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WD-40 (NASDAQ: WDFC)
Q4 2024 Earnings Call
Oct 17, 2024, 5:00 p.m. ET

WD-40 Company Reports Record Sales for Q4 2024

Strong Growth and Strategic Developments Highlight the Earnings Call

Insights from Leadership

Operator

Ladies and gentlemen, thank you for standing by. Good day, and welcome to the WD-40 Company fourth quarter and full fiscal year 2024 earnings conference call. Today’s call is being recorded. At this time, all participants are in listen-only mode.

At the end of the prepared remarks, we will conduct a question-and-answer session. [Operator instructions] I would now like to turn the presentation over to the host for today’s call, Wendy Kelley, Vice President of Stakeholder and Investor Engagement. Please proceed.

Wendy Kelley — Vice President, Stakeholder and Investor Engagement

Good afternoon, and thank you for joining us today. On our call are WD-40 Company’s President and CEO, Steve Brass; and CFO, Sara Hyzer. We encourage investors to review our earnings presentation, press release, and Form 10-K for the period ending August 31, 2024. These documents will be available on our investor relations website at investor.wd40company.com.

A replay and transcript of today’s call will be available shortly after. We will discuss certain non-GAAP measures, with descriptions in our SEC filings as well as our earnings documents. Please note that today’s call contains forward-looking statements regarding our expectations for future performance.

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Results may vary. The company’s expectations, beliefs, and projections are expressed in good faith, but achieving them is not guaranteed. Refer to risk factors in our SEC filings for more details. For anyone accessing this call’s replay or transcript, all information is current only as of today, October 17th, 2024.

The company disclaims any duty to update this forward-looking information. Now, I’ll turn the call over to Steve.

Steven A. Brass — President, Chief Executive Officer, and Director

Thank you, Wendy, and thanks to all for joining us this afternoon. Fiscal year ’24 has proven to be a remarkable time of growth, resilience, and strategic achievements. We navigated challenges, seized opportunities, and strengthened the foundation that has anchored WD-40 Company’s success for over seventy years. I’ll provide an overview of our sales for Q4 2024 and our progress within our four-by-four strategic framework.

Sara will follow with insights on our homecare and cleaning business divestiture, our business model, and our outlook for fiscal year 2025, after which we’ll address your questions. I’m pleased to share that our fourth quarter marked our second consecutive record-breaking sales period. We reported fourth quarter net sales of $156 million, representing an 11% increase year-over-year, with maintenance products enjoying double-digit growth throughout both the fourth quarter and the fiscal year.

For fiscal year ’24, sales of our flagship product, the WD-40 multi-use product, reached $453 million, reflecting an 11% increase compared to the previous year and setting a new annual record for our core brand. Our gross margin is showing continued improvement as we aim for our target of 55%. In Q4, we reported gross margins of 54.1%, a gain of 100 basis points from Q3 and 270 basis points from Q4 of the previous fiscal year. Let me now break down fourth quarter sales results by segment.

Unless otherwise noted, I will discuss sales on a reported basis compared to Q4 of the previous fiscal year. Sales in the Americas, which includes the U.S., Latin America, and Canada, grew by about 6% from the previous year to $79 million. This growth was primarily due to increased sales volumes of the WD-40 multi-use product, which rose 7% year-over-year, with a significant portion of this growth occurring in Latin America, which saw a 63% increase over the prior period.

In the U.S. and Canada, these gains were partially offset by lower sales figures. Sales of the WD-40 multi-use product in Latin America, buoyed by our transition to a direct market model in Brazil, were notable. Our acquisition of a Brazilian distributor in the third quarter allowed for direct retail sales in the region and boosted net sales in Brazil by almost $7 million for the entire fiscal year.

Additionally, we are observing positive trends in Mexico due to a similar transition we made in 2020. Sales in Mexico and other Latin American markets climbed by 24% and 9%, respectively, attributed to customer orders, successful branding, expanded distribution, and increased availability of WD-40 Smart Straw. Our strategic focus for fiscal year ’24 in the Americas was always connected to robust Latin American growth, which has materialized.

