WD 40 CO (WDFC)

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide the reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and certain other factors that may affect future results. This MD&A includes the following sections: Overview, Highlights, Results of Operations, Performance Measures and Non-GAAP Reconciliations, Liquidity and Capital Resources, Critical Accounting Estimates, and Recently Issued Accounting Standards. The MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and the related notes included in Item 15 of this report.

Use of Non-GAAP Constant Currency

In order to show the impact of changes in foreign currency exchange rates on our results of operations, we have included constant currency disclosures, where necessary, in the Overview and Results of Operations sections which follow. Constant currency disclosures represent the translation of our current fiscal year revenues, expenses and net income from the functional currencies of our subsidiaries to U.S. Dollars using the exchange rates in effect for the corresponding period of the prior fiscal year. Results on a constant currency basis are not in accordance with accounting principles generally accepted in the United States of America (“non-GAAP”) and should be considered in addition to, not as a substitute for, results prepared in accordance with U.S. GAAP. We use results on a constant currency basis as one of the measures to understand our operating results and evaluate our performance in comparison to prior periods in order to enhance the visibility of the underlying business trends, excluding the impact of translation arising from foreign currency exchange rate fluctuations. Management believes this non-GAAP financial measure provides investors with additional financial information that should be considered when assessing our underlying business performance and trends. However, reference

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to constant currency basis should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP.

Overview

The Company

WD-40 Company, based in San Diego, California, is a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories and homes around the world. We own a wide range of well-known brands that include maintenance products and homecare and cleaning products: WD-40® Multi-Use Product, WD-40 Specialist®, 3-IN-ONE®, GT85®, X-14®, 2000 Flushes®, Carpet Fresh®, no vac®, Spot Shot®, 1001®, Lava® and Solvol®.

Our products are sold in various locations around the world. Maintenance products are sold worldwide in markets throughout North, Central and South America, Asia, Australia, Europe, India, the Middle East and Africa. Homecare and cleaning products are sold primarily in North America, the United Kingdom (“U.K.”) and Australia. During the first quarter of fiscal year 2025 we reclassified our homecare and cleaning product portfolios 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.

Acquisitions

On March 4, 2024, we acquired all of the issued and outstanding capital stock of Brazilian distributor, Theron, from M12 Participações Empresarias S.A. See Note 3 – Acquisitions for additional information on this business combination. As a result of this acquisition, we shifted from an indirect distribution model to a direct model. Results from Brazil continue to be reported in the Americas segment for the fiscal year ended August 31, 2024.

Highlights

The following summarizes the financial and operational highlights for our business during the fiscal year ended August 31, 2024:

•Consolidated net sales increased $53.3 million, or 10%, for fiscal year 2024 compared to the prior fiscal year. Increases in sales volume favorably impacted net sales by approximately $41.3 million from period to period. Increases in the average selling price of our products positively impacted net sales by approximately $4.2 million from period to period, primarily due to sales price increases implemented in certain regions during the prior fiscal year. Changes to net sales attributable to volumes and average selling price of our products are impacted by differences in sales mix related to products, markets and distribution channels from period to period. In addition, changes in foreign currency exchange rates from period to period had a favorable impact of $7.8 million on consolidated net sales for the fiscal year 2024. On a constant currency basis, net sales would have increased by $45.5 million, or 8% for fiscal year 2024 compared to the prior fiscal year. This favorable impact from changes in foreign currency exchange rates mainly came from our EIMEA segment, which accounted for 37% of our consolidated sales for the fiscal year ended August 31, 2024.

•Gross profit as a percentage of net sales increased to 53.4% for fiscal year 2024 compared to 51.0% for the prior fiscal year.

•Consolidated net income increased $3.7 million, or 6%, for fiscal year 2024 compared to the corresponding period of the prior fiscal year. Changes in foreign currency exchange rates from period to period had a favorable impact of $1.5 million on consolidated net income for fiscal year 2024. Thus, on a constant currency basis, net income would have increased by $2.2 million, or 3%, for fiscal year 2024 compared to the prior fiscal year.

•Diluted earnings per common share for fiscal year 2024 were $5.11 versus $4.83 in the prior fiscal year.

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

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Results of Operations

Fiscal Year Ended August 31, 2024 Compared to Fiscal Year Ended August 31, 2023

Operating Items

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

(1)Homecare and cleaning products (“HCCP”)

Net Sales by Segment

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

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Americas Sales

The following table summarizes net sales by product line for the Americas segment (in thousands, except percentages):

(1)Current fiscal year constant currency (“CC”) net sales translated at the foreign currency exchange rates in effect for the corresponding period of the prior fiscal year, compared to prior period actual net sales.

The following table summarizes management’s estimates of effects on net sales of changes in price, volume and foreign currency exchange rate impacts for the Americas segment (in millions):

(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 – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

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

•WD-40 Multi-Use Product sales increased $14.1 million, or 7%, primarily due to the increase in Latin America of $14.8 million, or 40%. Sales in Latin America were favorably impacted by the transition to a direct marketing model in Brazil in the second half of fiscal year 2024, which resulted in an increase of net sales of $6.7 million from period to period. In addition, sales in other Latin American markets increased $8.1 million, or 23% due to increased sales volume from the timing of customer orders, successful promotional programs, and increased distribution of WD-40 Smart Straw. Sales in Latin America were favorably impacted by the changes in foreign currency exchange rates from period to period. End-user demand remained relatively constant in the U.S. and resulted in a slight increase in sales of $0.5 million from period to period. These favorable impacts to net sales were slightly offset by a decrease in sales in Canada of $1.2 million.

•WD-40 Specialist sales increased $1.9 million, or 6%, primarily due to new distribution and increased demand across all regions. Canada, in particular, saw an increase in sales of $0.8 million, or 46% from period to period primarily due to premiumization of the Specialist product line in the region.

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

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•Homecare and cleaning product sales decreased $1.6 million, or 10%, primarily due to reduced demand 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 Americas segment, 73% of sales came from the U.S., and 27% of sales came from Canada and Latin America combined for the fiscal year ended August 31, 2024 compared to the prior fiscal year when 78% of sales came from the U.S., and 22% of sales came from Canada and Latin America combined.

EIMEA Sales

The following table summarizes net sales by product line for the EIMEA segment (in thousands, except percentages):

(1)Current fiscal year constant currency net sales translated at the foreign currency exchange rates in effect for the corresponding period of the prior fiscal year, compared to prior period actual net sales.

The following table summarizes management’s estimates of effects on net sales of changes in price, volume and foreign currency exchange rate impacts for the EIMEA segment (in millions):

(1)Management’s estimates of changes in net sales attributable to volumes and the average selling price of our products are impacted by differences in sales mix related to products, markets and distribution channels from period to period.

The countries and regions in Europe where we sell through a direct sales force include the U.K., Italy, France, Iberia (which includes Spain and Portugal), DACH (which includes Germany, Austria and Switzerland) and Benelux (which includes Belgium, the Netherlands and Luxembourg). The regions in the EIMEA segment where we sell through local distributors include the Middle East, Africa, India, Eastern and Northern Europe.

