What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-09 compared with 2025-01-10 · 235 added, 130 removed, 276 unchanged (57% of the section changed)

8 unchanged sentences

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;

expected benefits from any acquisition or divestiture transaction;

acquired business not performing as expected;

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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;

changes in trade policies and tariffs;

the impacts from inflationary trends, supply chain constraints and supply chain disruptions;

changes in interest rates;

8 unchanged sentences

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.

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

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

The following summarizes the financial and operational highlights for our business during the six months ended February 28, 2025:

• Consolidated net sales increased $20.1 million or 7%, to $299.6 million compared to the corresponding period of the prior fiscal year.

Increases in sales volume favorably impacted net sales by approximately $22.2 million from period to period.

Increases in the average selling price of our products positively impacted net sales by approximately $1.2 million from period to period, primarily due to sales price increases implemented in certain regions during the prior fiscal year.

Increases in the average selling price of our products positively impacted net sales by approximately $1.3 million from period to period.

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.

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 sales was unfavorably impacted by changes in foreign currency exchange rates which was estimated to be $3.4 million from period to period.

• Gross profit as a percentage of net sales increased to 54.7% from 53.1% in the corresponding period of the prior fiscal year.

• Consolidated net income increased $15.8 million, or 48%, compared to the corresponding period of the prior fiscal year.

During the second quarter of fiscal year 2025, we released an uncertain tax position that generated a favorable income tax adjustment of $11.9 million.

Excluding this one-time benefit, net income would have increased $3.8 million, or 12%.

• Diluted earnings per common share were $3.58 versus $2.42 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.

As noted above, during the second quarter of fiscal year 2025, we released an uncertain tax position that generated a favorable income tax adjustment.

Excluding this one-time benefit, on a Non-GAAP basis, adjusted diluted EPS was $2.71.

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

• We returned approximately $31.4 million to our stockholders in the first half of fiscal year 2025 through share repurchases and dividends.

Global Economic Conditions

We continue to monitor changes in international trade relations and trade policy, including those related to tariffs, which could adversely impact our results.

We utilize third-party manufacturers and distribution centers that are primarily in regions near our customers and end users, which decreases the potential unfavorable impacts of new tariffs on purchases of our inventory and shipments to our customers.

However, certain inputs sourced by our third-party manufacturers to produce our inventory may increase in cost and unfavorably impact our results.

In addition, any supply chain constraints, inflationary impacts or weakening in consumer demand as a result of changes to global economic environments could impact our results.

See the Company’s risk factors disclosed in Part I―Item 1A, “Risk Factors,” in its Annual Report on Form 10-K for the fiscal year ended August 31, 2024, which was filed with the SEC on October 21, 2024 for further information on risks related to global economic conditions.

Results of Operations

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

Three and Six Months Ended February 28, 2025 Compared to Three and Six Months Ended February 29, 2024

Operating Items

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

Three Months Ended November 30,

Three Months Ended February 28/29, Six Months Ended February 28/29,

2025 2024 Change from

Dollars Percent

Prior Year 2025 2024 Change from

Dollars Percent Dollars Percent

WD-40 Multi-Use Product $ 113,692 $ 107,234 $ 6,458 6 % $ 232,239 $ 214,911 $ 17,328 8 %

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

Three Months Ended November 30,

Three Months Ended February 28/29, Six Months Ended February 28/29,

2025 2024 Change from

Dollars Percent

Prior Year 2025 2024 Change from

Dollars Percent Dollars Percent

Americas $ 65,529 $ 63,507 $ 2,022 3 % $ 134,965 $ 127,582 $ 7,383 6 %

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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 November 30,

Three Months Ended February 28/29, Six Months Ended February 28/29,

2025 2024 Change from

Dollars Percent

Prior Year 2025 2024 Change from

Dollars Percent Dollars Percent

WD-40 Multi-Use Product $ 51,058 $ 49,043 $ 2,015 4 % $ 103,959 $ 97,554 $ 6,405 7 %

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Change from Prior Year

First Quarter

First Quarter Second Quarter Year to Date

Increase in average selling price (1)

$ 0.2 $ 0.3 $ 0.5

Increase in sales volume (1)

2 unchanged sentences

(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 – November 30, 2024 Compared to November 30, 2023

Americas Sales – Three Months Ended – February 28, 2025 Compared to February 29, 2024

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

• 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 $0.3 million, or 7%, primarily due to reduced sales volume in the U.S.

