What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-01-10 compared with 2024-07-10 · 158 added, 275 removed, 248 unchanged (64% of the section changed)

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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, 2024, which was filed with the Securities and Exchange Commission (“SEC”) on October 21, 2024.

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.

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.

Forward-Looking Statements

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These forward-looking statements include, but are not limited to, discussions about future financial and operating results, including:

expected benefits from the acquisition or divestiture transaction;

acquired business not performing as expected;

assuming unexpected risks, liabilities and obligations of the acquired business;

disruption to the parties’ business as a result of the announcement and acquisition or divestiture transaction;

integration of acquired business and operations into the Company;

the Company's ability to successfully complete any planned divestiture;

expected timing of the closing for the divestiture;

expected proceeds from the divestiture;

the intended use of proceeds by the Company from the divestiture transaction;

impact of the divestiture transaction on the Company's stock price or EPS;

growth expectations for maintenance products;

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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 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;

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Homecare and cleaning products are sold primarily in North America, the United Kingdom (“U.K.”) and Australia.

During the first quarter of fiscal year 2025 we classified our homecare and cleaning product businesses in the Americas and EIMEA segments to held for sale.

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.

On March 4, 2024, we acquired all of the issued and outstanding capital stock of Brazilian distributor, Theron, from M12 Participações Empresarias S.A.

See Note 3 – Acquisitions for additional information on this business combination.

As a result of this acquisition, we shifted from an indirect distribution model to a direct model.

Results from Brazil continue to be reported in the Americas segment for both the three and nine months ended May 31, 2024 and 2023, respectively.

The following summarizes the financial and operational highlights for our business during the nine months ended May 31, 2024:

• Consolidated net sales increased $37.8 million, or 10%, compared to the corresponding period of the prior fiscal year.

The following summarizes the financial and operational highlights for our business during the three months ended November 30, 2024:

• Consolidated net sales increased $13.1 million or 9%, to $153.5 million compared to the corresponding period of the prior fiscal year.

Increases in sales volume favorably impacted net sales by approximately $10.4 million from period to period.

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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 $8.3 million on consolidated net sales for the first nine months of fiscal year 2024.

On a constant currency basis, net sales would have increased by $29.3 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 nine months ended May 31, 2024.

Consolidated net sales was also favorably impacted by changes in foreign currency exchange rates which was estimated to be $1.5 million from period to period.

• Gross profit as a percentage of net sales increased to 54.8% compared to 53.8% for the corresponding period of the prior fiscal year.

• Consolidated net income increased $1.4 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 $1.5 million on consolidated net income for the first nine months of fiscal year 2024.

Thus, on a constant currency basis, net income would have increased $1.9 million, or 4%, from period to period.

• Diluted earnings per common share were $1.39 versus $1.28 in the prior fiscal year period.

• During the first quarter of fiscal year 2025 we reclassified our homecare and cleaning product businesses in the Americas and EIMEA segments to held for sale.

• We returned approximately $15.6 million to our stockholders in the first quarter of fiscal 2025 through share repurchases and dividends.

Results of Operations

Three and Nine Months Ended May 31, 2024 Compared to Three and Nine Months Ended May 31, 2023

Three Months Ended November 30, 2024 Compared to Three Months Ended November 30, 2023

Operating Items

The following table summarizes operating data for our consolidated operations (in thousands, except percentages and per share amounts):

Three Months Ended May 31, Nine Months Ended May 31,

Three Months Ended November 30,

2024 2023 Change from

Prior Year 2024 2023 Change from

Dollars Percent Dollars Percent

Dollars Percent

WD-40 Multi-Use Product $ 118,547 $ 107,677 $ 10,870 10 %

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The following table summarizes net sales by segment (in thousands, except percentages):

Three Months Ended May 31, Nine Months Ended May 31,

Three Months Ended November 30,

2024 2023 Change from

Prior Year 2024 2023 Change from

Dollars Percent Dollars Percent

Dollars Percent

Americas $ 69,436 $ 64,075 $ 5,361 8 %

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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 May 31, Nine Months Ended May 31,

Three Months Ended November 30,

2024 2023 Change from

Prior Year 2024 2023 Change from

Dollars Percent Dollars Percent

Dollars Percent

WD-40 Multi-Use Product $ 52,901 $ 48,511 $ 4,390 9 %

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% of consolidated net sales 45 % 45 %

CC Net sales – non-GAAP (1)

$ 74,690 $ 71,130 $ 3,560 5 % $ 200,818 $ 192,034 $ 8,784 5 %

Currency impact on current period – non-GAAP $ 413 $ 1,867

(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 Third Quarter Year to Date

First Quarter

Increase in average selling price (1)

$ 1.8 $ 2.2 $ 0.1 $ 4.1

Increase (decrease) in sales volume (1)

3.6 (2.4) 3.5 4.7

Currency impact on current period – non-GAAP 0.7 0.8 0.4 1.9

Increase in sales volume (1)

Currency impact on current period (1.1)

Increase in net sales $ 5.4

(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 – May 31, 2024 Compared to May 31, 2023

Americas Sales – Three Months Ended – November 30, 2024 Compared to November 30, 2023

Net sales in the Americas segment increased from period to period, highlighted by the following:

• WD-40 Multi-Use Product sales increased $4.0 million, or 7%, primarily due to increases in Latin America of $5.4 million, or 51%, partially offset by decreases in U.S.

and Canada of $1.0 million and $0.3 million, or 3% and 13%, respectively.

