Hi. Welcome, everyone. I'm Linda Bolton-Weiser, Senior Analyst at Water Tower Research, and I'm pleased to be hosting today the management team of WD-40 Company, ticker symbol WDFC. Today we have for our Fireside chat, we have CEO Steve Brass and CFO Sara Hyzer. Before we get started, I would like to point out that the company's safe harbor statements can be found at www.wd40company.com. Also, this Fireside chat may not be reproduced or a written transcript distributed without the express written consent of Water Tower Research. Now let's get started. We'll start out with their long-term growth algorithm that the company. That long-term growth algorithm has a few key elements, including targeting maintenance product sales growth in the mid to high single digits, gross margin above 55%, and EBITDA to grow faster than sales. To achieve these objectives, Steve and Sara and your team, your strategy has four must-win battles, and you've been very consistent with this strategy and what these are. Today, I thought we could frame our conversation around those four must-win battles to start out and how they support your growth algorithm. Why don't we start with must-win battle number one, which is to grow WD-40 Multi-Use Product through geographic expansion. Maybe you can tell us about your approach to global expansion and give us a little overview of some of your highest growth markets. Sure. Thank you, Linda, and hello to everyone. Great to be with you all today. Yeah, I think it starts with a really strong position. We have a fortress position in our U.S. market. Our U.S. market is about 35% of our global sales, and so that provides us a stable platform from which to expand internationally. If you look at our U.S. market over the past five years, it's had a compound annual growth rate on maintenance products of in the order of 6% or 7%. The U.S. continues to grow. We still have gro wth opportunities in the U.S. Actually, in dollar terms, the U.S. has still been the fastest-growing market, growing about $55 million over the past five years, heading into this fiscal year. Outside of the U.S., about 65% of our business is already international. We are truly a global business. Our WD-40 brand is available to buy in 176 countries and territories across the world, and so we're laser-focused on our top 20 growth opportunities around the world. Outside of the U.S., we have growth opportunities just about everywhere you can look. So, a very strong track record already in Latin America, and we've pretty well tripled our business in Latin America over the past five or six years, but still strong growth in Latin America. In Europe and Asia, we pretty well have growth everywhere we look. Yeah, the European direct markets, which I used to m anage back in the days, are about a further 30% of our business, and so the U.K.'s, the France, the Germany's, the Spain's, etc., the Italy's. Those businesses are growing at very solid, predictable, single to high digits, sometimes into the double-digit growth rates, that complements the U.S. market. Looking further afield, at a lot of the emerging markets, we're consistently growing in places like China, which is our single largest growth opportunity, well into double digits. We have a great team. We have a direct business in China of about 60 people. It's now our third largest market globally after the U.S. and France, and delivering very strong growth. Our second largest opportunity being India, where we actually partner with a local company in India, a business called Pidilite, who are a fantastic strategic partner for us, and we've been achieving super strong rates of growth in India as well, over 20%. India's already our second largest market in unit terms, growing very, very quickly and a market one day that could rival the U.S. in terms of scale. You then overlay that with very strong growth oppo rtunities in a lot of emerging markets, places like Indonesia and Turkey, which are growing in very high double-digit growths. Overall, a mid to high single digit growth target, but with very fast growth available in a lot of these emerging markets. Great. Thank you, Steve. In terms of your must-win battle number two, this has to do with growing your sales and gross margin through the premiumization of WD-40 Multi-Use Product. Can you talk about what that is, what that entails, and the economics of that premiumization, and how much opportunity do you still have here? I'll go ahead and take that one, Linda. For us, premiumization is really about improving that end-user experience, and it also has the benefit of strengthening the economics of the business. These products, and of course I brought products to show. The two products that we talk about when we talk about premiumization is the Smart Straw. The biggest end-user complaint that we get is losing the straw on the classic can. The Smart Straw solves that issue. Smart Straw is one, and then the other one is the EZ-REACH, the one with the flexible straw. Both of these products solve real user and user pain points and make the product, in this particular case, easier to get to a particular point, and can save end users, particularly professionals, time and ultimately money. This allows us to offer these higher value formats and stronger gross margins, and also deepens our brand loyalty. So year to date, these two formats' sales combined were up 19% over the prior year and represents about 50% of our WD-40 Multi-Use Product sales. So really seeing good traction in those formats. In unit sales, though, our premium formats make up 40% of our MUP sales globally, and so we have a meaningful runway ahead of us for growth there. For context, in a developed market like the U.S., we see about 80% of our sales in those premium formats. Conversely, on the other side, in our emerging markets, the number can be in the low single digits. We are close to unlocking manufacturing capacity in China. So really that