WD-40 Company (NASDAQ:WDFC) reported its fourth-quarter 2024 earnings, surpassing analyst expectations with an earnings per share (EPS) of $1.39 against a forecast of $1.31. The company also exceeded revenue forecasts, reporting $153.5 million compared to an expected $147.4 million. Following the announcement, WD-40's stock rose significantly in aftermarket trading, closing at $256, up 6.33% from the previous close.
Key Takeaways
- WD-40's EPS and revenue exceeded market expectations for Q4 2024.
- The company's stock price increased by over 6% in aftermarket trading.
- Strong sales growth was recorded across all product lines and regions.
- The company plans to divest its Home Care and Cleaning brands.
- Future guidance indicates continued revenue and EPS growth.
Company Performance
WD-40 reported robust performance in Q4 2024, with net sales reaching $156 million, marking an 11% increase year-over-year. The company's full fiscal year revenue grew by 8% to $583 million. This growth was driven by strong sales of the WD-40 Multi-Use Product and Specialist products, each recording an 11% increase. The company's performance outpaced its historical growth trends and demonstrated resilience in a competitive market.
Financial Highlights
- Revenue: $156 million, up 11% YoY
- Full fiscal year revenue: $583 million, up 8% YoY
- Gross margin: 53.4%, slightly above guidance
- Net income: $69.6 million
- Diluted EPS: $5.11
- Return on Invested Capital: 25.5%, up from 23.7%
Earnings vs. Forecast
WD-40's actual EPS of $1.39 beat the forecast of $1.31 by approximately 6.1%. The company's revenue of $153.5 million surpassed the $147.4 million forecast by 4.1%. This positive earnings surprise reflects stronger-than-expected demand and effective cost management strategies. Compared to previous quarters, the magnitude of this beat is significant, showcasing the company's ability to exceed market expectations consistently.
Market Reaction
Following the earnings announcement, WD-40's stock experienced a notable increase in the aftermarket session, rising by 6.33% to $256. This movement contrasts with the broader market trends, highlighting investor confidence in the company's growth trajectory. The stock's performance also reflects its position within its 52-week range, moving closer to the high of $292.36.
Outlook & Guidance
For fiscal year 2025, WD-40 projects net sales growth of 6-11%, with sales expected to range between $600 million and $630 million. The company anticipates a gross margin of 54-55% and operating income between $95 million and $100 million. EPS is forecasted to be between $5.20 and $5.45. These projections exclude the Home Care and Cleaning brands, which the company plans to divest.
Executive Commentary
CEO Steve Brass emphasized the company's growth potential, stating, "After 71 years, we've achieved only approximately 28% of the benchmark sales opportunity." CFO Sarah Heiser added, "We are committed to delivering long-term value to all our stakeholders," underscoring the company's strategic focus on sustainable growth.
Q&A
During the earnings call, analysts inquired about the company's expansion plans, particularly in direct markets like Brazil and Mexico. Executives clarified that the guidance excludes the Home Care and Cleaning brands and discussed strategies for gross margin improvement. The company also highlighted growth opportunities in China despite economic challenges.
Risks and Challenges
- Supply chain disruptions could impact product availability and costs.
- Market saturation in key regions may limit growth opportunities.
- Economic uncertainties, particularly in emerging markets, pose potential risks.
- Competitive pressures from other brands could affect market share.
- Environmental regulations may increase operational costs.
Full transcript - WD-40 Company (WDFC) Q4 2024:
Conference Operator: by. Good day, and welcome to the WD-forty Company 4th Quarter and Full Fiscal Year 20 24 Earnings Conference Call. Today's call is being recorded. At this time, all participants are in a listen only mode. At the end of the prepared remarks, we will conduct a question and answer session.
I would now like to turn the presentation over to the host for today's call, Wendy Kelly, Vice President, Stakeholder and Investor Engagement. Please proceed.
Wendy Kelly, Vice President, Stakeholder and Investor Engagement, WD-40 Company: Good afternoon, and thanks to everyone for joining us today. On our call today are WD-forty Company's President and Chief Executive Officer, Steve Brass and Vice President and Chief Financial Officer, Sarah Heiser. In addition to the financial information presented on today's call, we encourage investors to review our earnings presentation, earnings press release and Form 10 ks for the period ending August 31, 2024. These documents will be made available on our Investor Relations website at investor. Wd40company.com.
A replay and transcript of today's call will also be made available shortly after this call. 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 the earnings documents posted on our Investor Relations website. As a reminder, today's call includes forward looking statements about our expectations for the company's future performance. 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. 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, October 17, 2024. The company disclaims any duty or obligation to update any forward looking information as a result of new information, future events or otherwise. With that, I'd now like to turn the call over to Steve.
Steve Brass, President and Chief Executive Officer, WD-40 Company: Thank you, Wendy, and thanks to all of you for joining us this afternoon. Fiscal year 2024 has been a year of exceptional strength, resilience and strategic progress. We've navigated challenges, capitalized on opportunities and continued to build on the strong foundation that has made WD-forty Company a success for over 7 decades. Today, I'll provide you an overview of our sales results for the 4th fiscal quarter of 2024 and the progress we've made against our 4x4 strategic framework. After that, Sarah will provide you a brief update on the divestiture of our home care and cleaning business and update on our business model and outlook for fiscal year 2025.