Sales in Latin America were favorably impacted by increased sales in Brazil.

Early in the third quarter of fiscal year 2024, we acquired a Brazilian distributor and shifted from an indirect distribution model to a direct model, where we sell directly to retail customers.

This shift favorably impacted sales in Brazil by $2.7 million for the three months ended May 31, 2024.

In addition, sales in other Latin American markets increased $2.8 million due to the timing of customer orders, successful promotional programs, increased distribution of WD-40 Smart Straw, and favorable impacts of changes in foreign currency exchange rates from period to period.

While end-user demand remained relatively constant in the United States from period to period, the decrease in

sales was primarily attributable to timing of customer orders associated with the implementation of our new ERP system that went live in January 2024.

• WD-40 Specialist sales increased $0.8 million, or 10%, primarily due to new distribution and timing of customer orders in the United States.

• WD-40 Multi-Use Product sales increased $4.4 million, or 9%, primarily due to increases in U.S.

and Latin America of $2.4 million and $2.3 million, or 7% and 21%, respectively.

The increase in the U.S.

was primarily due to higher sales volume as a result of successful promotional programs.

Sales in Latin America were favorably impacted by increased sales in Brazil which benefited from a shift from an indirect distribution model to a direct model in the third quarter of fiscal year 2024.

This shift favorably impacted sales in Brazil by $3.1 million for the three months ended November 30, 2024.

This increase in Latin America was partially offset by lower sales in Mexico due to decreased volumes and the timing of customer orders, as well as unfavorable changes in foreign currency exchange rates.

• WD-40 Specialist sales increased $1.1 million, or 16%, primarily due to new distribution and successful promotional programs in the United States.

• Other maintenance product sales remained relatively constant from period to period.

• Homecare and cleaning product sales decreased $0.5 million, or 14%, primarily due to reduced demand in the U.S.

• Homecare and cleaning product sales decreased $0.3 million, or 7%, primarily due to reduced sales volume in the U.S.

as a result of a lower level of advertising and promotional activities associated with these brands, as we focus on increasing sales of maintenance products in support of our four-by-four strategic framework.

• For the three months ended May 31, 2024, 72% of sales came from the U.S., and 28% of sales came from Canada and Latin America combined compared to the three months ended May 31, 2023 when 77% of sales came from the U.S., and 23% of sales came from Canada and Latin America.

Americas Sales – Nine Months Ended – May 31, 2024 Compared to May 31, 2023

Net sales in the Americas segment increased from period to period, highlighted by the following:

• WD-40 Multi-Use Product sales increased $10.0 million, or 7%, primarily due to increases in Latin America and the U.S.

of $8.9 million and $2.2 million, or 32% and 2%, respectively.

Sales in Latin America were favorably impacted by the transition to a direct marketing model in Brazil as discussed above in the section for the three months ended May 31, 2024.

In addition, sales in other Latin American markets increased $6.2 million due to the timing of customer orders, successful promotional programs, increased distribution of WD-40 Smart Straw, and favorable impacts of changes in foreign currency exchange rates from period to period.

The slight increase in sales in the U.S.

is primarily due to higher volumes as a result of successful promotions programs.

• WD-40 Specialist sales increased $1.3 million , or 6% , primarily due to new distribution and increased demand in the United States.

• Other maintenance product sales remained relatively constant from period to period.

• Homecare and cleaning product sales decreased $1.0 million, or 9%, primarily due to reduced demand in the U.S.

as discussed above in the section for the three months ended May 31, 2024.

• For the nine months ended May 31, 2024, 74% of sales came from the U.S., and 26% of sales came from Canada and Latin America combined compared to the nine months ended May 31, 2023 when 77% of sales came from the U.S., and 23% of sales came from Canada and Latin America.

• For the three months ended November 30, 2024, 73% of sales came from the U.S., and 27% of sales came from Canada and Latin America combined compared to the three months ended November 30, 2023 when 75% of sales came from the U.S., and 25% of sales came from Canada and Latin America.

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 May 31, Nine Months Ended May 31,

Three Months Ended November 30,

2024 2023 Change from

Prior Year 2024 2023 Change from

Dollars Percent Dollars Percent

Dollars Percent

WD-40 Multi-Use Product $ 44,866 $ 37,044 $ 7,822 21 %

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% of consolidated net sales 38 % 35 %

CC Net sales – non-GAAP (1)

$ 57,848 $ 52,524 $ 5,324 10 % $ 154,911 $ 140,105 $ 14,806 11 %

Currency impact on current period – non-GAAP $ 1,551 $ 7,555

(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 Third Quarter Year to Date

Increase (decrease) in average selling price (1)

$ 0.7 $ 0.0 $ (1.2) $ (0.5)

First Quarter

Increase in average selling price (1)

Increase in sales volume (1)

3.7 5.1 6.5 15.3

Currency impact on current period – non-GAAP 3.6 2.4 1.6 7.6

Currency impact on current period 2.0

Increase in net sales $ 8.7

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 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) DACH (which includes Germany, Austria and Switzerland) and Benelux (which includes Belgium, the Netherlands and Luxembourg).