gives us the opportunity to bring the Smart Straw can into both China and our Asia marketing distributors, really in a region that has our lowest penetration of those formats. From a gross ma rgin standpoint, from a revenue standpoint, this sells at a 30% uplift to the classic can, and the EZ-REACH sells at a 45% uplift. It doesn't cost us either 30% or 45% more to make, so both of these are great margin enhancers for us. We continue to target our annual growth rate for these formats at 10%, supported by expanding distribution, and so this opportunity is not just to trade customers up, but it's really to make the brand more relevant and really to bring a more useful can to our end users. Great. Thank you, Sara. That's a really powerful part of your strategy. So in te rms of your must-win battle number three, this has to do with your WD-40 Specialist product line. Can you tell us all what those products are and what the growth opportunity is that you see with Specialist? Sure. The WD-40 Specialist line was conceived about, what, 12, 13 years ago. It was really leveraging the core brand equity that we've built now many pla ces around the world. Whereas the WD-40 core product, the Multi-Use Product that most folk will be familiar with, which is really the kind of Swiss Army knife, if you like, of general purpose maintenance products. Specialist products are designed for professionals who seek a high degree of performance from specialist products. Things like high performance penetrants or high temperature lubricants, silicone sprays, cleaning and degreaser products, which a specialist or a professional would turn to solve more complex kind of maintenance problems. The Specialist range is currently our fastest growing range. As a sub-brand, it's been growing at a compound annual growth rate of about 14%, but we're only just really getting going. We have an identified opportunity of around $600 million of growth on the Specialist range, and we're only selling about 90% of our sales are to 10 countries. We really have the opportunity to take the Specialist range around the world to many of the countries where we've already introduced and have built the WD-40 core brand successfully. That is a very, very fast driver of growth. It also performs extremely well online, and so, it's really fueling strong e-commerce growth for us as well. Overall, between the two, between the core product and the WD-40 Specialist range, it gives us an opportunity to take a category approach with our retail partners. Protecting and maintaining the core strength of the core product, which typically accounts for perhaps 60%-65% of the entire category sales, and surrounding and protecting the core brand, but also taking market share on those specific product areas from established competition around the world. A very successful and fast-growing strategy. That's a good segue into your fourth must-win battle, which has to do with digital capabilities. Your goal is to accelerate those capabilities in brand marketing and e-commerce, which is still relatively small for you, I believe less than 10% of sales. Can you talk about that fourth must-win battle regarding digital capabilities? Sure. We do view digital as an accelerant across all of our other must-win battles, not necessarily as a standalone channel strategy. As you mentioned, Linda Bolton-Weiser, e-commerce is less than 10% of our sales to date, but it is our fastest growing channel. And year to date, we have seen our e-commerce sales up 22%, led by the U.S. and China. This must-win battle is both transactional, through the e-com, and brand building. On the commerce side, we are improving our content quality, our search, our availability, our ratings and reviews, and our execution with our key pure play and omni-channel players. We do not sell direct to consumers. 100% of our sales are through retail or through these online, pure play and omni-channel partners. On the brand side, we work with a lot of the influencers. We work through social media, video, and digital education helps us reach end users at scale all over the world, and it really allows us to show them new uses, new formats that I talked about with our premiumization strategy and the new solutions really bringing them that WD-40 Specialist line. As Steve Brass mentioned, WD-40 Specialist does extremely well online because you can really serve up a specific solution when people are searching for something specific. Digital also helps us premiumize because it gives us a better platform to explain why the WD-40 Smart Straw and the WD-40 EZ-REACH and the WD-40 Specialist products are worth that trade-up. What people do not always appreciate is actually how digital the brand is online. For a 70-year-old brand, the amount of engagement that people have online around WD-40, no other competitor can even touch the amount of online content that we have. Our end users love to share uses. They love to tell stories about how they use our products, and that peer-to-peer sharing is really invaluable. And again, no one else in our category has that. So we leverage our digital tools to really meet millions of users that are going online and now more than ever, they are going online in their path to purchase, and that is how we connect with our end users. Great. Thanks, Sara. Switching a little bit more to immediate, maybe, issues that the company faces in the macro environment. You have several key input costs that go into the cost of the can of WD-40. Those include petroleum-based specialty chemicals, tin cans, and plastic resin. We have seen obviously a lot of volatility in oil that relates to a key input cost of yours. Can you explain how you manage through that and talk about your ability to take pricing where needed? Sure. Let's talk about the cost of the can overall. Roughly 30%-35% of the overall cost of our can is subject to that monthly spot pricing volatility that you mentioned. It is