We will then take your questions. I'm pleased to announce that our 4th quarter was our 2nd consecutive record breaking sales quarter. Today, we reported 4th quarter net sales of $156,000,000 representing an increase of over 11% with sales of maintenance products experiencing double digit growth during both the Q4 and the full fiscal year. By the close of fiscal year 2024, sales of our signature product W40 Multi Use Product reached $453,000,000 an 11% increase over prior year and a new annual record for our core brand. In addition, I'm very happy to report that gross margin continues to improve and is moving closer to our target of 55%.
In the 4th quarter, we reported gross margin of 54.1%, which is an improvement of 100 basis points sequentially from the 3rd quarter and 2 70 basis points compared to the Q4 of last fiscal year. Now let me discuss 4th quarter sales results by segment. Unless otherwise noted, I will discuss sales in a reported basis compared to the Q4 of last fiscal year. This quarter sales in the Americas, which includes the United States, Latin America and Canada grew approximately 6% over the prior year to $79,000,000 The bulk of this growth was driven by higher sales volumes of W-forty Multi Use Product, which increased 7% compared to the prior year. Much of this growth came from strong sales in Latin America, which increased by 63% over the prior period.
These increased sales were partially offset by lower sales in the United States and Canada. Our Latin America market is comprised of our direct markets in Mexico and Brazil and all remaining Latin American countries, most of which are served by our marketing distributor partners in the region. Sales of WD-forty Multi Use product in Latin America was favorably impacted by our transition to a direct market model in Brazil. In the Q3 of fiscal year 2024, we acquired our Brazilian distributor and shifted from an indirect distribution model to one where we sell directly to retail customers. This distribution model shift favorably impacted net sales in Brazil by nearly $7,000,000 for the full fiscal year.
We also continue to experience positive momentum in our direct market in Mexico from the shift we made in 2020 from a distributor model. Sales in Mexico and other Latin American markets increased 24% and 9%, respectively, due to the timing of customer orders, successful brand building programs, increased distribution and expanded availability of WD-forty SMART Strong. As I shared with you last quarter, our plan for fiscal year 2024 in the Americas was always driven primarily by strong Latin American growth and that has played out. In the United States, sales of WD-forty Multi Use product decreased by 4% compared to the prior period. The United States experienced solid point of sale demand in the 4th quarter.
However, compared to the same period last year, sales were down. We are comparing against an exceptionally strong performance in the Q4 of last year when we saw double digit increases in both volume and sales in the United States. In Canada, sales of W40 Multi Use Product decreased 3% compared to the prior period. Sales in Canada were negatively impacted period over period due to phasing associated with discontinuation of our classic can delivery system and the implementation and conversion of Smart Straw Next (LON:NXT) Generation in Canada. The good news is that we're seeing positive trends at distribution points where we have fully converted our customers to Smart Straw Next Generation and expect this conversion to drive significant long term gains as we fully leverage our premium formats.
In the Americas, sales of WD-forty Specialist increased across most regions and were up 6% compared to the prior year period, primarily due to strong sales in Canada and Latin America. In total, our maintenance products increased 7% in the Americas this quarter. The growth in maintenance products was partly offset by a decline of 12% in home care and cleaning product brands. For the full fiscal year, maintenance product sales in the Americas totaled $267,000,000 reflecting a 7% increase compared to the prior year. This growth aligns with our long term target for the region, which projects annual growth between 5% 8%.
In total, our Americas segment made up 51% of our global business in the 4th quarter. Now turning to our sales in EMEA. This quarter sales in the EMEA, which includes Europe, India, the Middle East and Africa grew approximately 16% over the prior period to $59,000,000 Currency fluctuations had a minimal impact on our sales in EMEA and on a constant currency basis sales would have increased 15%. The strong growth in our EMEA was driven by higher volume sales of the V40 multiuse product, which increased 16% compared to the prior period. This growth is primarily attributable to increased sales in our EMEA distributor markets, which are up 41% compared to the prior year.
This quarter, we saw double digit growth in many of our EMEA distributor markets, but particularly strong growth in Northern Europe and India, which increased 52% and 206%, respectively. In our EMEA direct market, sales of Biviti 40 Multi Use product were also very strong in many markets, primarily due to improved volume as many of our customers have adjusted to the impact of price increases implemented last fiscal year. Sales increased 5% compared to the prior period, most significantly in France and the DAC region, where they were up 18% 12% respectively. The DAC region comprises Germany, Austria and Switzerland. Sales of W40 Specialist increased across most regions of EMEA and were up 13% compared to the prior period due to the combined impact of higher sales volume due to increased distribution and stronger levels of demand after customers adjusted the price increases.
In total, our maintenance products increased 15% in EMEA in the 4th fiscal quarter. In addition, sales of home care and cleaning product brands sold in the UK increased 25% in the 4th quarter. For the full fiscal year, maintenance product sales in EMEA totaled $212,000,000 reflecting a 17% increase compared to the prior year. This growth surpasses our long term growth target for the region, which projects annual growth between 8% 11%. In total, our EMEA segment made up 37% of our global business in the 4th quarter.