EIMEA Sales – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

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

•WD-40 Multi-Use Product sales increased $25.5 million, or 18%, primarily due to higher sales volume. Volumes in the comparative period were unfavorably impacted by price increases that we implemented in the fourth quarter

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of fiscal year 2022 and first quarter of fiscal year 2023, which resulted in reduced demand as customers adjusted to those price increases. The combination of recovering volumes and increased selling prices resulted in higher sales across most regions. Sales increased most significantly for our direct markets in France, the DACH and Benelux regions, and Iberia, which were up $5.2 million, $5.0 million and $2.1 million, respectively. In addition, marketing distributor sales in Northern Europe and the Middle East increased $5.5 million and $4.1 million, respectively.

•WD-40 Specialist and other maintenance product sales increased $3.8 million, or 14%, and $1.2 million, or 11%, respectively, primarily due to the combined impact of higher sales volume across most regions due to increased distribution and stronger levels of demand after customers adjusted to price increases.

•Homecare and cleaning product sales remained relatively constant from period to period.

•Net sales were favorably impacted $8.1 million across our various brands as a result of favorable changes in foreign currency exchange rates. On a constant currency basis, sales in EIMEA would have increased 12%.

Asia-Pacific Sales

The following table summarizes net sales by product line for the Asia-Pacific segment (in thousands, except percentages):

(1)Current fiscal year constant currency net sales translated at the foreign currency exchange rates in effect for the corresponding period of the prior fiscal year, compared to prior period actual net sales.

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The following table summarizes management’s estimates of effects on net sales of changes in price, volume and foreign currency exchange rate impacts for the Asia-Pacific segment (in millions):

(1)Management’s estimates of changes in net sales attributable to volumes and the average selling price of our products are impacted by differences in sales mix related to products, markets and distribution channels from period to period.

Asia-Pacific Sales – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

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

•WD-40 Multi-Use Product sales increased $5.7 million, or 9%. Sales in the Asia distributor markets increased $4.3 million, or 13%, primarily due to successful promotional programs across most countries in the region, in particular Indonesia, Korea and Taiwan. Increases in the average selling price in these distributor markets also increased net sales from period to period. In addition, sales in China increased $1.6 million, or 8%, due to increased sales volume from successful promotional programs and marketing activities throughout fiscal year 2024.

•WD-40 Specialist sales increased $1.5 million, or 17%, primarily due to increased sales volume in China due to successful promotional programs and marketing activities as well as increased sales volume due to distribution of a motorbike product line new to the region.

•Homecare and cleaning product sales increased $0.7 million or 9%. The increase was due to higher sales volume in Australia attributable to successful promotional activities and improved packaging.

•Net sales were unfavorably impacted $1.1 million across our various brands as a result of changes in foreign currency exchange rates. On a constant currency basis, sales in Asia-Pacific would have increased 11%.

Gross Profit

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

•There is often a delay before changes in costs of raw materials, such as specialty chemicals used in the formulation of our products, impact cost of products sold due to production and inventory life cycles. Such delays increase with higher production and inventory levels.

•In general, the timing of advertising, promotional and other discounts may cause fluctuations in gross margin from period to period. Advertising, promotional and other discounts that are given to our customers are recorded as a reduction to sales, whereas advertising and sales promotional costs associated with promotional activities that we pay to third parties are recorded as advertising and sales promotion expenses.

•In the EIMEA segment, the majority of our cost of goods sold is denominated in Pound Sterling whereas sales are generated in Pound Sterling, Euro and the U.S. Dollar. The strengthening or weakening of the Euro and U.S. Dollar against the Pound Sterling may result in foreign currency related changes to the gross margin percentage in the EIMEA segment from period to period.

•Our gross profit and gross margin may not be comparable to those of other consumer product companies, since some of these companies include all costs related to distribution of their products in cost of products sold, whereas we exclude the portion associated with amounts paid to third parties for shipment to our customers from our distribution centers and contract manufacturers and include these costs in selling, general and administrative

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expenses. These costs totaled $17.3 million and $17.1 million for the fiscal years ended August 31, 2024 and 2023, respectively.

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

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

Gross Margin – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

Gross margin increased 240 bps primarily due to the following favorable impacts:

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

SG&A Expenses – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

The increase in SG&A expenses was primarily due to increases in employee-related costs of $16.1 million primarily due to an increase in accrued incentive compensation of $8.8 million, as well as annual compensation increases and higher headcount. Professional services fees increased $6.1 million in support of our strategic initiatives in the Americas and EIMEA segments. The increase in professional service costs includes a $2.7 million increase in computer-related costs, primarily associated with the ERP system we recently implemented in the U.S. and the amortization of cloud computing implementation costs associated with this system. In addition, professional services fees increased due to costs associated with the development of a direct market in Brazil. Travel and meeting expense increased SG&A expense by $2.5 million primarily as a result of increased travel related to geographic expansion and other initiatives aligned with our strategic framework. Unfavorable changes in foreign currency exchange rates increased SG&A expenses by $2.1 million from period to period.

We continued our research and development investment, the majority of which is associated with our maintenance products, including efforts focused on sustainability as well as our focus on innovation and renovation of our products. Research and development costs for the fiscal years ended August 31, 2024 and 2023 were $8.0 million and $6.2 million, respectively. 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.

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

A&P Expenses – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

The increase in A&P expenses was primarily due to a higher level of promotional programs and marketing support, particularly in the Americas and EIMEA segments. Changes in foreign currency exchange rates primarily in EIMEA segment had a $0.9 million unfavorable impact on A&P expenses from period to period.

Total promotional costs recorded as a reduction to sales were $32.7 million and $29.1 million, or 5.5% and 5.4% of net sales, for the fiscal years ended August 31, 2024 and 2023, respectively. Therefore, our total expenditure on A&P activities totaled $66.6 million and $57.9 million or 11.2% and 10.8% of net sales, for the fiscal years ended August 31, 2024 and 2023, respectively.

Income from Operations by Segment

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

(1)Unallocated corporate expenses are general corporate overhead expenses not directly attributable to any one of the business segments. These expenses are reported separate from our identified segments and are included in Selling, General and Administrative expenses on our consolidated statements of operations.

Americas

Americas Operating Income – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

Income from operations for the Americas increased to $65.0 million, up $4.2 million, or 7%, due to a $15.1 million increase in sales and a higher gross margin, partially offset by higher operating expenses. Gross margin for the Americas segment increased from 48.9% to 50.9% primarily due to the favorable impact of price increases and decreases to costs of petroleum-based specialty chemicals as well as lower warehousing, distribution and freight costs from period to period. These favorable impacts were partially offset by increases in the costs of aerosol cans and filling fees at our third-party manufacturers. Operating expenses increased $8.6 million due to higher employee-related costs as a result of increased headcount and annual compensation increases. Operating expenses also increased due to to a higher level of A&P expenses and travel and meeting expense in support of our strategic framework. Operating income as a percentage of net sales increased from 22.8% to 23.1% period over period.

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EIMEA

EIMEA Operating Income – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

Income from operations for the EIMEA segment increased to $46.8 million, up $7.4 million, or 19%, primarily due to a $30.2 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 52.2% to 54.7% primarily due to favorable changes from foreign currency exchange rates and changes in sales mix and market mix, as well as the combined impact of decreases in the costs of petroleum-based specialty chemicals and aerosol cans from period to period. Operating expenses increased $14.0 million primarily due to higher employee-related costs as a result of higher accrued incentive compensation, annual compensation increases and increased headcount. In addition, operating expenses increased due to higher A&P expenses, as well as higher level of professional service costs and travel and meeting expenses in support of our strategic framework. Operating income as a percentage of net sales increased from 20.7% to 21.2% period over period.