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 – May 31, 2024 Compared to May 31, 2023

EIMEA Sales – Three Months Ended – November 30, 2024 Compared to November 30, 2023

Net sales increased in the EIMEA segment from period to period, highlighted by the following:

• WD-40 Multi-Use Product sales increased $6.5 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 higher sales across most regions.

Sales increased most significantly in France and Italy, which were up

$1.4 million and $1.2 million, respectively, as well as Benelux and Poland which were each up $1.1 million from the prior quarter of the previous fiscal year.

• WD-40 Specialist sales increased $0.9 million, or 11%, primarily due to the combined impact of higher sales volume due to increased distribution and stronger levels of demand after customers adjusted to price increases.

• WD-40 Multi-Use Product sales increased $7.8 million, or 21%, primarily due to higher sales volume across almost all regions.

Sales increased most significantly in India, France, the Benelux regions and Iberia, which were up $1.9 million, $1.0 million, $0.9 million and $0.9 million, respectively, from period to period.

Sales in India increased due to increased distribution and timing of customer orders.

Most regions in EIMEA have experienced

continued recovery of sales volumes since price increases we implemented in late fiscal year 2022 and early fiscal year 2023.

While most of this volume recovery was experienced in fiscal year 2024 after customers adjusted to those price increases, this volume recovery has continued into fiscal year 2025 and resulted in higher sales levels.

• WD-40 Specialist sales increased $1.2 million, or 17%, primarily due to higher sales volume as a result of increased distribution and stronger levels of demand most significantly in Iberia, U.K.

and Italy which were each up $0.5 million, $0.3 million, and $0.3 million, respectively.

• Other maintenance product sales remained relatively constant from period to period.

• Homecare and cleaning product sales decreased $0.4 million, or 19%, primarily due to reduced demand in the U.K.

• Net sales were favorably impacted $1.6 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 10%.

EIMEA Sales – Nine Months Ended – May 31, 2024 Compared to May 31, 2023

Net sales increased in the EIMEA segment from period to period, highlighted by the following:

• WD-40 Multi-Use Product sales increased $19.2 million, or 18%, 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 France, the DACH and Benelux regions, the Middle East, and Iberia, which were up $4.2 million, $4.2 million, $3.3 million, and $2.4 million, respectively.

• WD-40 Specialist and other maintenance product sales increased $2.9 million, or 15%, and $1.0 million, or 12%, respectively, primarily due to the combined impact of higher sales volume due to increased distribution and stronger levels of demand after customers adjusted to price increases.

France, in particular, saw an increase in sales of $0.8 million in these categories from period to period.

• Homecare and cleaning product sales decreased $0.8 million, or 12%, primarily due to reduced demand in the U.K.

as discussed above in the section for the three months ended May 31, 2024.

• Net sales were favorably impacted $7.6 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%.

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 May 31, Nine Months Ended May 31,

Prior Year Change from

2024 2023 Dollars Percent 2024 2023 Dollars Percent

Three Months Ended November 30,

2024 2023 Dollars Percent

WD-40 Multi-Use Product $ 20,780 $ 22,122 $ (1,342) (6) %

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% of consolidated net sales 17 % 20 %

CC Net sales – non-GAAP (1)

$ 20,948 $ 18,063 $ 2,885 16 % $ 70,497 $ 64,664 $ 5,833 9 %

Currency impact on current period – non-GAAP $ (405) $ (1,082)

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 Third Quarter Year to Date

Increase (decrease) in average selling price (1)

$ 1.6 $ 1.4 $ (0.1) $ 2.9

Increase (decrease) in sales volume (1)

0.3 (0.3) 3.0 3.0

Currency impact on current period – non-GAAP (0.4) (0.3) (0.4) (1.1)

First Quarter

Increase in average selling price (1)

Decrease in sales volume (1)

Currency impact on current period 0.6

Increase in net sales $ (1.0)

Asia-Pacific Sales – Three Months Ended – May 31, 2024 Compared to May 31, 2023

Net sales in the Asia-Pacific segment increased from period to period, highlighted by the following:

• WD-40 Multi-Use Product sales increased $1.5 million, or 11%.

Sales in China increased $1.0 million, or 25%, due to increased sales volume from successful promotional programs and marketing activities.

In addition, sales in the Asia distributor markets increased $0.4 million, or 5%, primarily due to successful promotional programs in certain regions and the timing of customer orders.

• WD-40 Specialist increased $0.7 million, or 30%, primarily due to increased sales volume in China due to expanded distribution and new product introduction, as well as successful promotional programs.

• Homecare and cleaning product sales increased $0.5 million, or 28%.

The increase was due to higher sales volume in Australia attributable to successful promotional activities and improved packaging.

• Net sales were unfavorably impacted $0.4 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 16%.

Asia-Pacific Sales – Nine Months Ended – May 31, 2024 Compared to May 31, 2023

Net sales in the Asia-Pacific segment increased from period to period, highlighted by the following:

• WD-40 Multi-Use Product sales increased $2.8 million, or 5%.