Now turning to Asia Pacific. Sales in Asia Pacific, which includes Australia, China and other countries in the Asia region, grew approximately 21% over the prior year to $18,000,000 The growth was driven primarily by higher sales of W40 Multi Use products, which were up 26% compared to the prior period. This growth is driven in large part by higher sales of maintenance products in our Asia Pacific distributor markets, which were up 51% compared to the prior period due to successful brand building programs in certain regions and the timing of customer orders. In China, sales of maintenance products were up 10% compared to the prior period due to successful brand building programs and the timing of customer orders. China continues to see strong growth of both W40 Multi Use Product and W40 Specialist with full fiscal year sales of maintenance products up 14% compared to the prior year.
In Australia, sales were flat compared to the prior period. Sales of Novak carpet cleaning product decreased 6% compared to the prior period due to the timing of promotional activities. However, this sales decline was almost entirely offset by higher sales of WD-forty Specialist, which increased 15% compared to the prior period, primarily due to successful brand building and promotional programs. For the full fiscal year, maintenance product sales in Asia Pacific totaled $79,000,000 reflecting a 10% increase compared to the prior year. This growth aligns with our long term growth target for the region, which projects annual growth between 10% 13%.
In total, our Asia Pacific segment met up 12% of our global business in the 4th quarter. Now let me discuss the progress we've made against our 4x4 strategic framework, which as you'll recall is comprised of our 4 must win battles and our 4 strategic enablers. Our must win battles focus on what we do to increase sales and profitability. We look at these as long term growth drivers and therefore we will focus our discussion on the full fiscal year results of those battles. Starting with Musquin Battle number 1, lead geographic expansion.
Global sales of W40 Multi Use Product in fiscal year 2024 were $453,000,000 representing growth of 11% over prior year. We experienced strong sales of our signature multi use product brand in all three trade blocks with 18% growth in EMEA, 7% growth in the Americas and 9% growth in Asia Pacific. People often ask Sarah and I what we believe investors misunderstand about WD-forty Company as an investment. I tell them that investors sometimes overlook the significant global expansion opportunities still available even after 71 years for the blue and yellow count, the little red top. We've made excellent progress this fiscal year in many key markets with strong sales growth of 40% in Latin America, 13% in our Asia distributor markets, 25% in France and 21% in India.
But what I want to emphasize today is that we have so much further to go. As I look around the world, all I see is opportunity. We estimate the global benchmark sales opportunity for WD-forty Multi Use Product be approximately $1,600,000,000 We calculate that benchmark sales opportunity by using macroeconomic data from World Bank market data and combining that data with an internally developed algorithm. We've used these data sources combined with our algorithm for close to 30 years and they've proven to be remarkably accurate. The data show that after 71 years, we've achieved only approximately 28% of the benchmark sales opportunity for WD-forty Multi Use Product.
Therefore, there remains approximately $1,200,000,000 of land and expand growth opportunity across the globe. Our strategy remains simple yet effective to reach this goal, make our product available to buy in more places and put more cans in the hands of our target end users around the world. The success of our geographic expansion strategy is perhaps best exemplified by our progress in Brazil. Following our acquisition of our Brazilian distributor, we achieved sales growth of nearly $7,000,000 in the 1st 6 months of direct operations, exceeding our initial expectations. This success coupled with our experience in growing markets all around the world gives us confidence in our ability to unlock further game changing opportunities in emerging markets and move the needle ever closer to the significant growth opportunity in front of us.
Next is Musquin Battle number 2, accelerating premiumization. Global sales of WD-forty Smart Straw and Easy Reach in fiscal year 2024 when combined grew 11% or approximately $20,000,000 over the prior year. Our premiumization strategy was developed with our end users in mind. Our premiumized products delight our end users and leave them with positive lasting memories. In addition, premiumization continues to be a major contributor to our revenue growth and gross margin expansion.
Over the last 5 years, we've achieved a compound annual growth rate for net sales of premium products of 10.7%. On a go forward basis, we'll be targeting a compound annual growth rate for net sales of premium product formats of greater than 10%. A third must win battle is to drive WD-forty Specialist growth. Global sales of WD-forty Specialist products in fiscal year 2024 were nearly $74,000,000 up 11% or $7,000,000 over the prior year. To our W40 Specialist product line, we aspire to achieve category leadership and increase our market share by leveraging our core brand equity.
Once again, we saw growth of W40 Specialist products across all three trade blocks with growth of 6% in the Americas, 14% in EMEA and 17% in Asia Pacific. In China, we continue to experience spectacular growth of WD-forty Specialist as sales grew over $1,400,000 or 45%. Due to expanded distribution, new W-forty Specialist product introduction to the region as well as successful brand building programs. We estimate the benchmark sales opportunity for W-forty Specialist globally to be approximately $605,000,000 and to date, we've achieved only 12% of our benchmark growth opportunity. Over the last 5 years, we've achieved a compound annual growth rate for net sales of WD-forty Specialist of 14%.
On a go forward basis, we'll be targeting a compound annual growth rate for net sales of W40 Specialist of greater than 15%. Our 4th and final Muslim battle is to accelerate digital commerce. Global sales within the pure play e commerce channel in fiscal year 2024 were up 12% compared to the prior year. The strategy associated with this battle is not just about driving online sales, it's about accelerating all our other must win battles. Digital commerce intersects with all our must win battles, much like the central overlap in a Venn diagram.