In contrast, U.S. sales of the WD-40 multi-use product decreased by 4% when compared to the previous year. While solid point-of-sale demand was noted in the fourth quarter, it was challenged when compared to the same period…

WD-40 Company Reports Mixed Sales Results Amid Strong Market Backdrop

During this quarter, our sales have experienced some declines, particularly against the impressive fourth quarter of last year, which saw double-digit growth in volume and sales across the United States.

Sales Overview: Mixed Results in North America

In Canada, sales of the W40 multi-use product fell by 3% compared to the same period last year. This decline is due to the phasing out of our classic can delivery system and the rollout of the Smart Straw Next Generation. On a positive note, we’re witnessing strengthening trends at distribution points that have fully transitioned to the Smart Straw, suggesting significant long-term gains ahead as we leverage our premium formats more effectively. Meanwhile, sales of WD-40 Specialist saw a 6% increase in the Americas, driven mainly by strong performance in Canada and Latin America.

Overall, maintenance product sales in the Americas rose 7% this quarter. However, this increase was partially countered by a 12% decline in homecare and cleaning product brands. For the entire fiscal year, maintenance product sales in the Americas totaled $267 million, reflecting a 7% increase and aligning with our goal of 5% to 8% annual growth.

Europe, India, the Middle East, and Africa (EIMEA): Strong Growth

In the EIMEA segment, sales grew about 16% compared to the previous period, reaching $59 million this quarter. Currency fluctuations had minimal impact, with constant currency sales increasing by 15%. The primary driver of this growth was a 16% increase in volume sales of the WD-40 multi-use product, significantly benefiting from our distributor markets, which saw a 41% rise year-over-year. Notably, Northern Europe and India experienced extraordinary growth at 52% and 206%, respectively.

Sales of WD-40 Specialist also increased across most EIMEA regions, up 13% from the prior period, as customers adjusted to last year’s price hikes. In the full fiscal year, maintenance product sales in EIMEA totalled $212 million, a strong 17% increase and surpassing our long-term target of 8% to 11% annual growth.

Asia-Pacific: Notable Rise in Sales

In Asia-Pacific, which includes Australia and China, sales soared about 21%, totaling $18 million. This growth was mainly attributed to a 26% rise in WD-40 multi-use product sales. Successful brand-building efforts in the region led to maintenance product sales among distributor markets increasing by 51% compared to the previous period. In China, maintenance product sales also saw a 10% increase, indicating strong momentum for both WD-40 multi-use and Specialist products.

While sales in Australia remained unchanged from the prior period, promotions for the no vac carpet cleaning product led to a 6% decline in sales, which was nearly balanced out by a 15% increase in WD-40 Specialist sales. For the fiscal year, maintenance product sales in Asia-Pacific reached $79 million, reflecting a 10% increase, consistent with our long-term growth goals between 10% and 13%.

Strategic Goals: Focus on Growth

In addition to regional performance, we continue to track our progress against our four-by-four strategic framework, emphasizing long-term growth drivers. The first goal, geographic expansion, resulted in global sales of WD-40 multi-use products totaling $453 million for fiscal year ’24—an 11% increase from the previous year. Strong growth was witnessed across trade blocs: 18% in EIMEA, 7% in the Americas, and 9% in Asia-Pacific.

Despite the company’s progress, there remains substantial growth potential. We estimate an untapped global sales opportunity for WD-40 multi-use products near $1.6 billion, highlighting that we have captured only 28% of this benchmark after 71 years. Our strategy focuses on making products more available and increasing customer accessibility.

The successful integration of our Brazilian distributor exemplifies this approach, with nearly $7 million in sales growth within the first six months of direct operations, surpassing expectations and reinforcing our confidence in emerging markets.

Conclusion: A Future Full of Potential

While recent sales results highlight challenges, they also underscore opportunities. Our continued focus on premium products and geographic expansion positions us well for future growth. Each step forward in these strategies fuels our belief in capturing the significant growth potential ahead.