Sales in China increased $1.5 million, or 9%, due to increased sales volume from successful promotional programs and marketing activities.

In addition, sales in the Asia distributor markets increased $1.4 million, or 5%, primarily due to price increases in these markets from period to period and successful promotional programs in certain regions.

• WD-40 Specialist sales increased $1.1 million, or 15%, primarily due to increased sales volume due to successful promotional programs and marketing activities as well as increased sales volume due to distribution of a motorbike product line new to the region.

Asia-Pacific Sales – Three Months Ended – November 30, 2024 Compared to November 30, 2023

Net sales in the Asia-Pacific segment decreased from period to period, highlighted by the following:

• WD-40 Multi-Use Product sales decreased $1.3 million, or 6%, primarily due to decreases in our Asia distributor markets of $2.6 million partially offset by increases in China of $1.0 million.

Asia distributor markets experienced a decrease in sales volume due to timing of customer orders placed by many of our marketing distributor customers, particularly in Indonesia, South Korea, and Philippines.

Many of these marketing distributors were carrying high levels of inventory after participating in successful promotional programs in fiscal year 2024 and reduced the volume of orders during the first quarter of fiscal year 2025 to adjust to more normal levels of inventory for our product.

Sales in China increased due to increased sales volume from successful promotional programs and marketing activities.

• WD-40 Specialist sales remained relatively constant from period to period.

• Homecare and cleaning product sales increased $0.4 million, or 20%.

The increase was due to higher sales volume in Australia attributable to successful promotional activities and improved packaging.

• Net sales were unfavorably impacted $1.1 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 9%.

The increase was due to higher sales volume in Australia attributable to increased support of these products from successful promotional activities and improved packaging.

Our homecare and cleaning businesses in the Asia-Pacific segment are not held for sale.

• Net sales were favorably impacted $0.6 million across our various brands as a result of changes in foreign currency exchange rates.

The following general information is important when assessing fluctuations in our gross margin:

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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 products sold is denominated in Pound Sterling whereas sales are generated in Pound Sterling, Euro and the U.S.

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.

• In the EIMEA segment, the cost of our products sold are generated in the Pound Sterling and Euro.

The strengthening or weakening of the Pound Sterling and Euro against U.S.

Dollar 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 $4.6 and $4.7 million for the three months ended May 31, 2024 and 2023, respectively, and $12.6 and $13.1 million for the nine months ended May 31, 2024 and 2023, respectively.

These costs totaled $4.6 million and $4.1 million for the three months ended November 30, 2024 and 2023, respectively.

The following table summarizes gross margin and gross profit (in thousands, except percentages):

Three Months Ended May 31, Nine Months Ended May 31,

Three Months Ended November 30,

2024 2023 Change from

Prior Year 2024 2023 Change from

Gross profit $ 84,087 $ 75,553 $ 8,534

Gross margin 54.8 % 53.8 % 100 bps (1)

53.1 % 50.9 % 220 bps (1)

(1) Basis points (“bps”) change in gross margin.

Gross Margin – Three Months Ended – May 31, 2024 Compared to May 31, 2023

Gross margin increased 250 bps primarily due to the following favorable impacts:

Favorable Explanations

160 bps Favorable sales mix and other miscellaneous mix impacts

110 bps Lower costs of specialty chemicals used in the formulation of our products

70 bps Lower warehousing, distribution and freight costs, primarily in the Americas segment

Gross Margin – Nine Months Ended – May 31, 2024 Compared to May 31, 2023

Gross margin increased 220 bps primarily due to the following favorable impacts:

Favorable Explanations

140 bps Favorable sales mix and other miscellaneous mix impacts

100 bps Lower costs of specialty chemicals used in the formulation of our products

90 bps Lower warehousing, distribution and freight costs, primarily in the Americas segment

50 bps Increases in average selling prices

Gross Margin – Three Months Ended – November 30, 2024 Compared to November 30, 2023

Gross margin increased 100 bps primarily due to the following favorable impacts, partially offset by unfavorable impacts:

Favorable/(Unfavorable) Explanations

Favorable sales mix and other miscellaneous mix impacts

Lower costs of specialty chemicals used in the formulation of our products

Higher warehousing, distribution and freight costs, primarily in the Americas segment

During the first quarter of fiscal year 2025 we reclassified our homecare and cleaning product businesses in the Americas and EIMEA segments to held for sale.

Gross margin excluding these products was 55.4% during the three months ended November 30, 2024.

Selling, General and Administrative (“SG&A”) Expenses

Three Months Ended May 31, Nine Months Ended May 31,

Three Months Ended November 30,

2024 2023 Change from

Prior Year 2024 2023 Change from

(in thousands) Dollars Percent Dollars Percent

(in thousands) Dollars Percent

SG&A expenses $ 50,525 $ 44,135 $ 6,390 14 %

% of net sales 32.9 % 31.4 %

SG&A Expenses – Three Months Ended – May 31, 2024 Compared to May 31, 2023

SG&A Expenses – Three Months Ended – November 30, 2024 Compared to November 30, 2023

The increase in SG&A expenses was primarily due to increases in employee-related costs of $2.2 million due to higher accrued incentive compensation, annual compensation increases and higher headcount.