As part of our digital commerce strategy in 2024, we continued our global online marketing campaign, The Repair Challenge. We are now in the 3rd year of this promotional effort, which motivates millions of doers, makers, fixers and builders across more than 40 countries to extend the lifespan of their tools and equipment. In FY 2024, our Repair Challenge websites attracted over 2,000,000 visitors with more than 10,000 projects submitted. These projects aim to prolong the life of tools, worn down equipment, bicycles, cars and just about anything else, helping to keep them in circulation longer. Turning to the second element of our 4x4 strategic framework, our strategic enablers.
Our strategic enablers focus on operational excellence and they collectively underpin and drive the success of our Muslim battles. Strategic enable number 1 is ensuring a people first mindset. At W40 company, our most powerful competitive advantage is a commitment of our 6 44 employees spread across 16 countries to our purpose, values and strategy. We strive to be an employer of choice where all employees can bring their best selves to work. Our people first mindset is intended to create programs that inspire, motivate and reward employees for contribution that are aligned with our 4x4 strategic framework, while maintaining a strong focus on growth and profitability.
I'm very proud of our 93% employee engagement rate in FY 2024, a testament to our strong culture and the opportunities we provide for our people to learn, grow and succeed. This year, we made significant strides and beginning to transform W40 Company into a world class global learning organization. To gain insights into our progress, we conducted a voluntary learning survey, which received an impressive 82% response rate. The results show that 90% of our employees believe that continuous learning is key to driving the company's success among other valuable findings. This brings us to strategic enabler number 2, build a sustainable business for the future.
We define sustainability as ability of a business to exist indefinitely. We're committed to operating our business in a manner that will have positive environmental and societal impacts, which will create value for all our stakeholders. Over the last 12 to 18 months, we've taken significant steps to embed sustainability into our business strategy, steps we believe will provide us with a competitive advantage in the global marketplace. Our efforts have been considerable. Some of the highlights include adding 3 dedicated ESG positions, completing an environmental assessment of our Tier 1 suppliers, implementing a carbon accounting system, refining our sustainability lens of future innovation and developing a science based environmental impact road map with a priority to reduce GHG emissions.
We will be publishing our 2024 ESG report next month. In this report, we detail our ESG related objectives, targets and progress made during the last 2 year period, and we establish objectives and targets for the future. Strategic enabler number 3 is achieving operational excellence in supply chain. Through this strategic enabler, we continue to pursue operational excellence. This year, we adopted a truly global approach to our supply chain strategy for the first time, recognizing its pivotal role in driving economic value and advancing sustainability.
We've undertaken several key initiatives that support this approach. In-depth analyses revealed significant opportunities for cost reduction and efficiency gains. By strengthening global partnerships with key suppliers, we've driven efficiency as it translate into cost savings. Additionally, we completed an environmental audit of our top suppliers and published an updated supplier code of conduct. In fiscal year 2025, we'll publish a new responsible sourcing policy to more clearly communicate how the supply chain can positively impact environmental and social responsibility.
Notably, we reduced our inventory by approximately $7,000,000 and maintained an average on time in full delivery rate of 95% for fiscal year 2024. Our employees achieved all of this while simultaneously rolling out the first phase of our new ERP implementation across a substantial portion of our business. And finally, strategic enable number 4 is to drive productivity by our enhanced systems. We've been laser focused on identifying and implementing systems that streamline operations, deliver actionable insights and drive value. By leveraging automation and AI, we aim to optimize our processes, reduce manual labor and ultimately enhance our bottom line.
A key milestone this year was a successful rollout of our new ERP system across 50% of our business. While we encountered some initial challenges, we've swiftly adapted and learned from the experience, which we expect will result in smoother implementations going forward. Other milestones this past fiscal year include standardization and processes like project and portfolio management, along with streamlined approaches to solution driven decision making. Lastly, we've established the foundation to move with more intent toward productivity improvement by establishing global centers of excellence along key areas of IT to bring once disparate teams together to harness their collective skills and capacity to focus on our long term growth objectives. With that, I'll now turn the call over to Sarah.
Sarah Heiser, Vice President and Chief Financial Officer, WD-40 Company: Thanks, Steve, for that overview of our sales results and strategic framework. I'm pleased to announce that we delivered a strong performance in the Q4, leading to a solid fiscal year 2024. Let's start with a discussion about how we performed our most recently issued fiscal year 2024 guidance. We expected net sales growth to be between 6% 12%, with net sales of between $570,000,000 $600,000,000 on a non GAAP constant currency basis. Today, we reported fiscal year revenue of $583,000,000 up 8% compared to last fiscal year on a non GAAP constant currency basis and in line with our expectations.
We expected gross margin to be between 51.5% to 53%. Today, we reported a gross margin of 53.4%, slightly above our guidance expectations. We expected our global advertising and promotion investment to be between 5% and 6% of net sales. Today, we reported an A and T investment of 5.7%. We expected net income to be between $67,700,000 $71,800,000 and a diluted EPS of between $5.30 Today, we reported net income of $69,600,000 and diluted EPS of $5.11 in line with our expectations.