• WD-40 Multi-Use Product sales increased $2.0 million, or 4%, primarily due to increase in Latin America of $4.7 million, or 47%.

Sales in Latin America were favorably impacted by increased sales in Brazil by $3.4 million, which benefited from a shift from an indirect distribution model to a direct model beginning in the third quarter of fiscal year 2024.

In addition, sales in other Latin American markets increased $1.3 million due to improved economic conditions in certain regions as well as a higher level of promotional activities.

This increase in Latin America was partially offset by lower sales in U.S.

and Mexico of $2.7 million and $0.7 million, or 7% and 13%, respectively, due to decreased volumes as a result of the timing of customer orders.

Mexico also decreased due to lower demand as a result of worsening economic conditions and unfavorable changes in foreign currency exchange rates from period to period.

• WD-40 Specialist sales increased $0.6 million, or 9%, primarily due to new distribution and increased demand in the United States.

• Other maintenance product sales decreased $0.4 million 10%, primarily due to decrease in Mexico due to decreased volumes from a lower level of promotional activities, as well as unfavorable changes in foreign currency exchange rates.

• Homecare and cleaning product sales decreased $0.2 million, or 6%, primarily due to changes in distribution and 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 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.

• For the three months ended February 28, 2025, 70% of sales came from the U.S., and 30% of sales came from Canada and Latin America combined compared to the three months ended February 29, 2024 when 76% of sales came from the U.S., and 24% of sales came from Canada and Latin America.

Americas Sales – Six Months Ended – February 28, 2025 Compared to February 29, 2024

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

• WD-40 Multi-Use Product sales increased $6.4 million, or 7%, primarily due to increases in Latin America of $7.0 million, or 33%.

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 February 28, 2025.

In addition, sales in other Latin American markets increased $1.7 million due to improved economic conditions in certain regions as well as a higher level of promotional activities.

This increase in Latin America was partially offset by lower sales in Mexico of $2.2 million, or 20%, due to lower demand as a result of worsening economic conditions, as well as unfavorable changes in foreign currency exchange rates.

• WD-40 Specialist sales increased $1.8 million , or 12% , 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 $0.5 million, or 7%, primarily due to changes in distribution as well as reduced demand in the U.S.

as discussed above in the section for the three months ended February 28, 2025.

• For the six months ended February 28, 2025, 72% of sales came from the U.S., and 28% of sales came from Canada and Latin America combined compared to the six months ended February 29, 2024 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 November 30,

Three Months Ended February 28/29, Six Months Ended February 28/29,

2025 2024 Change from

Dollars Percent

Prior Year 2025 2024 Change from

Dollars Percent Dollars Percent

WD-40 Multi-Use Product $ 46,406 $ 41,572 $ 4,834 12 % $ 91,272 $ 78,616 $ 12,656 16 %

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Change from Prior Year

First Quarter

First Quarter Second Quarter Year to Date

Increase in average selling price (1)

$ 0.5 $ 0.9 $ 1.4

Increase in sales volume (1)

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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 – November 30, 2024 Compared to November 30, 2023

EIMEA Sales – Three Months Ended – February 28, 2025 Compared to February 29, 2024

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

• 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.

• WD-40 Multi-Use Product sales increased $4.8 million, or 12%, primarily due to higher sales volume across most regions.

Sales in direct markets increased significantly in Italy, France, and the Benelux region, which were up $0.9 million, $0.8 million, and $0.6 million, respectively, from period to period.

In addition, sales to our marketing distributors in various regions increased $2.0 million primarily due to increased distribution and higher levels of demand.

Most regions in EIMEA have experienced continued increases in sales volumes after a temporary reduction in demand from price increases we implemented prior to fiscal year 2024.

• WD-40 Specialist sales increased $0.9 million, or 12%, primarily due to higher sales volume as a result of increased distribution and stronger levels of demand in various direct markets, most significantly in the DACH, Benelux, and Iberia regions.