Asia-Pacific

Asia-Pacific Operating Income – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

Income from operations for the Asia-Pacific segment increased to $29.7 million, up $3.8 million, or 15%, primarily due to a $8.0 million increase in sales and a higher gross margin, partially offset by an increase in operating expenses. Gross margin for the Asia-Pacific segment increased from 55.3% to 58.0% primarily due to changes in sales mix and market mix across most regions from period to period, as well as the favorable impact of price increases, particularly in Australia and Asia distributor markets. Operating expenses increased $3.0 million from period to period primarily due to higher employee-related costs, including increased accrued incentive compensation. In addition, operating expenses increased as a result of a higher level of A&P expenses, professional service costs and travel and meeting expenses. Operating income as a percentage of net sales increased from 32.5% to 33.9% period over period.

Unallocated Corporate

Unallocated Corporate Expenses – Fiscal Year Ended – August 31, 2024 Compared to August 31, 2023

Unallocated Corporate expenses increased to $45.2 million, up $8.8 million, or 24%, primarily due to increased accrued incentive compensation and higher employee-related costs as a result of increased headcount and annual compensation increases. In addition, operating expenses increased as a result of higher costs associated with the ERP system we recently implemented in the United States.

Non-Operating Items

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

Interest Income

Interest income was not significant for both the fiscal years ended August 31, 2024 and 2023.

Interest Expense

Interest expense decreased $1.3 million primarily due to a decrease in weighted average outstanding balance on our revolving credit facility slightly offset by higher interest rates related to draws on this credit facility.

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Other (Expense) Income, Net

Other (expense) income, net changed by $1.9 million from period to period which was primarily due to net foreign currency gains during fiscal year 2023 as compared to net foreign currency exchange losses in fiscal year 2024 due to fluctuations in the foreign currency exchange rates for both the U.S. Dollar and the Euro against the Pound Sterling.

Provision for Income Taxes

The provision for income taxes was 23.9% and 22.5% of income before income taxes for the fiscal years ended August 31, 2024 and 2023, respectively. Descriptions of impacts on our effective income tax rate are incorporated by reference to Part IV—Item 15, “Exhibits, Financial Statement Schedules” Note 14 – Income Taxes, included in this report.

Net Income

Net income was $69.6 million, or $5.11 per common share on a fully diluted basis, for fiscal year 2024 compared to $66.0 million, or $4.83 per common share on a fully diluted basis, for the prior fiscal year. Changes in foreign currency exchange rates year over year had a favorable impact of $1.5 million on net income for fiscal year 2024. Thus, on a constant currency basis, net income for fiscal year 2024 would have been $68.2 million.

Fiscal Year Ended August 31, 2023 Compared to Fiscal Year Ended August 31, 2022

For discussion related to changes in financial condition and the results of operations for fiscal year 2023 compared to fiscal year 2022, refer to Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, which was filed with the SEC on October 23, 2023.

Performance Measures and Non-GAAP Reconciliations

In managing our business operations and assessing our financial performance, we supplement the information provided by our financial statements with certain non-GAAP performance measures. These performance measures are part of our current 55/30/25 business model, which includes gross margin, cost of doing business, and earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”), the latter two of which are non-GAAP performance measures. Cost of doing business is defined as total operating expenses less amortization of definite-lived intangible assets, impairment charges related to intangible assets, amortization of implementation costs associated with cloud computing arrangements (“cloud computing amortization”) and depreciation in operating departments. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation, amortization of definite-lived intangible assets, and cloud computing amortization. Beginning in fiscal year 2024, cloud computing amortization is included in our of cost of doing business and Adjusted EBITDA calculations. We have placed a new cloud-based enterprise resource planning system into service in the U.S., which we began to amortize in the second quarter of fiscal year 2024. Implementation of such systems is related to initiatives associated with our strategic framework to help us achieve greater operational efficiencies. Cloud computing amortization is recognized in selling, general and administrative expenses in our consolidated statements of operations.

We target our gross margin to be 55% of net sales, our cost of doing business to be 30% of net sales, and our Adjusted EBITDA to be 25% of net sales. Results for these performance measures may vary from period to period depending on various factors, including economic conditions such as the inflationary environment we have experienced in the last several fiscal years, and our level of investment in activities for the future such as those related to quality assurance, regulatory compliance, information technology, sustainability, and intellectual property protection in order to safeguard our WD-40 brand. Our targets for gross margin and these other performance measures are long-term in nature and we expect to make progress towards them over time. Given the anticipated divestiture of certain of our household brands, progression on certain aspects of our business model may be challenged if the potential divestiture occurs. However, we intend to focus our resources and investments from the potential sale of those brands on growing our higher growth and higher gross margin core business.

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The following table summarizes the results of these performance measures:

(1)Percentages may not aggregate to Adjusted EBITDA percentage due to rounding and because amounts recorded in other income (expense), net on our consolidated statement of operations are not included as an adjustment to earnings in the Adjusted EBITDA calculation.

We use the performance measures above to establish financial goals and to gain an understanding of our comparative performance from period to period. We believe that these measures provide our stockholders with additional insights into how we run our business. We believe these measures also provide investors with additional financial information that should be considered when assessing our underlying business performance and trends. These non-GAAP financial measures are supplemental in nature and should not be considered in isolation or as alternatives to net income, income from operations or other financial information prepared in accordance with GAAP as indicators of our performance or operations. The use of any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies. Reconciliations of these non-GAAP financial measures to our financial statements as prepared in accordance with GAAP are as follows:

Cost of Doing Business (in thousands, except percentages):

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

Adjusted EBITDA (in thousands, except percentages):

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

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Liquidity and Capital Resources

Overview

Our financial condition and liquidity remain strong. Although there continues to be uncertainty related to adverse global economic conditions, volatility in financial markets, the current inflationary environment and their impacts on our future results, we believe our efficient business model positions us to manage our business through such situations. We continue to manage all aspects of our business including, but not limited to, monitoring our liquidity, the financial health of our customers, suppliers and other third-party relationships, implementing gross margin enhancement strategies and developing new opportunities for growth.

Our principal sources of liquidity are cash generated from operations and cash currently available from our existing unsecured revolving credit facility under the Credit Agreement with Bank of America, N.A. We use the revolving credit facility primarily for our general working capital needs. We also hold borrowings under the Note Agreement. See Note 9 – Debt for additional information on these agreements.

