Hello, and welcome to the WD-40 Company's 2025 Annual Meeting of Stockholders. Please note that today's meeting is being recorded. It is now my pleasure to turn today's meeting over to Mr. Steve Brass, President and Chief Executive Officer of WD-40 Company. Mr. Brass, the floor is yours.
Good morning, and welcome to WD-40 Company's 2025 Annual Meeting of Stockholders. I'm Steve Brass, WD-40 Company's President and CEO, and I'll preside at today's meeting. I'm very happy to welcome you to this year's Annual Meeting of Stockholders. Before calling the meeting to order, I'd like to introduce today's meeting participants.
The following directors are in virtual attendance today: Cynthia Burks, served as Senior Vice President and Chief People and Culture Officer of Genentech Inc. Daniel Carter, served as Executive Vice President and Chief Financial Officer of BevMo! Inc. Dan is the Chair of our Audit Committee. Eric Etchart, served as Senior Vice President of the Manitowoc Company. Eric is the Non-Executive Chairman of our Board. Lara Lee served as President of Orchard Supply Hardware. Edward McGhee, currently serves as Vice President, Strategic Operations for Belmont University. Trevor Mihalik is Executive Vice President and CFO at American Electric Power Company Inc. Trevor is the Outgoing Chair of our Finance Committee. Trevor is retiring at the conclusion of today's meeting. On behalf of the company, we extend our sincere gratitude to Trevor for his financial leadership and strategic insight.
His disciplined approach to fiscal management and unwavering commitment to robust governance have been instrumental in guiding us through critical decisions. Graciela Monteagudo served as President and CEO of LALA U.S., Inc. David Pendarvis served as Chief Administrative Officer, Global General Counsel, and Secretary of ResMed Inc. David is the Chair of our Corporate Governance Committee. Anne Saunders served as US President of NakedWines.com, and is the Chair of our Compensation and People Committee. Also participating on our call today are Phenix Kiamilev, our General Counsel and Chief Compliance Officer, Sara Hyzer, our Chief Financial Officer, and Wendy Kelley, our Vice President of Stakeholder and Investor Engagement. I would also like to introduce Jessica Allen and Jordan Gray from PricewaterhouseCoopers LLP, the company's auditors. They will be available to answer questions during the question-and-answer session of the meeting. Phenix Kiamilev will act as Secretary of the Meeting.
We will now officially start the meeting by confirming that proper notice of the meeting has been given and that we have a quorum.
Thank you. I've been informed by the Inspector of Elections that there are present in-person or by proxy stockholders entitled to vote, holding at least a majority of outstanding shares of common stock on the record date, October 15th, 2025. Accordingly, a quorum is present, and the meeting is duly convened for purposes of transacting such business as may properly come before it.
Thank you. I now call this meeting to order. Following the Secretary's introduction of the matters to be acted upon by stockholder votes at this meeting, Sara and I will share a strategic business update. Then we will take questions from the online audience, and thereafter, the formal meeting of stockholders will adjourn.
There are three matters for stockholder consideration and voting at today's meeting: the election of directors, an advisory vote to approve executive compensation, and the ratification of the appointment of our independent auditors. Stockholders have been encouraged to vote in advance of the meeting. However, if you've not yet voted or would like to change your vote, any stockholder attending the virtual meeting today who has entered the meeting with a control number may vote at any time prior to the adjournment of today's meeting. If you need a copy of the annual report or the proxy statement, the links are provided in the online meeting center. Instructions for voting and/or changing a previously submitted vote are provided on the Computershare Meeting Center website as well. The following matters are presented for stockholder approval. The first matter is the election of directors.
I'm pleased to report that all of the nominees have received sufficient votes to be elected to serve as directors until their successors are elected and qualified. With respect to the advisory vote to approve executive compensation, I'm pleased to announce that at least 9,790,271 shares have been voted to approve executive compensation. The third matter presented for stockholder approval is the ratification of the Audit Committee's appointment of PricewaterhouseCoopers LLP as the company's independent accountant for fiscal year 2026. Representatives of PricewaterhouseCoopers are in attendance and have been offered the opportunity to make a statement and can respond to appropriate questions. If any questions for the auditors are submitted prior to the adjournment of the meeting, a PricewaterhouseCoopers representative will respond.
