WD 40 CO 10-Q

Item 1. Financial Statements WD-40 COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited and in thousands, except share and per share amounts) November 30, 2024 August 31, 2024 Assets Current assets: Cash and cash equivalents $ 54,914 $ 46,699 Trade and other accounts receivable, net 111,433 117,493 Inventories 74,887 79,088 Other current assets 21,567 12,161 Total current assets 262,801 255,441 Property and equipment, net 59,384 62,983 Goodwill 96,584 96,985 Other intangible assets, net 2,287 6,222 Right-of-use assets 10,581 11,611 Deferred tax assets, net 948 993 Other assets 14,739 14,804 Total assets $ 447,324 $ 449,039 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 32,212 $ 35,960 Accrued liabilities 29,132 31,272 Accrued payroll and related expenses 20,581 26,055 Short-term borrowings 23,429 8,659 Income taxes payable 2,148 1,554 Total current liabilities 107,502 103,500 Long-term borrowings 84,552 85,977 Deferred tax liabilities, net 9,228 9,066 Long-term operating lease liabilities 5,297 5,904 Other long-term liabilities 14,448 14,066 Total liabilities 221,027 218,513 Commitments and Contingencies (Note 11) Stockholders’ equity: Common stock — authorized 36,000,000 shares, $ 0.001 par value; 19,940,370 and 19,925,212 shares issued at November 30, 2024 and August 31, 2024, respectively; and 13,549,989 and 13,548,581 shares outstanding at November 30, 2024 and August 31, 2024, respectively 20 20 Additional paid-in capital 174,258 175,642 Retained earnings 506,898 499,931 Accumulated other comprehensive loss ( 35,453 ) ( 29,268 ) Common stock held in treasury, at cost — 6,390,381 and 6,376,631 shares at November 30, 2024 and August 31, 2024, respectively ( 419,426 ) ( 415,799 ) Total stockholders’ equity 226,297 230,526 Total liabilities and stockholders’ equity $ 447,324 $ 449,039 See accompanying notes to condensed consolidated financial statements (unaudited). 3 Table of Contents WD-40 COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited and in thousands, except per share amounts) Three Months Ended November 30, 2024 2023 Net sales $ 153,495 $ 140,416 Cost of products sold 69,408 64,863 Gross profit 84,087 75,553 Operating expenses: Selling, general and administrative 50,525 44,135 Advertising and sales promotion 8,393 6,983 Amortization of definite-lived intangible assets 47 251 Total operating expenses 58,965 51,369 Income from operations 25,122 24,184 Other income (expense): Interest income 148 74 Interest expense ( 873 ) ( 1,146 ) Other expense, net ( 141 ) ( 40 ) Income before income taxes 24,256 23,072 Provision for income taxes 5,331 5,590 Net income $ 18,925 $ 17,482 Earnings per common share: Basic $ 1.39 $ 1.28 Diluted $ 1.39 $ 1.28 Shares used in per share calculations: Basic 13,548 13,560 Diluted 13,573 13,584 See accompanying notes to condensed consolidated financial statements (unaudited). 4 Table of Contents WD-40 COMPANY CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited and in thousands) Three Months Ended November 30, 2024 2023 Net income $ 18,925 $ 17,482 Other comprehensive income (loss): Foreign currency translation adjustment ( 6,185 ) 390 Total comprehensive income $ 12,740 $ 17,872 See accompanying notes to condensed consolidated financial statements (unaudited). 5 Table of Contents WD-40 COMPANY CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited and in thousands, except share and per share amounts) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders’ Equity Shares Amount Shares Amount Balance at August 31, 2024 19,925,212 $ 20 $ 175,642 $ 499,931 $ ( 29,268 ) 6,376,631 $ ( 415,799 ) $ 230,526 Issuance of common stock under share-based compensation plan, net of shares withheld for taxes 15,158 - ( 2,883 ) ( 2,883 ) Stock-based compensation 1,499 1,499 Cash dividends ($ 0.88 per share) ( 11,958 ) ( 11,958 ) Repurchases of common stock 13,750 ( 3,627 ) ( 3,627 ) Foreign currency translation adjustment ( 6,185 ) ( 6,185 ) Net income 18,925 18,925 Balance at November 30, 2024 19,940,370 $ 20 $ 174,258 $ 506,898 $ ( 35,453 ) 6,390,381 $ ( 419,426 ) $ 226,297 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders’ Equity Shares Amount Shares Amount Balance at August 31, 2023 19,905,815 $ 20 $ 171,546 $ 477,488 $ ( 31,206 ) 6,342,381 $ ( 407,670 ) $ 210,178 Issuance of common stock under share-based compensation plan, net of shares withheld for taxes 5,680 - ( 678 ) ( 678 ) Stock-based compensation 2,271 2,271 Cash dividends ($ 0.83 per share) ( 11,297 ) ( 11,297 ) Repurchases of common stock 11,500 ( 2,414 ) ( 2,414 ) Foreign currency translation adjustment 390 390 Net income 17,482 17,482 Balance at November 30, 2023 19,911,495 $ 20 $ 173,139 $ 483,673 $ ( 30,816 ) 6,353,881 $ ( 410,084 ) $ 215,932 See accompanying notes to condensed consolidated financial statements (unaudited). 