To better understand what is driving these results, let's begin with a review of our Q4 results against our 50 Fivethirtytwenty 5 business model. I will then provide an update on our financial results, an update on the divestiture of the Home Care and Cleaning brands in the Americas and the UK, and finish with providing a view towards fiscal year 2025. Our asset light and dynamic business model has helped the company maintain a healthy financial position and generate strong returns for our stockholders for many years, and it continues to be our guiding light. Our fifty Fivethirtytwenty five business model has been a long term beacon for us that we aspire to over time. Recently, we have been thinking about each critical component of the model in a range.
As we've mentioned previously, if we successfully divest the home care and cleaning brands in the Americas and the UK, we expect that progress on certain aspects of our business model will be temporarily impacted as we digest the impacts. However, in the longer term, we anticipate significant benefits as we shift our focus and investments towards our higher growth, higher margin maintenance products. I'll share more details on our outlook when we provide guidance for fiscal year 2025. Let's look at our Q4 gross margin performance. We target a range of 50% to 55% for gross margin, and we have made significant progress this fiscal year to perform well within this range.
In the Q4, our gross margin was 54.1 percent compared to 51.4% last year. This represents an improvement of 2 70 basis points and was most significantly impacted by the following factors. Gross margin benefited 100 basis points from lower cost of our cans, 70 basis points from favorable sales mix and other miscellaneous mix and 60 basis points from lower warehousing, distribution and freight costs. We are pleased to see that the inflationary environment has stabilized for now, and our gross margin has steadily improved throughout the fiscal year. This marks the 3rd consecutive quarter of sequential gross margin growth.
We are also happy to share with you that this quarter gross margin improved across all three trade blocks. Within the Americas, gross margin improved 3 50 basis points over prior periods to 52.5%. EMEA continues to expand gross margin improving 190 basis points over the prior period to 55.5%. And Asia Pacific improved gross margin 70 basis points over the prior period to 56.4%. I am delighted to report that 2 of our trading blocks are already above our 55% gross margin target for the Q4.
Despite some of the headwinds we anticipate to the business model from divesting of the Home Care and Cleaning brands in the Americas and the UK, the divestiture will have an immediate positive impact on our gross margin. We forecast an annual boost to gross margin of approximately 60 basis points post divestiture. This strengthens our confidence in reaching our target of 55% gross margin. Considering our current trajectory, the current cost environment and macroeconomic factors, we continue to target achieving a gross margin of 55% by the end of fiscal year 2026 at the latest. However, depending on the cost landscape, we may achieve this goal even sooner, potentially by the end of fiscal year 2025 following the divestiture.
In fiscal year 2025, gross margin recovery is a central focus for senior leadership, who will be incentivized to recover gross margin to 55% and beyond. Now turning to our cost of doing business, which we define as total operating expenses less adjustments for certain non cash expenses and is primarily comprised of investments in our employees, investments in our brand, freight expense to get our products to our customers and investments in information technologies. As we continue to grow our top line, we remain committed to operating efficiently and maintaining the company's financial health, while also investing in areas to drive both future growth and future operating efficiencies. With increased operational leverage, after we have time to digest the anticipated impacts of the divestiture, we expect that our cost of doing business will align with our targeted range of 30% to 35% over time. This quarter, our cost of doing business was 38% compared to 34% in the prior year.
For the full fiscal year, our cost of doing business was 36% compared to 33% in the prior year. Both increases were primarily driven by higher employee related costs, including the impact of accruing higher earned incentive compensation. In fiscal years 202223, we had to navigate a dynamic macroeconomic landscape marked by supply chain disruptions and higher than normal inflation levels. Our earned incentive program was developed to protect our bottom line during difficult financial times and reward our employees during better financial times. Therefore, as the business has recovered, so has our incentive compensation program.
Fiscal year 2022, when the business was challenged with high inflation, our incentive program paid out approximately $3,000,000 and we were able to rebuild that to about $8,000,000 by fiscal year 2023, and now $16,500,000 for this fiscal year. This is an improvement of over $13,000,000 over the course of 2 years. Our incentive plan applies to every employee at every level of the organization, and we couldn't be more pleased to reward their outstanding individual and collective efforts this fiscal year. For the full year, the increase in our accrued incentive compensation program was $8,800,000 and in the 4th quarter, the increase was $4,600,000 We exceeded our 4th quarter forecast and therefore the timing of our accrued incentive compensation was larger in the Q4 than the previous 3 quarters this year. In addition to higher employee related costs, we have also been making strategic investments in the areas of information technologies, ESG and innovation and supply chain, which have led to some elevated SG and A expenses and therefore higher cost of doing business.
Turning now to adjusted EBITDA margin. All these investments have put some pressure on our adjusted EBITDA margin. For both the full fiscal year and Q4, our adjusted EBITDA margin was 17% and remained relatively constant compared to the prior period. However, on a dollar basis, we grew EBITDA for the full fiscal year by 8% over the prior year, even after absorbing these increased costs. As we've mentioned previously, if we successfully divest the Home Care and Cleaning brands we are actively selling, we know that we will need some time to digest the impact.
However, we continue to believe we can move adjusted EBITDA margin back to our target range of 20% to 22% over the medium term. Now let's discuss net income and EPS for the Q4. Net income of $16,800,000 this quarter improved slightly by about 1% compared to the prior period. For the full year, which adjusts for the lumpiness of our incentive compensation program accrual this year, our net income grew by $3,600,000 or about 6% over the prior year. On a constant currency basis, net income for the full year would have increased 3% compared to the prior year.