tied to specialty chemicals, primarily solvents and base oils. We manage our input cost volatility usually within a range. We are usually comfortable within a range of it coming up a little bit, and it always comes back down. It us ually flows within a range that is manageable, so we are not chasing price just by when those costs are within a band that we are comfortable with. On the flip side, the other part of our cost structure that is less volatile relates to tinplate cans and manufacturing fees, which are longer-term contracts. Specialty chemicals is only one piece of the equation. Those specialty chemical costs can move differently than the headlined oil prices that we typically point investors to monitor at least that subset of our input costs. Recently we have seen those, we call it decoupling. The cost of our input costs have gone up slightly higher, I want to say slightly, higher than the cost of what you have seen in those trading markets. In the near term, we are expecting there to be some pressure on our gross margin. We did reflect that in our most recent guidance that we put out between 54.5% and 55.5% is what we are expecting for the full year. Still in line with our 55% plus targets, but we will see it have an impact on us in the fourth quarter. We have taken price. We mentioned that as part of our third quarter earnings call. We have already taken some price actions in both Europe and Asia, and we are continuing to evaluate whether or not additional pricing actions are needed. From a pricing standpoint, the strength of the brand, our high awareness, and really the value that we deliver to end users gives us the ability to take reasonable price when necessary. Given the stickiness that we expect in the near term, we did move on those price actions because we do believe that the input costs will be sticky for a period of time. We are thoughtful about the timing, and our customer partnerships, but we have been very clear that we will defend our gr oss margin. It took us a lot of time to get back to the 55%, so we want to make sure that we are able to hold that going forward. Great. Thanks. That's a great explanation. Can you talk about where your products are manufactured? You've taken a lot of actions and continue to take actions to further strengthen your supply chain. Can you talk about that, please? Sure. We have a decentralized supply chain, and we manufacture with broadly 20 external partners around the world, and that gives us a lot of flexibility, and actually enables us. In recent times, we've been able to move manufacturing and product manufacturing around, based upon the recent disruptions. It really gives us an optimal kind of cost base plus flexibility. It also helps us offset things like tariffs. Because we're not shipping large amounts of product across borders, by manufacturing locally, it's helped us offset tariffs and really is a big part of us being very flexible in market. We've also put in a global supply chain team over the past few years that have really helped us figure out where next, where do we need to be manufacturing next. Recently we're in the process of ope ning up manufacturing in Thailand to give us another option. We already manufacture in Asia, in China and in Australia. Just adding another kind of opportunity there to spread that across Asia Pacific. The global supply chain has also been working on cost savings. A couple of years in now, they have an annual program of cost savings, really leveraging the kind of global brand that we have and the global business position that we have, and really sourcing much more smarter for the first time, as opposed to just decentralized sourcing. Looking at the big opportunity for cost savings. Those cost savings are quite considerable now. Each and every year, we have a program of cost saving opportunities, which the team are executing really well in partnership with the Trading Bloc supply chain teams. That's helping us offset the impact of tariffs or of the more recent disruption in quite a significant way. Thanks, Steve. As you just mentioned, you have an asset-light model, and your CapEx is relatively low as a percentage of revenue. Therefore, you have been generating annual free cash flow that is pretty strong. I calculate before dividends of around $80 million in the last few fiscal years. That is quite a bit of free cash flow. Can you talk about your capital allocation priorities? Sure. Our capital allocation approach is really consistent and reflects what you mentioned, Linda, that asset-light model. The first of our focus is really on investing back into the business. So we invest primarily in brands, people. I mentioned, we talked earlier about our digital capabilities. Steve just went through all the supply chain resilience and the productivity initiatives that we have. So our first focus is reinvesting back into the business for that growth. Because we outsource the manufacturing and distribution, as Steve just walked through, our capital requirements are modest. So we target around 1%-2% of net sales, and that really allows us to generate strong free cash flow that you just highlighted. So our second focus is really on returning that cash to stockholders, and we primarily do that through the use of dividends and share repurchases. We have paid dividends without interruption for more than 40 years, and our annual dividend target is approximately 50% of net income, and we have been well above that in the last few years. We also like to be in a position where we can increase that dividend incrementally on an annual basis. We also then use share repurchases as a vehicle of returning capital to investors, and we do that more opportunistically. So at a minimum, we want to make sure that we are buying back what we are issuing every year, but we have been in well excess of that in the last few years. This year, we have spent $22.5 million on share repurchases year to date