We have historically held a balance of outstanding draws on our line of credit in either U.S. Dollars in the Americas segment or in Euros and Pounds Sterling in the EIMEA segment. Euro and Pound Sterling denominated draws fluctuate in U.S. Dollars from period to period due to changes in foreign currency exchange rates. We regularly convert many of our draws on our line of credit to new draws with new maturity dates and interest rates. We have the ability to refinance any draws under the line of credit with successive short-term borrowings through the 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 August 31, 2024, $20.0 million of the facility was classified as long-term and was entirely denominated in Euros. $7.8 million was classified as short-term and was entirely denominated in U.S. Dollars. In the United States, we held $66.8 million in fixed rate long-term borrowings as of August 31, 2024, consisting of senior notes under our Note Agreement. We paid $0.8 million in principal payments on our Series A Notes during fiscal year 2024. There were no other letters of credit outstanding or restrictions on the amount available on our line of credit or notes. Per the terms of both the Note Agreement and the Credit Agreement, our consolidated leverage ratio cannot be greater than three and a half to one and our consolidated interest coverage ratio cannot be less than three to one. See Note 9 – Debt for additional information on these financial covenants. At August 31, 2024, we were in compliance with all material debt covenants. We continue to monitor our compliance with all debt covenants and, at the present time, we believe that the likelihood of being unable to satisfy all material covenants is remote. At August 31, 2024, we had a total of $46.7 million in cash and cash equivalents. We do not foresee any ongoing issues with repaying our borrowings and we closely monitor the use of this credit facility.

We believe that our future cash from domestic and international operations, together with our access to funds available under our unsecured revolving credit facility, will provide adequate resources to fund short-term and long-term operating requirements, debt maturities, capital expenditures, dividend payments, acquisitions, new business development activities and share repurchases. On June 19, 2023, our Board approved a share repurchase plan (the “2023 Repurchase Plan”). Under the 2023 Repurchase Plan, which became effective on September 1, 2023, we are authorized to acquire up to $50.0 million of our outstanding shares through August 31, 2025, of which $41.9 million remained available for the repurchase of shares of common stock as of August 31, 2024.

Cash Flows

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

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Operating Activities

Net cash provided by operating activities decreased $6.4 million to $92.0 million for fiscal year 2024. Cash flows from operating activities depend heavily on operating performance and changes in working capital. Our primary source of operating cash flows for fiscal year ended August 31, 2024 was net income of $69.6 million, which increased $3.7 million from period to period. Changes in adjustments to reconcile net income to cash increased net cash provided by operating activities by $5.0 million, primarily due to net unrealized foreign currency losses during the current fiscal year compared to net unrealized foreign currency gains in the prior fiscal year and an increase in depreciation expense.

Changes in our working capital increased net cash provided by operating activities by $4.6 million for the fiscal year 2024, compared to a $19.5 million increase in the prior fiscal year. The unfavorable net change in working capital was primarily attributable to changes in inventory and trade and other accounts receivable. Although we decreased inventory levels throughout fiscal year 2024, decreases in inventory during fiscal year 2023 were more significant. We took deliberate actions during fiscal year 2023 to improve capacity and flexibility of our supply chain to decrease inventory levels from the build up from prior years. Trade and other accounts receivable increased significantly during fiscal year 2024 as a result of higher sales and timing of collection of payments from customers. These unfavorable changes in working capital were partially offset by favorable changes in accounts payable, accrued liabilities, accrued payroll and related expenses.

Investing Activities

Net cash used in investing activities increased $3.5 million to $9.7 million for fiscal year 2024, primarily due to the purchase of our Brazilian distributor, Theron, as we shifted from an indirect distribution model to a direct model.

Financing Activities

Net cash used in financing activities decreased $1.1 million to $83.9 million for fiscal year 2024. This change was primarily due to lower net repayments on our revolving credit facility which was $25.4 million during the fiscal year, compared to $28.4 million in the prior fiscal year, as well as decreases in treasury stock purchases of $2.3 million during the fiscal year compared to the prior period. Offsetting these decreases in cash outflows from period to period was an increase in dividends paid to our stockholders of $2.6 million, as well as an increase of $1.6 million in shares withheld to cover taxes on conversion of equity awards.

Effect of Exchange Rate Changes

All of our foreign subsidiaries currently operate in currencies other than the U.S. Dollar and a significant portion of our consolidated cash balance is denominated in these foreign functional currencies, particularly at our U.K. subsidiary. As a result, our cash and cash equivalents balances are subject to the effects of the fluctuations in these functional currencies against the U.S. Dollar at the end of each reporting period. The net effect of exchange rate changes on cash and cash equivalents, when expressed in U.S. Dollar terms was not significant in fiscal year 2024, while such changes resulted in an increase in cash of $3.2 million for fiscal year 2023, and a decrease in cash of $5.0 million in fiscal year 2022. These changes were primarily due to fluctuations in various foreign currency exchange rates from period to period, but the majority is related to the fluctuations in the Pound Sterling against the U.S. Dollar.

Cash Flows

Fiscal Year Ended August 31, 2023 Compared to Fiscal Year Ended August 31, 2022

For discussion related to changes in the consolidated statements of cash flows for fiscal year 2023 compared to fiscal year 2022, refer to Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, which was filed with the SEC on October 23, 2023.

Share Repurchase Plans

The information required by this item is incorporated by reference to Part IV—Item 15, “Exhibits, Financial Statement Schedules” Note 10 — Share Repurchase Plan, included in this report.

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Dividends

We have historically paid regular quarterly cash dividends on our common stock. On December 12, 2023, our Board approved a 6% increase in the regular quarterly cash dividend, increasing it from $0.83 per share to $0.88 per share. On October 4, 2024, our Board declared a cash dividend of $0.88 per share payable on October 31, 2024 to stockholders of record on October 18, 2024. Our ability to pay dividends could be affected by future business performance, liquidity, capital needs, alternative investment opportunities and loan covenants.

Contractual Obligations

We hold borrowings under our Note Purchase and Private Shelf Agreement with fixed repayment requirements and under a Revolving Credit Facility that has variable underlying interest rates. For additional details on these borrowings, including ability and intent assessment on our credit facility agreement with Bank of America, N.A., refer to the information set forth in Part IV—Item 15, “Exhibits, Financial Statement Schedules”, Note 9 – Debt.

Additionally, we have ongoing relationships with various suppliers (contract manufacturers) that manufacture our products, and third-party distribution centers that warehouse and ship our products to customers. The contract manufacturers maintain title and control of certain raw materials and components, materials utilized in finished products, and the finished products themselves until shipment to our third-party distribution centers or customers in accordance with agreed-upon shipment terms. Although we have definitive minimum purchase obligations in the contract terms with certain of our contract manufacturers, when such obligations have been included, they have either been immaterial or the minimum amounts have been such that they are well below the volume of goods that we have historically purchased. In addition, in the ordinary course of business, we communicate supply needs to our contract manufacturers based on orders and short-term projections, ranging from two to six months. We are committed to purchase the products produced by the contract manufacturers based on the projections provided.

Upon the termination of contracts with contract manufacturers, we obtain certain inventory control rights and are obligated to work with the contract manufacturer to sell through all product held by or manufactured by the contract manufacturer on our behalf during the termination notification period. If any inventory remains at the contract manufacturer at the termination date, we are obligated to purchase such inventory which may include raw materials, components and finished goods. The amounts for inventory purchased under termination commitments have been immaterial.

In addition to the commitments to purchase products from contract manufacturers described above, we may also enter into commitments with other manufacturers to purchase finished goods and components to support innovation initiatives and/or supply chain initiatives. As of August 31, 2024, no such commitments were outstanding.

We have also recorded a liability for uncertain tax positions. For details on our uncertain tax positions, refer to the information set forth in Part IV—Item 15, “Exhibits, Financial Statement Schedules” Note 14 – Income Taxes.