WD-40 Company Reports Strong Growth and Strategic Focus in FY 2024

Fiscal Year Highlights: Growth Driven by Premiumization and WD-40 Specialist

In fiscal year 2024, Straw and EZ-Reach combined to achieve an 11% growth, contributing approximately $20 million over the previous year. The success of our premiumization strategy, designed with our end users in mind, continues to play a crucial role in driving revenue and improving gross margins.

Over the past five years, we have seen a compound annual growth rate (CAGR) of 10.7% for net sales of premium products. Looking ahead, we are targeting a CAGR of over 10% for premium product sales.

WD-40 Specialist: A Key Growth Driver

Our third key focus area is boosting WD-40 Specialist sales. In FY 2024, global sales reached nearly $74 million, marking an 11% increase or $7 million from the previous year. We aim to achieve category leadership in this segment by leveraging our core brand equity. Growth was seen across all three trade regions: 6% in the Americas, 14% in EIMEA, and 17% in Asia Pacific.

Remarkably, in China, sales of WD-40 Specialist surged by 45%, totaling over $1.4 million due to expanded distribution and new product introductions. The global benchmark sales opportunity for WD-40 Specialist is estimated at approximately $605 million, of which we have captured only 12%. Over the last five years, WD-40 Specialist achieved a 14% CAGR in net sales. Our future target for net sales in this category is set at over 15% CAGR.

Digital Commerce and the Repair Challenge

Our final strategic objective is to accelerate digital commerce. In FY 2024, sales through pure-play e-commerce channels rose by 12% year-on-year. This effort supports all our key focus areas, much like the overlapping sections of a Venn diagram. To enhance our digital strategy, we continued our global online marketing campaign known as the Repair Challenge, now in its third year. This initiative inspires millions to extend the lifespan of their tools and equipment.

This fiscal year, the Repair Challenge websites attracted over 2 million visitors, with more than 10,000 projects submitted. These projects aim to keep various tools and equipment, from bicycles to cars, in use for longer.

Focus on People and Sustainable Practices

Moving to the next part of our strategy, we emphasize operational excellence, starting with a people-first mindset at WD-40 Company. Our commitment from our 644 employees across 16 countries strengthens our culture. We strive to be an employer of choice, allowing employees to bring their best to work. A proud achievement is our 93% employee engagement rate, reflecting our dedication to learning and growth.

This year, we made strides toward evolving into a world-class global learning organization, conducting a voluntary learning survey that yielded an impressive 82% response rate. The results showed that 90% of our employees recognize continuous learning as essential for company success.

Strategic Enablers for Long-Term Success

The second strategic enabler focuses on building a sustainable business for the future. We define sustainability as the ability of a business to operate indefinitely while positively impacting the environment and society. Significant steps have been taken to integrate sustainability into our business strategy. Recent initiatives include adding three dedicated ESG positions, an environmental assessment of our top suppliers, and developing a roadmap aimed at reducing greenhouse gas emissions. Our 2024 ESG report, due next month, will outline our objectives and target progress over the past two years.

Our third enabler is achieving operational excellence in the supply chain. This year, we adopted a global approach to our supply chain strategy, recognizing its importance in driving value and sustainability. Our efforts led to reduced costs and improved efficiencies through strengthened partnerships with key suppliers. Notably, we reduced inventory by approximately $7 million while maintaining an impressive 95% on-time delivery rate in FY 2024.

Streamlining Operations through Technology

Lastly, our fourth enabler focuses on enhancing productivity through improved systems. By using automation and AI, we strive to streamline operations and increase efficiency. A major accomplishment this year was the successful rollout of our new ERP system, which is now in place for half of our business. Despite initial challenges, we adapted quickly, paving the way for smoother implementations in the future.

To consolidate our advancements, we are establishing global centers of excellence in key IT areas. This allows us to harness our teams’ skills effectively, focusing on long-term growth objectives. With that overview, I will now hand over the discussion to our Vice President and Chief Financial Officer, Sara Hyzer.

Sara Hyzer — Vice President, Chief Financial Officer

Thank you, Steve, for that comprehensive overview of our sales results and strategic direction.