through the third quarter. Just recently, our board authorized a new share repurchase plan of up to $100 million beginning next fiscal year. We have a lot of flexibility on our balance sheet. Our leverage is low, and so that gives us a lot of optionality to invest both organically, which I mentioned, allows us to manage through the volatility that we are seeing right now, and gives us that flexibility if and when there is something strategic for us to go after that fits within our strategy. So overall, again, our priorities are to fund growth first. We will protect that balance sheet, and then we really do return our excess cash to stockholders consistently over time, but in a disciplined way. Great. Thank you, Sara. Investors kind of might be wondering about the changing world we are seeing, the growth of importance of technology, arguably, AI, all these different technology developments. Can you talk about any mega trends that would either decrease or increase demand for your core multipurpose maintenance products? Sure. I will start with one that will decrease demand, which is kind of well documented, right? The rise of EVs around the world. EVs have much fewer moving parts, and so as that grows as a share of overall automotive fleet, then that side of the business will decline over time. Our automotive business is about 13% of our business today, and if we look out, this thing is going to play out over 10, 15 years, maybe even longer, depending on EV adoption. As that kind of trend increases, then there will be a reduction there. Although, in some markets like China, we did not really have an automotive business in the first place to lose. So you have to put that caveat out that a lot of these emerging markets are actually just going straight to the EV side of things. That trend, which is well documented, I think, and accepted by investors and understood, is going to be considerably offset by lots of growth avenues. You mentioned AI data centers. That is a use case for our products, both the WD-40 Multi-Use Product and for contact cleaners, which are a fast-growing area, as well as for products like White Lithium Grease. AI data centers, drone technology around the world, particularly in agriculture, is a massive growth area for us. Tapping into that growth opportunity again for the core product and for the more WD-40 Specialist products. Growth areas like robotics, automation, also need significant lubrication, et cetera. Lots of growth opportunities across robotics, automation, drone technology. Actually, another big kind of trend out there is aging capital equipment. Older equipment tends to need, and even the automotive fleet today in the medium term is aging around the world. They are trends that are also kind of driving further kind of consumption. You have got some of the other big ones. Growth of emerging markets, and so we are certainly tapping into that. You heard examples where we are growing very strongly in places like Indonesia and Turkey, where those economies are storming ahead. Sustainability is another big one. There is a trend out there for particularly younger consumers, their preferences for sustainable products is changing, and so it is a generational thing. A lso with this tendency to kind of repair, not replace, is a big kind of trend that we see out there. And one of our most successful global campaigns we run is the Repair Challenge, which invites end users to send us their stories and projects of how they're kind of keeping stuff out of landfill by renovating projects. And so that's something that we tap into and is a very powerful force for the future in terms of sustainable kind of attitudes changing. Great. So finally, just to wrap things up, I guess I had a question about recent company developments. You've announced fairly recently that Sara will be transitioning out of the CFO role to become president of the Americas. Maybe you can just update us on where you are in that process of identifying a replacement and where we stand on that. Sure. Sara and I both started at the same time four years ago in our current roles, and she's been a wonderful business partner to me and to the business in terms of being a super effective CFO and business partner. I'm really excited for her now as she takes on the responsibility for leading our Americas team, and driving almost half of our global revenues, 45% of our global revenues. I'm really excited for her. So we have gone out, and we've looked externally. We are looking for an experienced public company CFO to replace Sara. We're currently in the middle of that process, and once we have some news, we will share it with investors. But we're very optimistic at the quality of the candidates we've been able to identify. Sara's very hard to replace, but we're very optimistic that we'll be able to find a high caliber CFO to replace Sara. Then Sara will transition out of her current role probably in early November, and the new CFO would begin hopefully at that time. Sounds good. All right. I think that wraps it up here. We've had a great conversation. You've really covered all the bases and given us a lot of really insightful information. Thank you for joining us today, CEO Steve Brass and CFO Sara Hyzer. Thank you. Thank you, Linda. Thank you. Thank you. More information on the company can be found on the company's website, and our research can be found at www.watertowerresearch.com. The views expressed in this Fireside chat may not necessarily reflect the views of Water Tower Research LLC and are provided for informational purposes only. This Fireside chat may not be distributed or reproduced without the written consent of Water Tower Research and should not be considered research, nor a recommendation. WTR is an investor engagement firm, not a licensed broker-dealer, market maker, investment bank, underwriter, or investment advisor. Additional disclaimers can be found at watertowerresearch.com.