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WD-40 (WDFC +1%) shares are trading higher after reporting Q3 (May) results last night. The reported EPS was a solid beat relative to the single analyst estimate. Given that WDFC was lapping a huge quarter last year, the company deserves credit for posting even modest growth this quarter. Revenue grew 1.2% yr/yr to $156.9 mln. WDFC increased its FY25 EPS guidance to $5.30-5.60 from $5.25-5.45, while slightly lowering the upper end of revenue guidance.

• Sales in its largest segment, the Americas (50%), increased 4% yr/yr to $78.2 mln; however, that lagged the growth of its Asia-Pacific segment, which grew 7% yr/yr to $22 mln. EIMEA sales declined 5% yr/yr to $56.7 mln, which was primarily driven by lower sales volumes to its marketing distributer customers, particularly in Turkey and the Middle East. Importantly, it continues to see strong sales trends in its direct markets within EIMEA.
• Perhaps another cause for the positive reaction is a solid increase in its gross margin. In Q3, gross margin was 56.2%, a 310-bps improvement from 53.1% last year. Notably, gross margin improved across all three of its trade blocks. WDFC is confident that gross margin for the year will be between 55-56%, in line with its target and one year ahead of its original timeline.
• WDFC has four "must-win battles" which focus on geographic expansion, accelerating premiumization, growing WD-40 specialist, and increasing digital commerce. It is making strong progress in all these categories. Global sales of WD-40 multi-use products grew 6% yr/yr, its combined premium products were up 7% yr/yr, specialist products were up 11% yr/yr, and e-commerce sales were up 11% yr/yr.
• WDFC is still looking to divest its household line in the US and the UK. There is no certainty of a deal right now, and if it is unsuccessful, WDFC's guidance would be positively impacted.

Shares are bouncing back nicely today after there was some pressure prior to the release of its Q3 results. Investor sentiment seemed to be fairly low heading into the report, but the continued revenue growth, the ahead of schedule improvement to its gross margin, and the bullish commentary on its must-win battles are soothing investor's nerves.