435 694 9 % Total maintenance products 60,136 59,126 1,010 2 % 119,881 112,697 7,184 6 % HCCP 3,371 3,764 (393) (10) % 7,701 8,207 (506) (6) % Total net sales $ 63,507 $ 62,890 $ 617 1 % $ 127,582 $ 120,904 $ 6,678 6 % % of consolidated net sales 46 % 48 % 46 % 48 % CC Net sales – non-GAAP (1) $ 62,779 $ 62,890 $ (111) 0 % $ 126,128 $ 120,904 $ 5,224 4 % Currency impact on current period – non-GAAP $ 728 $ 1,454 (1) Current fiscal year constant currency (“CC”) net sales translated at the foreign currency exchange rates in effect for the corresponding period of the prior fiscal year, compared to prior period actual net sales. The following table summarizes management’s estimates of effects on net sales of changes in price, volume and foreign currency exchange rate impacts for the Americas segment (in millions): Change from Prior Year First Quarter Second Quarter Year to Date Increase in average selling price (1) $ 1.8 $ 2.2 $ 4.0 Increase (decrease) in sales volume (1) 3.6 (2.4) 1.2 Currency impact on current period – non-GAAP 0.7 0.8 1.5 Increase in net sales $ 6.1 $ 0.6 $ 6.7 (1) Management’s estimates of changes in net sales attributable to volumes and the average selling price of our products are impacted by differences in sales mix related to products, markets and distribution channels from period to period. Americas Sales – Three Months Ended – February 29, 2024 Compared to February 28, 2023 Net sales in the Americas segment increased due to the following: • WD-40 Multi-Use Product sales increased $0.6 million, or 1%, primarily due to increases in Latin America and the U.S. of $1.1 million and $0.7 million, or 12% and 2%, respectively, partially offset by decreases in Canada of $1.2 million, or 35%. The increased sales in Latin America were primarily due to the favorable impact of price increases and higher volumes in Mexico as a result of the timing of customer orders, as well as the favorable impacts of changes in foreign currency exchange rates. The decrease in sales in Canada was primarily due to the timing of promotional activities and customer orders period over period. • WD-40 Specialist and other maintenance product sales slightly increased across most regions in the Americas. 24 Table of Contents • Homecare and cleaning product sales decreased $0.4 million, or 10%, primarily due to lower volume in the U.S. as a result of reduced demand. For both the three months ended February 29, 2024 and February 28, 2023, 76% of sales came from the U.S., and 24% of sales came from Canada and Latin America combined. Americas Sales – Six Months Ended – February 29, 2024 Compared to February 28, 2023 Net sales in the Americas segment increased due to the following: • WD-40 Multi-Use Product sales increased $6.0 million, or 7%, primarily due to increases in Latin America and the U.S. of $3.5 million and $3.2 million, or 20% and 5%, respectively. In Latin America, sales in the first half of fiscal year 2024 were favorably impacted by higher volumes as the result of timing of customer orders. This favorable impact was due to reduced demand in the comparative period as a result of customers that purchased higher levels of our product at the end of fiscal year 2022 in anticipation of price increases. In addition, sales in Mexico increased due to higher volumes as a result of timing of customer orders and favorable impacts of changes in foreign exchange rates. The increase in the U.S. was due to a combination of recovering volumes at increased selling prices as well as a result of successful promotional programs. • WD-40 Specialist sales slightly increased across most regions in the Americas. • Other maintenance product sales increased due to a $0.7 million, or 9%, increase in 3-IN-ONE sales, primarily due to successful promotional programs in Mexico and Canada. • Homecare and cleaning product sales decreased $0.5 million, or 6%, primarily due to lower volume in the U.S. as a result of reduced demand. • For the six months ended February 29, 2024, 75% of sales came from the U.S., and 25% of sales came from Canada and Latin America combined compared to the six months ended February 28, 2023 when 77% of sales came from the U.S., and 23% of sales came from Canada and Latin America. 25 Table of Contents EIMEA Sales The following table summarizes net sales by product line for the EIMEA segment, which includes Europe, India, the Middle East and Africa (in thousands, except percentages): Three Months Ended February 29/28, Six Months Ended February 29/28, 2024 2023 Change from Prior Year 2024 2023 Change from Prior Year Dollars Percent Dollars Percent WD-40 Multi-Use Product 41,572 35,660 5,912 17 % $ 78,616 $ 65,838 $ 12,778 19 % WD-40 Specialist 7,525 6,122 1,403 23 % 14,191 12,133 2,058 17 % Other maintenance products 3,009 2,569 440 17 % 6,071 5,109 962 19 % Total maintenance products 52,106 44,351 7,755 17 % 98,878 83,080 15,798 19 % HCCP 2,207 2,458 (251) (10) % 4,189 4,501 (312) (7) % Total net sales 54,313 46,809 7,504 16 % $ 103,067 $ 87,581 $ 15,486 18 % % of consolidated net sales 39 % 36 % 37 % 34 % CC Net sales – non-GAAP (1) $ 51,924 $ 46,809 $ 5,115 11 % $ 97,063 $ 87,581 $ 9,482 11 % Currency impact on current period – non-GAAP $ 2,389 $ 6,004 (1) Current fiscal year constant currency net sales translated at the foreign currency exchange rates in effect for the corresponding period of the prior fiscal year, compared to prior period actual net sales. The following table summarizes management’s estimates of effects on net sales of changes in price, volume and foreign currency exchange rate impacts for the EIMEA segment (in millions): Change from Prior Year First Quarter Second Quarter Year to Date Increase in average selling price (1) $ 0.7 $ 0.0 $ 0.7 Increase in sales volume (1) 3.7 5.1 8.8 Currency impact on current period – non-GAAP 3.6 2.4 6.0 Increase in net sales $ 8.0 $ 7.5 $ 15.5 (1) Management’s estimates of changes in net sales attributable to volumes and the average selling price of our products are impacted by differences in sales mix related to products, markets and distribution channels from period to period. The countries and regions in Europe where we sell through a direct sales force include the U.K., Italy, France, Iberia (which includes Spain and Portugal) and the DACH and Benelux sales regions. The regions in the EIMEA segment where we sell through local distributors include the Middle East, Africa, India, Eastern and Northern Europe. EIMEA Sales – Three Months Ended – February 29, 2024 Compared to February 28, 2023 Net sales increased in the EIMEA segment primarily due to the following: • WD-40 Multi-Use Product sales increased $5.9 million, or 17%, primarily due to higher sales volume. Volumes in the comparative period were unfavorably impacted by price increases that we implemented in the fourth quarter of fiscal year 2022 and first quarter of fiscal year 2023, which resulted in temporarily reduced demand as customers adjusted to those price increases. The combination of recovering volumes at increased selling prices resulted in 26 Table of Contents higher sales across most regions. Sales increased most significantly in France, India, and Iberia, which were up $1.0 million, $0.9 million, and $0.6 million, respectively. • WD-40 Specialist and other maintenance product sales increased $1.4 million, or 23%, and $0.4 million, or 17%, respectively, primarily due to the combined impact of higher sales volume and the favorable impact of price increases across the regions. • Homecare and cleaning product sales decreased $0.3 million, or 10%, primarily due to lower volume in the U.K. as a result of reduced demand. • Net sales were favorably impacted $2.4 million across our various brands as a result of favorable changes in foreign currency exchange rates. On a constant currency basis, sales in EIMEA would have increased 11%. EIMEA Sales – Six Months Ended – February 29, 2024 Compared to February 28, 2023 Net sales increased in the EIMEA segment primarily due to the following: • WD-40 Multi-Use Product sales increased $12.8 million, or 19%, primarily due to higher sales volume. Volumes in the comparative period were unfavorably impacted by price increases that we implemented in the fourth quarter of fiscal year 2022 and first quarter of fiscal year 2023, which resulted in reduced demand as customers adjusted to those price increases. The combination of recovering volumes and increased selling prices resulted in higher sales across most regions. Sales increased most significantly in the DACH and Benelux regions, France, the Middle East, and Iberia, which were up $3.0 million, $2.8 million, $2.3 million, and $1.9 million, respectively. • WD-40 Specialist and other maintenance product sales increased $2.1 million, or 17%, and $1.0 million, or 19%, respectively, primarily due to the combined impact of higher sales volume and the favorable impact of price increases. France, in particular, saw an increase in sales of $1.3 million in these categories from period to period. • Homecare and cleaning product sales decreased $0.3 million, or 7%, primarily due to lower volume in the U.K. as a result of reduced demand. • Net sales were favorably impacted $6.0 million across our various brands as a result of favorable changes in foreign currency exchange rates. On a constant currency basis, sales in EIMEA would have increased 11%. 27 Table of Contents Asia-Pacific Sales The following table summarizes net sales by product line for the Asia-Pacific segment, which includes Australia, China and other countries in the Asia region (in thousands, except percentages): Three Months Ended February 29/28, Six Months Ended February 29/28, Change from Prior Year Change from Prior Year 2024 2023 Dollars Percent 2024 2023 Dollars Percent WD-40 Multi-Use Product $ 16,619 $ 16,196 $ 423 3 % $ 38,741 $ 37,449 $ 1,292 3 % WD-40 Specialist 2,202 $ 2,277 $ (75) (3) % 5,270 4,847 423 9 % Other maintenance products 176 $ 154 $ 22 14 % 614 343 271 79 % Total maintenance products 18,997 $ 18,627 $ 370 2 % 44,625 42,639 1,986 5 % HCCP 2,288 1,867 421 23 % 4,247 3,962 285 7 % Total net sales $ 21,285 $ 20,494 $ 791 4 % $ 48,872 $ 46,601 $ 2,271 5 % % of consolidated net sales 15 % 16 % 17 % 18 % CC Net sales – non-GAAP (1) $ 21,562 $ 20,494 $ 1,068 5 % $ 49,549 $ 46,601 $ 2,948 6 % Currency impact on current period – non-GAAP $ (277) $ (677) (1) Current fiscal year constant currency (“CC”) net sales translated at the foreign currency exchange rates in effect for the corresponding period of the prior fiscal year, compared to prior period actual net sales. The following table summarizes management’s estimates of effects on net sales of changes in price, volume and foreign currency exchange rate impacts for the Asia-Pacific segment (in millions): Change from Prior Year First Quarter Second Quarter Year to Date Increase in average selling price (1) $ 1.6 $ 1.4 $ 3.0 Increase (decrease) in sales volume (1) 0.3 (0.3) 0.0 Currency impact on current period – non-GAAP (0.4) (0.3) (0.7) Increase in net sales $ 1.5 $ 0.8 $ 2.3 (1) Management’s estimates of changes in net sales attributable to volumes and the average selling price of our products are impacted by differences in sales mix related to products, markets and distribution channels from period to period. Asia-Pacific Sales – Three Months Ended – February 29, 2024 Compared to February 28, 2023 Net sales in the Asia-Pacific segment increased primarily due to the following: • WD-40 Multi-Use Product sales increased $0.4 million, or 3%. Sales in the Asia distributor markets increased $0.5 million, or 7%, primarily due to price increases in these markets from period to period and successful promotional programs in certain regions, as well as the timing of customer orders. • WD-40 Specialist and other maintenance product sales remained relatively constant from period to period. • Homecare and cleaning product sales increased $0.4 million, or 23%. The increase was due to higher sales volume in Australia attributable to successful promotional activities and improved packaging. 28 Table of Contents • Net sales were unfavorably impacted $0.3 million across our various brands as a result of changes in foreign currency exchange rates. On a constant currency basis, sales in Asia-Pacific would have increased 5%. Asia-Pacific Sales – Six Months Ended – February 29, 2024 Compared to February 28, 2023 Net sales in the Asia-Pacific segment increased primarily due to the following: • WD-40 Multi-Use Product sales increased $1.3 million, or 3%. Sales in the Asia distributor markets increased $1.0 million, or 5%, primarily due to price increases in these markets from period to period and successful promotional programs in certain regions. In addition, sales in China increased $0.5 million, or 4%, due to increased sales volume from successful promotional programs and marketing activities. These increases were slightly offset by lower sales volume in Australia. • WD-40 Specialist sales increased $0.4 million, or 9%, primarily due to increased sales volume from successful promotional programs and marketing activities in China. • Other maintenance product sales increased $0.3 million, or 79%, due to higher sales of 3-IN-ONE, primarily due to increased sales in Australia as a result of the timing of customer orders and successful promotional programs. • Homecare and cleaning product sales increased $0.3 million or 7%. The increase was due to higher sales volume in Australia attributable to successful promotional activities and improved packaging. • Net sales were unfavorably impacted $0.7 million across our various brands as a result of changes in foreign currency exchange rates. On a constant currency basis, sales in Asia-Pacific would have increased 6%. Gross Profit The following general information is important when assessing fluctuations in our gross margin: • There is often a delay before changes in costs of raw materials, such as specialty chemicals used in the formulation of our products, impact cost of products sold due to production and inventory life cycles. Such delays increase with higher production and inventory levels. • In general, the timing of advertising, promotional and other discounts may cause fluctuations in gross margin from period to period. Advertising, promotional and other discounts that are given to our customers are recorded as a reduction to sales, whereas advertising and sales promotional costs associated with promotional activities that we pay to third parties are recorded as advertising and sales promotion expenses. • In the EIMEA segment, the majority of our cost of goods sold is denominated in Pound Sterling whereas sales are generated in Pound Sterling, Euro and the U.S. Dollar. The strengthening or weakening of the Euro and U.S. Dollar against the Pound Sterling may result in foreign currency related changes to the gross margin percentage in the EIMEA segment from period to period. • Our gross profit and gross margin may not be comparable to those of other consumer product companies, since some of these companies include all costs related to distribution of their products in cost of products sold, whereas we exclude the portion associated with amounts paid to third parties for shipment to our customers from our distribution centers and contract manufacturers and include these costs in selling, general and administrative expenses. These costs totaled $4.0 million and $4.2 million for the three months ended February 29, 2024 and February 28, 2023, respectively, and $8.0 million and $8.4 million for the six months ended February 29, 2024 and February 28, 2023, respectively. The following table summarizes gross margin and gross profit (in thousands, except percentages): Three Months Ended February 29/28, Six Months Ended February 29/28, 2024 2023 Change from Prior Year 2024 2023 Change from Prior Year Gross profit $ 72,941 $ 66,078 $ 6,863 $ 148,494 $ 130,333 $ 18,161 Gross margin 52.4 % 50.8 % 160 bps (1) 53.1 % 51.1 % 200 bps (1) (1) Basis points (“bps”) change in gross margin. 29 Table of Contents Gross Margin – Three Months Ended – February 29, 2024 Compared to February 28, 2023 Gross margin increased 160 bps primarily due to the following favorable impacts, partially offset by unfavorable impacts: Favorable/(Unfavorable) Explanations 130 bps Favorable sales mix and other miscellaneous mix impacts 100 bps Lower costs of specialty chemicals used in the formulation of our products 70 bps Increases in average selling prices (100) bps Increases in miscellaneous other input costs Gross Margin – Six Months Ended – February 29, 2024 Compared to February 28, 2023 Gross margin increased 200 bps primarily due to the following favorable impacts, partially offset by unfavorable impacts: Favorable/(Unfavorable) Explanations 130 bps Favorable sales mix and other miscellaneous mix impacts 100 bps Increases in average selling prices 90 bps Lower warehousing, distribution and freight costs, primarily in the Americas segment 80 bps Lower costs of specialty chemicals used in the formulation of our products (60) bps Increases in miscellaneous other input costs (50) bps Higher costs of aerosol cans Selling, General and Administrative (“SG&A”) Expenses Three Months Ended February 29/28, Six Months Ended February 29/28, 2024 2023 Change from Prior Year 2024 2023 Change from Prior Year (in thousands) Dollars Percent Dollars Percent SG&A expenses $ 45,023 $ 37,690 $ 7,333 19 % $ 89,158 $ 77,674 $ 11,484 15 % % of net sales 32.4 % 28.9 % 31.9 % 30.5 % SG&A Expenses – Three Months Ended – February 29, 2024 Compared to February 28, 2023 The increase in SG&A expenses was primarily due to increases in employee-related costs of $4.1 million due to higher accrued incentive compensation, annual compensation increases and higher headcount, partially offset by lower stock-based compensation expense. In addition, professional services fees increased $1.3 million in support of our strategic initiatives in the Americas and EIMEA segments, as well as higher costs associated with the ERP system we recently implemented in the United States. In addition, travel and meeting expense increased SG&A expense by $0.8 million in support of our strategic framework. Unfavorable changes in foreign currency exchange rates increased SG&A expenses by $0.6 million from period to period. SG&A Expenses – Six Months Ended – February 29, 2024 Compared to February 28, 2023 The increase in SG&A expenses was primarily due to increases in employee-related costs of $6.0 million due to higher accrued incentive compensation, annual compensation increases and higher headcount, partially offset by lower stock-based compensation expense. In addition, travel and meeting expense increased SG&A expense by $1.7 million and professional services fees increased $1.6 million in support of our strategic initiatives in the Americas and EIMEA segments, as well as higher costs associated with the ERP system we recently implemented in the United States. Unfavorable changes in foreign currency exchange rates increased SG&A expenses by $1.7 million from period to period. We continued our research and development investment, the majority of which is associated with our maintenance products, including efforts focused on sustainability as well as our focus on innovation and renovation of our products. Research and development costs were $1.7 million and $1.2 million for the three months ended February 29, 2024 and February 28, 2023, respectively, and $3.6 million and $2.5 million for the six months ended February 29, 2024 and February 28, 2023, respectively. The increase from period to period was partially due to a higher level of research and 30 Table of Contents development activity associated with our sustainability initiatives. Our research and development team engages in consumer research, environmental and sustainability initiatives, product development, product improvements and testing activities. This team leverages its development capabilities by collaborating with a network of outside resources including our current and prospective third-party contract manufacturers. The level and types of expenses incurred within research and development can vary from period to period depending upon the types of activities being performed. Advertising and Sales Promotion (“A&P”) Expenses Three Months Ended February 29/28, Six Months Ended February 29/28, Change from Prior Year Change from Prior Year (in thousands) 2024 2023 Dollars Percent 2024 2023 Dollars Percent A&P expenses $ 6,725 $ 5,985 $ 740 12 % $ 13,708 $ 11,324 $ 2,384 21 % % of net sales 4.8 % 4.6 % 4.9 % 4.4 % A&P Expenses – Three M onths Ended – February 29, 2024 Compared to February 28, 2023 The increase in A&P expenses was primarily due to a higher level of promotional programs and marketing support in the EIMEA segment. Changes in foreign currency exchange rates did not have a significant impact on A&P expenses from period to period. As a percentage of net sales, A&P expenses may fluctuate period to period based upon the type of marketing activities we employ and the period in which the costs are incurred. Total promotional costs recorded as a reduction to sales were $7.6 million and $7.1 million, respectively, for the three months ended February 29, 2024 and February 28, 2023, or 5.5% of net sales for each period. Therefore, our total investment in A&P activities was $14.3 million and $13.1 million or 10.3% and 10.1% of net sales for the three months ended February 29, 2024 and February 28, 2023, respectively. A&P Expenses – Six Months Ended – February 29, 2024 Compared to February 28, 2023 The increase in A&P expenses was primarily due to a higher level of promotional programs and marketing support, particularly in EIMEA and the Americas segments. Changes in foreign currency exchange rates primarily in EIMEA segment had a $0.4 million unfavorable impact on A&P expenses from period to period. Total promotional costs recorded as a reduction to sales were $15.4 million and $13.6 million, or 5.5% and 5.3% of net sales, for the six months ended February 29, 2024 and February 28, 2023, respectively. Therefore, our total investment in A&P activities was $29.1 million and $24.9 million or 10.4% and 9.8% of net sales, for the six months ended February 29, 2024 and February 28, 2023, respectively. Income from Operations by Segment The following table summarizes income from operations by segment (in thousands, except percentages): Three Months Ended February 29/28, Six Months Ended February 29/28, 2024 2023 Change from Prior Year 2024 2023 Change from Prior Year Dollars Percent Dollars Percent Americas $ 13,220 $ 13,712 $ (492) (4) % $ 27,416 $ 26,484 $ 932 4 % EIMEA 12,087 10,383 1,704 16 % 21,602 16,666 4,936 30 % Asia-Pacific 7,489 7,023 466 7 % 18,514 16,640 1,874 11 % Unallocated corporate (11,855) (8,965) (2,890) (32) % (22,407) (18,958) (3,449) (18) % Total $ 20,941 $ 22,153 $ (1,212) (5) % $ 45,125 $ 40,832 $ 4,293 11 % 31 Table of Contents Americas Americas Operating Income – Three Months Ended – February 29, 2024 Compared to February 28, 2023 Income from operations for the Americas decreased to $13.2 million, down $0.5 million, or 4%, due to higher operating expenses, partially offset by a higher gross margin and increased sales. Operating expenses increased $1.6 million primarily due to higher employee-related costs as a result of increased headcount and annual compensation increases. In addition, operating expenses increased due to higher travel and meeting expenses in support of our strategic framework. Gross margin for the Americas segment increased from 48.1% to 49.4% primarily due to the favorable impact of decreases in the costs of petroleum-based specialty chemicals, as well as price increases we implemented from period to period. These favorable impacts were partially offset by increases to miscellaneous other input costs. Operating income as a percentage of net sales decreased from 21.8% to 20.8% period over period. Americas Operating Income – Six Months Ended – February 29, 2024 Compared to February 28, 2023 Income from operations for the Americas increased to $27.4 million, up $0.9 million, or 4%, due to a $6.7 million increase in sales and a higher gross margin, partially offset by higher operating expenses. Gross margin for the Americas segment increased from 49.4% to 50.0% primarily due to the favorable impact of price increases and decreases to costs of petroleum-based specialty chemicals. These favorable impacts were partially offset by increases in the costs aerosol cans and filling fees at our third-party manufacturers, as well as increases to miscellaneous other input costs. Operating expenses increased $3.3 million due to higher employee-related costs as a result of increased headcount, higher accrued incentive compensation and annual compensation increases. In addition, operating expenses increased due to a higher level of A&P expenses and travel and meeting expense in support of our strategic framework. Operating income as a percentage of net sales decreased from 21.9% to 21.5% period over period. EIMEA EIMEA Operating Income – Three Months Ended – February 29, 2024 Compared to February 28, 2023 Income from operations for the EIMEA segment increased to $12.1 million, up $1.7 million, or 16%, primarily due to a $7.5 million increase in sales and a higher gross margin, partially offset by higher operating expenses. Gross margin for the EIMEA segment increased from 52.3% to 53.7% primarily due to the favorable impact of changes in sales mix and market mix from period to period, as well as the combined impact of decreases in the costs of petroleum-based specialty chemicals and aerosol cans. Operating expenses increased $2.9 million primarily due higher employee-related costs as a result of higher accrued incentive compensation, annual compensation increases and increased headcount. In addition, operating expenses increased due to higher A&P expenses, as well as higher level of professional service costs travel and meeting expenses in support of our strategic framework. Operating income as a percentage of net sales increased from 22.2% to 22.3% period over period. EIMEA Operating Income – Six Months Ended – February 29, 2024 Compared to February 28, 2023 Income from operations for the EIMEA segment increased to $21.6 million, up $4.9 million, or 30%, primarily due to a $15.5 million increase in sales and a higher gross margin, which was partially offset by higher operating expenses. Gross margin for the EIMEA segment increased from 51.5% to 54.2% primarily due changes in sales mix and market mix from period to period, as well as the combined impact of decreases in the costs of petroleum-based specialty chemicals and aerosol cans. Operating expenses increased $5.8 million primarily due to higher employee-related costs as a result of higher accrued incentive compensation, annual compensation increases and increased headcount. In addition, operating expenses increased due to higher A&P expenses, as well as higher level of professional service costs and travel and meeting expenses in support of our strategic framework. Operating income as a percentage of net sales increased from 19.0% to 21.0% period over period. Asia-Pacific Asia-Pacific Operating Income – Three Months Ended – February 29, 2024 Compared to February 28, 2023 Income from operations for the Asia-Pacific segment increased to $7.5 million, up $0.5 million, or 7%, primarily due to a $0.8 million increase in sales and a higher gross margin, partially offset by an increase in operating expenses. Gross margin for the Asia-Pacific segment increased from 55.3% to 58.5% primarily due to the favorable impact of price increases as well as favorable changes to other miscellaneous other input costs. Operating expenses increased $0.7 million primarily due to higher accrued incentive compensation, as well as a higher level of professional service costs and travel and meeting 32 Table of Contents expenses in support of our strategic framework. Operating income as a percentage of net sales increased from 34.3% to 35.2% period over period. Asia-Pacific Operating Income – Six Months Ended – February 29, 2024 Compared to February 28, 2023 Income from operations for the Asia-Pacific segment increased to $18.5 million, up $1.9 million, or 11%, primarily due to a $2.3 million increase in sales and a higher gross margin, partially offset by an increase in operating expenses. Gross margin for the Asia-Pacific segment increased from 54.8% to 58.9% primarily due to the favorable impact of price increases, as well as favorable changes to other miscellaneous other input costs. Operating expenses increased $1.4 million from period to period primarily due to higher employee-related costs, including increased accrued incentive compensation. In addition, operating expenses increased as a result of a higher level of A&P expenses, professional service costs and travel and meeting expenses in support of our strategic framework. Operating income as a percentage of net sales increased from 35.7% to 37.9% period over period. Non-Operating Items The following table summarizes non-operating income and expenses for our consolidated operations (in thousands): Three Months Ended February 29/28, Six Months Ended February 29/28, 2024 2023 Change 2024 2023 Change Interest income $ 66 $ 51 $ 15 $ 140 $ 95 $ 45 Interest expense $ 1,008 $ 1,502 $ (494) $ 2,154 $ 2,671 $ (517) Other (expense) income, net $ (193) $ 165 $ (358) $ (233) $ 315 $ (548) Provision for income taxes $ 4,270 $ 4,341 $ (71) $ 9,860 $ 8,048 $ 1,812 Interest Income Interest income remained relatively consistent for both the three and six months ended February 29, 2024 and February 28, 2023. Interest Expense Interest expense decreased $0.5 million for both three and six months ended February 29, 2024 primarily due to lower aggregate outstanding balances on our revolving credit agreement from period to period. Other (Expense) Income, Net Other (expense) income, net was not significant during the three and six months ended February 29, 2024 and February 28, 2023. Provision for Income Taxes The provision for income taxes was 21.6% and 20.8% of income before income taxes for the three months ended February 29, 2024 and February 28, 2023, respectively. Descriptions of impacts on our effective income tax rate are incorporated by reference to Part I—Item 1, “Notes to Condensed Consolidated Financial Statements” Note 13 – Income Taxes included in this report. The provision for income taxes was 23.0% and 20.9% of income before income taxes for the six months ended February 29, 2024 and February 28, 2023, respectively. Descriptions of impacts on our effective income tax rate are incorporated by reference to Part I—Item 1, “Notes to Condensed Consolidated Financial Statements” Note 13 – Income Taxes included in this report. Net Income Net income decreased 6% to $15.5 million, or $1.14 per common share on a fully diluted basis, for the three months ended February 29, 2024 compared to $16.5 million, or $1.21 per common share on a fully diluted basis, for the three months ended February 28, 2023. Changes in foreign currency exchange rates from period to period had a favorable impact of $0.5 million on consolidated net income for the second quarter of fiscal year 2024. Thus, on a constant currency basis, net income would have decreased $1.5 million, or 9%, from period to period. 33 Table of Contents Net income increased 8% to $33.0 million, or $2.42 per common share on a fully diluted basis, for the six months ended February 29, 2024 compared to $30.5 million, or $2.23 per common share on a fully diluted basis, for the corresponding period of the prior fiscal year. Changes in foreign currency exchange rates from period to period had a favorable impact of $1.2 million on consolidated net income for the six months ended February 29, 2024. Thus, on a constant currency basis, net income would have increased $1.3 million, or 4%, from period to period. Performance Measures and Non-GAAP Reconciliations In managing our business operations and assessing our financial performance, we supplement the information provided by our financial statements with certain non-GAAP performance measures. These performance measures are part of our current 55/30/25 business model, which includes gross margin, cost of doing business, and earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”), the latter two of which are non-GAAP performance measures. Cost of doing business is defined as total operating expenses less amortization of definite-lived intangible assets, impairment charges related to intangible assets, amortization of implementation costs associated with cloud computing arrangements (“cloud computing amortization”) and depreciation in operating departments. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation, amortization of definite-lived intangible assets, and cloud computing amortization. Beginning in fiscal year 2024, cloud computing amortization is included in our of cost of doing business and Adjusted EBITDA calculations. We have placed a new cloud-based enterprise resource planning system into service in the U.S., which we began to amortize in the second quarter of fiscal year 2024. Implementation of such systems is related to initiatives associated with our strategic framework intended to achieve greater operational efficiencies. Cloud computing amortization is recognized in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations. We target our gross margin to be 55% of net sales, our cost of doing business to be 30% of net sales, and our Adjusted EBITDA to be 25% of net sales. Results for these performance measures may vary from period to period depending on various factors, including economic conditions such as the inflationary environment we have experienced in the last several fiscal years, and our level of investment in activities for the future such as those related to quality assurance, regulatory compliance, information technology, sustainability, and intellectual property protection in order to safeguard our WD-40 brand. Our targets for gross margin and these other performance measures are long-term in nature and we expect to make progress towards them over time. The following table summarizes the results of these performance measures: Three Months Ended February 29/28, Six Months Ended February 29/28, 2024 2023 2024 2023 Gross margin – GAAP 52 % 51 % 53 % 51 % Cost of doing business as a percentage of net sales – non-GAAP 36 % 33 % 36 % 34 % Adjusted EBITDA as a percentage of net sales – non-GAAP (1) 17 % 19 % 18 % 18 % (1) Percentages may not aggregate to Adjusted EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on our consolidated statement of operations are not included as an adjustment to earnings in the Adjusted EBITDA calculation. We use the performance measures above to establish financial goals and to gain an understanding of our comparative performance from period to period. We believe that these measures provide our stockholders with additional insights into how we run our business. We believe these measures also provide investors with additional financial information that should be considered when assessing our underlying business performance and trends. These non-GAAP financial measures 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 our performance or operations. The use of any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies. Reconciliations of these non-GAAP financial measures to our financial statements as prepared in accordance with GAAP are as follows: 34 Table of Contents Cost of Doing Business (in thousands, except percentages) Three Months Ended February 29/28, Six Months Ended February 29/28, 2024 2023 2024 2023 Total operating expenses – GAAP $ 52,000 $ 43,925 $ 103,369 $ 89,501 Amortization (1) (508) (250) (816) (503) Depreciation (in operating departments) (1,095) (1,034) (2,145) (1,999) Cost of doing business $ 50,397 $ 42,641 $ 100,408 $ 86,999 Net sales $ 139,105 $ 130,193 $ 279,521 $ 255,086 Cost of doing business as a percentage of net sales – non-GAAP 36 % 33 % 36 % 34 % (1) Includes amortization of definite-lived intangible assets and cloud computing amortization. Adjusted EBITDA (in thousands, except percentages) Three Months Ended February 29/28, Six Months Ended February 29/28, 2024 2023 2024 2023 Net income – GAAP $ 15,536 $ 16,526 $ 33,018 $ 30,523 Provision for income taxes 4,270 4,341 9,860 8,048 Interest income (66) (51) (140) (95) Interest expense 1,008 1,502 2,154 2,671 Amortization (1) 508 250 816 503 Depreciation 2,170 1,718 4,180 3,361 Adjusted EBITDA $ 23,426 $ 24,286 $ 49,888 $ 45,011 Net sales $ 139,105 $ 130,193 $ 279,521 $ 255,086 Adjusted EBITDA as a percentage of net sales – non-GAAP 17 % 19 % 18 % 18 % (1) Includes amortization of definite-lived intangible assets and cloud computing amortization. Liquidity and Capital Resources Overview Our financial condition and liquidity remain strong. Although there continues to be uncertainty related to adverse global economic conditions, volatility in financial markets, the current inflationary environment and their impacts on our future results, we believe our efficient business model positions us to manage our business through such situations. We continue to manage all aspects of our business including, but not limited to, monitoring our liquidity, the financial health of our customers, suppliers and other third-party relationships, implementing gross margin enhancement strategies and developing new opportunities for growth. Our principal sources of liquidity are cash generated from operations and cash currently available from our existing unsecured revolving credit facility under the Credit Agreement with Bank of America, N.A. We use proceeds of the revolving credit facility primarily for our general working capital needs. We also hold borrowings under the Note Agreement. See Note 8 – Debt for additional information on these agreements. We have historically held a balance of outstanding draws on our line of credit in either U.S. Dollars in the Americas segment, or in Euros and Pounds Sterling in the EIMEA segment. Euro and Pound Sterling denominated draws fluctuate in U.S. Dollars from period to period due to changes in foreign currency exchange rates. We regularly convert many of our draws on our line of credit to new draws with new maturity dates and interest rates. We have the ability to refinance any draws under the line of credit with successive short-term borrowings through the September 30, 2025 maturity date of the Credit Agreement. Outstanding draws for which we have both the ability and intent to refinance with successive short-term borrowings for a period of at least twelve months are classified as long-term. As of February 29, 2024, $19.5 million of this facility was classified as long-term and was entirely denominated in Euros. $29.0 million was classified as short-term and 35 Table of Contents was denominated in U.S. Dollars and Pounds Sterling. In the United States, we held $67.2 million in fixed rate long-term borrowings as of February 29, 2024, consisting of senior notes under our Note Agreement. We paid $0.4 million in principal payments on our Series A Notes during the first half of fiscal year 2024. There were no other letters of credit outstanding or restrictions on the amount available on our line of credit or notes. Per the terms of both the Note Agreement and the Credit Agreement, our consolidated leverage ratio cannot be greater than three and a half to one and our consolidated interest coverage ratio cannot be less than three to one. See Note 8 – Debt for additional information on these financial covenants. At February 29, 2024, we were in compliance with all material debt covenants. We continue to monitor our compliance with all debt covenants and, at the present time, we believe that the likelihood of being unable to satisfy all material covenants is remote. At February 29, 2024, we had a total of $55.4 million in cash and cash equivalents. We do not foresee any ongoing issues with repaying our borrowings and we closely monitor the use of this credit facility. We believe that our future cash from domestic and international operations, together with our access to funds available under our unsecured revolving credit facility, will provide adequate resources to fund short-term and long-term operating requirements, capital expenditures, dividend payments, acquisitions, new business development activities and share repurchases. On June 19, 2023, the Board approved the 2023 Repurchase Plan. Under the 2023 Repurchase Plan, which became effective on September 1, 2023, we are authorized to acquire up to $50.0 million of our outstanding shares through August 31, 2025, of which $44.7 million remains available for the repurchase of shares of common stock as of February 29, 2024. Cash Flows The following table summarizes our cash flows by category for the periods presented (in thousands): Six Months Ended February 29/28, 2024 2023 Change Net cash provided by operating activities $ 44,892 $ 20,947 $ 23,945 Net cash used in investing activities (1,743) (3,281) 1,538 Net cash used in financing activities (35,589) (20,294) (15,295) Effect of exchange rate changes on cash and cash equivalents (260) 2,777 (3,037) Net increase in cash and cash equivalents $ 7,300 $ 149 $ 7,151 Operating Activities Net cash provided by operating activities increased $23.9 million to $44.9 million for the six months ended February 29, 2024. Cash flows from operating activities depend heavily on operating performance and changes in working capital. Our primary source of operating cash flows for the six months ended February 29, 2024 was net income of $33.0 million, which increased approximately $2.5 million from period to period. Changes in our working capital, which increased net cash provided by operating activities, were primarily attributable to a decrease in inventory during the first half of fiscal year 2024 compared to a increase in inventory in the corresponding period of the prior fiscal year, which resulted in a $11.4 million favorable impact period over period to our cash provided by operating activities. In the corresponding period of the prior fiscal year, we held elevated levels of certain raw materials, components and finished goods due to challenges within supply chain that we experienced after the COVID-19 pandemic. We have since been able to increase the capacity and flexibility of our supply chain which has enabled us to reduce our inventory levels since they peaked during the first quarter of fiscal year 2023. In addition, accounts payable and accrued liabilities increased primarily due to timing of payments during the period resulting in a $6.7 million favorable impact compared to the corresponding period of the prior fiscal year. Investing Activities Net cash used in investing activities decreased $1.5 million to $1.7 million for the six months ended February 29, 2024, primarily due to a lower level of manufacturing-related capital expenditures within the Americas and the EIMEA segments from period to period. Financing Activities Net cash used in financing activities increased $15.3 million to $35.6 million for the six months ended February 29, 2024. This change was primarily due to net repayments on our revolving credit facility of $4.2 million during the six months of 36 Table of Contents the fiscal year, compared to net proceeds of $8.3 million in the corresponding period of the prior fiscal year. In addition, increases in shares withheld to cover taxes on conversion of equity rewards of $1.8 million and increases in dividends paid to our stockholders of $1.3 million resulted in higher cash outflows from period to period. Effect of Exchange Rate Changes All of our foreign subsidiaries currently operate in currencies other than the U.S. Dollar and a significant portion of our consolidated cash balance is denominated in these foreign functional currencies, particularly at our U.K. subsidiary, which operates in Pound Sterling. As a result, our cash and cash equivalents balances are subject to the effects of the fluctuations in these functional currencies against the U.S. Dollar at the end of each reporting period. The net effect of exchange rate changes on cash and cash equivalents, when expressed in U.S. Dollar terms, was a decrease in cash of $0.3 million for the six months ended February 29, 2024 as compared to an increase in cash of $2.8 million for the six months ended February 28, 2023. These changes were primarily due to fluctuations in various foreign currency exchange rates from period to period, but the majority is related to the fluctuations in the Pound Sterling against the U.S. Dollar. Commercial Commitments We have ongoing relationships with various third-party suppliers (contract manufacturers) that manufacture our products and third-party distribution centers that warehouse and ship our products to customers. The contract manufacturers maintain title and control of certain raw materials and components, materials utilized in finished products, and the finished products themselves until shipment to our third-party distribution centers or customers in accordance with agreed upon shipment terms. Although we have contractual minimum purchase obligations with certain contract manufacturers, such obligations are immaterial or well below the volume of goods that we have historically purchased. In addition, in the ordinary course of business, we communicate supply needs to our contract manufacturers based on orders and short-term projections, ranging from two to six months. We are committed to purchase the products produced by the contract manufacturers based on the projections provided. Upon the termination of contracts with contract manufacturers, we obtain certain inventory control rights and are obligated to work with the contract manufacturer to sell through all product held by or manufactured by the contract manufacturer on our behalf during the termination notification period. If any inventory remains at the contract manufacturer at the termination date, we are obligated to purchase such inventory, which may include raw materials, components and finished goods. The amounts for inventory purchased under termination commitments have been immaterial. In addition to the commitments to purchase products from contract manufacturers described above, we may also enter into commitments with other manufacturers to purchase finished goods and components to support innovation initiatives and/or supply chain initiatives. As of February 29, 2024, no such commitments were outstanding. Share Repurchase Plans The information required by this item is incorporated by reference to Part I—Item 1, “Notes to Condensed Consolidated Financial Statements” Note 9 — Share Repurchase Plan included in this report. Dividends On March 19, 2024, the Company’s Board declared a cash dividend of $0.88 per share payable on April 30, 2024 to stockholders of record on April 19, 2024. Critical Accounting Policies and Estimates Our discussion and analysis of our operating results and financial condition is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Critical accounting policies are those that involve subjective or complex judgments, often as a result of the need to make estimates. The following areas all require the use of judgments and estimates: revenue recognition and accounting for income taxes. Estimates in each of these areas are based on historical experience and various judgments and assumptions that we believe are appropriate. Actual results may materially differ from these estimates. There have been no material changes in our critical accounting policies and estimates from those disclosed in Part II—Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 2 to our 37 Table of Contents consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, which was filed with the SEC on October 23, 2023. Recently Issued Accounting Standards Information on Recently Issued Accounting Standards that could potentially impact our consolidated financial statements and related disclosures is incorporated by reference to Part I—Item 1, “Notes to Condensed Consolidated Financial Statements” Note 2 – Basis of Presentation and Summary of Significant Accounting Policies, included in this report. Item 3. Quantitative and Qualitative Disclosures About Market Risk The information required by this item is incorporated by reference to Part II—Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, which was filed with the SEC on October 23, 2023.