6 Table of Contents WD-40 COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and in thousands) Three Months Ended November 30, 2024 2023 Operating activities: Net income $ 18,925 $ 17,482 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,075 2,261 Amortization of cloud computing implementation costs 416 57 Net gains on sales and disposals of property and equipment ( 41 ) ( 58 ) Deferred income taxes 522 625 Stock-based compensation 1,499 2,271 Unrealized foreign currency exchange (gains) losses ( 330 ) 322 Provision for credit losses 994 42 Write-off of inventories 255 811 Changes in assets and liabilities: Trade and other accounts receivable ( 293 ) 2,886 Inventories ( 2,651 ) 4,042 Other assets ( 1,177 ) 139 Operating lease assets and liabilities, net 14 ( 8 ) Accounts payable and accrued liabilities ( 1,730 ) ( 4,697 ) Accrued payroll and related expenses ( 4,954 ) ( 998 ) Other long-term liabilities and income taxes payable 1,406 1,739 Net cash provided by operating activities 14,930 26,916 Investing activities: Purchases of property and equipment ( 691 ) ( 786 ) Proceeds from sales of property and equipment 124 115 Net cash used in investing activities ( 567 ) ( 671 ) Financing activities: Treasury stock purchases ( 3,627 ) ( 2,414 ) Dividends paid ( 11,958 ) ( 11,297 ) Repayments of long-term senior notes ( 400 ) ( 400 ) Net proceeds (repayments) from revolving credit facility 14,771 ( 9,713 ) Shares withheld to cover taxes upon conversions of equity awards ( 2,883 ) ( 678 ) Net cash used in financing activities ( 4,097 ) ( 24,502 ) Effect of exchange rate changes on cash and cash equivalents ( 2,051 ) 431 Net increase in cash and cash equivalents 8,215 2,174 Cash and cash equivalents at beginning of period 46,699 48,143 Cash and cash equivalents at end of period $ 54,914 $ 50,317 Supplemental disclosure of noncash investing activities: Accrued capital expenditures $ 188 $ 190 Finance lease obligation settled with prepaid deposit $ — $ 3,855 See accompanying notes to condensed consolidated financial statements (unaudited). 7 Table of Contents WD-40 COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. The Company WD-40 Company (the “Company”), incorporated in Delaware and 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. The Company owns a wide range of 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®. Certain of our homecare and cleaning businesses are classified as held for sale as of November 30, 2024. Please refer to Note 3 Assets Held for Sale for additional information. The Company’s 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. The Company’s products are sold 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. Note 2. Basis of Presentation and Summary of Significant Accounting Policies Basis of Consolidation The unaudited condensed consolidated financial statements included herein have been prepared by the Company according to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The August 31, 2024 year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. In the opinion of management, the unaudited financial information for the interim periods shown reflects all adjustments necessary for a fair statement thereof and such adjustments are of a normal recurring nature. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2024, which was filed with the SEC on October 21, 2024. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. Global economies have experienced significant volatility in recent years. Although the Company’s estimates consider current conditions, the inputs into certain of the Company’s significant and critical accounting estimates include judgments and assumptions about the economic implications of factors that have been subject to such volatility and how management expects them to change in the future, as appropriate. It is possible that actual results experienced may materially differ from the Company’s estimates in future periods, which could materially affect its results of operations and financial condition. Foreign Currency Forward Contracts In the normal course of business, the Company employs established policies and procedures to manage its exposure to fluctuations in foreign currency exchange rates. The Company utilizes foreign currency forward contracts to limit its exposure to net asset balances held in non-functional currencies, primarily at its U.K. subsidiary. The Company monitors its foreign currency exchange rate exposures to ensure the overall effectiveness of its foreign currency hedge positions. 8 Table of Contents While the Company engages in foreign currency hedging activity to reduce its risk, for accounting purposes, none of its foreign currency forward contracts are designated as hedges. Foreign currency forward contracts are carried at fair value, with net realized and unrealized gains and losses recognized in other income (expense), net in the Company’s condensed consolidated statements of operations. Cash flows from settlements of foreign currency forward contracts are included in operating activities in the condensed consolidated statements of cash flows. Foreign currency forward contracts in an asset position at the end of the reporting period are included in other current assets, while foreign currency forward contracts in a liability position at the end of the reporting period are included in accrued liabilities in the Company’s condensed consolidated balance sheets. At November 30, 2024, the Company had a notional amount of $ 8.3 million outstanding in foreign currency forward contracts, which will mature in January 2025. Unrealized net gains and losses related to foreign currency forward contracts were not significant at November 30, 2024 and August 31, 2024. Realized net gains and losses related to foreign currency forward contracts were not significant for the three months ended November 30, 2024 and 2023. Both unrealized and realized net gains and losses