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

1 unchanged sentence

EIMEA Sales – Six Months Ended – February 28, 2025 Compared to February 29, 2024

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

• WD-40 Multi-Use Product sales increased $12.7 million, or 16%, primarily due to higher sales volume across nearly all regions.

Sales in direct markets increased significantly in France, Italy, and Benelux regions, which were up $1.8 million, $1.6 million, and $1.5 million, respectively.

Sales to our marketing distributors in various regions, increased $5.8 million primarily due to increased distribution, higher levels of demand and timing of customer orders.

India in particular increased $1.6 million from period to period.

Most regions in EIMEA have experienced continued increases in sales volumes after a temporary reduction in demand from price increases we implemented prior to fiscal year 2024.

• WD-40 Specialist and other maintenance product sales increased $2.1 million, or 14%, and $0.4 million, or 6%, 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.

• Homecare and cleaning product sales decreased $1.1 million, or 26%, primarily due to reduced demand in the U.K.

as discussed above in the section for the three months ended February 28, 2025.

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 November 30,

2024 2023 Dollars Percent

Three Months Ended February 28/29, Six Months Ended February 28/29,

Prior Year Change from

2025 2024 Dollars Percent 2025 2024 Dollars Percent

WD-40 Multi-Use Product $ 16,228 $ 16,619 $ (391) (2) % $ 37,008 $ 38,741 $ (1,733) (4) %

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Change from Prior Year

First Quarter

Increase in average selling price (1)

Decrease in sales volume (1)

First Quarter Second Quarter Year to Date

Increase (decrease) in average selling price (1)

$ 0.5 $ (1.1) $ (0.6)

(Decrease) increase in sales volume (1)

(2.1) 1.3 (0.8)

Currency impact on current period 0.6 (0.5) 0.1

Increase in net sales $ (1.0)

Decrease in net sales $ (1.0) $ (0.3) $ (1.3)

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

Asia-Pacific Sales – Three Months Ended – February 28, 2025 Compared to February 29, 2024

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

• WD-40 Multi-Use Product sales decreased $0.4 million, or 2%, primarily due to decreases in our Asia distributor markets of $0.7 million partially offset by increases in China of $0.3 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.

Asia distributor markets experienced a decrease in sales volume primarily due to market disruption driven by the strengthening of the U.S.

In addition, sales volumes decreased due to timing of customer orders placed by certain of our distributors, particularly in the Philippines.

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.

• WD-40 Specialist sales increased $0.2 million, or 10%, primarily due to increased sales volume due to successful promotional programs and marketing activities in our Asia distributor markets.

• Homecare and cleaning product sales decreased $0.2 million, or 7%, from period to period.

Asia-Pacific Sales – Six Months Ended – February 28, 2025 Compared to February 29, 2024

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

• WD-40 Multi-Use Product sales decreased $1.7 million, or 4%, primarily due to decreases in our Asia distributor markets of $3.3 million partially offset by increases in China and Australia of $1.2 million and $0.3 million, respectively.

In the Asia distributor markets, many of our distributors were carrying high levels of inventory of our product after participating in successful promotional programs in fiscal year 2024 and reduced the volume of orders during the first half of fiscal year 2025 to adjust to more normal levels of inventory, particularly in the Philippines, Indonesia and Singapore.

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

• WD-40 Specialist sales increased $0.3 million, or 5%, primarily due to increased sales volume due to successful promotional programs and marketing activities in China.

• Homecare and cleaning product sales increased $0.2 million or 6%.

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

The increase was due to higher sales volume in Australia attributable to 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:

7 unchanged sentences

• 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 million and $4.1 million for the three months ended November 30, 2024 and 2023, respectively.

These costs totaled $4.3 million and $4.0 million, or 3.0% and 2.8% of net sales for the three months ended February 28, 2025 and February 29, 2024, respectively and $8.9 million and $8.0 million, or 3.0% and 2.9% of net sales for the six months ended February 28, 2025 and February 29, 2024, respectively.