I'm pleased to announce that at least 11,489,839 shares were voted in favor of ratification of the appointment of PricewaterhouseCoopers LLP as the company's independent accountant for the current fiscal year. A current report on Form 8-K will be filed with the SEC within four business days, reporting the final results of the voting at today's meeting, a copy of which will be available on the company's website.
I'd like to thank all our stockholders for their continued support. We will now share an update with you on the company and where it's headed in the future. Following management's presentation, we will answer questions from stockholders in attendance. Questions or comments may be submitted at any time during the virtual meeting by clicking on the Q&A message icon on the right-hand side of the Computershare Meeting Center website. We will collate all appropriate questions for a response. Before we proceed, I'm going to ask Wendy Kelley to get us started on our business update and provide our required notices.
Thank you, Steve. As a reminder, today's call includes forward-looking statements about our expectations for the company's future performance. Of course, actual results could differ materially. The company's expectations, beliefs, and projections are expressed in good faith, but there can be no assurance that they will be achieved or accomplished. Please refer to the risk factors detailed in our SEC filings for further discussion. On today's call, we will discuss certain Non-GAAP measures. The descriptions and reconciliations of these Non-GAAP measures are available in our SEC filings as well as our presentation. Finally, for anyone listening to a webcast replay or reviewing a written transcript of this call, please note that all information presented is current only as of today's date, December 12, 2025. With that, I'd now like to turn the call back over to Steve.
Thank you, Wendy. The theme of our presentation today is Future Forward, leveraging our incredibly iconic hero brand to drive innovation in action. Our core multi-use product has always had an amazing ability to reinvent itself over the decades, staying relevant to new generations of users. As some old uses fade away, people around the world keep discovering new ones, whether it's in emerging areas like robotics, drone technology, wind and solar energy, or creative applications in more traditional spaces like protecting tools and machinery during monsoon season. Usage innovation is a big driver of growth for our core product. As Brian Gildenberg, Managing Director of Retail Cities, recently said, we have almost unlimited potential for new uses. That's exciting when you consider this product represents about 80% of our sales and typically drives 70% of our annual growth. At WD-40 Company, innovation isn't a single moment. It's a mindset.
We're always looking for better ways to serve our end users and grow our business. That means finding fresh, creative applications for our products to keep them relevant and valuable. It means refining how we go to market with flexible strategies that keep us close to customers across 176 countries and territories. It means leading the category by using our global brand strength to create new value, drive growth, and stand out from the competition. Innovation also thrives through shared learning. Just when we share what works and what doesn't, we accelerate progress. And finally, we innovate through product development, always keeping our end users at the center of every design. At WD-40 Company, innovation is continuous, collaborative, and focused on creating lasting value for our stakeholders and end users.
With our 4x4 Framework, we have a really simple strategy: four Must-Win Battles to drive faster global revenue growth and four strategic enablers that support execution and drive operational excellence. Today, we'll talk to all of our Must-Win Battles and strategic enablers, but with particular focus on our largest growth opportunity: geographic expansion of our core multi-use product. We will also give investors an update on progress made on gross margin and how we expect to drive operational efficiencies as we increasingly leverage global synergies going forward. As I look around the WD-40 world, all I see are growth opportunities. It's amazing to me that, 72 years young, we've only realized 25% of our global growth opportunity, with a long-term opportunity to virtually quadruple current sales on our core multi-use product from FY25 sales of $478 million to more than $1.9 billion.
In FY25, our second-largest market, France, overtook the US market as our benchmark market of what is possible with our core product. To generate our $1.9 billion opportunity, we use our own internal benchmark algorithm, which uses France as our benchmark market and illustrates the potential market around the world based upon purchase price parity and adjusted GDP. The algorithm represents a long-term view of our growth opportunity and should be taken by investors as directional long-term growth potential. We have several other key markets that are approaching the benchmark level set by France, which gives us confidence in the benchmark. Investors are likely already familiar with this slide showing the relative size of the growth opportunities we have around the world on our core product based upon our growth algorithm. The relative size of the bubble represents the size of the growth opportunity.