Critical Accounting Estimates

Our results of operations and financial condition, as reflected in our consolidated financial statements, have been prepared in accordance with accounting principles generally accepted in the United States of America. Preparation of financial statements requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. We use historical experience and other relevant factors when developing estimates and assumptions and these estimates and assumptions are continually evaluated. The accounting estimates discussed below are the ones we consider to be most critical to an understanding of our consolidated financial statements because their application places the most significant demands on our judgment. Our financial results may have varied from those reported had different assumptions been used or other conditions prevailed.

Revenue Recognition

Sales are recognized as revenue at a point in time upon transferring control of the product to the customer. This typically occurs when products are shipped or delivered, depending on when risks of loss and title have passed to the customer per the terms of the contract. For certain of our sales we must make judgments and certain assumptions in order to determine when delivery has occurred. Through an analysis of end-of-period shipments for these particular sales, we estimate the time of transit and delivery of product to our customers to determine whether revenue should be recognized during the current

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reporting period for such shipments. Differences in judgments or estimates related to the lengthening or shortening of the estimated delivery time used could result in material differences in the timing of revenue recognition.

In determining the transaction price, management evaluates whether the price is subject to refunds or adjustments related to variable consideration to determine the net consideration to which we expect to be entitled. We record estimates of variable consideration as a reduction of sales in the consolidated statements of operations. Variable consideration primarily includes rebates/other discounts (cooperative marketing programs, volume-based discounts, shelf price reductions and allowances for shelf space, charges from customers for services they provided to us related to the sale and penalties/fines charged to us by our customers for failing to adhere to contractual obligations), coupon offers, cash discount allowances, and sales returns. These estimates are based on the expected value method considering all reasonably available information, including current and past trade promotion spending patterns, status of trade promotion activities and the interpretation of historical spending trends by customer and category, customer agreements and/or currently known factors that arise in the normal course of business. We review our assumptions and adjust these estimates accordingly on a quarterly basis. Our consolidated financial statements could be materially impacted if the actual promotion rates are different from the estimated rates. If our accrual estimates for sales incentives at August 31, 2024 were to differ by 10%, the impact on net sales would be approximately $1.4 million.

Accounting for Income Taxes

A deferred income tax liability or asset is established for the expected future tax consequences resulting from the differences in financial reporting and tax bases of assets and liabilities. Based on changes in the related tax law as well as forecasted results, a valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized. In addition to valuation allowances, we provide for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards prescribed by the authoritative guidance on income taxes. Amounts for uncertain tax positions are adjusted in periods when new information becomes available or when positions are effectively settled. We recognize accrued interest and penalties related to uncertain tax positions as a component of income tax expense.

We are required to make assertions on whether our foreign subsidiaries will invest their undistributed earnings indefinitely and these assertions are based on the capital needs of the foreign subsidiaries. Generally, unremitted earnings of our foreign subsidiaries are not considered to be indefinitely reinvested. However, there is an exception regarding specific statutory remittance restrictions imposed on our China subsidiary. Costs associated with repatriating unremitted foreign earnings, including U.S. state income taxes and foreign withholding taxes, are immaterial to our consolidated financial statements. For additional information on income tax matters, see Part IV—Item 15, “Exhibits, Financial Statement Schedules” Note 14 — Income Taxes, included in this report.

Recently Issued Accounting Standards

Information on Recently Issued Accounting Standards that could potentially impact our consolidated financial statements and related disclosures is incorporated by reference to Part IV—Item 15, “Exhibits, Financial Statement Schedules” Note 2 — Basis of Presentation and Summary of Significant Accounting Policies, included in this report.

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide the reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and certain other factors that may affect future results. This MD&A includes the following sections: Overview, Highlights, Results of Operations, Performance Measures and Non-GAAP Reconciliations, Liquidity and Capital Resources, Critical Accounting Policies and Estimates, and Recently Issued Accounting Standards. The MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and the related notes included in Item 15 of this report.

Use of Non-GAAP Constant Currency

In order to show the impact of changes in foreign currency exchange rates on our results of operations, we have included constant currency disclosures, where necessary, in the Overview and Results of Operations sections which follow. Constant currency disclosures represent the translation of our current fiscal year revenues, expenses and net income from the functional currencies of our subsidiaries to U.S. Dollars using the exchange rates in effect for the corresponding period of the prior fiscal year. Results on a constant currency basis are not in accordance with accounting principles generally accepted in the United States of America (“non-GAAP”) and should be considered in addition to, not as a substitute for, results prepared in accordance with U.S. GAAP. We use results on a constant currency basis as one of the measures to

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understand our operating results and evaluate our performance in comparison to prior periods in order to enhance the visibility of the underlying business trends, excluding the impact of translation arising from foreign currency exchange rate fluctuations. Management believes this non-GAAP financial measure provides investors with additional financial information that should be considered when assessing our underlying business performance and trends. However, reference to constant currency basis should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP.

Overview

The Company

WD-40 Company, based in San Diego, California, is a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories and homes around the world. We own a wide range of well-known brands that include maintenance products and homecare and cleaning products: WD-40 Multi-Use Product, WD-40 Specialist, 3-IN-ONE, GT85, X-14, 2000 Flushes, Carpet Fresh, no vac, Spot Shot, 1001, Lava and Solvol.

Our products are sold in various locations around the world. Maintenance products are sold worldwide in markets throughout North, Central and South America, Asia, Australia, Europe, the Middle East and Africa. Homecare and cleaning products are sold primarily in North America, the United Kingdom (“U.K.”) and Australia. We sell our products primarily through warehouse club stores, hardware stores, automotive parts outlets, industrial distributors and suppliers, mass retail and home center stores, value retailers, grocery stores, online retailers, farm supply, sport retailers, and independent bike dealers.

Highlights

The following summarizes the financial and operational highlights for our business during the fiscal year ended August 31, 2023:

•Consolidated net sales increased $18.4 million, or 4%, for fiscal year 2023 compared to the corresponding period of the prior fiscal year. Increases in the average selling price of our products positively impacted net sales by approximately $81.9 million from period to period, primarily due to sales price increases implemented across all segments at varying times during the current and prior fiscal year. These favorable impacts were partially offset by decreases in sales volume, which unfavorably impacted net sales by approximately $45.8 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. In addition, changes in foreign currency exchange rates from period to period had an unfavorable impact of $17.7 million on consolidated net sales for fiscal year 2023. On a constant currency basis, net sales would have increased by $36.1 million, or 7% for fiscal year 2023 compared to the prior fiscal year. This unfavorable impact from changes in foreign currency exchange rates mainly came from our EMEA segment, which accounted for 36% of our consolidated sales for the fiscal year ended August 31, 2023.

•Gross profit as a percentage of net sales increased to 51.0% for fiscal year 2023 compared to 49.1% for the prior fiscal year, primarily due to the positive impacts of price increases implemented at varying times during the current and prior fiscal year, offset by ongoing global supply chain challenges, including the increased cost of raw materials and changes in consumer behavior as a result of inflation. See the Impact of Global Supply Chain Constraints and Inflation on Our Business section which follows for details, including actions we continue to take in response to these challenges.

•Consolidated net income decreased $1.3 million, or 2%, for fiscal year 2023 compared to the corresponding period of the prior fiscal year. Changes in foreign currency exchange rates from period to period had an unfavorable impact of $2.4 million on consolidated net income for fiscal year 2023. Thus, on a constant currency basis, net income would have increased by $1.1 million, or 2%, for fiscal year 2023 compared to the prior fiscal year.