Professional services fees increased $2.2 million in support of our strategic initiatives in the Americas and EIMEA segments, including higher costs associated with the ERP system we recently implemented in the United States.

In addition, professional service fees increased due to costs associated with the development of a direct market in Brazil after the purchase of our Brazilian distributor in March 2024.

Changes in foreign currency exchange rates did not have a significant impact on SG&A expenses from period to period.

SG&A Expenses – Nine Months Ended – May 31, 2024 Compared to May 31, 2023

The increase in SG&A expenses was primarily due to increases in employee-related costs of $9.7 million due to higher accrued incentive compensation, annual compensation increases and higher headcount, partially offset by lower stock-based compensation expense.

Professional services fees increased $3.8 million in support of our strategic initiatives in the Americas and EIMEA segments, including higher costs associated with the ERP system we recently implemented in the United States.

In addition, professional services fees increased due to costs associated with the development of a direct market in Brazil.

In addition, travel and meeting expense increased SG&A expense by $2.0 million primarily as a result of increased travel related to geographic expansion and other initiatives aligned with our strategic framework.

Unfavorable changes in foreign currency exchange rates increased SG&A expenses by $2.1 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 $2.2 million and $1.6 million for the three months ended May 31, 2024 and 2023, respectively, and $5.8 million and $4.1 million for the nine months ended May 31, 2024 and 2023, respectively.

The increase from period to period was partially due to a higher level of research and 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.

This was partially offset by lower stock based compensation expense due to changes in the vesting provisions for the acceleration of expense for certain equity awards granted during the first quarter of fiscal year 2025.

Professional services fees increased $1.6 million in support of our strategic initiatives in the Americas and EIMEA segments, primarily due to higher costs associated with computer related software licenses and solutions, including increased cloud computing amortization of $0.4 million.

In addition, provision for credit losses increased by $1.0 million, and freight expense increased by $0.5 million primarily due to the combined impacts of higher sales and increased costs.

We continued our research and development investment, the majority of which is associated with our maintenance products.

Our research and development team engages in innovation and renovation of our products, consumer research, environmental and sustainability initiatives, new product development, 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.

Research and development costs were $1.9 million for both the three months ended November 30, 2024 and 2023.

Advertising and Sales Promotion (“A&P”) Expenses

Three Months Ended May 31, Nine Months Ended May 31,

Prior Year Change from

(in thousands) 2024 2023 Dollars Percent 2024 2023 Dollars Percent

Three Months Ended November 30,

(in thousands) 2024 2023 Dollars Percent

A&P expenses $ 8,393 $ 6,983 $ 1,410 20 %

% of net sales 5.5 % 5.0 %

A&P Expenses – Three M onths Ended – May 31, 2024 Compared to May 31, 2023

A&P Expenses – Three M onths Ended – November 30, 2024 Compared to November 30, 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 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 $7.7 million and $7.9 million, or 4.9% and 5.6% for the three months ended May 31, 2024 and 2023, respectively.

Therefore, our total investment in A&P activities was $17.0 and $15.6 million or 11.0% of net sales for both the three months ended May 31, 2024 and 2023, respectively.

A&P Expenses – Nine Months Ended – May 31, 2024 Compared to May 31, 2023

The increase in A&P expenses was primarily due to a higher level of promotional programs and marketing support, particularly in the Americas and EIMEA 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 $23.1 million and $21.5 million, or 5.3% and 5.4% of net sales, for the nine months ended May 31, 2024 and 2023, respectively.

Therefore, our total investment in A&P activities was $46.1 million and $40.5 million or 10.6% and 10.2% of net sales, for the nine months ended May 31, 2024 and 2023, respectively.

Total promotional costs recorded as a reduction to sales were $8.8 million and $7.8 million, or 5.7% and 5.5% for the three months ended November 30, 2024 and 2023, respectively.

Therefore, our total expenditure on A&P activities was $17.2 and $14.8 million or 11.2% and 10.5% of net sales for the three months ended November 30, 2024 and 2023, respectively.

Income from Operations by Segment

The following table summarizes income from operations by segment (in thousands, except percentages):

Three Months Ended May 31, Nine Months Ended May 31,

Three Months Ended November 30,

2024 2023 Change from

Prior Year 2024 2023 Change from

Dollars Percent Dollars Percent

Dollars Percent

Americas $ 12,652 $ 14,196 $ (1,544) (11) %

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Unallocated corporate (1)

(11,391) (10,552) (839) (8) %

Total $ 25,122 $ 24,184 $ 938 4 %

Americas Operating Income – Three Months Ended – May 31, 2024 Compared to May 31, 2023

Income from operations for the Americas increased to $18.4 million, up $1.5 million, or 9%, due to a higher gross margin and increased sales, partially offset by higher operating expenses.

Gross margin for the Americas segment increased from 48.2% to 50.6% primarily due to the favorable impact of increases in average selling price, decreases in the costs of petroleum-based specialty chemicals, as well as lower warehousing, distribution and freight costs from period to period.