Company Reports Positive Results as Fiscal Year 2024 Ends

In an encouraging update, our company has finished strong in the fourth quarter, setting a robust foundation for fiscal year 2024. Let’s delve into the highlights of our financial performance and projections.

Fiscal Year 2024 Performance Overview

We initially projected net sales growth between 6% and 12%, anticipating sales to reach between $570 million and $600 million on a non-GAAP constant currency basis.

Today, we are pleased to announce that our fiscal year revenue stood at $583 million, reflecting an 8% increase from last year and matching our expectations. Our anticipated gross margin was between 51.5% to 53%, and we reported a gross margin of 53.4%, slightly exceeding our guidance. Our global investment in advertising and promotion was expected to fall between 5% and 6% of net sales, and we achieved an investment of 5.7%.

Regarding net income, we projected between $67.7 million and $71.8 million, with diluted earnings per share (EPS) estimated between $5 and $5.37. We reported net income at $69.6 million and diluted EPS at $5.11, affirming our expectations. To provide further clarity on these results, let’s analyze our fourth quarter performance through the lens of our 55-30-25 business model.

Financial Strategy and Future Plans

I will also share updates regarding our financial performance, the divestiture of homecare and cleaning brands in the Americas and the U.K., and insights into fiscal year 2025. Our asset-light and dynamic business model has been pivotal in securing a solid financial stance and delivering strong returns for stockholders over the years.

The 55-30-25 model remains our long-term guide. Recently, we’ve assessed each aspect of this model within a range. As noted before, the divestiture of our homecare and cleaning brands is expected to temporarily affect our operational capacities. Nevertheless, in the long run, we foresee considerable advantages as we shift our focus and resources toward high-growth, high-margin maintenance products. More details will come when we present our guidance for fiscal year 2025.

Fourth Quarter Gross Margin Insights

Our target for gross margin lies between 50% and 55%. We have made substantial strides in this area, with a fourth-quarter gross margin recorded at 54.1%, up from 51.4% last year. This improvement of 270 basis points was driven by several factors:

• Lower costs associated with our cans added 100 basis points.
• A favorable sales mix contributed 70 basis points.
• Reduced warehousing, distribution, and freight costs improved margins by 60 basis points.

The stabilization of inflation has positively impacted our gross margin. Notably, we’ve seen three consecutive quarters of improving margins, recording gains across all three trade blocs. In the Americas, gross margin increased by 350 basis points to 52.5%. EIMEA saw a 190 basis point rise to 55.5%, while Asia-Pacific improved by 70 basis points to 56.4%. Encouragingly, two of our trading blocs have surpassed the 55% gross margin target for this quarter.

Divestiture Effects and Long-Term Outlook

While we anticipate some challenges from the divestiture of the homecare and cleaning brands, this move is expected to enhance our gross margin by approximately 60 basis points annually post-divestiture. We remain optimistic about reaching our 55% gross margin target by the end of fiscal year 2026, or potentially sooner, by the close of fiscal year 2025.

In fiscal year 2025, enhancing our growth margin will be a primary focus for senior leadership, who are set to be incentivized in this effort. Our costs of doing business include total operating expenses, which consist mainly of investments in employees, brand marketing, freight services, and technology. As we continue to grow, we remain dedicated to efficient operations and maintaining financial stability, while strategically investing for future growth.

As part of this operational strategy, we expect that our costs of doing business will gradually align with our target of 30% to 35%. Currently, our costs of doing business stand at 38%, a rise from 34% last year, primarily due to higher employee-related expenses.

Employee Compensation and Incentives

In the tumultuous economic environment of fiscal years ’22 and ’23, supply chain issues and high inflation challenged our operations. We created an earned incentive program designed to protect our bottom line while rewarding employees during more prosperous times. This year, our incentive compensations rose significantly, totaling $16.5 million, compared to $3 million in fiscal year 2022.

We are proud to support every employee through our incentive plan as recognition for their efforts. For the fiscal year, our accrued incentive compensation program increased by $8.8 million, with $4.6 million accounted for in the fourth quarter alone. Exceeding our fourth-quarter forecast resulted in this notable uptick.