•Diluted earnings per common share for fiscal year 2023 were $4.83 versus $4.90 in the prior fiscal year.

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Significant Developments

Impact of Global Supply Chain Constraints and Inflation on Our Business

Our financial results and operations continue to be impacted by certain ongoing macroeconomic factors that have been affecting global economies, the rate of inflation, supply chains, distribution networks and consumer behavior around the world.

Global supply chain issues have resulted in increased raw material costs and other input costs, higher competition for freight resources, and labor constraints within manufacturing and distribution networks. This inflationary environment started to negatively impact our gross margin and financial results in fiscal year 2021 and these trends have continued to increase our cost of goods sold since that time. In response to these global supply chain issues, we implemented various initiatives. These initiatives included improvements within our existing third-party manufacturer network, as well as identifying and onboarding new third-party manufacturers, particularly in the Americas and EMEA segments. As a result of these initiatives, we experienced increases in the capacity and flexibility of our supply chain and were able to reduce our inventory levels since they peaked during the first quarter of fiscal year 2023. Although it is not possible to estimate the costs or impacts associated with potential future supply chain disruptions or the inflationary environment that continues to impact our raw material costs, we believe that the changes we continue to implement will have a positive impact on our ability to better manage any future disruptions.

To offset the unfavorable impact of increased costs to our gross margin, price increases have been implemented across all of our markets and geographies in fiscal years 2022 and 2023. Although we are seeing the favorable impacts of these price increases, sales volumes are often impacted unfavorably in the short term as customers and end users adjust to increased sales prices. The severity and duration of these conditions and their effects on our supply chain, changes in end-user demand and the current inflationary environment remain uncertain and it is not possible to estimate the extent to which these conditions will impact our financial results and operations in future periods.

See our risk factors disclosed in Part I—Item 1A, “Risk Factors,” for further information on these risks.

The Impact of Russian Military Action in Ukraine

On February 24, 2022, Russian forces launched significant military action against Ukraine, which has resulted in conflict and disruption in the region. In response to this action taken by Russia, the U.S. and other countries immediately imposed various economic sanctions against Russia and this event has continued to impact global economies, particularly in Europe. It is uncertain when conditions will improve or whether additional governmental sanctions will be enacted in future periods. It is not possible to predict the direct and indirect impacts of this evolving situation and its effect on global economies in future periods. We suspended selling our products to markets in Russia and Belarus beginning in March 2022, which had and continues to have an unfavorable impact on our business. In addition, we were temporarily unable to sell our products in Ukraine due to the disruption in the country, but sales to Ukraine resumed in the first quarter of fiscal year 2023. Prior to the suspension of sales in Russia and Belarus, our net sales to these two regions were approximately 3% to 4% of consolidated net sales, the majority of which is related to Russia. We do not have facilities, third-party manufacturing partners, employees or inventory located in these affected regions. Additionally, the only activities we conducted in these regions prior to the suspension of sales were through local marketing distributors. Write-offs of previously existing accounts receivable from those marketing distributors affected by the crisis have not been significant to date and are not expected to become significant in future periods.

As a result of this conflict, commodity markets remain subject to heightened levels of uncertainty, especially as they relate to the price of crude oil, which increased significantly in the immediate aftermath of the sanctions against Russia. Increases in crude oil prices unfavorably impact the cost of our products, as well as the cost of the transportation and distribution of our products. The length and severity of the recent volatility increases in the price of crude oil are highly unpredictable and may impact our cost of goods sold for as long as these conditions exist.

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Results of Operations

Fiscal Year Ended August 31, 2023 Compared to Fiscal Year Ended August 31, 2022

Operating Items

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

Net Sales by Segment

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

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Americas Sales

The following table summarizes net sales by product line for the Americas segment (in thousands, except percentages):

(1)Current fiscal year constant currency (“CC”) net sales translated at the foreign currency exchange rates in effect for the corresponding period of the prior fiscal year, compared to prior period actual net sales.

The following table summarizes management’s estimates of effects on net sales of changes in price, volume and foreign currency exchange rate impacts for the Americas segment (in millions):

(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 – Fiscal Year Ended – August 31, 2023 Compared to August 31, 2022

Net sales of maintenance products in the Americas segment increased primarily due to the following (by region):

•U.S. sales increased $30.8 million, or 17%. WD-40 Multi-Use Product sales increased by $31.0 million, or 19%, primarily due to price increases implemented throughout the prior fiscal year, which had a significant impact on net sales during fiscal year 2023. In addition, net sales were positively impacted by improved supply chain capacity. WD-40 Specialist and 3-IN-ONE products are sourced at certain third-party manufacturers that were impacted significantly by global supply chain constraints in the prior period, particularly in the first half of fiscal year 2022. However, adjustments we have made in our supply chain to increase the production capacity of our most significant products, including WD-40 Specialist and 3-IN-ONE, improved the availability of these products from period to period. WD-40 Specialist and 3-IN-ONE sales increased by $5.5 million, or 24%, and $3.7 million, or 49%, respectively, primarily due to these improvements that resulted in increased sales volume, as well as price increases implemented during the last twelve months.

•Latin America sales decreased $3.6 million, or 8%, primarily due to weaker economic conditions in many countries within this region, as well as the timing of marketing distributor orders from period to period. Sales were unfavorably impacted period to period due to marketing distributors purchasing a higher level of our product in advance of price increases that went into effect in late fiscal year 2022 for some regions in Latin America. This resulted in certain marketing distributors carrying a higher level of our product than usual leading into fiscal year 2023, which was combined with lower demand due to weaker economic conditions in these regions that limited the level of orders from these distributors during the fiscal year 2023. These unfavorable impacts were partially offset by higher sales in our direct market in Mexico, primarily due to favorable impacts of changes in foreign

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currency exchange rates and price increases from period to period, partially offset by lower sales volumes as a result of lower demand.

•Canada sales decreased $0.6 million, or 4%, due to unfavorable changes in foreign currency exchange rates and weaker economic conditions that resulted in lower levels of demand and decreased sales volume. In the prior fiscal year, we experienced a higher level of demand in the industrial channel of Western Canada as a result of increased activity levels of end-users in the oil industry due to market conditions within the industry at that time. Demand in the industrial channel of Western Canada was significantly lower in fiscal year 2023. These unfavorable impacts were partially offset by price increases from period to period.

Net sales of homecare and cleaning products in the Americas decreased due to the following:

•The unfavorable impact of lower demand for certain brands was partially offset by price increases and the improvement in the capacity and flexibility of our supply chain from period to period.

•While each of our homecare and cleaning products have continued to generate positive cash flows, we have generally experienced flat or slightly decreased sales for many of these products in recent periods.

For the Americas segment, 78% of sales came from the U.S., and 22% of sales came from Canada and Latin America combined for the fiscal year ended August 31, 2023 compared to the prior fiscal year when 74% of sales came from the U.S., and 26% of sales came from Canada and Latin America combined.

EMEA Sales

The following table summarizes net sales by product line for the EMEA segment (in thousands, except percentages):

(1)Current fiscal year constant currency net sales translated at the foreign currency exchange rates in effect for the corresponding period of the prior fiscal year, compared to prior period actual net sales.