are recorded in other (expense) income, net in the Company’s condensed consolidated statements of operations. Functional Currencies The reporting currency of the Company is the U.S. Dollar. The functional currency of each of the Company’s subsidiaries is based on the currency of the economic environment in which it operates. Management periodically assesses the functional currency of each subsidiary in accordance with Accounting Standards Codification (“ASC”) 830, “ Foreign Currency Matters ”. The functional currency of the Company’s U.K. subsidiary, the entity in which the EIMEA results are generated, has been the Pound Sterling through August 31, 2024. However, trends within EIMEA have indicated a shift towards the Euro over time. During the first quarter of fiscal year 2025, management determined that changes in economic facts and circumstances, such as additional shifts in the currency mix of our operating income, represented a significant change that was other-than-temporary and required a change in functional currency from Pound Sterling to Euro at the Company’s U.K. subsidiary. In accordance with ASC 830-10-45-7, a change in functional currency should be made on the date that significant changes in economic facts and circumstances occurred. Although such a change could occur on any date during the fiscal year, the use of a date at the beginning of the most recent reporting period is permissible. Accordingly, the change in functional currency from Pound Sterling to Euro at the Company’s U.K. subsidiary was accounted for prospectively from September 1, 2024. In the period of a functional currency change, nonmonetary assets and liabilities at the impacted subsidiary are remeasured into the new functional currency using the exchange rate on the date the asset or liability arose. These amounts are then translated into the Company’s reporting currency, the U.S. Dollar, based on the exchange rate at the date of the change in functional currency. The difference between this amount and the prior translated balance was not material and was recorded in accumulated other comprehensive loss in the Company’s consolidated balance sheet as of September 1, 2024. The balances previously recorded in accumulated comprehensive loss for prior periods through August 31, 2024 were not reversed upon this prospective change in functional currency. Monetary assets and liabilities not denominated in the new functional currency, the Euro, will create transaction gains and losses subsequent to the change in functional currency. The Company does not expect that the impact of such gains and losses will be material to the Company’s consolidated statements of operations. Fair Value of Financial Instruments ASC 820, “ Fair Value Measurements and Disclosures ”, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company categorizes its financial assets and liabilities measured at fair value into a hierarchy that categorizes fair value measurements into the following three levels based on the types of inputs used in measuring their fair value: Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities; Level 2: Observable market-based inputs or observable inputs that are corroborated by market data; and Level 3: Unobservable inputs reflecting the Company’s own assumptions. Under fair value accounting, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As of November 30, 2024, the Company had no assets or liabilities that are measured at fair value in the financial statements on a recurring basis, with the exception of the foreign currency forward contracts, which are classified as Level 2 within the fair value hierarchy. The carrying values of cash equivalents and short-term borrowings are recorded at cost, which approximates their fair values, primarily due to their short-term nature. In 9 Table of Contents addition, the carrying value of borrowings held under the Company’s revolving credit facility approximates fair value, based on Level 2 inputs, due to the variable nature of underlying interest rates, which generally reflect market conditions. The Company’s fixed rate long-term borrowings consist of senior notes and are recorded at carrying value. The Company estimates that the fair value of its senior notes, based on Level 2 inputs, was approximately $ 60.3 million as of November 30, 2024, which was determined based on a discounted cash flow analysis using current market interest rates for instruments with similar terms, compared to their carrying value of $ 66.4 million. During the three months ended November 30, 2024, the Company did not record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial recognition. Recently Issued Accounting Standards In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” These amendments primarily require enhanced disclosures about significant segment expenses regularly provided to the Chief Operating Decision Maker and included within each reported measure of segment profit or loss. The amendments are effective for the Company’s annual periods beginning September 1, 2024, and interim periods beginning September 1, 2025, with early adoption permitted, and will be applied retrospectively to all prior periods presented in the financial statements. The Company has been evaluating this ASU to determine its impact on the Company’s disclosures. In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning September 1, 2025, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is in the process of evaluating this ASU to determine its impact on the Company’s disclosures. In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” which includes amendments that require disclosure in the notes to financial statements of specified information about certain costs and expenses. The amendments are effective for the Company’s annual periods beginning September 1, 2027, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is in the process of evaluating this ASU to determine its impact on the Company’s disclosures. Note 3. Assets Held for Sale Reclassification to Held for Sale of Certain Homecare and Cleaning Product Businesses In the first quarter of fiscal year 2025, the Company’s homecare and cleaning product businesses in the Americas and EIMEA segments met the criteria to be classified as held for sale. Management has determined that the planned sale of these brands does not represent a strategic shift having a major effect on the Company’s operations and financial results and therefore does not meet the criteria for classification as discontinued operations in the first quarter of fiscal year 2025. The Company expects to sell these homecare and cleaning product businesses in the Americas and EIMEA segments in fiscal year 2025. Assets included as part of the disposal group classified as held for sale consisted of intangible assets, goodwill and inventory. There are no liabilities in the disposal group. The following table summarizes assets held for sale (in thousands): November 30, 2024 Intangibles, Net 3,897 Goodwill 1,069 Inventory 4,899 Total assets held for sale (1) $ 9,865 (1) Total assets held for sale are included in other current assets on the Company’s condensed consolidated balance sheets. 10 Table of Contents Note 4. Inventories Inventories consisted of the following (in thousands): November 30, 2024 August 31, 2024 Product held at third-party contract manufacturers $ 6,035 $ 8,199 Raw materials and components 9,356 10,037 Work-in-process 521 521 Finished goods 63,874 60,331 Inventory held for sale (1) ( 4,899 ) — Total $ 74,887 $ 79,088 (1) Inventory held for sale consists mostly of finished goods inventory and is included in other current assets on the Company’s condensed consolidated balance sheets. Note 5. Property and Equipment and Capitalized Cloud Computing Implementation Costs Property and equipment, net, consisted of the following (in thousands): November 30, 2024 August 31, 2024 Machinery, equipment and vehicles $ 52,886 $ 53,844 Buildings and improvements 27,524 28,433 Computer and office equipment 6,573 6,652 Internal-use software 9,370 9,799 Furniture and fixtures 3,076 3,165 Capital in progress 2,732 3,344 Land 4,187 4,260 Subtotal 106,348 109,497 Less: accumulated depreciation and amortization ( 46,964 ) ( 46,514 ) Total $ 59,384 $ 62,983 As of November 30, 2024 and August 31, 2024, the Company’s condensed consolidated balance sheets included $ 13.7 million and $ 13.4 million, respectively, of capitalized cloud computing implementation costs recorded as other assets within the Company’s condensed consolidated balance sheets. Accumulated amortization associated with these assets was $ 2.5 million and $ 2.1 million as of November 30, 2024 and August 31, 2024, respectively. Amortization expense associated with these assets was $ 0.4 million for the three months ended November 30, 2024 and was not significant for the three months ended November 30, 2023. Note 6. Goodwill and Other Intangible Assets Goodwill The following table summarizes the changes in the carrying amounts of goodwill by segment (in thousands): Americas EIMEA Asia-Pacific Total Balance as of August 31, 2024 $ 86,765 $ 9,011 $ 1,209 $ 96,985 Translation adjustments 86 582 - 668 Goodwill held for sale (1) ( 995 ) ( 74 ) - ( 1,069 ) Balance as of November 30, 2024 $ 85,856 $ 9,519 $ 1,209 $ 96,584 (1) Goodwill held for sale is included in other current assets on the Company’s condensed consolidated balance sheets. 11 Table of Contents There were no indicators of impairment identified as a result of the Company’s review of events and circumstances related to its goodwill as of November 30, 2024. To date, there have been no impairment losses identified and recorded related to the Company’s goodwill. Definite-lived Intangible Assets The Company’s definite-lived intangible assets include the trade names Spot Shot, Carpet Fresh, 1001, EZ REACH and GT85 trade names, as well as intangible assets related to customer relationships and a non-compete agreement acquired in connection with the Company’s purchase of a Brazilian distributor during the fiscal year ended August 31, 2024. All of these assets are included in other intangible assets, net in the Company’s condensed consolidated balance sheets. In the first quarter of fiscal year 2025, the Company’s homecare and cleaning product businesses in the Americas and EIMEA segments was classified as held for sale. Definite-lived intangible assets included in homecare and cleaning include Spot Shot and Carpet Fresh in the Americas segment as well as the 1001 trade name in the EIMEA segment. Spot Shot in the Americas segment was recorded at an acquisition-date fair value of $ 13.7 million and was being amortized on a straight-line basis over the useful life of 17 years. Accumulated amortization expense was $ 10.9 million and the carrying value of this asset was $ 2.8 million as of August 31, 2024. Carpet Fresh in the Americas segment was recorded at an acquisition-date fair value of $ 2.8 million, was being amortized on a straight-line basis over the useful life of 13 years and was fully amortized as of August 31, 2022. 