Diluted earnings per common share for the Q4 were $1.23 compared to $1.21 in the prior period. For the full year, diluted EPS grew $0.28 per share or 6% over the prior year. Diluted EPS reflects 13,600,000 weighted average shares outstanding this quarter, which was essentially flat compared to the prior year. Next, we'll discuss a word about our balance sheet and capital allocation strategy. The company maintains a solid financial position and strong liquidity.
Our capital allocation strategy takes a balanced approach, prioritizing long term organic growth investments, while delivering robust returns to our stockholders. We continue to return capital to our stockholders through regular dividends and buybacks. Annual dividends will continue to be our priority and are targeted at greater than 50% of earnings. On October 4, our Board of Directors approved a quarterly cash dividend of $0.88 per share. We have continued to manage our inventory levels, which were impacted due to the investments we made to stabilize our U.
S. Supply chain in prior years. Our inventory levels peaked in the Q1 of fiscal year 2023, and since then, we have reduced inventory by nearly $40,000,000 or 34%. At this point in time, our inventory levels are stable, with what we believe is the right balance from a risk management perspective. We continue to hold certain levels of componentry and cans, which have benefited us recently and will continue to do so into the foreseeable future.
Furthermore, divesting from our household brands would positively impact our working capital and inventory levels, as these brands typically require us to maintain higher inventory levels. Our cash flow from operations for fiscal year 2024 was approximately $92,000,000 and we elected to use approximately $25,000,000 of that cash to pay down a portion of our short term higher interest rate borrowings. Our intent is to continue to pay down our higher interest rate borrowings under the current interest rate environment. This activity will likely be wrapping up in the first half of twenty twenty five. In fiscal year 2024, our return on invested capital was 25.5%, improving from 23.7% last fiscal year and in line with our target of 25%.
Now a brief update on changes we're making that will affect foreign currency impacts in fiscal year 2025. The functional currency for our U. K. Subsidiary, which consolidates the results for the EMEA trade block, has long been the pound sterling. We reassess this on an annual basis.
As we look out to fiscal year 2025 and beyond, the shifts in the operating landscape within the EMEA region, along with certain strategic actions we are taking, require a change in our functional currency. A few key factors influenced our decision, including a growing dependence on euro denominated inventory within our supply chain and an increase in sales and operational expenses tied to the euro. As a result, beginning September 1, 2024, we will change the functional currency of our UK subsidiary from pound sterling to euro with the change being applied prospectively. Now a quick update on HCCP. We continue to make progress on the sale of our Americas and UK home care and cleaning product brands.
Sales of home care and cleaning products in the Americas and U. K. This fiscal year 2024 were approximately $24,000,000 representing 4% of our global business. As I shared with you last quarter, we have engaged an investment bank and they are currently in discussions with potential suitors on our behalf. While there are no certainties on identifying a buyer when going to the market, our expectation is that we will likely complete the divestiture of these brands during the first half of fiscal year twenty twenty five.
We will provide further updates on the divestiture process as appropriate. Given the expectation that these brands will soon be divested, we are providing this year's guidance on a pro form a basis, excluding the financial impact of the Home Care and Cleaning brands in the Americas and the U. K. We're also offering a pro form a view of what fiscal year 2024 would have looked like without these brands to assist with modeling and comparing the business period over period. Fiscal year 2024 pro form a net sales would have been approximately 567,000,000 dollars Fiscal year 2024 pro form a gross margin would have been approximately 53.9 percent Fiscal year 2024 pro form a operating income would have been approximately 89,300,000 dollars And fiscal year 2024 pro form a EPS would have been approximately $4.76 Now with that backdrop, let's take a closer look at our guidance for fiscal year 2025.
We are excited for what is ahead for us in fiscal year 2025. We are committed to delivering long term value to all our stakeholders, which requires balancing short term results with strategic investments to drive long term growth and enhance business efficiency. As I have mentioned before, this year's guidance excludes the financial impact of the Home Care and Cleaning brands currently classified as assets held for sale as of September 1, 2024. While the exact timing of the transaction's closing remains uncertain, we believe this approach will provide investors with clarity on the direction of the core business and help minimize the noise surrounding the transaction. This year, we've also made a change by removing net income from our guidance and replacing it with operating income.
We believe this provides a better measure for offering more insight into the business' operating performance. For fiscal year 2025, we are estimating net sales growth from the pro form a 2024 results is projected to be between 6% and 11%, with net sales between $600,000,000 $630,000,000 in constant currency. Gross margin is expected to be between 54% to 55%. Advertising and promotion investment is projected to be around 6% of net sales. Operating income is expected to be between $95,000,000 $100,000,000 representing growth of between 6% to 12% over the pro form a 2024 results.
The provision for income tax is expected to be around 24%. And diluted earnings per share is expected to be between $5.20 $5.45 which is based on an estimated 13,500,000 weighted average shares outstanding. This range represents growth of between 9% 14% over the pro form a 2024 results. This guidance assumes no major changes to the current economic environment. Unanticipated inflationary headwinds and other unforeseen events may affect our view of fiscal year 2025.
