Earnings Call Transcript - WDFC Q4 2023

Operator, Operator

Ladies and gentlemen, thank you for being here. Good day and welcome to the WD-40 Company Fourth Quarter 2023 Earnings Conference Call. Today's call is being recorded. Currently, all participants are in a listen-only mode. After the prepared remarks, we will have a question-and-answer session. I will now turn the presentation over to Ms. Wendy Kelley, Vice President of Stakeholder and Investor Engagement. Please proceed.

Wendy Kelley, Vice President of Stakeholder and Investor Engagement

Thank you. Good afternoon and thanks to everyone for joining us today. On our call today are WD-40 Company's President and Chief Executive Officer, Steve Brass; and Vice President and Chief Financial Officer, Sara Hyzer. 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-K for the period ending August 31st, 2023. These documents are 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 19th, 2023. 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, CEO

Thanks, Wendy, and thanks to all of you for joining us this afternoon. It's been a privilege and honor to lead our great company over the last year and even more special as my first year as CEO coincides with our 70th-year anniversary. I've taken time over the last year to meet with our employees across the business and around the world and it was truly a pleasure to have the chance to listen to their personal stories. While it is not surprising to me, it has been exceptional to see and feel the depth of engagement and commitment across the organization, witnessing their inspired energy reinforced my own commitment and responsibility to nurture and build on our unique culture. I want to thank each of them for their dedication to drive superior results and the execution of our strategy. Looking at fiscal year 2023, for us, it was essentially a tale of two halves. Our first half saw disruption resulting from general economic uncertainty, higher costs, the loss of our Russian business, and price increases that were implemented. In the second half of the year, we saw volumes recover and we're also pleased with the recovery we experienced in EMEA, where we delivered double-digit constant currency growth for the last two quarters. Despite a difficult first half and the negative impact of currency of nearly $18 million, we still grew revenue by 4% over prior year. Excluding the impact of currency, revenue grew 7%, which is in line with our long-term growth projections. We are encouraged by the improvement in trends we experienced through the second half of the fiscal year as we enter fiscal year 2024. Now turning to our fourth quarter 2023 results, today I'll begin by discussing our sales results, I'll then walk you through our new Four-by-Four strategic framework, including an update on our full-year results and the progress we've made as it relates to our Must-Win Battles. Sara will provide further details on our fourth quarter results, an update on our business model and our outlook for fiscal year 2024 and then we'll take your questions. Turning to our fourth quarter sales results, today I'm happy to share with you that we reported net sales of $140.5 million, up nearly 8% over the fourth quarter of last fiscal year. Translation of our subsidiary's results into the US dollar had a favorable impact on our consolidated net sales in the fourth quarter on a non-GAAP constant currency basis, fourth quarter sales would have been $139.2 million, up 7% compared to the fourth quarter of last year. Now let's take a closer look at the fourth quarter sales results in our trade blocks, starting with the Americas. Sales in the Americas, which includes the United States, Latin America, and Canada were up 10% in the fourth quarter to $74.7 million. Maintenance product sales in the United States increased 18% driven by double-digit growth of both WD-40 Multi-Use Product and WD-40 Specialist. We're seeing solid improvements in volume now that we've lapped the impact of the price increases that we put into place last fiscal year. In the fourth quarter, we experienced double-digit volume and sales increases in the US. As a reminder, the US was the first region to implement price increases and therefore have been the first region to recover from the related disruptions. Maintenance product sales in Latin America were down 12% against a strong comparative period in the prior year. As you may recall, the fourth quarter of last fiscal year was the strongest sales quarter in the region's history where sales grew 80% largely as a result of many of our marketing distributor customers purchasing product in advance of price increases that went into effect near that time. Sales in maintenance products in Canada decreased slightly down 3% period over period as the favorable impact of sales price increases was completely offset by lower sales volumes due to weaker economic conditions in the region. We continue to experience positive momentum in our direct market in Mexico from the shift we made in 2020 from a distributor model. Maintenance product sales in our direct market in Mexico decreased 19% in the fourth quarter as we continue to add new points of distribution, making our maintenance products available in more places for more people who find more uses more frequently. Sales of our homecare and cleaning products in the Americas were down 4% in the fourth quarter compared to the fourth quarter of last year. We consider our homecare and cleaning products as harvest brands that continue to generate consistent contributions in cash flows, but are generally expected to become a smaller part of the business over time. We shared with investors last quarter that we are currently exploring options to further de-emphasize our homecare and cleaning brands. We are currently conducting a global strategic review about the future of our homecare and cleaning brands. The result of this strategic review could mean many things, but no decision has yet been made. We look forward to providing an update in the future. In total, our Americas segment made up 53% of our global business in the fourth quarter. Now let's take a look