# Dear fellow stockholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NASDAQ_WDFC_2021/NASDAQ_WDFC_2021.mmd` · pages 5-11_

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Dear fellow stockholders,

Fiscal year 2021 was an exceptional year for the blue and yellow brand with the little red top. We saw increased end-user demand across all our trade blocs. For the full fiscal year 2021 we delivered consolidated revenue of \(488.1 million, up 19% compared to last fiscal year. We experienced very high end-user demand for our maintenance products due to the higher level of renovation and maintenance activities driven by the pandemic. In addition, we continued to see recoveries in many markets due to improvements in public health and safety standards, as well as expanded brick and mortar distribution and continued success within the e-commerce channel.

All three of our segments performed well in fiscal year 2021 but we saw substantial strength in certain geographies. For the full fiscal year, revenue in the Americas was up 7% to \(214.6 million primarily driven by strong sales in Latin America, especially in our newest direct market, Mexico. Revenue in EMEA was up 33% to \)208.3 million resulting in the most successful year in the history of the trade bloc. In Asia-Pacific, which is our smallest but fastest growing segment, revenue was up 26% to $65.3 million.

## Our Must-Win Battles

Our Must-Win Battles are the primary areas of action that will enable us to deliver against our revenue growth aspirations to drive net sales to between \(650 and \)700 million by the end of fiscal year 2025. These hyper-focused actions support our overall strategy and are the key drivers of future revenue growth.

## Must-Win Battle #1 – Geographic Expansion

Our largest growth opportunity and first Must-Win Battle is the geographic expansion of the blue and yellow can with the little red top. We are focused like never before on our top 20 global growth markets. We increased our marketing investments during the pandemic and are focused on building brand awareness and market penetration in these identified markets. We've seen tremendous growth in markets like France, India, and Russia, where in fiscal year 2021 we saw growth of 36%, 161%, and 43% respectively. In addition, we've seen tremendous growth in Mexico, which has been the fastest growing direct market we have ever launched in the history of the company.

## Must-Win Battle #2 – Premiumization

Our second Must-Win Battle is to grow WD-40 Multi-Use Product through premiumization. Premiumization creates opportunities for revenue growth and gross margin expansion. Most importantly, it delights our end-users. Our Smart Straw Next Generation delivery system is currently available in Canada and is being rolled out in the United States. Smart Straw Next Generation supports our objective to grow premium delivery system penetration to greater than 60% of our WD-40 Multi-Use Product sales by 2025.

## Must-Win Battle #3 – WD-40 Specialist

Our third Must-Win Battle is to grow the WD-40 Specialist product line. We recently completed some very interesting research that suggests that end-users of WD-40 Specialist are some of our most loyal WD-40 Multi-Use Product fans. As you might recall, in early fiscal year 2020 we debuted new packaging for WD-40 Specialist. This gave us stronger brand presence for both WD-40 Multi-Use Product and WD-40 Specialist, aligning them as the blue and yellow brand with the little red top.

## Must-Win Battle #4 – Digital Commerce

Our final Must-Win Battle is focused on driving digital commerce. We believe we are well-positioned to benefit from the significant shift to online behaviors in the post-pandemic world. We are focused on developing a data-driven marketing strategy that empowers us to engage directly with end-users in meaningful ways online. That strategy has already delivered a year-over-year increase of nearly 80% in website visits, doubled the views of our digital content globally, and has accelerated and deepened our engagement with end-users on many digital platforms around the world.

As we look toward opportunities on the horizon, we are investing our time, talent, treasure, and technology to support specific growth objectives. We believe investments in these areas will drive our growth in the future.

## Steve Brass

PRESIDENT AND CHIEF OPERATING OFFICER

<--- Page Split --->

FISCAL YEAR 2021 NET SALES BY SEGMENT

AMERICAS

EMEA

ASIA-PACIFIC

$214.6
MILLION

NET SALES

REPRESENTS
44% 7%
OF GLOBAL SALES

$208.3
MILLION

NET SALES

REPRESENTS
43% 33%
OF GLOBAL SALES FROM FY2020

$65.3
MILLION

NET SALES

REPRESENTS
13% 26%
OF GLOBAL SALES FROM FY2020

<--- Page Split --->

![](images/7_0.jpg)

## Dear fellow stockholders,

This year we saw both opportunities and challenges as we continued to navigate uncertain times driven by the global pandemic. We experienced growth in each of our segments during the year with continued focus on our strategic initiatives. Like many other companies, we experienced supply chain and transportation disruptions and constraints that impacted all our markets to varying degrees. I am proud of how our tribe members came together to manage these disruptive events and produce such strong financial results.

Net sales increased 19% compared to last year, generating \(488.1 million of net sales. Changes in foreign currency exchange rates had a favorable impact on our net sales for this year. On a constant currency basis, net sales would have increased 15% over last year. Net income was \)70.2 million, an increase of 16% compared to last year. And we delivered diluted earnings per share of $5.09, compared to $4.40 last year.

## Our 55/30/25 Business Model

Our discipline and diligence around our 55/30/25 business model remain a top priority for us. The model targets a gross margin at or above 55% of net sales, a cost of doing business of 30% of net sales, and an EBITDA of 25% of net sales.

For the full fiscal year 2021, our gross margin fell slightly to 54.0%, compared to 54.6% last year. Our cost of doing business increased slightly to 35%, compared to 34% last year. And EBITDA decreased slightly to 20%, compared to 21% last year. All three measures were impacted by inflationary headwinds, which affected our overall costs, with our supply chain being impacted the most. In addition, our incentive compensation plan served as intended to reward our tribe this year in recognition of their amazing efforts through a multifaceted year.

## Creating Value

During fiscal year 2020, with the uncertainty of the pandemic in full force, we took certain measures, including suspending our share repurchase plan, to ensure our business was set up to manage through various scenarios. Those decisions, along with the strong results we experienced in fiscal year 2021, have strengthened our balance sheet. Our financial condition and liquidity remain strong.

As a result, I am pleased to share with you that our board of directors recently approved a new share repurchase plan. The newly authorized share repurchase plan reflects our confidence in our long-term growth outlook, our commitment to our capital allocation strategy, and our capacity to return capital to our stockholders.

We also continue to return capital to our shareholders through regular dividends and raised our quarterly dividend to \(0.72 per share in the third quarter of fiscal year 2021. In fiscal year 2021, we paid cash dividends of \)38.2 million, resulting in an annualized dividend of $2.78 per share.

In closing, I would like to thank our stockholders for their continued confidence in WD-40 Company. We look forward to continuing to increase the value of the company for all our stakeholders.

![](images/7_1.jpg)

## Jay Rembolt

VICE PRESIDENT, FINANCE, TREASURER AND CHIEF FINANCIAL OFFICER