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The following table summarizes management’s estimates of effects on net sales of changes in price, volume and foreign currency exchange rate impacts for the EMEA segment (in millions):

(1)Management’s estimates of changes in net sales attributable to volumes and the average selling price of our products are impacted by differences in sales mix related to products, markets and distribution channels from period to period.

The countries and regions in Europe where we sell through a direct sales force include the U.K., Italy, France, Iberia (which includes Spain and Portugal) and the Germanics sales region (which includes Austria, Denmark, Switzerland, Belgium and the Netherlands). The regions in the EMEA segment where we sell through local distributors include the Middle East, Africa, India, Eastern and Northern Europe.

EMEA Sales – Fiscal Year Ended – August 31, 2023 Compared to August 31, 2022

Net sales decreased in the EMEA segment due to the following drivers:

Direct Markets – EMEA (72% of net sales YTD FY2023 vs 67% YTD FY2022)

•Sales in our direct markets decreased $1.6 million, or 1%. Changes in foreign currency exchange rates unfavorably impacted net sales by $10.6 million as a result of the weakening of the Pound Sterling, the functional currency of our U.K. subsidiary, against the U.S. Dollar.

•In addition, decreases in sales volume in most direct markets within Europe unfavorably impacted sales period to period. These volume decreases were due to reduced demand compared to the prior period, driven by weaker market and economic conditions as well as a lower level of customer orders and promotional programs as customers adjust to the price increases implemented in late fiscal year 2022 and the first half of fiscal year 2023. These unfavorable impacts due to volume declines in Europe were offset by increases in sales volumes within the United Kingdom.

•The unfavorable impacts were partially offset by price increases across all direct markets.

Distributor Markets – EMEA (28% of net sales YTD FY2023 vs 33% YTD FY2022)

•Distributor market sales decreased $12.3 million, or 18%, in EMEA.

•Sales in Russia decreased $8.3 million from period to period due to the ongoing effects of the Russian military action in Ukraine. See The Impact of Russian Military Action in Ukraine described in the “Significant Developments” section above for further information regarding the suspension of our sales to Russian markets.

•In addition, sales in our distributor markets were unfavorably impacted by $4.3 million due to the weakening of the Pound Sterling, the functional currency of our U.K. subsidiary, against the U.S. Dollar. However, this unfavorable impact to sales in distributor markets was partially offset by the favorable impact of certain sales denominated other than in Pound Sterling, which strengthened against the Pound Sterling from period to period.

•Sales in distributor markets also decreased due to lower sales volumes of maintenance products in most distributor markets, particularly India, Kuwait, Poland, and Pakistan which were down $1.5 million, $1.2 million, $0.7 million and $0.6 million, respectively.

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•The decreases in distributor market sales were partially offset by price increases implemented over the last twelve months and favorable changes in sales mix.

Asia-Pacific Sales

The following table summarizes net sales by product line for the Asia-Pacific segment (in thousands, except percentages):

(1)Current fiscal year constant currency net sales translated at the foreign currency exchange rates in effect for the corresponding period of the prior fiscal year, compared to prior period actual net sales.

The following table summarizes management’s estimates of effects on net sales of changes in price, volume and foreign currency exchange rate impacts for the Asia-Pacific segment (in millions):

(1)Management’s estimates of changes in net sales attributable to volumes and the average selling price of our products are impacted by differences in sales mix related to products, markets and distribution channels from period to period.

Asia-Pacific Sales – Fiscal Year Ended – August 31, 2023 Compared to August 31, 2022

Net sales in the Asia-Pacific segment increased due to the following drivers:

•Asia distributor markets sales increased $4.0 million, or 13%, primarily due to higher sales in the fiscal year 2023 due to the absence of COVID-19 lockdown measures, that had severely limited the production of our products by our third-party manufacturer located in Shanghai, China. In addition, sales increased as a result of successful promotional programs and customers that purchased product in advance of price increases implemented in the first half of fiscal year 2023, all of which resulted in increased demand and higher sales volumes in most countries in the region early in fiscal year 2023. Sales were also favorably impacted by price increases implemented over the last twelve months.

•China sales increased $2.4 million, or 12%, due to the success of promotional programs in fiscal year 2023, which increased sales volume from period to period. In addition, sales were favorably impacted by price increases during the prior fiscal year as well as the easing of COVID-19 lockdown measures in Shanghai during the comparative period that severely limited the production of our products by our third-party manufacturer located in the region. These favorable impacts were partially offset by unfavorable changes in foreign currency exchange rates. On a constant currency basis, sales in China would have increased $4.3 million, or 21%.

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•Australia sales decreased $0.6 million, or 3% primarily due to the unfavorable impact of changes in foreign currency exchange rates and lower sales volumes, primarily due to lower demand of homecare and cleaning products in the region. On a constant currency basis, sales in Australia would have increased $1.1 million, or 5% due to the favorable impact of price increases.

Gross Profit

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

•There is often a delay before changes in costs of raw materials, such as specialty chemicals used in the formulation of our products, impact cost of products sold due to production and inventory life cycles. Such delays increase with higher production and inventory levels;

•In general, the timing of advertising, promotional and other discounts may cause fluctuations in gross margin from period to period. Advertising, promotional and other discounts that are given to our customers are recorded as a reduction to sales, whereas advertising and sales promotional costs associated with promotional activities that we pay to third parties are recorded as advertising and sales promotion expenses;

•In the EMEA segment, the majority of our cost of goods sold is denominated in Pound Sterling whereas sales are generated in Pound Sterling, Euro and the U.S. Dollar. The strengthening or weakening of the Euro and U.S. Dollar against the Pound Sterling may result in foreign currency related changes to the gross margin percentage in the EMEA segment from period to period; and

•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 $17.1 million and $18.6 million for the fiscal years ended August 31, 2023 and 2022, respectively.

•For further information pertaining to recent trends and economic conditions affecting gross margin, please see the section titled “Significant Developments”.

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

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

Gross Margin – Fiscal Year Ended – August 31, 2023 Compared to August 31, 2022

Gross margin increased 190 bps primarily due to the following favorable impacts, significantly offset by unfavorable impacts:

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

SG&A Expenses – Fiscal Year Ended – August 31, 2023 Compared to August 31, 2022

The increase in SG&A expenses was primarily due to increases in employee-related costs of $13.0 million due to increased headcount and annual compensation increases, as well as higher incentive compensation accruals. Travel and meeting expense also increased SG&A by $4.2 million due to the reduction in travel restrictions related to COVID-19 from period to period. In addition, professional services fees increased $3.4 million in support of the initiatives associated with our strategic framework in the Americas and EMEA segments, including the ongoing implementation of our new information system and increased cloud-based software usage and license fees. In addition, sales commissions increased $0.5 million primarily due to higher sales in the Americas segment. Other miscellaneous expenses increased $0.9 million, primarily as a result of higher overhead expenses. These increases to SG&A expenses were partially offset by favorable changes in foreign currency exchange rates, which reduced SG&A expenses by $5.0 million. In addition, freight expense decreased $1.0 million from period to period.