1001 trade name in the EIMEA segment was recorded at an acquisition-date fair value of $ 3.3 million and was being amortized on a straight-line basis over the useful life of 20 years. Accumulated amortization expense was $ 2.2 million and the carrying value of this asset was $ 1.1 million as of August 31, 2024. Amortization of the Spot Shot and 1001 trade names ceased as of September 1, 2024. The following table summarizes the definite-lived intangible assets and the related accumulated amortization (in thousands): November 30, 2024 August 31, 2024 Gross carrying amount $ 39,091 $ 38,863 Accumulated amortization ( 32,907 ) ( 32,641 ) Less: intangibles, net current held for sale (1) ( 3,897 ) - Net carrying amount $ 2,287 $ 6,222 (1) Intangibles, current held for sale are included in other current assets on the Company’s condensed consolidated balance sheets. There has been no impairment charge for the three months ended November 30, 2024 and there were no indicators of impairment identified as a result of the Company’s review of events and circumstances related to its existing definite-lived intangible assets. Changes in the carrying amounts of definite-lived intangible assets by segment for the three months ended November 30, 2024 are summarized below (in thousands): Americas EIMEA Asia-Pacific Total Balance as of August 31, 2024 $ 5,354 $ 868 - $ 6,222 Amortization expense ( 47 ) - - ( 47 ) Translation adjustments ( 114 ) 123 - 9 Less: Intangibles, net current held for sale (1) ( 2,820 ) ( 1,077 ) - ( 3,897 ) Balance as of November 30, 2024 $ 2,373 $ ( 86 ) $ - $ 2,287 (1) Intangibles, current held for sale are included in other current assets on the Company’s condensed consolidated balance sheets. The estimated amortization expense for the Company’s definite-lived intangible assets is not significant in any future individual fiscal year. 12 Table of Contents Note 7. Accrued and Other Liabilities Accrued liabilities consisted of the following (in thousands): November 30, 2024 August 31, 2024 Accrued advertising and sales promotion expenses $ 13,896 $ 15,091 Accrued professional services fees 2,160 2,058 Accrued sales taxes and other taxes 3,044 2,885 Deferred revenue 3,044 4,288 Short-term operating lease liability 2,140 2,294 Other 4,848 4,656 Total $ 29,132 $ 31,272 Accrued payroll and related expenses consisted of the following (in thousands): November 30, 2024 August 31, 2024 Accrued incentive compensation $ 3,828 $ 13,532 Accrued payroll 5,685 4,559 Accrued payroll taxes 4,696 2,907 Accrued profit sharing 5,646 4,403 Other 726 654 Total $ 20,581 $ 26,055 Note 8. Debt As of November 30, 2024, the Company held borrowings under two separate agreements as detailed below. Note Purchase and Private Shelf Agreement The Company holds borrowings under its Note Purchase and Private Shelf Agreement, as amended (the “Note Agreement”) by and among the Company, PGIM, Inc. (“Prudential”), and certain affiliates and managed accounts of Prudential (the “Note Purchasers”). As of November 30, 2024, the Company had outstanding balances on its series A, B and C notes issued under the Note Agreement. The Note Agreement was most recently amended on April 30, 2024 (the “Fourth Amendment”). The Fourth Amendment permitted the Company to enter into an amendment to its revolving credit agreement with Bank of America, N.A. and also included certain conforming amendments to the credit agreement, including the revision of financial and restrictive covenants. Credit Agreement On April 30, 2024, the Company and certain subsidiaries of the Company, entered into a Second Amended and Restated Credit Agreement with Bank of America, N.A. (the “Credit Agreement”). The Credit Agreement modified certain terms and conditions of the Company’s previous Amended and Restated Agreement dated March 16, 2020 (as amended on September 30, 2020, and November 29, 2021), and extended the maturity date for the revolving credit facility from September 30, 2025 to April 30, 2029. Borrowings under the Credit Agreement will be used for the Company’s various operating, investing and financing needs. The Company’s Credit Agreement with Bank of America, N.A. consists of a revolving commitment for borrowing by the Company up to $ 125.0 million with a sublimit of $ 95.0 million for WD-40 Company Limited, a wholly owned operating subsidiary of the Company for Europe, India, the Middle East and Africa. In addition, the Company’s index rate under the Credit Agreement for U.S. Dollar borrowings changed from the Bloomberg Short-term Bank Yield Index rate to the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York. 13 Table of Contents Short-term and long-term borrowings under the Company’s Credit Agreement and Note Agreement consisted of the following (in thousands): Issuance Maturities November 30, 2024 August 31, 2024 Credit Agreement – revolving credit facility (1) Various 4/30/2029 $ 41,581 $ 27,836 Note Agreement Series A Notes – 3.39 % fixed rate (2) 11/15/2017 2025-2032 14,400 14,800 Series B Notes – 2.50 % fixed rate (3) 9/30/2020 