at our sales results in EMEA, which includes Europe, India, the Middle East, and Africa. I'm happy to share with you that the recovery we began to experience in EMEA last quarter continued into the fourth quarter. Sales in EMEA were up 16% to $50.7 million. We saw strong sales in the UK, Italy, and Benelux, which have all turned in their best quarterly performance for the year. Currency fluctuations positively impacted our sales in EMEA on a constant currency basis, sales would have increased by 13% compared to the fourth quarter of last year, marking the second consecutive quarter of double-digit sales growth in constant currency. As you know, we sell into EMEA through a combination of direct operations, as well as through marketing distributors. Sales in our EMEA direct markets, which accounted for 73% of the region's sales in the fourth quarter, increased by 19% compared to last year. Maintenance product sales in the EMEA direct markets increased in the fourth quarter, driven primarily by double-digit growth of both WD-40 Multi-Use Product and WD-40 Specialist in the United Kingdom, Italy, and Spain, mainly due to the impact of price increases, which is partially offset by slightly lower demand, which resulted in decreased sales volume. The increase in sales was also driven by the timing of promotional programs, particularly in the wholesale and trade channels. Sales in our EMEA distributor markets, which accounted for 27% of the region's sales in the fourth quarter, increased by 9% compared to last year. This increase in sales was primarily driven by higher sales of maintenance products in many distributor markets. In total, our EMEA segment made up 36% of our global business in the fourth quarter. And on to Asia-Pacific, sales in Asia-Pacific, which includes Australia, China, and other countries in the Asia region were down 20% in the fourth quarter to $50 million. In Australia, sales were down 1% in the fourth quarter primarily due to the impact of foreign currency exchange rates. On a constant currency basis, sales for Australia would have increased by 5% compared to last year, primarily due to higher sales of homecare and cleaning products as a result of successful promotional programs. In our Asia-Pacific distributor markets, sales were down 38% in the fourth quarter against a tough prior-year comparison. As you may recall from last year, severe lockdown restrictions from earlier in the year were lifted and we resumed shipping products to the area, resulting in strong sales during the fourth quarter. In China, sales were down 4% in the fourth quarter primarily due to the impact of foreign currency exchange rates. On a constant currency basis, sales for China would have increased by 2%. In total, our Asia-Pacific segment made up 11% of our global business in the fourth quarter. Now, let's talk about our long-term growth aspirations. At WD-40 Company we're privileged to have one of the world's best-known and most iconic brands. We have a strong competitive moat that allows us to capture the tremendous runway of opportunity before us. As we enter fiscal year 2024, I'm proud to introduce you to our new Four-by-Four strategic framework, which is tied to our purpose and values and will guide our future performance. Our Four-by-Four strategic framework was developed to drive profitable growth for sustainable value creation. There are two main elements of our strategic framework. The first element, which we refer to as our Must-Win Battles, focuses on what we do to increase sales of our maintenance products. This is an area of focus we discussed with investors for several years. Our Must-Win Battles include growing WD-40 Multi-Use product sales through geographic expansion, growing sales and gross margin through the premiumization of WD-40 Multi-Use products, growing WD-40 Specialist product line through category leadership, and accelerating our capabilities in building our brand digitally and maximizing our global digital commerce presence. Today, we're also introducing the second element of our strategic framework, which we refer to as our strategic enablers. These four strategic enablers focus on operational excellence and support how we will achieve our Must-Win Battles and include ensuring a people-first mindset where we can attract, develop, and engage outstanding employees, building a sustainable business for the future, achieving operational excellence and supply chain, and driving productivity through our enhanced systems. These are the primary areas that make up our Four-By-Four strategic framework and where we will continue to focus our time, talent, and resources to be successful in achieving our long-term financial and operational goals. Let's reflect on the progress we've made against our Must-Win Battles for fiscal year 2023. Starting with Must-Win Battle number one, lead geographic expansion, our largest growth opportunity and first Must-Win Battle is a geographic expansion of the blue and yellow can with a little red top. We estimate the potential global growth opportunity for WD-40 Multi-Use Product to be approximately $1 billion and we are laser-focused on delivering long-term growth in our top 20 growth markets around the world. In fiscal year 2023, global sales of WD-40 Multi-Use Product grew 2% over the prior year. So this growth is not in line with our long-term expectations. We ended the year strong and expect to see growth return to historic levels. For the year, we made good progress in several key markets on this Must-Win Battle with strong sales growth of 14% in the UK, 14% in Mexico, 10% in China, and 17% in the US. Next is Must-Win Battle number two, accelerating premiumization. Our Smart Straw delivery system has been our most successful innovation in the company's 70-year history and is loved by end users around the world. Our EZ-Reach delivery system provides our end users with even more options to solve problems in factories, workshops, and homes. For us, premiumization is a major contributor to our revenue growth, as well as gross margin expansion and also delights our end users. Over the last five years, we've achieved a compound annual growth