We continued our research and development investment, the majority of which is associated with our maintenance products, in support of our focus on innovation and renovation of our products. Research and development costs for the fiscal years ended August 31, 2023 and 2022 were $6.2 million and $5.1 million, respectively. Our research and development team engages in consumer research, product development, current product improvements and testing activities. This team leverages its development capabilities by collaborating with a network of outside resources including our current and prospective third-party contract manufacturers. The level and types of expenses incurred within research and development can vary from period to period depending upon the types of activities being performed.

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

A&P Expenses – Fiscal Year Ended – August 31, 2023 Compared to August 31, 2022

The increase in A&P expenses was primarily due to a higher level of promotional programs and marketing support in the Americas segment. This increase was also partially attributable to us investing more in the promotion of new product innovations such as WD-40 Specialist Degreaser & Cleaner EZ-Pods and WD-40 Precision Pen.

Total promotional costs recorded as a reduction to sales were $29.1 million and $28.1 million for the fiscal years ended August 31, 2023 and 2022, respectively. Therefore, our total investment in A&P activities totaled $57.9 million and $55.4 million for the fiscal years ended August 31, 2023 and 2022, respectively.

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Income from Operations by Segment

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

(1)Unallocated corporate expenses are general corporate overhead expenses not directly attributable to any one of the business segments. These expenses are reported separate from our identified segments and are included in Selling, General and Administrative expenses on our consolidated statements of operations.

Americas

Americas Operating Income – Fiscal Year Ended – August 31, 2023 Compared to August 31, 2022

Income from operations for the Americas increased to $60.8 million, up $6.6 million, or 12%, due to a $26.5 million increase in sales and a higher gross margin, partially offset by higher operating expenses. Gross margin for the Americas segment increased from 47.3% to 48.9% primarily due to the favorable impact of price increases implemented during the last twelve months, offset by increases in the costs of petroleum-based specialty chemicals and concentrate costs at our third-party manufacturers due to inflationary impacts. Operating expenses increased $10.4 million due to higher employee-related costs as a result of increased headcount and higher accrued incentive compensation. In addition, operating expenses increased due to a higher level of professional services expense, travel and meeting expense and A&P expense. Operating income as a percentage of net sales increased from 22.6% to 22.8% period over period.

EMEA

EMEA Operating Income – Fiscal Year Ended – August 31, 2023 Compared to August 31, 2022

Income from operations for the EMEA segment decreased to $39.5 million, down $2.6 million, or 6%, primarily due to a $13.9 million decrease in sales, which was slightly offset by a higher gross margin. Gross margin for the EMEA segment increased from 49.6% to 52.2% primarily due to price increases that were implemented over the last twelve months, significantly offset by the increased costs of aerosol cans and petroleum-based specialty chemicals. Operating expenses increased $0.6 million as higher travel and meeting expense and higher employee-related costs were mostly offset by lower level of A&P and freight expenses. Operating income as a percentage of net sales increased from 20.5% to 20.7% period over period.

Asia-Pacific

Asia-Pacific Operating Income – Fiscal Year Ended – August 31, 2023 Compared to August 31, 2022

Income from operations for the Asia-Pacific segment increased to $25.9 million, up $3.3 million, or 15%, primarily due to a $5.8 million increase in sales and a higher gross margin, partially offset by an increase in operating expenses. Gross margin for the Asia-Pacific segment increased from 53.6% to 55.3% primarily due to the favorable impact of price increases that were implemented during the current and prior fiscal year, partially offset by the increased cost of petroleum-based specialty chemicals and higher fill fees paid to our third-party contract manufacturers. Operating expenses increased $1.2 million from period to period primarily due to higher A&P expenses and travel and meetings expense. Operating income as a percentage of net sales increased from 30.6% to 32.5% period over period.

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Non-Operating Items

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

Interest Income

Interest income was not significant for both the fiscal years ended August 31, 2023 and 2022.

Interest Expense

Interest expense increased primarily due to an increased weighted average outstanding balance on our revolving credit facility and higher interest rates related to draws on this credit facility.

Other (Expense) Income, Net

Other income (expense), net changed by $1.4 million from period to period which was primarily due to net foreign currency losses during fiscal year 2022 as compared to net foreign currency exchange gains in fiscal year 2023 due to fluctuations in the foreign currency exchange rates for both the U.S. Dollar and the Euro against the Pound Sterling.

Provision for Income Taxes

The provision for income taxes was 22.5% of income before income taxes for the fiscal year ended August 31, 2023 compared to 19.9% for the prior fiscal year. The increase in the effective income tax rate from period to period was primarily due to higher tax rates in certain foreign jurisdictions, as well as tax shortfalls from the settlements of stock-based equity awards and increases in interest expense related to uncertain tax positions. The increase was partially offset by a decrease in nondeductible performance-based compensation expense.

Net Income

Net income was $66.0 million, or $4.83 per common share on a fully diluted basis, for fiscal year 2023 compared to $67.3 million, or $4.90 per common share on a fully diluted basis, for the prior fiscal year. Changes in foreign currency exchange rates year over year had an unfavorable impact of $2.4 million on net income for fiscal year 2023. Thus, on a constant currency basis, net income for fiscal year 2023 would have been $68.4 million.

Results of Operations

Fiscal Year Ended August 31, 2022 Compared to Fiscal Year Ended August 31, 2021

For discussion related to changes in financial condition and the results of operations for fiscal year 2022 compared to fiscal year 2021, refer to Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022, which was filed with the SEC on October 24, 2022.

Performance Measures and Non-GAAP Reconciliations

In managing our business operations and assessing our financial performance, we supplement the information provided by our financial statements with certain non-GAAP performance measures. These performance measures are part of our current 55/30/25 business model, which includes gross margin, cost of doing business, and earnings before interest, income taxes, depreciation and amortization (“EBITDA”), the latter two of which are non-GAAP performance measures. Cost of doing business is defined as total operating expenses less amortization of definite-lived intangible assets, impairment

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charges related to intangible assets and depreciation in operating departments, and EBITDA is defined as net income before interest, income taxes, depreciation and amortization. We target our gross margin to be 55% of net sales, our cost of doing business to be 30% of net sales, and our EBITDA to be 25% of net sales. Results for these performance measures may vary from period to period depending on various factors, including economic conditions such as the inflationary environment we have experienced in the last several fiscal years, and our level of investment in activities for the future such as those related to quality assurance, regulatory compliance, information technology, sustainability, and intellectual property protection in order to safeguard our WD-40 brand. Our targets for gross margin and these other performance measures are long-term in nature and we expect to make progress towards them over time. For more detailed information pertaining to recent trends and economic conditions and the actions we are taking to respond to them, please see the section titled “Significant Developments”.

The following table summarizes the results of these performance measures:

(1)Percentages may not aggregate to 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 EBITDA calculation.

We use the performance measures above to establish financial goals and to gain an understanding of our comparative performance from period to period. We believe that these measures provide our stockholders with additional insights into how we run our business. We believe these measures also provide investors with additional financial information that should be considered when assessing our underlying business performance and trends. These non-GAAP financial measures are supplemental in nature and should not be considered in isolation or as alternatives to net income, income from operations or other financial information prepared in accordance with GAAP as indicators of our performance or operations. The use of any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies. Reconciliations of these non-GAAP financial measures to our financial statements as prepared in accordance with GAAP are as follows:

Cost of Doing Business (in thousands, except percentages):

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EBITDA (in thousands, except percentages):