These favorable impacts were partially offset by increases in the costs of aerosol cans.

Operating expenses increased $2.2 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 costs associated with the ERP system we recently implemented in the United States.

Operating income as a percentage of net sales increased from 23.8% to 24.5% period over period.

Americas Operating Income – Nine Months Ended – May 31, 2024 Compared to May 31, 2023

Income from operations for the Americas increased to $45.8 million, up $2.4 million, or 6%, due to a $10.7 million increase in sales and a higher gross margin, partially offset by higher operating expenses.

Gross margin for the Americas segment increased from 48.9% to 50.2% primarily due to the favorable impact of price increases and decreases to costs of petroleum-based specialty chemicals as well as lower warehousing, distribution and freight costs from period to period.

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 $5.5 million due to higher employee-related costs as a result of increased headcount, higher accrued incentive compensation and annual compensation increases.

Operating expenses increased due to higher costs associated with the ERP system we recently implemented in the United States as well as increases 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 remained constant at 22.6% for both three and nine months ended May 31, 2024.

EIMEA Operating Income – Three Months Ended – May 31, 2024 Compared to May 31, 2023

(1) Unallocated corporate expenses are general corporate overhead expenses not directly attributable to any one of the business segments.

These expenses are reported separate from our identified segments and are included in Selling, General and Administrative expenses on our consolidated statements of operations.

Americas Operating Income – Three Months Ended – November 30, 2024 Compared to November 30, 2023

Income from operations for the Americas decreased to $12.7 million, down $1.5 million, or 11%, due to higher operating expenses partially offset by increased sales.

Gross margin for the Americas segment stayed relatively constant decreasing slightly from 50.7% to 50.4% from period to period while sales increased $2.6 million.

Operating expenses increased $4.1 million primarily due to higher employee-related costs as a result of increased headcount and annual compensation increases as well as an increase in provision for credit losses from period to period.

Operating income as a percentage of net sales decreased from 22.2% to 18.2% period over period.

EIMEA Operating Income – Three Months Ended – November 30, 2024 Compared to November 30, 2023

Income from operations for the EIMEA segment increased to $13.7 million, up $4.2 million, or 44%, primarily due to a $8.7 million increase in sales and a higher gross margin, partially offset by higher operating expenses.

Gross margin for the EIMEA segment increased from 52.0% to 54.8% 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 $3.5 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 22.8% to 23.1% period over period.

EIMEA Operating Income – Nine Months Ended – May 31, 2024 Compared to May 31, 2023

Income from operations for the EIMEA segment increased to $35.3 million, up $6.7 million, or 23%, primarily due to a $22.4 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 51.7% to 54.4% primarily due changes in sales mix and market mix from period to period, favorable changes from foreign currency exchange rates as well as the combined impact of decreases in the costs of petroleum-based specialty chemicals and aerosol cans.

Gross margin for the EIMEA segment increased from 54.9% to 57.8% primarily due to the favorable impact of decreases in the costs of aerosol cans and changes in sales mix and market mix from period to period.

Operating expenses increased $2.3 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 20.4% to 21.7% period over period.

Asia-Pacific Operating Income – Three Months Ended – May 31, 2024 Compared to May 31, 2023

Income from operations for the Asia-Pacific segment increased to $6.8 million, up $1.4 million, or 27%, primarily due to a $2.5 million increase in sales and a higher gross margin.

Gross margin for the Asia-Pacific segment increased from 56.3%

to 57.6% primarily due to the favorable impact of changes in sales mix and market mix from period to period.

Operating income as a percentage of net sales increased from 29.4% to 32.9% period over period.

Asia-Pacific Operating Income – Nine Months Ended – May 31, 2024 Compared to May 31, 2023

Income from operations for the Asia-Pacific segment increased to $25.3 million, up $3.3 million, or 15%, primarily due to a $4.8 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 55.2% to 58.5% primarily due to the favorable impact of price increases, as well as favorable changes to miscellaneous other input costs.

Operating expenses increased $1.6 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 addition, operating expenses increased due to higher A&P and freight expenses.

Operating income as a percentage of net sales increased from 19.5% to 23.8% period over period.

Asia-Pacific Operating Income – Three Months Ended – November 30, 2024 Compared to November 30, 2023

Income from operations for the Asia-Pacific segment decreased to $10.2 million, down $0.8 million, or 8%, primarily due to a $1.0 million decrease in sales partially offset by a higher gross margin.

Gross margin for the Asia-Pacific segment increased from 59.2% to 59.6% primarily due to the favorable impact of changes in sales mix and market mix from period to period.

Operating income as a percentage of net sales decreased from 40.0% to 38.3% period over period.

Unallocated Corporate

Unallocated Corporate Expenses – Three Months Ended – November 30, 2024 Compared to November 30, 2023

Unallocated Corporate expenses increased to $11.4 million, up $0.8 million, or 8%, as a result higher costs associated with cloud-based software solutions and the amortization of costs associated with the implementation of the ERP system in the United States.