Final Thoughts on Current Financial Status

Despite the pressures from our increased employee compensation and strategic investments, we achieved an adjusted EBITDA margin of 17% for both the full fiscal year and the fourth quarter. This figure held steady compared to the previous period, demonstrating resilience in the face of rising costs, with an 8% increase in EBITDA year over year.

Looking forward, if the homecare and cleaning brands divestiture proceeds as planned, we expect it will take time to adapt to its impacts. However, we remain confident in our ability to return the adjusted EBITDA margin within our medium-term target range of 20% to 22%. As we navigate these transitions, we’re well positioned to achieve continued growth and financial stability.

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WD-40 Company Reports Modest Growth in Q4 Earnings and Announces Future Strategies

Financial Highlights: A Year of Gradual Progress

In the fourth quarter, WD-40 Company reported a net income of $16.8 million, marking a slight increase of about 1% compared to the previous quarter. For the entire fiscal year, adjusted for the timing of incentive compensation, net income rose by $3.6 million, or nearly 6%, year-over-year. On a constant currency basis, net income would have seen a 3% increase compared to the last year.

The diluted earnings per share (EPS) for the fourth quarter reached $1.23, up from $1.21 in the same quarter last year. Over the full year, diluted EPS improved by $0.28 per share, translating to a 6% increase. The fourth quarter figure reflects an average of 13.6 million weighted shares outstanding, remaining flat compared to the prior year. Next, we’ll explore the company’s financial position and plans for capital allocation.

Strong Financial Position and Future Allocations

WD-40 maintains a robust financial foundation and solid liquidity. The company’s capital allocation strategy aims for a balanced approach, focusing on sustainable organic growth alongside providing substantial returns to shareholders. Consistent capital returns are made through regular dividends and stock buybacks, with annual dividends targeted at over 50% of earnings.

Recently, the board of directors approved a quarterly cash dividend of $0.88 per share. Efficient management of inventory levels reflects adjustments made to stabilize the U.S. supply chain, with inventory peaking in the first quarter of fiscal year 2023. Since that time, the company has successfully reduced inventory by nearly $40 million, or 34%. Current levels are now stable, reflecting a balanced approach to risk management.

Cash flow from operations for fiscal year 2024 was around $92 million. The company allocated roughly $25 million to reduce a portion of its short-term, high-interest borrowings, a strategy they plan to continue as interest rates remain elevated. By the first half of 2025, they expect to complete this restructuring. In fiscal year 2024, return on invested capital was 25.5%, up from 23.7% in the previous year, aligning with their 25% target.

Additionally, a shift is coming regarding currency operations. Starting from September 1, 2024, the U.K. subsidiary will change its functional currency from the pound sterling to the euro, influenced by increasing reliance on euro-based operations and expenses.

Update on Homecare and Cleaning Brands

An update on the potential sale of the Americas and U.K. homecare and cleaning product brands indicates continued progress. For fiscal year 2024, these product sales totaled around $24 million, representing 4% of global operations. The company is working with an investment bank to explore potential buyers, and they anticipate completing the divestiture in the first half of fiscal year 2025. Updates will be shared as the process evolves.

Given these expected changes, the company is providing guidance for the year on a pro forma basis, excluding the homecare brand’s financial impacts. Pro forma net sales for fiscal year 2024 would have been roughly $567 million, with a gross margin of about 53.9%. Also, pro forma operating income would approximate $89.3 million, leading to a pro forma EPS of around $4.76.

Looking Ahead: Fiscal Year 2025 Guidance

Looking ahead to fiscal year 2025, WD-40 Company remains dedicated to providing long-term value and balancing short-term results with strategic investments for growth and efficiency. Their guidance forFY 2025 excludes the homecare brand impacts, with net sales growth projected between 6% and 11%, amounting to an anticipated total of $600 million to $630 million in constant currency. Expected gross margin is forecasted between 54% and 55%, with advertising and promotion expenses at approximately 6% of net sales.

Operating income is anticipated to range between $95 million and $100 million, reflecting growth between 6% and 12% over the pro forma results from 2024. The tax provision is expected around 24%, while diluted EPS is projected between $5.20 and $5.45, an increase of 9% to 14% from the previous pro forma results.

This forward-looking guidance presumes no drastic changes to the economic environment. Any unforeseen inflationary pressures could alter the outlook. Should the homecare and cleaning brands not be divested, estimates suggest a $23 million uplift in net sales, $6 million in operating income, and $0.33 in diluted EPS for the full year.

This concludes our financial overview.

Steven A. Brass — President, Chief Executive Officer, and Director

Thank you, Sara, for your report. As we approach fiscal year 2025, our focus remains clear: we will adhere to our strategic framework, continue unlocking value in promising markets, and prioritize the well-being of our employees who contribute to our success. The overarching theme for the WD-40 Company will be to manage a focused approach to impact in diverse locations. This method will optimize our global synergies and enhance efficiency as we grow.

In conclusion, we appreciate your attention and support as we navigate these developments.

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WD-40 Posts Record Sales in Q4, Eyes Future Growth Opportunities

WD-40 Company reported consolidated net sales of $156 million in the fourth quarter, marking an impressive increase of over 11% compared to the previous year. This achievement represents the second consecutive record quarter for the company. Notably, all three trade blocs reported revenue growth aligning with or exceeding long-term targets for each region, both for the fourth quarter and the entire fiscal year. The recent entry into the Brazilian market has proven beneficial, positioning the acquisition as a pivotal opportunity. The company estimates the benchmark sales opportunity for its WD-40 Multi-Use Product at approximately $1.6 billion, of which only 28% has been realized. Similarly, the WD-40 Specialist is estimated at $605 million, with just 12% achieved to date.

Furthermore, WD-40 is making significant progress in the sale of its homecare and cleaning product brands in the Americas and U.K. Improved gross margins are anticipated as the company strives toward a long-term target of 55%.

As a strategic move, guidance for fiscal year 2025 has been set on a pro forma basis, excluding brands expected to be divested this year. The call concluded with an invitation for questions from participants.

Interactive Q&A Session

Operator

[Operator instructions] Our first question comes from the line of Daniel Rizzo with Jefferies. Daniel, please proceed with your question.

Dan Rizzo — Jefferies — Analyst

Thank you for taking my question. While reviewing your presentation, I noted some pricing challenges in the second half of fiscal ’24, which affected results by about 21%. Could you elaborate on whether this was due to promotional activities or other factors?

Sara Hyzer — Vice President, Chief Financial Officer

Hi, Dan. Yes, there was a slight fluctuation in the pricing mix in the latter half of the year. Most of that impact stems from product mix rather than significant price decreases. We find it challenging to isolate the mix component at this time.

Dan Rizzo — Jefferies — Analyst

Understood. With the ongoing ERP rollout and divestiture preparations, should we expect SG&A expenses to stay high for the next few quarters?

Sara Hyzer — Vice President, Chief Financial Officer

Indeed. Our investments in ERP and the expenses from Brazil will contribute to elevated SG&A, though the increase won’t mirror last year’s significant jump.

Dan Rizzo — Jefferies — Analyst

Thank you. You’ve made strides in shifting to a direct business model in Brazil and Mexico. Are there more opportunities for direct market expansion coming up?

Steven A. Brass — President, Chief Executive Officer, and Director

Hello, Daniel. Thank you for your question. We have seen exceptional growth in Mexico, increasing by 25% last fiscal year. Brazil exceeded expectations, contributing an additional $7 million in growth, and we anticipate similar performance moving forward. We are actively focused on identifying our top 20 growth opportunities globally.

Historically, we’ve seen strong growth rates in countries like China (17%), India (21%), Indonesia (17%), and Turkey (66%), among others. We plan to continue capitalizing on these opportunities, though no immediate announcements are on the horizon.

Dan Rizzo — Jefferies — Analyst

Thank you very much.

Operator

Our next question comes from Linda Bolton-Weiser with D.A. Davidson. Linda, please proceed.

Linda Bolton-Weiser — D.A. Davidson — Analyst

Hello. Congratulations on a strong quarter and year. Regarding your guidance for the next fiscal year, does your operating profit estimate of $95 million to $100 million assume that the household cleaning business will not contribute this year?