At the very least, this analysis shows us where to allocate time, talent, and treasure in order to drive the fastest growth. In the new emerging multipolar world we live in, we don't believe in putting all our eggs in one geographic basket. Rather, in a focused diversification strategy, prioritizing the top 20 growth opportunities we highlight here. With France, our second-largest market globally, having now overtaken the USA in terms of penetration levels, the US now appears here as a top growth opportunity. The US represents 35% of global revenues and has actually been our fastest growing market globally in dollar terms over the past five years, with maintenance product growth of $54 million, representing a compound annual growth rate of 6.5%. As such, the US market offers us a stable, foundational market to expand from internationally.
We are not done growing in the US either, and strong growth opportunities remain in the industrial and e-commerce channels, as well as with the WD-40 Specialist brand extension. In recent years, we've taken several steps to accelerate growth in many of these high-potential markets, and I'd like to talk next to progress made in several key markets for the future. I'd like to start with Mexico, detailed on the right of your screen. In 2020, we took the Mexico market direct, and since doing so, we've more than tripled our Mexico business from $6.8 million- $23.5 million in FY25, and we're not done, as we see Mexico as a $30-$40 million market over the coming years. Our success in Mexico gave us confidence to convert Brazil to a direct market in March 2024. So far, we're extremely pleased with progress made in Brazil.
In our first full year of business as a direct market in FY25, we achieved sales of $15 million, a more than seven-fold increase over the levels we were achieving via our prior distributor arrangement. We expect Brazil to be a $20 million market within three to five years and ultimately see a similar $30-$40 million potential to Mexico over the longer term. Moving to the left of our screen, China has consistently delivered strong double-digit growth in recent years. We've been direct in China since 2006 with our highly capable team of approximately 60 and our simple but effective strategy of expanding distribution while sampling 20,000-plus factories each and every year continues to deliver strong results despite a somewhat weaker economy. India is one of, if not the, most attractive growth markets in the world right now.
Since entering into our strategic partnership with our local partner, Pidilite, six years or so ago, we've more than doubled our sales in India. India is now our second-largest market in terms of unit sales after the USA, and we see huge potential for future growth ahead. One day, we believe India can rival the USA in terms of market size. Indonesia is another very fast-growing market for us, with a compound annual growth rate of 29% over the past five years. Indonesia is now our largest marketing distributor market in dollar terms. Indonesia is a hybrid market for us, where we have both an outstanding local marketing distributor partner but also a small team in market, a formula that has really accelerated growth. In our fiscal year 2025, this increased focus on our key growth markets around the world yielded overall 6% growth for WD-40 Multi-Use Product.
Our second revenue battle is to accelerate sales of premium formats of our Multi-Use WD-40 Product. In FY25, sales of our Smart Straw and EZ-Reach formats combined increased by 8%, or approximately $18 million over the prior year. We've consistently delivered strong growth in our premium formats with a five-year compound annual growth rate of 9.4%. Our expectations going forward are to deliver double-digit growth of 10%+ on premium formats. Our premium formats delight our end users but also help us drive margin expansion. With premium format sales representing approximately 40% of global unit sales in our core product, there is significant upside for growth, especially in Asia-Pacific and within our distributor markets. Through our WD-40 Specialist line, we aspire to achieve category leadership and increase our market share by leveraging core brand equity.
When we introduce WD-40 Specialist alongside WD-40 Multi-Use Product, we're not just adding variety. We're strengthening our brand, capturing new segments, and offering end users more choice without diluting what makes our core brand iconic. For fiscal year 25, sales of WD-40 Specialist were up 11%, or $7 million, to $82 million. Over the past five years, WD-40 Specialist has been our fastest-growing brand with a five-year compound annual growth rate of 14%. We target growth of 10%+ on a go-forward basis. We're only just really getting going on WD-40 Specialist. We deploy a similar growth benchmark algorithm on WD-40 Specialist, leveraging our success in our benchmark market of Australia. Our Australian team has set the benchmark on what is possible on WD-40 Specialist with sales to our core Multi-Use Product of 34% in FY25.
Our benchmark assumes all markets operating at that 34% to multi-use product sales level and generates a market potential on the WD-40 Specialist range of $665 million as compared to our FY 2025 sales of $82 million. We now have several key markets that are approaching similar penetration levels to Australia, which once again gives us confidence in the validity of this long-term potential for the battle. We view digital commerce as the accelerator for all our other must-win battles. Our digital commerce strategy is not just about driving online sales. It's about building our brand in the digital space and accelerating all our other must-win battles. For fiscal year 2025, global sales within the pure-play e-commerce channel grew 10% over the prior year. A highlight of our digital efforts this year was the expansion of our global online marketing campaign, the Repair Challenge.
