WD-40 Company (NASDAQ:WDFC) Q1 2024 Earnings Call Transcript

Daniel Rizzo: Was there any pull forward in the quarter from the second quarter? I know in the past, particularly, sales in Asia have been kind of lumpy just because of order timing. I was wondering if we saw that at all here in the first quarter.

Steve Brass: Not really pull forward, Daniel. But there is — Asia Pacific seems to have just entered this cadence of kind of a front-loaded fiscal year. And part of that is really cultural, down to the way that kind of orders happen and — particularly in the Chinese market and Asian distributor markets. And so I think that that cadence of a stronger Q1, I mean, if you look at the overall Asia-Pac business, we’re up 6%, 7% of constant currency. China is doing very well. Local currency up 18%. It’s just this front-loaded piece that just seems to become the way we do business there increasingly, yeah.

Daniel Rizzo: Okay. And then this may be a dumb question, but given your asset-light business model, is there any benefit from improved cost absorption with higher production volumes? I mean, volumes can be fairly strong. I was wondering if that will have a meaningful impact on gross and EBIT margins.

Sara Hyzer: So, yes, we do — volume does help us, right? The more that we can push into our filler network, the better pricing we can get. So as volumes continue to recover, right, we will be able to see improved filling fees. Although fill fees for us have been one of those costs that have been stickier than others. So if you look at the comparison quarter-over-quarter, fill fees are still higher today than they were this time last year. And a lot of that is around the labor and inflationary environment that our third-party manufacturers incurred. A lot of those increases have just stuck. So in general, to answer your question, Daniel, yes, the more volume, the better pricing we get. But we have seen higher fill fees as we sit here today than we were a year ago.

Daniel Rizzo: Right. Thank you very much.

Sara Hyzer: You’re welcome.

Operator: Ladies and gentlemen that does conclude our allotted time for questions. We thank you for your participation on today’s conference call and ask that you please disconnect your lines. Have a great day.