11/15/2027 26,000 26,000 Series C Notes – 2.69 % fixed rate (3) 9/30/2020 11/15/2030 26,000 26,000 Total borrowings 107,981 94,636 Short-term portion of borrowings ( 23,429 ) ( 8,659 ) Total long-term borrowings $ 84,552 $ 85,977 (1) The Company has the ability to refinance any draw under the line of credit with successive short-term borrowings through the maturity date. Outstanding draws for which management has 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 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 denominated in U.S. Dollars. Euro and Pound Sterling denominated draws fluctuate in U.S. Dollars from period to period due to changes in foreign currency exchange rates. (2) Principal payments are required semi-annually in May and November of each year in equal installments of $ 0.4 million through May 15, 2032, resulting in $ 0.8 million classified as short-term. The remaining outstanding principal in the amount of $ 8.4 million will become due on November 15, 2032. (3) Interest on notes is payable semi-annually in May and November of each year with no principal due until the maturity date. Both the Note Agreement and the Credit Agreement contain representations, warranties, events of default and remedies, as well as affirmative, negative and other financial covenants customary for these types of agreements. These covenants include, among other things, certain limitations on the ability of the Company and its subsidiaries to incur indebtedness, create liens, dispose of assets, make investments, declare, make or incur obligations to make certain restricted payments, including payments for the repurchase of the Company’s capital stock and enter into certain merger or consolidation transactions. The Credit Agreement includes, among other limitations on indebtedness, a $ 125.0 million limit on other unsecured indebtedness. Each agreement also includes a most favored lender provision which requires that any time any other lender has the benefit of one or more financial or operational covenants that is different than, or similar to, but more restrictive than those contained in its own agreement, those covenants shall be immediately and automatically incorporated by reference to the other lender’s agreement. Both the Note Agreement and the Credit Agreement require the Company to adhere to the same financial covenants. For the financial covenants, the definition of consolidated EBITDA includes the add back of non-cash stock-based compensation to consolidated net income when arriving at consolidated EBITDA. The terms of the financial covenants are as follows: • The consolidated leverage ratio cannot be greater than three and a half to one. The consolidated leverage ratio means, as of any date of determination, the ratio of (a) consolidated funded indebtedness as of such date to (b) consolidated EBITDA for the most recently completed four fiscal quarters. • The consolidated interest coverage ratio cannot be less than three to one. The consolidated interest coverage ratio means, as of any date of determination, the ratio of (a) consolidated EBITDA for the most recently completed four fiscal quarters to (b) consolidated interest charges for the most recently completed four fiscal quarters. As of November 30, 2024, the Company was in compliance with all debt covenants under both the Note Agreement and the Credit Agreement. Note 9. Share Repurchase Plan On June 19, 2023, the Company’s Board (the “Board”) approved a share repurchase plan (the “2023 Repurchase Plan”). Under the 2023 Repurchase Plan, which became effective on September 1, 2023, the Company is authorized to acquire up to $ 50.0 million of its outstanding shares through August 31, 2025. The timing and amount of repurchases are based on terms and conditions as may be acceptable to the Company’s Chief Executive Officer and Chief Financial Officer, subject 14 Table of Contents to present loan covenants and in compliance with all laws and regulations applicable thereto. During the three months ended November 30, 2024, the Company repurchased 13,750 shares at an average price of $ 263.75 per share, for a total cost of $ 3.6 million under this $ 50.0 million plan. As of November 30, 2024, the Company is authorized to purchase an additional $ 38.3 million under the 2023 Repurchase Plan. Note 10. Earnings per Common Share The table below reconciles net income to net income available to common stockholders (in thousands): Three Months Ended November 30, 2024 2023 Net income $ 18,925 $ 17,482 Less: Net income allocated to participating securities ( 64 ) ( 66 ) Net income available to common stockholders $ 18,861 $ 17,416 The table below summarizes the weighted-average number of common shares outstanding included in the calculation of basic and diluted EPS (in thousands): Three Months Ended November 30, 2024 2023 Weighted-average common shares outstanding, basic 13,548 13,560 Weighted-average dilutive securities 25 24 Weighted-average common shares outstanding, diluted 13,573 13,584 For the three months ended November 30, 2024 and 2023 , weighted-average stock-based equity awards outstanding that are non-participating securities in the amount of 6,188 and 5,404 , respectively, were excluded from the calculation of diluted EPS under the treasury stock method as they were anti-dilutive. Note 11. Revenue The following table presents the Company’s revenues by segment and major source (in thousands): Three Months Ended November 30, 2024 Americas EIMEA Asia-Pacific Total WD-40 Multi-Use Product $ 52,901 $ 44,866 $ 20,780 $ 118,547 WD-40 Specialist 8,233 7,817 3,122 19,172 Other maintenance products (1) 4,274 3,194 320 7,788 Total maintenance products 65,408 55,877 24,222 145,507 HCCP (2) 4,028 1,606 2,354 7,988 Total net sales $ 69,436 $ 57,483 $ 26,576 $ 153,495 Three Months Ended November 30, 2023 Americas EIMEA Asia-Pacific Total WD-40 Multi-Use Product $ 48,511 $ 37,044 $ 22,122 $ 107,677 WD-40 Specialist 7,108 6,666 3,068 16,842 Other maintenance products (1) 4,126 3,062 438 7,626 Total maintenance products 59,745 46,772 25,628 132,145 HCCP (2) 4,330 1,982 1,959 8,271 Total net sales $ 64,075 $ 48,754 $ 27,587 $ 140,416 (1) Other maintenance products consist of the 3-IN-ONE and GT85 brands. (2) Homecare and cleaning products (“HCCP”). Contract Balances Contract liabilities consist of deferred revenue related to undelivered products. Deferred revenue is recorded when payments have been received from customers for undelivered products. Revenue is subsequently recognized when revenue 15 Table of Contents recognition criteria are met, generally when control of the product transfers to the customer. The Company had contract liabilities of $ 3.0 million and $ 4.3 million as of November 30, 2024 and August 31, 2024, respectively. Substantially all of the $ 4.3 million that was included in contract liabilities as of August 31, 2024 was recognized to revenue during the three months ended November 30, 2024. These contract liabilities are recorded in accrued liabilities on the Company’s condensed consolidated balance sheets. Contract assets are recorded if the Company has satisfied a performance obligation but does not yet have an unconditional right to consideration. The Company did not have any contract assets as of November 30, 2024 and August 31, 2024. The Company has an unconditional right to payment for its trade and other accounts receivable on the Company’s condensed consolidated balance sheets. These receivables are presented net of an allowance for credit losses of $ 1.8 million as of November 30, 2024 and which was not significant as of August 31, 2024. Note 12. Commitments and Contingencies Purchase Commitments The Company has ongoing relationships with various suppliers (contract manufacturers) that manufacture the Company’s products and third-party distribution centers that warehouse and ship the Company’s 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 the Company’s third-party distribution centers or customers in accordance with agreed upon shipment terms. Although the Company has contractual minimum purchase obligations with certain contract manufacturers, such obligations are either immaterial or below the volume of goods that the Company has historically purchased. In the ordinary course of business, supply needs are communicated by the Company to its contract manufacturers based on orders and short-term projections, ranging from two months to six months . The Company is committed to purchase the products produced by the contract manufacturers based on the projections provided. Upon the termination of contracts with contract manufacturers, the Company obtains certain inventory control rights and is obligated to work with the contract manufacturer to sell through all product held by or manufactured by the contract manufacturer on behalf of the Company during the termination notification period. If any inventory remains at the contract manufacturer at the termination date, the Company is 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, the Company may also enter into commitments with other manufacturers to purchase finished goods and components to support innovation and renovation initiatives and/or supply chain initiatives. As of November 30, 2024, no such commitments were outstanding. Litigation From time to time, the Company is subject to various claims, lawsuits, investigations and proceedings arising in the ordinary course of business, including but not limited to, product liability litigation and other claims and proceedings with respect to intellectual property, breach of contract, labor and employment, tax and other matters. As of November 30, 2024, there were no unasserted claims or pending proceedings for claims against the Company that the Company believes will result in a probable loss. As to claims that the Company believes may result in a reasonably possible loss, the Company believes that no reasonably possible outcome of any such claim will have a materially adverse impact on the Company’s financial condition, results of operations or cash flows. Indemnifications As permitted under Delaware law, the Company has agreements whereby it indemnifies senior officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is not capped; however, the Company maintains Director and Officer insurance coverage that mitigates the Company’s exposure with respect to such obligations. As a result of the Company’s insurance coverage, management believes that the estimated fair value of these indemnification agreements is minimal. Thus, no liabilities have been recorded for these agreements as of November 30, 2024. From time to time, the Company enters into indemnification agreements with certain parties in the ordinary course of business, including agreements with lenders, lessors, contract manufacturers, marketing distributors, customers and certain vendors. Indemnification agreements are generally entered into in the context of the particular agreements and are provided in an attempt to allocate risk of loss in connection with the consummation of the underlying contractual arrangements. Although the maximum amount of future payments that the Company could be required to make under these 16 Table of Contents indemnification agreements is not capped, management believes that the Company maintains adequate levels of insurance coverage to protect the Company with respect to most potential claims arising from such agreements and that such agreements do not otherwise have value separate and apart from the liabilities incurred in the ordinary course of the Company’s business. Thus, no liabilities have been recorded with respect to such indemnification agreements as of November 30, 2024. Note 13. Income Taxes The Company uses an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates, to determine its quarterly provision for income taxes. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter. 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. This 2.2 % decrease in the effective tax rate from period to period was primarily due to an increase in excess tax benefits from settlements of stock-based equity awards that are recognized in the provision for income taxes. The Company is subject to taxation in the U.S. and in various state and foreign jurisdictions. Due to expired statutes of limitations, the Company’s federal income tax returns for years prior to fiscal year 2018 are not subject to examination by the U.S. Internal Revenue Service. Generally, for the majority of state and foreign jurisdictions where the Company does business, periods prior to fiscal year 2020 are no longer subject to examination. The Company is currently under audit in various state jurisdictions for fiscal years 2021 through 2022. The Company has estimated that up to $ 13.4 million of unrecognized tax benefits related to income tax positions may be affected by the resolution of tax examinations or expiring statutes of limitations within the next twelve months. This includes $ 13.1 million associated with the Tax Cuts and Jobs Act’s mandatory one-time “toll tax” on unremitted foreign earnings. Audit outcomes and the timing of settlements are subject to significant uncertainty. Please refer to subsequent events for potential unrecognized tax benefits related to income tax positions after the period ending November 30, 2024. Note 14. Business Segments and Foreign Operations The Company evaluates the performance of its segments and allocates resources to them based on sales and income from operations. The Company is organized on the basis of geographical area into the following three segments: the Americas; EIMEA; and Asia-Pacific. Segment data does not include inter-segment revenues. Unallocated corporate expenses are general corporate overhead expenses not directly attributable to the business segments and are reported separate from the Company’s identified segments. Corporate overhead costs include expenses for the Company’s accounting and finance, information technology, legal, human resources, research and development, quality control and executive management functions, as well as all direct costs associated with public company compliance matters including legal, audit and other professional services costs. 17 Table of Contents Summary information about reportable segments is as follows (in thousands): For the Three Months Ended Americas EIMEA Asia-Pacific Unallocated Corporate (1) Total November 30, 2024 Net sales $ 69,436 $ 57,483 $ 26,576 $ - $ 153,495 Income from operations $ 12,652 $ 13,681 $ 10,180 $ ( 11,391 ) $ 25,122 Depreciation and amortization expense (2) $ 931 $ 1,040 $ 58 $ 46 $ 2,075 Interest income $ 58 $ 63 $ 27 $ - $ 148 Interest expense $ 653 $ 219 $ 1 $ - $ 873 November 30, 2023 Net sales $ 64,075 $ 48,754 $ 27,587 $ - $ 140,416 Income from operations $ 14,196 $ 9,515 $ 11,025 $ ( 10,552 ) $ 24,184 Depreciation and amortization expense (2) $ 1,051 $ 1,074 $ 57 $ 79 $ 2,261 Interest income $ - $ 46 $ 28 $ - $ 74 Interest expense $ 560 $ 584 $ 2 $ - $ 1,146 (1) These expenses are reported separately from the Company’s identified segments and are included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations. (2) Amortization presented above includes amortization of definite-lived intangible assets and excludes amortization of implementation costs associated with cloud computing arrangements. The Company’s Chief Operating Decision Maker does not review assets by segment as part of the financial information provided, and therefore, no asset information is provided in the above table. Note 15. Subsequent Events Dividend Declaration 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. Release of Uncertain Tax Position Due to the expiration of federal statutes on December 17, 2024, the Company released an unrecognized tax benefit associated with the Tax Cuts and Jobs Act of 2017 mandatory onetime “toll tax” on unremitted foreign earnings. The release of this unrecognized tax benefit is expected to generate a favorable income tax adjustment of $ 11.9 million, net of federal benefit, in the fiscal second quarter ending February 28, 2025. 18 Table of Contents