In the event we are unsuccessful in the divestiture of our home care and cleaning brands in the Americas and the United Kingdom (TADAWUL:4280), our guidance would be positively impacted by approximately $23,000,000 in net sales, dollars 6,000,000 in operating income and $0.33 in diluted EPS on a full year basis. That completes the financial overview. Now I would like to turn the call back to Steve.
Steve Brass, President and Chief Executive Officer, WD-40 Company: Thank you, Sarah, for that update. Our focus for fiscal year 2025 and beyond is clear: stay true to our 4x4 strategic framework, continue to unlock value in high potential markets and take care of our people who drive our success. The key theme throughout this journey for the WD-forty company will be few things, many places, bigger impact. This approach will help us leverage global synergies and become more efficient as we expand. In summary, what did you hear from us on this call?
You heard that for the 4th quarter, we reported consolidated net sales of $156,000,000 an increase of over 11% over the prior year and the 2nd consecutive record quarter for the company. You heard that all 3 of our trade blocks reported revenue growth that aligns with or exceeds our long term growth targets for each region, both in the Q4 and the full fiscal year. You heard that our newest direct market in Brazil continues to do well that we believe the acquisition of the Brazil market was a game changing opportunity for us. You heard that we estimate the benchmark sales opportunity for WD-forty Multi Use Product to be approximately $1,600,000,000 and that we've achieved only 28% of that benchmarked opportunity. You heard that we estimate the benchmark sales opportunity for W40 Specialist to be approximately $605,000,000 and that we've achieved only 12% of that benchmark opportunity.
You heard that we're making good progress in the sale of our Americas and UK home care and cleaning product brands. You heard the gross margin continues to improve and is moving closer to our long term target of 55%. And you heard that we're issuing guidance for fiscal year 2025 on a pro form a basis, excluding the brands we expect to divest this year. Thank you for joining our call today. We'd now be pleased to answer your questions.
Conference Operator: Our first question comes from the line of Daniel Rizzo with Jefferies. Daniel, please proceed with your question.
Daniel Rizzo, Analyst, Jefferies: Everyone, thanks for taking my question. I was just going through the deck and one thing I noticed is that I think in the second half of twenty twenty four, there was some I think pricing was a bit of a headwind, I think 2% to 1%. I can't find right now. I was just wondering what that was, if that's just promotional activity or if it's something else?
Wendy Kelly, Vice President, Stakeholder and Investor Engagement, WD-40 Company: Hi, Jamie. It's Sarah.
Sarah Heiser, Vice President and Chief Financial Officer, WD-40 Company: So yes, there was a little bit of swing in the back half of the year. Most of that is going to be mix. It's hard right now for us to break out mix from that metric. And so there's nothing significant on a pricing that went backwards. It's going to all be mix related.
Daniel Rizzo, Analyst, Jefferies: Okay. And then with I mean, with the ongoing rollout of the ERP, with everything that's going on with divestiture, I would imagine that SG and A expenses are going to remain relatively elevated for at least the next couple of quarters? I'm just trying to modeling that. Is that something we should probably expect?
Sarah Heiser, Vice President and Chief Financial Officer, WD-40 Company: Yes. I think we are obviously continuing to invest in the ERP, and we also are inheriting Brazil expenses in addition to that. So if you're looking at the upcoming year, we're not growing at the pace that we grew out last year, especially because we've rebuilt that GRP that I mentioned on the call. So it won't be as large of an increase as last year, but it will continue to be more elevated than it has been in the past.
Daniel Rizzo, Analyst, Jefferies: Okay. And then one final question. Then you've had good success with moving to a direct business model in Brazil, Mexico and elsewhere. I was wondering where the other opportunities to do that are? If we expect more announcements like that within, I don't know, the next year or so, how should we think about it?
Steve Brass, President and Chief Executive Officer, WD-40 Company: Daniel, it's Steve. Thanks for the question. So yes, we're really delighted with the progress. Mexico continued to grow, grew by another 25% in last fiscal year. Brazil actually beat our expectations in terms of delivering overall $8,000,000 to $7,000,000 of growth almost over prior year, and we expect for this next fiscal year for that to continue to grow and deliver a further $7,000,000 to $9,000,000 on top of that base of $8,000,000 for the 1st year.
So yes, these are game changing opportunities. And so as we look around the world, we are absolutely laser focused on those top 20 growth opportunities that we have. And I look back at the last year, China local currency 17% growth India 21% growth Indonesia 17% growth Turkey 66% growth on top of phenomenal growth across just about everywhere in Europe and Latin America. So phenomenal focus, I think, is delivering these really exceptional results. And yes, you're going to see more of that.
We have no announcements that are imminent in terms of planned kind of direct markets. A lot of our growth internationally is achieved by excellent partnerships around the world with our marketing distributor partners as well. Thank you very much.
Conference Operator: Our next question comes from the line of Linda Baldung Weiser with D. A. Davidson. Linda, please proceed with your question.
Linda Baldung Weiser, Analyst, D.A. Davidson: Yes. Hello. Thank you. Congratulations on a really strong quarter year. So just to make sure I understand this, your guidance for the next fiscal, the dollar figure amounts like operating profit of 90 $5,000,000 to $100,000,000 does that assume that the household cleaning business is not in for any of the year?
Is that correct?
Sarah Heiser, Vice President and Chief Financial Officer, WD-40 Company: You have that yes, Linda, that's correct. We've excluded it for the full year just given the uncertainty of the timing and then provided you with some information of what it would what the difference would be if it was included for the full year. So you have it kind of both with and without.
Linda Baldung Weiser, Analyst, D.A. Davidson: Yes. Thank you. Thank you for giving all that. But in reality, it's not going to be sold like it could be toward the end of the first half. So in reality, the numbers will probably be a little toward the higher end of these ranges that you've given.
Am I understanding that correctly?
Sarah Heiser, Vice President and Chief Financial Officer, WD-40 Company: So on a GAAP basis, yes. We will also be presenting the business on a non GAAP basis starting in Q1, so that you can have apples or how we're measuring ourselves for the full year against that guidance that we've provided.
Linda Baldung Weiser, Analyst, D.A. Davidson: Okay. Okay, great. And then I guess then with that I mean your gross margin in 2024 was 53.4%. So I guess I'm wondering about the guidance of 54% to 55%. If you're getting a lift of 60 basis points from the divestiture, why wouldn't that guidance be like higher?
I guess I'm trying to understand that.
Sarah Heiser, Vice President and Chief Financial Officer, WD-40 Company: Well, most of the move that we've had in the last couple of years has come from price with premiumization and supply chain initiatives being lesser of an impact. We are starting to now see the efforts of some of those supply chain initiatives that we've implemented both at this year and then also plan to implement next year. Those just have a smaller immediate impact to the margin. So we do intend to make improvement to the margin. It's just going to be at a lesser scale than it was for this year.
Linda Baldung Weiser, Analyst, D.A. Davidson: Okay. And then, so usually you have a like an oil price assumption that's baked in. Can you give what you're including in the guidance for oil price assumption?
Sarah Heiser, Vice President and Chief Financial Officer, WD-40 Company: Sure. The range right now we have is between $70 $90
Linda Baldung Weiser, Analyst, D.A. Davidson: Okay. And then I guess I was wondering about just the cadence of your pro form a sales growth in the next fiscal. I mean, Q1 in particular has a pretty hard comparison in Q1 of 'twenty four. Is there anything we should be cognizant of in terms of growth rates and how that will kind of go through the year on a pro form a basis for sales growth?
Sarah Heiser, Vice President and Chief Financial Officer, WD-40 Company: Yes. It's a good question, Linda. We obviously, as you know, don't guide to the quarter, but I will comment that similar to last year, if you looked at the growth of the business, it was weighted towards the back half of the year. And as we're forecasting out this year, I would say it's going to be a similar balance between that Q1, Q2 compared to Q3 to Q4, kind of that first half to second half balancing. You can look at last year as a guide and maybe it might just be a little bit spread, a little bit wider than that, but not by much.
Steve Brass, President and Chief Executive Officer, WD-40 Company: If I could just add to that, Linda, as well. There's a little bit of phasing in Asia Pacific. The Q1 was so strong last year that that's going to be a challenge to exceed that in Asia Pacific. So Asia Pacific in terms of growth will probably have a slower start and build up in the year. And then Brazil, obviously, the impact of Brazil will mainly be felt in the 1st 6 months of the year.
So that $7,000,000 to $9,000,000 of growth, a substantial part of that will be in the first half of the year.
Linda Baldung Weiser, Analyst, D.A. Davidson: You mean in terms of the incremental growth versus prior year?
Steve Brass, President and Chief Executive Officer, WD-40 Company: Exactly. Correct. Yes, correct.
Wendy Kelly, Vice President, Stakeholder and Investor Engagement, WD-40 Company: Okay.
Linda Baldung Weiser, Analyst, D.A. Davidson: And just let me ask a little bit about China. I mean, I can't quite remember what you said it was in the quarter. It seemed like it was pretty strong. And I think you said 17% for the year. So are you the economy there is just so weak and that's all we hear about every day.
But it doesn't seem to be affecting your business. Is it just that you have so much growth opportunity that you're immune from the macro or maybe could you give a little more color?
Steve Brass, President and Chief Executive Officer, WD-40 Company: Yes. We just continue to do our thing, right? And so we talk often about our China sampling program, which is very successful multi year program where we're putting out, I believe, last year, we sampled 33,000 factories and converted a substantial amount of those to DIVIDI 40 users. And so that happens year in, year out. And so we're always bringing new users into the brand.
Combined with that, we were very successful last year also in expanding our distribution making our product more available to buy with several 100 new points of distribution opened across the country. And so it's a very simple formula that just works, and the Chinese team are doing a great job of turning up the heat even further. So 17% local currency growth last year, 13.5% in U. S. Dollars with spectacular growth also on W40 Specialist around 45% in U.
S. Dollars.
Linda Baldung Weiser, Analyst, D.A. Davidson: Okay. Well, I guess that's all I have then for now. Thank you very much.
Steve Brass, President and Chief Executive Officer, WD-40 Company: Thank you.
Sarah Heiser, Vice President and Chief Financial Officer, WD-40 Company: Thank you, Linda.
Conference Operator: Ladies and gentlemen, that does conclude our allotted time for questions. We thank you for your participation in today's conference call and ask that you please disconnect your line.
Linda Baldung Weiser, Analyst, D.A. Davidson: Thank you.
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