This initiative, which now spans over 40 countries, exemplifies how we can leverage digital tools to build our brand globally while promoting sustainability. So what does that mean for our future growth ambitions? Going forward, we expect to build on our historic consistent delivery of growth on our focused maintenance products, which have delivered growth at constant currency over the past 10 years of 6.7%. As we seek to divest most of our household brands and focus in even more on our significant organic growth opportunities around the world, we will target growth in the mid to high single digits. We are very clear where that growth will come from, with growth expected from our Americas division of 5%-8%, 8%-11% in our EMEA segment, and 10%-13% in Asia-Pacific. Of course, the real key to delivering the future is by taking care of our people.
At WD-40 Company, we've long held the belief that first you build the people, then the people build the business. Our greatest asset is our 714 employees spread across 18 countries. We strive to be an employer of choice where all employees bring their best selves to work. In November 2025, we conducted our latest employee engagement survey. I'm very proud of our new record 95% engagement score, a testament to our strong culture and the opportunities we provide to our people to learn, grow, and succeed. Our success is accelerated through global collaboration and our bold ambition to become a true world-class global learning organization. With that, I'll now hand over the presentation to Sara Hyzer.
Thanks, Steve. Now let's turn to enabler number two, building an enduring business for the future.
Our focus here is simplifying portfolio innovation with sustainability, making fewer, higher-impact choices that lower complexity while improving outcomes for customers, partners, and the planet. As you evaluate our progress, please refer to our 2024 ESG report for the details behind our environmental impact plan and how we're operationalizing sustainability across the portfolio. For us, sustainability is pragmatic and value-accretive. It guides innovation, informs sourcing, and strengthens trust with stakeholders. We're integrating it where it matters most, into product design, packaging, and supply decisions, so that the choices we make today compound into durable advantages over time. Enabler number three is operational excellence in our global supply chain. This mandate is straightforward: increase forecast accuracy, elevate service, and optimize inventory while continuously improving our end-to-end processes. We're targeting on-time delivery above 95% and inventory on hand under 90 days.
These are disciplined targets designed to protect the customer experience, free working capital, and support growth without sacrificing resilience. We're also advancing integrated end-to-end planning by segment so that all our segments get the right level of agility and reliability. This is how we scale capacity, build an outsourced, balanced global network, and keep quality, cost, and speed moving in the right direction. Enabler number four is systems-driven productivity. We are enabling global growth and operational resilience with data and AI-driven business solutions, modern tools that improve forecasting, service, and decision velocity across the enterprise. This approach is anchored in intelligent IT, focused on a simple, scalable, and resilient global digital infrastructure that optimizes service delivery, empowers a digital workforce, and strengthens cyber resilience. In short, we are building secure, reliable capabilities that turn data into speed and better business decisions.
I'll close this section with our operating philosophy: few things, many places, bigger impact. We focus on a concentrated set of high-value products. We distribute them widely and efficiently, and we unlock efficiencies by leveraging global synergies: shared systems, shared processes, and shared learning. It's a disciplined model that scales margins and accelerates growth without adding complexity. Let's turn to what truly sets WD-40 Company apart: our financial value drivers and outcomes. Our business model is asset-light by design. We invest in brands and people, not factories and warehouses. This approach gives us a solid financial foundation, a strong balance sheet, predictable free cash flow, and ready access to capital when opportunities arise. We run an efficient business. We leverage outsourced manufacturing and distribution, and in FY25, we generated $860,000 in sales per employee, a testament to our productivity and focus. Returns are powered by our iconic brands.
We target a return on invested capital of 25% or more, supported by a diversified global footprint and a long runway for growth ahead. In short, we invest where it matters most: our brands and our people. This is how we convert brand strength into durable financial outcomes for our stockholders. You can see this foundation reflected in our FY25 results. Let's take a closer look at those results. Net sales of maintenance products, which is our primary focus, reached $591 million, up 6% versus the prior year. Gross margin improved to 55.1%, up 170 basis points from last year, and operating income rose to $103.8 million, an 8% increase. Net income was positively impacted by a one-time tax income adjustment. Excluding this benefit, adjusted net income would have been $79.1 million, an increase of 12% over the prior year. Diluted EPS was also positively impacted by that same adjustment.