Non-Operating Items

The following table summarizes non-operating income and expenses for our consolidated operations (in thousands):

Three Months Ended May 31, Nine Months Ended May 31,

2024 2023 Change 2024 2023 Change

Three Months Ended November 30,

2024 2023 Change

Interest income $ 148 $ 74 $ 74

Interest expense $ 873 $ 1,146 $ (273)

Other (expense) income, net $ (283) $ 243 $ (526) $ (516) $ 558 $ (1,074)

Other expense, net $ (141) $ (40) $ (101)

Provision for income taxes $ 5,331 $ 5,590 $ (259)

Interest Income

Interest income remained relatively consistent for both the three and nine months ended May 31, 2024 and 2023.

Interest Expense

Interest expense decreased by $0.4 million and $0.9 million for the three and nine months ended May 31, 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 decreased by $0.5 million and $1.1 million for the three and nine months ended May 31, 2024, respectively, primarily due to foreign currency exchange losses which were recorded for the three and nine months ended May 31, 2024 compared to net foreign currency exchange gains which were recorded in the same period of the prior fiscal year as a result of fluctuations in the foreign currency exchange rates for both the Euro and the U.S.

Dollar against the Pound Sterling.

Provision for Income Taxes

The provision for income taxes was 23.2% and 22.5% of income before income taxes for the three months ended May 31, 2024 and 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 14 – Income Taxes included in this report.

The provision for income taxes was 23.1% and 21.5% of income before income taxes for the nine months ended May 31, 2024 and 2023, respectively.

The provision for income taxes was 22.0% and 24.2% of income before income taxes for the three months ended November 30, 2024 and 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 increased 5% to $19.8 million, or $1.46 per common share on a fully diluted basis, for the three months ended May 31, 2024 compared to $18.9 million, or $1.38 per common share on a fully diluted basis, for the three months ended May 31, 2023.

Changes in foreign currency exchange rates from period to period had a favorable impact of $0.3 million on consolidated net income for the third quarter of fiscal year 2024.

Thus, on a constant currency basis, net income would have increased $0.7 million, or 4%, from period to period.

Net income increased 7% to $52.9 million, or $3.88 per common share on a fully diluted basis, for the nine months ended May 31, 2024 compared to $49.4 million, or $3.62 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 $1.5 million on consolidated net income for the nine months ended May 31, 2024.

Thus, on a constant currency basis, net income would have increased $1.9 million, or 4%, from period to period.

Net income increased 8% to $18.9 million, or $1.39 per common share on a fully diluted basis, for the three months ended November 30, 2024 compared to $17.5 million, or $1.28 per common share on a fully diluted basis, for the three months ended November 30, 2023.

Changes in foreign currency exchange rates from period to period had an estimated favorable impact of $0.5 million on consolidated net income for the first quarter of fiscal year 2025.

Performance Measures and Non-GAAP Reconciliations

3 unchanged sentences

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.

Implementation of such systems is related to initiatives associated with our strategic framework to help us achieve greater operational efficiencies.

Cloud computing amortization is recognized in selling, general and administrative expenses in our 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.

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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.

Given the anticipated divestiture of certain trade names of our homecare and cleaning products, progression on certain aspects of our business model may be challenged if the divestiture occurs.

However, we intend to focus our resources and investments from the potential sale of those brands on growing our higher growth and higher gross margin core business.

The following table summarizes the results of these performance measures:

Three Months Ended May 31, Nine Months Ended May 31,

2024 2023 2024 2023

Three Months Ended November 30,

Gross margin – GAAP 55 % 54 %

1 unchanged sentence

Adjusted EBITDA as a percentage of net sales – non-GAAP (1)

19 % 20 % 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.

6 unchanged sentences

Cost of Doing Business (in thousands, except percentages)

Three Months Ended May 31, Nine Months Ended May 31,

2024 2023 2024 2023

Three Months Ended November 30,

Total operating expenses – GAAP $ 58,965 $ 51,369

Amortization (1)

(640) (250) (1,456) (753)

Depreciation (in operating departments) (957) (1,049)

4 unchanged sentences

Adjusted EBITDA (in thousands, except percentages)

Three Months Ended May 31, Nine Months Ended May 31,

2024 2023 2024 2023

Three Months Ended November 30,

Net income – GAAP $ 18,925 $ 17,482

3 unchanged sentences

Amortization (1)

640 250 1,456 753

Depreciation 2,028 2,010

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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.

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.

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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 May 31, 2024, $19.5 million of this facility was classified as long-term and was entirely denominated in Euros.

As of November 30, 2024, $19.0 million of this facility was classified as long-term and was entirely denominated in Euros.

$22.6 million was classified as short-term and was entirely denominated in U.S.

In the United States, we held $66.8 million in fixed rate long-term borrowings as

of May 31, 2024, consisting of senior notes under our Note Agreement.

We paid $0.8 million in principal payments on our Series A Notes during the first nine months of fiscal year 2024.

In the United States, we held $66.4 million in fixed rate long-term borrowings as of November 30, 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 three months of fiscal year 2025.

There were no other letters of credit outstanding or restrictions on the amount available on our line of credit or notes.

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See Note 8 – Debt for additional information on these financial covenants.

At May 31, 2024, we were in compliance with all material debt covenants.

At November 30, 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 May 31, 2024, we had a total of $45.3 million in cash and cash equivalents.