Sara Hyzer — Vice President, Chief Financial Officer

Correct, Linda. We have excluded it from the full year due to uncertainty in the timing of its divestiture. We have also provided figures for scenarios including it.

Linda Bolton-Weiser — D.A. Davidson — Analyst

Thanks for the clarification. With the expectation that the business won’t be sold until late in the first half, will we see higher numbers than the ranges provided?

Sara Hyzer — Vice President, Chief Financial Officer

Yes, on a GAAP basis, that’s right. Starting in Q1, we will also present non-GAAP figures for a clearer view.

Linda Bolton-Weiser — D.A. Davidson — Analyst

Great. Your gross margin in 2024 was 53.4%. With a goal of 54% to 55%, why isn’t the expectation set higher, considering the divestiture impact?

Sara Hyzer — Vice President, Chief Financial Officer

The previous margin improvements largely stem from pricing actions. Although we anticipate further enhancements from supply chain initiatives, these changes will have a smaller immediate effect on margins compared to past years.

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WD-40 Company Sees Promising Growth Prospects Amid Economic Challenges

Sara Hyzer — Vice President, Chief Financial Officer

We currently project oil prices to range between $70 and $90.

Linda Bolton-Weiser — D.A. Davidson — Analyst

What can you tell us about the anticipated sales growth for the upcoming fiscal year, particularly in the first quarter? It looks like there will be a tough comparison from first quarter ’24.

Sara Hyzer — Vice President, Chief Financial Officer

That’s a valid point, Linda. As you know, we do not provide quarterly guidance. However, like last year, our sales growth is projected to be stronger in the latter half of the year. The growth pattern this year is likely to mirror that trend, with Q1 and Q2 showing less growth compared to Q3 and Q4.

Using last year’s performance as a reference, we expect a somewhat similar balance, although adjustments may cause variations.

Steven A. Brass — President, Chief Executive Officer, and Director

To add to that, the Asia-Pacific region had a notably strong first quarter last year, creating a higher bar for comparison. We anticipate a slower start in that market, with growth expected to pick up later in the year.

In Brazil, the financial impacts will mainly unfold during the first half, contributing approximately $7 million to $9 million in growth during that period.

Linda Bolton-Weiser — D.A. Davidson — Analyst

So you’re highlighting incremental growth compared to the previous year?

Steven A. Brass — President, Chief Executive Officer, and Director

Correct, that is exactly what we’re discussing.

Linda Bolton-Weiser — D.A. Davidson — Analyst

Shifting gears a bit, can you provide insights on your performance in China? I recall it being strong, but there are concerns about the overall economic landscape there.

Steven A. Brass — President, Chief Executive Officer, and Director

Indeed, we are continuing our efforts effectively. Our China sampling program has yielded significant results; last year, we sampled 33,000 factories and converted many to WD-40 users. This initiative operates year-round, consistently attracting new customers.

Last year, we also expanded our distribution network, opening several hundred new points of sale across China, which has helped make our products more accessible. This straightforward approach has proven effective, and our team in China is committed to enhancing our presence further. Last year, we reported a 17% growth in local currency and a 13.5% increase in U.S. dollars, with WD-40 Specialist experiencing a remarkable 45% growth in U.S. dollars.

Linda Bolton-Weiser — D.A. Davidson — Analyst

Thank you for the insights.

Steven A. Brass — President, Chief Executive Officer, and Director

Thank you, Linda.

Sara Hyzer — Vice President, Chief Financial Officer

Thank you, Linda.

Operator

Thank you, everyone, for your participation in today’s conference call. This concludes our question-and-answer segment. [Operator signoff]

Duration: 0 minutes

Participants on the Call:

Wendy Kelley — Vice President, Stakeholder and Investor Engagement

Steven A. Brass — President, Chief Executive Officer, and Director

Sara Hyzer — Vice President, Chief Financial Officer

Dan Rizzo — Jefferies — Analyst

Linda Bolton-Weiser — D.A. Davidson — Analyst

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