Without it, adjusted diluted EPS would have been $5.82 per share, an increase of 14% over prior year. These results reflect the strength of our business model and our disciplined approach to growth and capital allocation. Turning to our highlight for the year, which is the recovery of our gross margin to above 55%, that 170 basis points improvement reflects a mix of structural and tactical levers, primarily cost optimization and increased selling prices driven by market mix and premiumization. Specifically, the increase was driven by lower specialty chemical costs, lower aerosol can costs, and higher average selling prices, partially offset by higher warehousing, distribution, and freight in the Americas segment. And to give you a clear view of our core business, excluding assets held for sale, gross margin would have been 55.6% in FY25. The takeaway? Our margin playbook is working.
Premium features, supply chain productivity, and disciplined pricing are compounding into durable profitability. Turning to our capital allocation priorities, our strong capital optionality is supported by consistent free cash flow generation. Our first priority is long-term growth. We target revenue and earnings growth in the mid to high single digits, with CapEx of 1%-2% of net sales per year. Our strong free cash flow provides the liquidity needed to support that growth. We have a strong balance sheet with access to liquidity should we need it. Annual dividends are targeted at over 50% of earnings, and we consistently maintain a strong payout ratio. And finally, we allocate excess capital to the highest return alternatives: organic growth initiatives, acquiring new users and new uses daily, and share repurchases. Our aim is a return on invested capital of 25% or more.
Let's look at how these priorities translate into cash returns for our stockholders. We have a long history of returning cash to stockholders. Our company has paid dividends without interruption for over 40 years. Recently, our board of directors raised the dividend by more than 8%, which is above our five-year CAGR of 7.4%, and we remain committed to delivering consistent and compelling cash returns to our stockholders. Our board of directors also approved an extension of our current share repurchase plan through the end of FY26, with $30 million remaining under the current authorization. We have begun to accelerate buybacks, and we plan to fully utilize the remaining authorization this fiscal year, which will more than double what we bought back in the prior year. These disciplined capital allocation practices, combined with our strong financial results, position WD-40 Company for continued growth and value creation.
Before we wrap it up, let me summarize what sets WD-40 Company apart as a compelling investment opportunity. We deliver unique, high-value, and easy-to-use solutions for a wide variety of maintenance needs in workshops, factories, and homes. Our sustainable competitive advantages empower a simple and easy-to-understand business model. Our iconic brand and category leadership provide the foundation for resilient and sustainable profitable growth. Significant cash flow generation, an asset-light strategy, and a strong balance sheet maximize stockholder returns, and it's our highly engaged culture with deep organizational talent that enables significant growth opportunities for the future. Let me underscore the key financial benefits for our stockholders. We strive to consistently deliver mid to high single-digit revenue growth. We strive to maintain a Return on Invested Capital of 25% or more. Our asset-light strategy keeps us nimble and efficient.
We're proud to be a Dividend Aristocrat with dividends over 50% of net income. In short, WD-40 Company is built for durable value creation, driven by brand strength, operational discipline, and a culture that thrives on making things better every day. With this foundation, we're well-positioned for continued growth and stockholder returns. Finally, before I turn it back to Steve, I also want to thank our outgoing board member, Trevor Mihalik, for his outstanding leadership and guidance as Finance Committee Chairman. His expertise, steady counsel, and willingness to share his insights have been invaluable to me. I am deeply grateful for his support and for being such a tremendous resource. Thank you for everything you've done to help me and the company succeed. With that, I will turn it back to Steve.
Thank you, Sara. Wendy Kelley has been monitoring the online questions being submitted.
We would now be pleased to answer any questions from our virtual audience at this time.
Thank you, Steve. We have no questions from the virtual audience today. Back to you.
Thank you, Wendy. This concludes WD-40 Company's 2025 annual meeting of stockholders. The polls are now closed, and the meeting is now adjourned. I'd like to thank everyone for their participation.
This concludes today's meeting. You may now disconnect.