At November 30, 2024, we had a total of $54.9 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.

1 unchanged sentence

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 $41.9 million remains available for the repurchase of shares of common stock as of May 31, 2024.

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 $38.3 million remains available for the repurchase of shares of common stock as of November 30, 2024.

The following table summarizes our cash flows by category for the periods presented (in thousands):

Nine Months Ended May 31,

Three Months Ended November 30,

2024 2023 Change

3 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents (2,051) 431 (2,482)

Net (decrease) increase in cash and cash equivalents $ (2,843) $ 560 $ (3,403)

Net increase in cash and cash equivalents $ 8,215 $ 2,174 $ 6,041

Operating Activities

Net cash provided by operating activities increased $9.2 million to $64.8 million for the nine months ended May 31, 2024.

Net cash provided by operating activities decreased $12.0 million to $14.9 million for the three months ended November 30, 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 nine months ended May 31, 2024 was net income of $52.9 million, which increased approximately $3.4 million from period to period.

Changes in adjustments to reconcile net income to cash increased net cash provided by operating activities by $4.5 million, primarily due to net unrealized foreign currency losses during the first nine months of the current fiscal year compared to net unrealized foreign currency gains in the corresponding period of the prior fiscal year, an increase in depreciation expense and a net deferred income tax expense for the nine months ended May 31, 2024 compared to net deferred tax benefit in the corresponding period of the prior fiscal year.

Changes in working capital decreased net cash provided by operating activities by $3.1 million for the nine months ended May 31, 2024 compared to a decrease of $4.3 million in the corresponding period of the prior fiscal year.

The favorable net change in working capital was primarily attributable to favorable changes in accounts payable and accrued liabilities balances during the first nine months of the current fiscal year compared to the corresponding period of the prior fiscal year, offset by unfavorable changes in trade and other accounts receivable balances due to the timing of collection of payments from customers in the U.S., and changes in inventory balances.

In the current and prior fiscal year, we took deliberate actions to decrease inventory levels after having increased them in fiscal year 2022 due to challenges within supply chain and increased lead times required by suppliers.

Our primary source of operating cash flows for the three months ended November 30, 2024 was net income of $18.9 million, which increased approximately $1.4 million from period to period.

Changes in adjustments to reconcile net income to cash decreased net cash provided by operating activities by $0.9 million, primarily due to a decreases in stock based

compensation and impairments of inventories partially offset by an increase in provision for credit losses during the first three months of the current fiscal year.

Changes in working capital decreased net cash provided by operating activities by $12.5 million for the three months ended November 30, 2024 primarily due to changes in inventory balances.

Changes in inventory balances decreased net cash provided by operating activities by $6.7 million.

The prior fiscal year comparison period had higher inventory levels built up from previous fiscal years and therefore fewer inventory purchases were made in the prior fiscal year.

In addition, net cash provided by operating activities decreased by $4.0 million primarily due to higher earned incentive payouts in the first quarter of fiscal year 2025 compared to the same period of the prior fiscal year.

Investing Activities

Net cash used in investing activities increased $4.9 million to $9.1 million for the nine months ended May 31, 2024, primarily due to the $6.2 million of cash used for the acquisition of a subsidiary.

Net cash used in investing activities remained relatively consistent from period to period.

Financing Activities

Net cash used in financing activities increased $4.1 million to $58.1 million for the nine months ended May 31, 2024.

This change was primarily due to a $2.0 million increase in dividends paid to stockholders, a $1.8 million increase in shares withheld to cover taxes on conversion of equity awards, and a $0.7 million increase in treasury stock repurchases.

These increases in cash outflows from period to period were partially offset by a slight decrease of $0.3 million in net repayments on our revolving credit facility.

Net cash used in financing activities increased $20.4 million to $4.1 million for the three months ended November 30, 2024.

This change was primarily due to net proceeds of $14.8 million on our revolving credit facility during the first three months of the fiscal year, compared to net repayments of $9.7 million in the corresponding period of the prior fiscal year.

In addition, cash used in financing activities increased due to a $2.2 million increase in shares withheld to cover taxes on conversion of equity awards, as well as a $1.2 million increase in treasury stock repurchases.

Effect of Exchange Rate Changes

1 unchanged sentence

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.

1 unchanged sentence

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 $0.4 million for the nine months ended May 31, 2024 as compared to an increase in cash of $3.2 million for the nine months ended May 31, 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 terms, was a decrease in cash of $2.1 million for the three months ended November 30, 2024 as compared to an increase in cash of $0.4 million for the three months ended November 30, 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 Euro and Pound Sterling against the U.S.

Commercial Commitments

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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 May 31, 2024, no such commitments were outstanding.

As of November 30, 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.

On June 18, 2024, the Company’s Board declared a cash dividend of $0.88 per share payable on July 31, 2024 to stockholders of record at the close of business on July 19, 2024.

On December 11, 2024, the Company’s Board approved a 7% increase in the regular quarterly cash dividend, increasing it from $0.88 per share to $0.94 per share.

The $0.94 per share dividend declared on December 11, 2024 is payable on January 31, 2025 to stockholders of record at the close of business on January 17, 2025.

Critical Accounting Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis