The WD-40 Company NasdaqGS: WDFC Recommendation: BUY · 2019 Quarter 1 Results Reflect This Thesis...

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The WD-40 CompanyNasdaqGS: WDFC

Recommendation: BUY

CJ & Quinn Jacobs

Recognize this canister?

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WD-40 is one of the most recognizable household maintenance brands in America and is poised to become one of the most recognizable in the world…

Investment Thesis

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Recommendation:The WD-40 Company (NasdaqGS: WDFC), one of the highest quality companies in its industry, is currently undervalued and their future growth will greatly outperform current market sentiment. Therefore, we recommend WDFC as a BUY for ND Investment Club.

Theses:

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WD-40 Multi-Use is an irreplaceable product and brand that is leading the charge into emerging markets as the key driver for growth. The unwavering brand strength of their original product pushes specialty products forward

The strong product base, including the Multi-Use product & Specialty brand, will allow growth to continue its acceleration in the EMEA and Asia-Pacific Markets

The WD-40 Tribe’s commitment to their 2025 Plan, combined with the company’s new R&D Center, will allow the company to reach their $700 MM sales goal and grow EBITDA margins

Price Target: $203.7919.5% upside to current price of $169.82

WD-40 Company Overview & History

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Overview Operating Performance

Company History

What is WD-40?• WDFC is a global marketing organization that

develops & sells products that solve problems in workshops, factories and homes

• WD-40 Multi-Use can be found in 8/10 homes in the U.S.

Financial Overview & Highlights• Current Market Cap: $2.38 Billion• Enterprise Value (EV): $2.41 Billion• Return on Invested Capital: 31%

378.15 380.67 380.506408.518

63.69 73.748 76.309 77.204

050

100150200250300350400450

2015 2016 2017 2018

Mill

ions

$

Revenue Cost of Doing Business EBIT

Founded by Cy Irving &

Norman Larsen & John Gregory

1953

1958

WD-40 first appears on

shelves in San Diego, CA

The company breaks

$100MM in Sales

1993

1995

2008

2018

International sales exceed

domestic sales for first time

Spree of acquisitions

begins w/ 3-IN-ONE

Company celebrates 65th anniversary with $408MM in sales in

176 countries

Industry & Customer Breakdown

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▸ Provides maintenance products to industrial, agricultural and consumer markets

▸ Regarded as “softly cyclical”, because in a recession new capital purchases are reduced and existing equipment is reused, using more MPMPs

Multi-purpose Maintenance Products

U.S. Competitors

Retail

Store Brand

WD-40 Customer Breakdown

5 Years ago Industry User consumption averaged $40-60

International Competitors▸ EMEA and Asia have substantially less

competition than the Americas segment▸ This less competitive environment results in, and is

demonstrated by, the higher gross margins in EMEA and Asia

Use of the Product

Consumers Industry Users$0.40 $70

20% 80%

Per Year Consumption

Consumer Market:▸ For the average consumer, WD-40 is the go-to

product when it comes to removing rust, stickers, fixing a squeaky door.

▸ While these events may not happen all of the time, there is no better product than WD-40

Industrial & Agricultural Markets▸ Manufacturers and farmers routinely use WD-

40 to maintain machines and equipment▸ WD-40 also continues to grow during

downturns in the economy. This is due to the increased need for WD-40 or lubricant when old equipment is not replaced by new capital expenditures

Cost Breakdown & Supply Chain

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Outsources manufacturing to 12 countries, including

the U.S., Canada, Brazil, Australia,

India

Raw materials used in manufacture are

commodities such as petroleum and

various metals, other chemicals

Third-party logistics providers move the

finished product through 62 unique

trade channels to 176 countries

Product is then sold primarily through

home center stores, grocery stores,

hardware stores, online retailers

Supply Chain

Cost Breakdown

Corrugate

19% 35% 13% 19%3%

Plastic

Petroleum-Based Specialty Chemicals

Manufacturing Fees

Can

Unique “Tribe” Culture & Management

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Senior Management WD-40 Company Tribe

Garry Ridge, CEO & President▸ Joined company in 1987 and

appointed CEO & President in 1997▸ Responsible for development &

implementation of 2025 Plan▸ Co-authored book Helping People

Win at Work▸ Total Compensation: $2.40mm

▸ Cash: $1.35mm▸ Stock: $.975mm

Jay Rembolt, VP & CFO ▸ Joined company in 1997 as manager,

financial services. Assumed CFO role in 2008

▸ Holds MSA from SDSU▸ Committed to the 55/30/25 business

model▸ Total Compensation: $800K

▸ Cash: $513K▸ Stock: $176K

“We create positive lasting memories by cultivating atribal culture of learning and teaching which produces ahighly engaged workforce who live our company’s valuesevery day”

Question ResponseAverage of all Questions 93.3%I love to tell people I work for WD-40 Company 99.0%I understand how my job contributes to achieving the WD-40 Company culture 97.9%I am clear on results are expected of me 97.4%I am excited about WD-40 Company's future direction 93.4%

2019 Targets

1. Focus on growth areas in markets around the globesuch as Latin America, China, India and Europe

2. Continue to innovate products and delivery methods

3. Revenue target of $437 MM with 7% growth YoY

4. Gross Margin target of 55%

5. Increase employee engagement to 95%

The 2025 Plan

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2025 Plan Initiatives

1. Grow WD-40 Multi-Use Product• Focus on geographic expansion, increased market penetration & developing unique delivery systems

2. Grow the WD-40 Specialist Product Line• Leverage this line to create continued growth through geographic expansion and product development

3. Broaden Product and Revenue Base• Leverage recognized strengths of the company to derive revenue from existing products

4. Attract, Develop and Retain Outstanding Tribe Members• Succeed as a “tribe” as well as individuals. Grow employee engagement to 95%

5. Operational Excellence• Execute the 55/30/25 business model and continue of improvement of resource allocation

Breakdown of $700 MM Sales Goal

Revenue TargetsMulti-purpose: $530 MMSpecialist Line: $100 MMHomecare: $70 MM

Revenue FY18Multi-purpose: $314 MMSpecialist Line: $31 MMHomecare: $52 MM

Vigilant Commitment to 55/30/25 Model & the 2025 Plan

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55-30-25 Business Model

Taking R&D in House

During the Q1 2019 Earnings Call, Mr. Ridge announced that the company will be opening its brand new technology center in Pine Ridge, New Jersey

• This represents the WD-40 team bringing their product development efforts in-house, most of which was previously outsourced

• The technology center is expected to improve Operating Expense & EBITDA Margins

• Research & Development staff will be work collaboratively with marketing executives to drive new product and delivery method innovations

• Spent around $17 MM in CapEx to replace old NJ Office and add heavily to in-house R&D

Target FY18 FY17 FY16

Gross Margin 55% 55% 56% 56%

Cost of Doing Business 30% 34% 35% 36%

EBITDA Margin 25% 21% 22% 21%0%

5%

10%

15%

20%

25%

0%10%20%30%40%50%60%70%

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Gross Margin CODB EBITDA Margin

Irreplaceable brand and product array to serve costumers

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Secret Formula & Uses Brand Recognition

Original Formula Priming Specialist Growth

WD-40 is not a patented product and has a very different formula than that of competitors

WD-40 MP and Specialty products do not contain:1. Silicone 4. Graphite2. Kerosene 5. Chlorofluorocarbons (CFC)3. Water

Allows for increase in usages in nearly every setting, especially in manufacturing and agricultural industries

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WD-40 has over 2,000 uses and is found in over 80% of households, totaling 92 million households

Irreplaceable brand and product array to serve costumers

WD-40 Multi-Use

▸ The namesake product was invented in 1953

▸ Innovation and growth from multiple variations of nozzles and canisters

WD-40 Specialist

▸ High performance, professional grade product

▸ Each “Specialist” product has a specific maintenance use

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▸ Products include GT85, WD-40 BIKE, Carpet Fresh, X-14, 1001

▸ Homecare products faces intense competition in the U.S.

Bike & Homecare

Product Segments Serving All Needs

Multi-purpose Growth Homecare GrowthSpecialist Growth

0102030405060708090

Q1FY17

Q3FY17

Q1FY18

Q3FY18

Q1FY19

$ (M

illio

ns)

0123456789

Q1FY17

Q3FY17

Q1FY18

Q3FY18

Q1FY19

$ (M

illio

ns)

Quarterly CAGR: 1.84%Yearly CAGR: 8.08%


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0

2

4

6

8

10

12

14

Q1FY17

Q3FY17

Q1FY18

Q3FY18

Q1FY19

$ (M

illio

ns)


Primed for growth acceleration in international markets

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• Potential TAM Abroad: ~$640 MM in China, India,

Indonesia, Germany, Russia and 3 more countries

• China is the largest, most attractive emerging market

(~$150mm)

• International markets account for ~52% of total sales

$1 Billion International Market Potential for WD-40 Multi-Use

WDFC has been establishing deep brand recognition and strong distribution chains on an international level for years and is now primed for growth acceleration

International Brand Recognition and Growth

International sales first eclipsed domestic sales in 2008, driven almost

solely by the WD-40 Multi-Use product

The meticulously developed brand

recognition of WD-40 is leveraged to push the

WD-40 Specialty products

Continue market penetration and

expansion of the Multi-Use product with

innovations, allowing further brand leverage

for Specialty sales

THEN NOW NEXT

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Primed for growth acceleration in international markets 3

Europe, Middle East, and Africa (EMEA) Asia-Pacific

2015 2016 2017 2018Homecare 7,117 6,018 5,209 5,946Maintenance 129,730 129,217 131,562 144,932

100,000

120,000

140,000

160,000

2015 2016 2017 2018Homecare 7,320 6,936 7,239 7,463Maintenance 46,639 47,102 51,567 57,299

10,000

30,000

50,000

70,000• Revenues grew by 10% YoY

• UK: 15% growth• Iberia: 26% • $151mm in net

sales• 37% of total sales

• Revenues also grew by 10% YoY

• China & India are the key markets

• $65mm in net sales

• 16% of total sales

• The Specialty products were introduced this year

• Executives have signaled that the Multi-Use product is no where near saturation

• Strong growth of WD-40 Multi-Use through 2025

• The Specialist line, introduced a few years ago, has shown double digit growth in this region

• WD-40 Flexible (Multi-Use) was introduced to the EMEA market in 2018

2019 Quarter 1 Results Reflect This Thesis• Despite unfavorable currency translation, the EMEA segment saw growth of 11% in the first quarter of this fiscal

year. On a constant currency basis, sales were up 12%

• Slow sales to start out in Asia-Pacific, down 13%. However, this is primarily a reflection of the hangover from very

strong Q4 2018 sales and unfavorable currency exchange rates

• China sales are up 4%, or 9% on a constant currency basis

Key Risks

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Despite some quarter-to-quarter volatility, long-term volatility is mitigated with price adjustments

Ensuring the product development teams only develop differentiated products

Strong investment in people and A&P expenses in emerging markets

Crude oil is only a small percentage of the input of specialty chemicals used by the company

CEO & CFO investment in people and culture development should limit downside in the event of retirement

! Foreign currency exchange rate risk

! Cannibalism of Multi-Purpose product sales by Specialist Line sales

! High sales volume growth may be difficult to meet

! Rise in price of input materials, specifically petroleum based specialty chemicals

! Possible retirement of CFO or CEO before 2025 causing company to lose sight of mission, negatively impacting sales

Key Risks Mitigants

Final Recommendation

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Base Case

Price Target: $203.79Upside: 20%

BUY

Upside Case

Price Target: $233.35Upside: 38%

Downside Case

Price Target: $157.69

Upside: (8%)

Appendix

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Valuation – Comparable Companies AnalysisValuation Statistics

Price Market Enterprise EV / Revenue EV / EBITDA Price / EarningsCompany Ticker 4/2/2019 Capitalization Value 2018A LTM 2018A LTM 2018A LTMChurch & Dwight Co., Inc. NYSE: CHD $72.01 $17,710 $19,507 4.7x 4.7x 20.9x 20.9x 31.7x 39.3xThe Clorox Company NYSE: CLX $157.64 20,204 22,562 3.7x 3.6x 17.6x 17.6x 27.9x 31.1xNewell Brands Inc. NASDAQ: NWL $15.34 6,490 13,009 1.5x 1.5x 14.2x 14.2x 5.7x 83.7xThe Coca-Cola Company NYSE: KO $46.57 199,094 226,725 7.1x 7.1x 21.4x 21.4x 22.4x 30.4x

WD-40 Company NASDAQ: WDFC $170.57 $2,358 $2,405 5.9x 5.8x 28.3x 28.6x 31.7x 36.4x

Low $6,490 $13,009 1.5x 1.5x 14.2x 14.2x 5.7x 30.4xMean 60,874 70,451 4.3x 4.2x 18.5x 18.5x 21.9x 46.1xMedian 18,957 21,034 4.2x 4.2x 19.2x 19.2x 25.1x 35.2xHigh 199,094 226,725 7.1x 7.1x 21.4x 21.4x 31.7x 83.7x

Operating StatisticsRevenue Revenue Growth EBITDA EBITDA Margin EPS

Company Ticker 2018A LTM '17-'18A LTM 2018A LTM 2018A LTMChurch & Dwight Co., Inc. NYSE: CHD $4,146 $4,146 8.1% 9.8% $933 $933 22.5% 22.5%The Clorox Company NYSE: CLX 6,124 6,244 3.7% 3.4% $1,284 $1,284 21.0% 20.6%Newell Brands Inc. NASDAQ: NWL 8,631 8,631 4.0% (9.6%) $918 $918 10.6% 10.6%The Coca-Cola Company NYSE: KO 31,856 31,856 (15.4%) (10.0%) $10,594 $10,594 33.3% 33.3%

WD-40 Company NASDAQ: WDFC $409 $ 412.20 7.4% 6.0% $85 $ 84.18 $ 0.21 $ 0.20

Low $4,146 $4,146 (15.4%) (10.0%) $918 $918 10.6% 10.6%Mean 12,689 12,719 0.1% (1.6%) $3,432 $3,432 21.8% 21.7%Median 7,377 7,437 3.9% (3.1%) $1,108 $1,108 21.7% 21.5%High 31,856 31,856 8.1% 9.8% $10,594 $10,594 33.3% 33.3%

Valuation - WACC

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WACC CalculationCapital Structure

Debt-to-Total Capitalization 2.5%Equity-to-Total Capitalization 97.5%

Cost of DebtCost of Debt 3.6%Tax Rate 25.7%

After-tax Cost of Debt 2.66%

Cost of EquityRisk-free Rate(1) 2.7%Market Risk Premium(2) 7.0%Levered Beta 0.7

Cost of Equity 7.24%

WACC 7.13%

Valuation – DCF (Base)

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FYE August 31, FYE August 31,

($ in thousands) 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2023E 2024E 2025E

Total Revenue $378,150.0 $380,670.0 $380,506.0 $408,518.0 $438,207.8 $478,361.7 $522,408.1 $566,408.4 $608,622.6 $651,380.1 $692,866.9

Revenue Growth 0.7% (0.0%) 7.4% 7.3% 9.2% 9.2% 8.4% 7.5% 7.0% 6.4%

Expenses

COGS 177,963.1 166,214.5 166,516.3 183,300.2 196,558.3 212,170.3 231,531.5 250,843.6 269,398.7 288,177.2 306,399.0Gross Profit $200,186.9 $214,455.5 $213,989.7 $225,217.8 $241,649.5 $266,191.5 $290,876.6 $315,564.8 $339,224.0 $363,203.0 $386,468.0

Gross Margin 52.9% 56.3% 56.2% 55.1% 55.1% 55.6% 55.7% 55.7% 55.7% 55.8% 55.8%SG&A 132,124.0 140,277.0 135,187.0 142,934.0 152,344.1 163,764.6 177,072.4 180,999.8 193,718.1 202,599.0 210,479.3

Operating Expenses 134,788.0 143,021.0 137,976.0 146,659.0 156,153.8 167,674.1 181,079.0 185,124.6 197,940.6 206,900.7 214,831.7Operating Income (EBIT) $65,398.9 $71,434.5 $76,013.7 $78,558.8 $85,495.8 $98,517.3 $109,797.6 $130,440.2 $141,283.4 $156,302.3 $171,636.3

EBIT Margin 17.3% 18.8% 20.0% 19.2% 19.5% 20.6% 21.0% 23.0% 23.2% 24.0% 24.8%Income Tax Expense (22%) 22,889.6 25,002.1 26,604.8 20,189.6 19,065.6 21,969.4 24,484.9 29,088.2 31,506.2 34,855.4 38,274.9

EBIAT $42,509.3 $46,432.4 $49,408.9 $58,369.2 $66,430.2 $76,548.0 $85,312.7 $101,352.0 $109,777.2 $121,446.9 $133,361.4

Cash Flow

Plus: D&A 5,703.0 5,720.0 5,668.0 6,676.0 6,767.1 6,944.6 7,117.1 7,326.9 7,500.3 7,641.1 7,731.2Plus: Stock Based Compensation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Discretionary Cash Flow $48,212.3 $52,152.4 $55,076.9 $65,045.2 $73,197.4 $83,492.6 $92,429.8 $108,679.0 $117,277.6 $129,088.0 $141,092.7

Less: Increase in NWC 5,609.0 (7,854.0) (5,231.0) (4,175.1) (6,006.2) (6,362.0) (6,358.2) (6,097.4) (6,177.5) (5,993.7)Less: CapEx (5,784.0) (4,354.0) (20,150.0) (12,356.0) (4,820.3) (5,262.0) (5,746.5) (6,230.5) (6,694.8) (7,165.2) (7,621.5)Less: Cash Acquisitions (4,117.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Free Cash Flow $38,311.3 $53,407.4 $27,072.9 $47,458.2 $64,202.0 $72,224.4 $80,321.4 $96,090.2 $104,485.3 $115,745.4 $127,477.4

Free Cash Flow Growth 39.4% (49.3%) 75.3% 35.3% 12.5% 11.2% 19.6% 8.7% 10.8% 10.1%

Unlevered Free Cash Flow

WACC 7.13%

Discount Period 0.5 1.5 2.5 3.5 4.5 5.5 6.5Discount Factor 0.97 0.90 0.84 0.79 0.73 0.68 0.64

Present Value of Free Cash Flow $46,522.14 $65,137.8 $67,620.8 $75,514.1 $76,648.5 $79,259.6 $81,485.6

Valuation - DCF (Base)

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Enterprise Value DCF Sensitivity AnalysisCumulative Present Value of FCF $492,188.5Terminal ValueTerminal Year EBITDA $179,367.6Exit Multiple 20.9x

Terminal Value $3,750,994.8Discount Factor 63.92%

Present Value of Terminal Value $2,397,696.6% of Enterprise Value 83.0%

Enterprise Value $2,889,885.1

DCF Implied Equity Value and Share PriceEnterprise Value $2,889,885.1

Less: Total Debt $60,000.0Plus: Cash & Cash Equivalents $48,866.0

Implied Equity Value $2,878,751.1

Implied Share Price $208.30

Shares Outstanding 13,820

Comps Implied Equity Value and Share PriceEnterprise Value $1,633,716.3


Implied Equity Value 1,622,582



Perpetuity Growth Method Perpetuity Sensitivity AnalysisCumulative Present Value of FCF $492,188.5 WACCTerminal ValueTerminal Year FCF $127,477.4Growth Rate 3.1%