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

Three Months Ended November 30,

Three Months Ended February 28/29, Six Months Ended February 28/29,

2025 2024 Change from

Prior Year 2025 2024 Change from

Gross profit $ 79,716 $ 72,941 $ 6,775 $ 163,803 $ 148,494 $ 15,309

Gross margin 54.6 % 52.4 % 220 bps (1)

54.7 % 53.1 % 160 bps (1)

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

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

Gross Margin – Three Months Ended – February 28, 2025 Compared to February 29, 2024

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

Favorable Explanations

Lower costs of aerosol cans

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

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

Gross margin excluding these products would have been 0.5% higher during the three months ended February 28, 2025.

Gross Margin – Six Months Ended – February 28, 2025 Compared to February 29, 2024

Gross margin increased 160 bps primarily due to the following favorable impacts, partially offset by unfavorable impacts:

Favorable/(Unfavorable) Explanations

Favorable sales mix and other miscellaneous mix impacts

Favorable/(Unfavorable)

Lower costs of aerosol cans

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

Favorable sales mix and other miscellaneous mix impacts and decreases in miscellaneous other input costs

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.

Gross margin excluding assets held for sale would have been 0.5% higher during the six months ended February 28, 2025.

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

Three Months Ended November 30,

Three Months Ended February 28/29, Six Months Ended February 28/29,

2025 2024 Change from

(in thousands) Dollars Percent

Prior Year 2025 2024 Change from

(in thousands) Dollars Percent Dollars Percent

SG&A expenses $ 48,988 $ 45,023 $ 3,965 9 % $ 99,513 $ 89,158 $ 10,355 12 %

% of net sales 33.5 % 32.4 % 33.2 % 31.9 %

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

SG&A Expenses – Three Months Ended – February 28, 2025 Compared to February 29, 2024

The increase in SG&A expenses was primarily due to increases in employee-related costs of $3.6 million due to higher accrued incentive compensation, annual compensation increases, higher stock-based compensation expense and higher headcount.

In addition, freight expense increased by $0.4 million primarily due to the combined impacts of higher sales and increased costs.

SG&A Expenses – Six Months Ended – February 28, 2025 Compared to February 29, 2024

The increase in SG&A expenses was primarily due to increases in employee-related costs of $5.7 million due to higher accrued incentive compensation, annual compensation increases and higher headcount.

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.

Other professional services fees, such as those costs in support of our strategic initiatives in the Americas and EIMEA segments increased SG&A by $1.3 million.

Freight expense increased $0.9 million primarily in the Americas and EIMEA segments, due to the combined impacts of higher sales and increased costs.

In addition, SG&A increased due to a credit loss adjustment in the U.S.

of $0.8 million, $0.5 million in sales commissions expense in Brazil given the shift to direct selling model, and travel and meeting expense of $0.5 million as a result of increased travel related to geographic expansion and other initiatives aligned with our strategic framework.

Amortization costs associated with cloud computing implementation also increased SG&A by $0.5 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 $2.0 million and $1.7 million for the three months ended February 28, 2025 and February 29, 2024, respectively, and $3.9 million and $3.6 million for the six months ended February 28, 2025 and

February 29, 2024, 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.

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 November 30,

(in thousands) 2024 2023 Dollars Percent

Three Months Ended February 28/29, Six Months Ended February 28/29,

Prior Year Change from

(in thousands) 2025 2024 Dollars Percent 2025 2024 Dollars Percent

A&P expenses $ 7,404 $ 6,725 $ 679 10 % $ 15,797 $ 13,708 $ 2,089 15 %

% of net sales 5.1 % 4.8 % 5.3 % 4.9 %

A&P Expenses – Three M onths Ended – November 30, 2024 Compared to November 30, 2023

A&P Expenses – Three M onths Ended – February 28, 2025 Compared to February 29, 2024

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.

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 $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.

Total promotional costs recorded as a reduction to sales were $7.7 million and $7.6 million for the three months ended February 28, 2025 and February 29, 2024, respectively.

Therefore, our total expenditure on A&P activities was $15.1 million and $14.3 million for the three months ended February 28, 2025 and February 29, 2024, respectively.

A&P Expenses – Six Months Ended – February 28, 2025 Compared to February 29, 2024

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.

Total promotional costs recorded as a reduction to sales were $16.5 million and $15.4 million, for the six months ended February 28, 2025 and February 29, 2024, respectively.

Therefore, our total expenditure on A&P activities was $32.3 million and $29.1 million for the six months ended February 28, 2025 and February 29, 2024, respectively.

