0000105132-26-000061
SEC filingWD-40 delivered strong Q3 FY2026 with 24% revenue growth to $195.1M, driven by a significant promotional program in the Americas, and net income rose 44% to $30.2M.
WD-40 Company delivered a strong third quarter of fiscal 2026, with net sales increasing 24% to $195.1 million compared to $156.9 million in the same period last year. The growth was broad-based across all segments, with the Americas leading at +29%, followed by Asia-Pacific at +24% and EIMEA at +17%. A significant promotional program in the U.S., involving limited-edition cans with Disney Entertainment and The Home Depot, contributed substantially to Americas sales. Gross profit rose 25% to $110.4 million, with gross margin expanding 40 basis points to 56.6%, benefiting from lower aerosol can costs and favorable sales mix.
Operating income surged 47% to $40.3 million, as operating expenses grew at a slower rate (15%) than revenue. Net income increased 44% to $30.2 million, or $2.24 per diluted share, compared to $1.54 in the prior year.
For the nine-month period, net sales were $511.2 million, up 12% from $456.5 million. However, net income declined 3% to $68.0 million, largely due to a $11.9 million tax benefit recognized in the prior year's second quarter. Excluding that benefit, adjusted net income rose 20% to $69.3 million. Adjusted diluted EPS grew 20% to $5.12.
As of May 31, 2026, total assets were $499.8 million, up from $475.8 million at fiscal year-end August 31, 2025. Cash and cash equivalents increased slightly to $59.1 million. Total debt rose to $100.7 million from $87.0 million, primarily due to higher revolver borrowings ($35.5 million vs $21.0 million). The company maintains a $125 million revolving credit facility with maturity in April 2029. Leverage and interest coverage covenants were satisfied, with the leverage ratio below the 3.5x maximum and coverage above the 3.0x minimum.
Working capital increased, with accounts receivable rising 24% to $150.1 million, reflecting the strong late-quarter sales. Inventories remained relatively flat at $80.9 million.
Operating cash flow for the nine months was $54.8 million, below net income of $68.0 million, largely due to a $29.1 million increase in accounts receivable. Capital expenditures were $3.9 million, leading to free cash flow of approximately $50.9 million. The company returned $62.9 million to shareholders through dividends ($40.3 million) and share repurchases ($22.5 million). Net debt financing added $14.5 million from revolver draws, while $0.8 million of senior notes were repaid. The cash conversion cycle extended given the receivable build, but overall liquidity remains solid.
Management highlighted the impact of the promotional program on Q3 results and noted that average oil price increases in the Middle East are expected to pressure cost of goods sold most significantly in the fourth quarter. Price increases have been implemented in certain markets to mitigate margin pressure. The company introduced a new "Enduring Business Model" targeting 5-9% annual constant-currency sales growth, gross margin above 55%, and Adjusted EBITDA growth exceeding sales growth. No specific quantitative guidance for Q4 or fiscal 2026 was provided.
A new $100 million share repurchase plan was approved in June 2026, effective September 1, 2026, replacing the prior program with $7 million remaining. The company also declared a cash dividend of $1.02 per share for the next quarter.
Segment performance: The Americas segment saw operating income rise 34% to $27.5 million, with margin expanding to 27.2%. EIMEA operating income increased 37% to $16.5 million, with margin improving to 24.7%. Asia-Pacific operating income grew 29% to $9.1 million, with margin rising to 33.4%, despite a 250 bps contraction in gross margin due to higher petroleum costs.
The company reclassified its homecare and cleaning product businesses in the Americas from held for sale to held for use, recording $1.3 million of catch-up amortization in Q3. No impairment was recognized as the fair value exceeded carrying value.
Goodwill increased by $1.2 million to $98.3 million, primarily from the reclassification of held-for-sale assets. Intangible assets net increased to $3.8 million after the reclassification and amortization.
The effective tax rate for the nine months was 22.8%, up from 5.9% in the prior year, largely due to the absence of the $11.9 million tax benefit. The Q3 rate was 23.6% for both years.
Research and development spending decreased to $1.9 million in Q3 (from $2.5 million) and $6.0 million year-to-date (from $6.3 million).