Terminal Value at 2024 $3,263,419.94Discount Factor 63.92%


Enterprise Value $2,578,219.4Less: Total Debt $60,000.0Plus: Cash & Cash Equivalents $48,866.0




Method Weight Price UpsidePerpetuity Growth Method 20% $185.75 8.9%DCF/Exit Multiple Method 80% $208.30 22.1%

Fair Value Estimate $203.79 19.5%

DCF Sensitivity AnalysisWACC

208.30 5.1% 6.1% 7.1% 8.1% 9.1%19.5x $220.33 $208.05 $196.59 $185.88 $175.8720.0x $225.02 $212.46 $200.73 $189.78 $179.55

EV/EBITDA 20.9x $225.02 $212.46 $200.73 $189.78 $179.5521.4x $229.71 $216.87 $204.88 $193.69 $183.2321.9x $239.08 $225.68 $213.18 $201.50 $190.58

Valuation - DCF (Upside)

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($ in millions) 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2023E 2024E 2025E

Total Revenue $378,150.0 $380,670.0 $380,506.0 $408,518.0 $448,699.9 $495,755.0 $545,125.8 $596,266.7 $642,840.2 $689,334.6 $734,859.4

Revenue Growth 0.7% (0.0%) 7.4% 9.8% 10.5% 10.0% 9.4% 7.8% 7.2% 6.6%

Expenses

COGS 177,963.1 166,214.5 166,516.3 183,300.2 198,117.0 216,970.5 236,414.8 258,357.0 278,133.9 298,084.5 317,630.4Gross Profit $200,186.9 $214,455.5 $213,989.7 $225,217.8 $250,582.9 $278,784.6 $308,711.0 $337,909.7 $364,706.3 $391,250.1 $417,229.1

Gross Margin 52.9% 56.3% 56.2% 55.1% 55.8% 56.2% 56.6% 56.7% 56.7% 56.8% 56.8%SG&A



EBIAT $42,509.3 $46,432.4 $49,408.9 $58,369.2 $73,358.6 $87,089.1 $102,323.2 $116,847.6 $131,755.7 $141,849.4 $151,722.7

Cash Flow



Less: Increase in NWC 5,609.0 (7,854.0) (5,231.0) (5,999.8) (6,982.0) (7,359.7) (7,441.2) (6,797.4) (6,764.9) (6,622.6)Less: CapEx (5,784.0) (4,354.0) (20,150.0) (12,356.0) (4,935.7) (5,453.3) (5,996.4) (6,558.9) (7,071.2) (7,582.7) (8,083.5)Less: Cash Acquisitions (4,117.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Free Cash Flow $38,311.3 $53,407.4 $27,072.9 $47,458.2 $69,176.4 $81,225.7 $95,363.7 $109,109.2 $124,028.6 $133,527.2 $142,929.7

Free Cash Flow Growth 39.4% (49.3%) 75.3% 45.8% 17.4% 17.4% 14.4% 13.7% 7.7% 7.0%


WACC 7.13%



Valuation - DCF (Upside)

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Enterprise Value DCF Sensitivity AnalysisCumulative Present Value of FCF $563,196.7Terminal ValueTerminal Year EBITDA $201,180.4Exit Multiple 20.9x




Implied Equity Value and Share PriceEnterprise Value $3,252,476.7










Perpetuity Growth MethodCumulative Present Value of FCF $563,196.7Terminal ValueTerminal Year FCF $142,929.7Growth Rate 3.5%







Method Weight Price UpsidePerpetuity Growth Method 20% $228.58 34.0%DCF/Exit Multiple Method 80% $234.54 37.5%

Fair Value Estimate $233.35 36.8%


234.54 5.1% 6.1% 7.1% 8.1% 9.1%20.0x $253.36 $239.23 $226.05 $213.73 $202.2220.5x $258.62 $244.18 $230.70 $218.11 $206.35

EV/EBITDA 20.9x $258.62 $244.18 $230.70 $218.11 $206.3521.4x $263.88 $249.13 $235.36 $222.49 $210.4721.9x $274.40 $259.02 $244.66 $231.25 $218.73

Valuation DCF – (Downside)

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($ in millions) 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2023E 2024E 2025E

Total Revenue $378,150.0 $380,670.0 $380,506.0 $408,518.0 $430,233.6 $452,078.7 $473,822.9 $495,237.8 $516,853.7 $538,305.4 $559,438.1

Revenue Growth 0.7% (0.0%) 7.4% 5.3% 5.1% 4.8% 4.5% 4.4% 4.2% 3.9%

Expenses

COGS 177,963.1 166,214.5 166,516.3 183,300.2 191,413.8 200,995.7 210,526.2 222,475.5 232,085.4 241,624.7 251,025.1Gross Profit $200,186.9 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0

Gross Margin 52.9% 56.3% 56.2% 55.1% 55.5% 55.5% 55.6% 55.1% 55.1% 55.1% 55.1%SG&A 97,209.0 107,323.0 103,371.0 110,669.0 115,261.1 118,627.1 121,726.8 124,504.6 127,096.2 129,410.6 131,414.0



EBIAT $42,509.3 $46,432.4 $49,408.9 $58,369.2 $65,093.4 $71,163.0 $77,400.8 $81,737.1 $88,171.2 $94,752.5 $101,446.5

Cash Flow



Less: Increase in NWC 5,609.0 (7,854.0) (5,231.0) (1,169.7) (363.8) (156.5) 174.6 (47.9) 49.6 15.7Less: CapEx (5,784.0) (4,354.0) (20,150.0) (12,356.0) (4,732.6) (4,972.9) (5,212.1) (5,447.6) (5,685.4) (5,921.4) (6,153.8)Less: Cash Acquisitions (4,117.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Free Cash Flow $38,311.3 $53,407.4 $27,072.9 $47,458.2 $65,944.4 $72,398.2 $78,428.9 $82,725.7 $88,579.5 $94,906.0 $101,221.5

Free Cash Flow Growth -- 39.4% (49.3%) 75.3% 39.0% 9.8% 8.3% 5.5% 7.1% 7.1% 6.7%


WACC 7.13%



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Valuation DCF – (Downside)Enterprise Value DCF Sensitivity Analysis

Cumulative Present Value of FCF $413,998.5Terminal ValueTerminal Year EBITDA $136,475.0Exit Multiple 20.9x




Implied Equity Value and Share PriceEnterprise Value $2,270,000.4










Perpetuity Growth MethodCumulative Present Value of FCF $413,998.5Terminal ValueTerminal Year FCF $101,221.5Growth Rate 2.5%







Method Weight Price UpsidePerpetuity Growth Method 20% $134.66 -21.1%DCF/Exit Multiple Method 80% $163.45 -4.2%

Fair Value Estimate $157.69 -7.6%


163.45 8.0% 8.5% 6.8% 7.3% 7.8%20.0x $150.38 $146.43 $160.40 $156.13 $152.0020.5x $153.43 $149.39 $163.68 $159.31 $155.08

EV/EBITDA 20.9x $153.43 $149.39 $163.68 $159.31 $155.0821.4x $156.48 $152.36 $166.95 $162.49 $158.1721.9x $162.59 $158.29 $173.50 $168.85 $164.35

Thank you!

The WD-40 Company NasdaqGS: WDFC Recommendation: BUY · 2019 Quarter 1 Results Reflect This Thesis...

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Transcript of The WD-40 Company NasdaqGS: WDFC Recommendation: BUY · 2019 Quarter 1 Results Reflect This Thesis...