Income from Operations by Segment

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

Three Months Ended November 30,

Three Months Ended February 28/29, Six Months Ended February 28/29,

2025 2024 Change from

Dollars Percent

Prior Year 2025 2024 Change from

Dollars Percent Dollars Percent

Americas $ 13,210 $ 13,220 $ (10) — % $ 25,862 $ 27,416 $ (1,554) (6) %

6 unchanged sentences

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.

Americas Operating Income – Three Months Ended – February 28, 2025 Compared to February 29, 2024

Income from operations for the Americas remained constant for the three months ended February 28, 2025 compared to February 29, 2024.

Gross margin for the Americas segment increased slightly from 49.4% to 50.1% and sales increased $2.0 million, which was offset by an increase in operating expenses.

Operating expenses increased $1.4 million primarily due to higher employee-related costs as a result of increased headcount, annual compensation increases and increased stock-based compensation expense from period to period.

Operating income as a percentage of net sales decreased from 20.8% to 20.2% period over period.

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

Americas Operating Income – Six Months Ended – February 28, 2025 Compared to February 29, 2024

Income from operations for the Americas decreased to $25.9 million, down $1.6 million, or 6%, due to higher operating expenses partially offset by increased sales of $7.4 million and higher gross margin.

Gross margin for the Americas segment increased slightly from 50.0% to 50.3%.

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 as well as an increase in provision for credit losses from period to period.

Operating income as a percentage of net sales decreased from 21.5% to 19.2% period over period.

EIMEA Operating Income – Three Months Ended – February 28, 2025 Compared to February 29, 2024

Income from operations for the EIMEA segment increased to $15.3 million, up $3.2 million, or 26%, primarily due to a $5.3 million increase in sales and a higher gross margin, partially offset by higher operating expenses.

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.

Gross margin for the EIMEA segment increased from 53.7% to 58.1% primarily due to the favorable impact of decreases in the costs of aerosol cans, decreases in other miscellaneous input costs, and increases in average selling price 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 and freight expenses.

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 22.3% to 25.6% 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.

EIMEA Operating Income – Six Months Ended – February 28, 2025 Compared to February 29, 2024

Income from operations for the EIMEA segment increased to $29.0 million, up $7.4 million, or 34%, primarily due to a $14.0 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 54.2% to 58.0% 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, partially offset by unfavorable changes from foreign currency exchange rates.

Operating expenses increased $4.6 million primarily due to the factors as discussed above in the section for the three months ended February 28, 2025.

Operating income as a percentage of net sales increased from 21.0% to 24.7% period over period.

Asia-Pacific Operating Income – Three Months Ended – February 28, 2025 Compared to February 29, 2024

Income from operations for the Asia-Pacific segment remained relatively constant for the three months ended February 28, 2025 compared to February 29, 2024.

Gross margin for the Asia-Pacific segment decreased slightly from 58.5% to 58.4%.

Operating income as a percentage of net sales decreased slightly from 35.2% to 35.0%.

Asia-Pacific Operating Income – Six Months Ended – February 28, 2025 Compared to February 29, 2024

Income from operations for the Asia-Pacific segment decreased to $17.5 million, down $1.0 million, or 5%, due to decreased sales of $1.3 million and slightly higher operating expenses.

Gross margin for the Asia-Pacific segment increased slightly from 58.9% to 59.0%.

Operating income as a percentage of net sales decreased from 37.9% to 36.8% 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.

Unallocated Corporate Expenses – Three Months Ended – February 28, 2025 Compared to February 29, 2024

Unallocated Corporate expenses increased to $12.6 million, up $0.7 million, or 6%, as a result of higher stock-based compensation expense as well as higher accrued incentive compensation expense from period to period.

Unallocated Corporate Expenses – Six Months Ended – February 28, 2025 Compared to February 29, 2024

Unallocated Corporate expenses increased to $23.9 million, up $1.5 million, or 7%, as a result higher accrued incentive compensation costs as well as amortization costs associated with the implementation of the ERP system in the U.S.

Non-Operating Items

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

Three Months Ended November 30,

2024 2023 Change

Three Months Ended February 28/29, Six Months Ended February 28/29,

2025 2024 Change 2025 2024 Change

Interest income $ 106 $ 66 $ 40 $ 254 $ 140 $ 114

Interest expense $ 1,021 $ 1,008 $ 13 $ 1,894 $ 2,154 $ (260)

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

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

Provision for Income Taxes

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.

Other income (expense), net $ 74 $ (193) $ 267 $ (67) $ (233) $ 166

(Benefit) provision for income taxes $ (7,412) $ 4,270 $ (11,682) $ (2,081) $ 9,860 $ (11,941)

(Benefit) provision for Income Taxes

The (benefit) provision for income taxes was (33.0)% and 21.6% of income before income taxes for the three months ended February 28, 2025 and February 29, 2024, 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 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.

The (benefit) provision for income taxes was (4.5)% and 23.0% of income before income taxes for the six months ended February 28, 2025 and February 29, 2024, respectively.

Net income increased 92% to $29.9 million, or $2.19 per common share on a fully diluted basis, for the three months ended February 28, 2025 compared to $15.5 million, or $1.14 per common share on a fully diluted basis, for the three months ended February 29, 2024.

During the second quarter of fiscal year 2025, we released an uncertain tax position that generated a favorable income tax adjustment of $11.9 million.

Excluding this one-time benefit, net income would have increased $2.4 million, or 15%.

Net income increased 48% to $48.8 million, or $3.58 per common share on a fully diluted basis, for the six months ended February 28, 2025 compared to $33.0 million, or $2.42 per common share on a fully diluted basis, for the corresponding period of the prior fiscal year.

During the second quarter of fiscal year 2025, we released an uncertain tax position that generated a favorable income tax adjustment as discussed above.

Excluding this one-time benefit, net income would have increased $3.8 million, or 12%.

Performance Measures and Non-GAAP Reconciliations

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Cost of doing business is defined as total operating expenses less amortization of definite-lived intangible assets, impairment charges related to intangible assets, amortization of implementation costs associated with cloud computing arrangements (“cloud computing amortization”) and depreciation in operating departments.

Adjusted EBITDA is defined as net income before interest, income taxes, depreciation, amortization of definite-lived intangible assets, and cloud computing amortization.

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 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.

Adjusted EBITDA is defined

as net income before interest, income taxes, depreciation, amortization of definite-lived intangible assets, and cloud computing amortization.

We 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.

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.

Progression on our cost of doing business and Adjusted EBITDA metrics may be challenged if the anticipated divestiture of certain of our homecare and cleaning product businesses occurs, due to the low level of operating expenses associated with these businesses.

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 November 30,

Three Months Ended February 28/29, Six Months Ended February 28/29,

2025 2024 2025 2024

Gross margin – GAAP 55 % 52 % 55 % 53 %

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

18 % 17 % 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.

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Cost of Doing Business (in thousands, except percentages)

Three Months Ended November 30,

Three Months Ended February 28/29, Six Months Ended February 28/29,

2025 2024 2025 2024

Total operating expenses – GAAP $ 56,436 $ 52,000 $ 115,401 $ 103,369

Amortization (1)

(462) (508) (926) (816)

Depreciation (in operating departments) (858) (1,095) (1,815) (2,145)

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Adjusted EBITDA (in thousands, except percentages)

Three Months Ended November 30,

Three Months Ended February 28/29, Six Months Ended February 28/29,

2025 2024 2025 2024

Net income – GAAP $ 29,851 $ 15,536 $ 48,776 $ 33,018

Provision for income taxes 5,331 5,590

(Benefit) provision for income taxes (7,412) 4,270 (2,081) 9,860

Interest income (106) (66) (254) (140)

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Amortization (1)

462 508 926 816

Depreciation 1,943 2,170 3,971 4,180

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(1) Includes amortization of definite-lived intangible assets and cloud computing amortization.

During the second quarter of fiscal year 2025 we released a previously unrecognized tax benefit associated with the Tax Cuts and Jobs Act of 2017 mandatory “toll tax” on unremitted foreign earnings.

This item is infrequent in nature and not reflective of the underlying operational results of our business.

We have included a non-GAAP measure of Adjusted EPS which is defined as diluted EPS less benefits associated with this toll tax on unremitted earnings.

The following is a reconciliation of diluted EPS to Adjusted EPS:

Three Months Ended February 28/29,

Six Months Ended February 28/29,

Diluted EPS - GAAP $ 2.19 $ 1.14 $ 3.58 $ 2.42

Release of Uncertain Tax Position - Tax Cut and Jobs Act (1)

(0.87) — (0.87) —

Adjusted diluted EPS - Non-GAAP $ 1.32 $ 1.14 $ 2.71 $ 2.42

(1) Includes the tax impact on adjustment

Liquidity and Capital Resources

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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We have the ability to refinance any draws under the line of credit with successive short-term borrowings through the April 30, 2029 maturity date of the Credit Agreement.

Outstanding draws for which we have both the ability and intent to refinance with successive short-term borrowings for a period of at least twelve months are classified as long-term.

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

Outstanding draws for which we have both the ability and intent to refinance with successive short-term

borrowings for a period of at least twelve months are classified as long-term.

As of February 28, 2025, $18.9 million of this facility was classified as long-term and was entirely denominated in Euros.

$29.9 million was classified as short-term and was entirely denominated in U.S.

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.

In the United States, we held $66.4 million in fixed rate long-term borrowings as of February 28, 2025, consisting of senior notes under our Note Agreement.

We paid $0.4 million in principal payments on our Series A Notes during the first half of fiscal year 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 November 30, 2024, we were in compliance with all material debt covenants.

At February 28, 2025, 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 November 30, 2024, we had a total of $54.9 million in cash and cash equivalents.

At February 28, 2025, we had a total of $53.0 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.

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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 $38.3 million remains available for the repurchase of shares of common stock as of November 30, 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 $35.2 million remains available for the repurchase of shares of common stock as of February 28, 2025.

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

Three Months Ended November 30,

Six Months Ended February 28/29,

2025 2024 Change

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Operating Activities

Net cash provided by operating activities decreased $12.0 million to $14.9 million for the three months ended November 30, 2024.

Net cash provided by operating activities decreased $22.0 million to $22.9 million for the six months ended February 28, 2025.

Cash flows from operating activities depend heavily on operating performance and changes in working capital.

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.

Our primary source of operating cash flows for the six months ended February 28, 2025 was net income of $48.8 million, which increased approximately $15.8 million from period to period, primarily due to the release of the uncertain tax position in the second quarter of fiscal year 2025 that resulted in a net benefit of $11.9 million, as discussed in Note 13 to the condensed consolidated financial statements.

Other changes in adjustments to reconcile net income to cash decreased net cash provided by operating activities by $1.0 million.

Changes in working capital decreased net cash provided by operating activities by $24.8 million for the six months ended February 28, 2025 primarily due to changes in inventory balances and a larger decrease in accrued payroll liabilities compared to the prior period.

Changes in inventory balances decreased net cash provided by operating activities by $15.8 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.

Inventory balances increased during the first six months of fiscal year 2025 primarily to support certain supply chain initiatives in EIMEA and to meet strong demand in the region, compared to decreases in inventory balances, specifically in the Americas in the comparative period.

In addition, net cash provided by operating activities decreased by $6.5 million primarily due to higher earned incentive payouts in the first half of fiscal year 2025 compared to the same period of the prior fiscal year.

Investing Activities

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

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

Financing Activities

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.

Net cash used in financing activities decreased $23.0 million to $12.6 million for the six months ended February 28, 2025.

This change was primarily due to net proceeds of $22.1 million on our revolving credit facility during the first six months of the fiscal year, compared to net repayments of $4.2 million in the corresponding period of the prior fiscal year.

This decrease in net cash used in financing activities was slightly offset by increases in dividends paid to stockholders of $1.5 million and increases of treasury stock repurchases of $1.4 million.

Effect of Exchange Rate Changes

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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 $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.

Dollar terms, was a decrease in cash of $2.2 million for the six months ended February 28, 2025 as compared to a decrease in cash of $0.3 million for the six months ended February 29, 2024.

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.

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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 November 30, 2024, no such commitments were outstanding.

As of February 28, 2025, 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 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.

On March 18, 2025, the Company’s Board declared a cash dividend of $0.94 per share payable on April 30, 2025 to stockholders of record at the close of business on April 18, 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