rate for net sales of premiumized products of 7.3% in reported currency and 8.2% on a constant currency basis. We are on track to fully implement the WD-40 Smart Straw Next Generation capacity within the Americas and EMEA in the first quarter of fiscal year 2024, which we expect to accelerate the sales of WD-40 Multi-Use premiumized products. On a go-forward basis, we will be targeting a compound annual growth rate for net sales of premiumized products of greater than 10% in reported currency. Our third Must-Win Battle is to drive WD-40 Specialist growth. However, we see this as much more than an incremental revenue opportunity. Driving WD-40 Specialist growth focuses on achieving category leadership by leveraging our core brand equity and taking advantage of our strong moat. It's about taking competitors off the shelf and increasing our market share. I'm happy to report that our efforts to drive brand awareness, maximize store placement, and increase shelf space are paying off. For fiscal year 2023, sales of WD-40 Specialist products were just under $67 million, up 11%. We saw growth in WD-40 Specialist products across all three trade blocks with growth of 18% in the Americas, 7% in EMEA, and 3% in Asia-Pacific. Over the last five years, we've achieved a compound annual growth rate for net sales of WD-40 Specialist of 14.4% in reported currency and 15.4% on a constant currency basis. On a go-forward basis, we'll be targeting a compound annual growth rate for net sales of WD-40 Specialist of greater than 15% in reported currency. Our final Must-Win Battle number four is to turbocharge digital commerce. Our ambition here is to engage with end users at scale and become the global leader in our category within the digital commerce platform. Must-Win Battle number four is about much more than selling products online; we view it as the accelerator for all other Must-Win Battles. Digital commerce is about brand building; it drives awareness of our brands by leveraging digital media to teach end users how to use our solutions in addition to driving online sales. For fiscal year 2023, e-commerce sales were up over 35% for the year, largely due to strong growth in the Americas. We believe the greatest benefit of this Must-Win Battle is to increase brand awareness and engagement online, which will lead to an improved shopping experience and higher sales across all channels, both in-store and online. As part of our digital commerce strategy in 2023, we launched our first global online marketing campaign, Repair, Don't Replace. This campaign further expands our opportunity to inspire millions of doers, makers, fixers, and builders to use our solutions, not only to extend the lifespan of their tools or equipment, but also support global efforts to reduce waste resources and leave a positive handprint for future generations. And now turning to the second element of our strategic framework, our four strategic enablers which collectively underpin our Must-Win Battles. We view these as the way we will achieve our drivers for success. Starting with strategic enabler number one, ensuring a people-first mindset, at WD-40 Company, we know our people make us great. You will not find the greatest asset we have on our balance sheet because it's comprised of our 613 employees. We strive to be an employer of choice where all employees can bring their best and genuine selves to work. We are committed to fostering a culture of belonging, recognition, rewards, and resiliency while attracting, developing, and engaging talent, which will drive our sustainable forward momentum. We will measure ourselves against this enabler via three quantitative metrics: Employee Engagement, our Better Together scores, and our Employee Retention Rates. Next is strategic enabler number two, building a business for the future. Simply put, we are committed to operating our business in a manner that will have a positive environmental and societal impact and one that will continue to create and protect long-term stakeholder value. We've shared with you in the past that we are philosophically aligned with the vision to reach net zero greenhouse gas emissions by 2050. The term sustainability is increasingly perceived as a climate-related matter, but we see it as more than that. We define sustainability as the ability of the business to exist for a long period, perhaps indefinitely. A sustainable enterprise should ensure a balance between economic growth, environmental care, and social well-being. We believe that taking an integrated approach to environmental, social, and governance issues enhances the long-term sustainability and resilience of our business and protects the long-term interests of our stakeholders. We're in the process of setting further targets to reduce greenhouse gas emissions, which we will share in our 2024 ESG report. Strategic enabler number three is achieving operational excellence in the supply chain. Operational excellence has always been an important part of our strategy at WD-40 Company. Our supply chain was tested during the pandemic and we learned a lot. The advances made by our employees to production capacity and product availability not only helped to recover our supply chain, but also uncovered a myriad of ways to make it better than it is today. This strategic enabler is meant to continue that quest for operational excellence. We believe that a resilient and high-performing supply chain enabled by people, capacity, and capabilities will secure the long-term success of our company. Our goal under this enabler is to achieve on-time delivery of greater than 95% and manage our inventory on hand to less than 90 days. Finally, strategic enabler number four, driving productivity via our enhanced systems. We will identify and implement productivity solutions by using secure technologies to improve processes, provide effective access to critical analytics, and deliver the highest value investments through effective project and program management. This will drive profitability improvements to enhance productivity, control IT spending, increase employee satisfaction, as well as provide access to timely and accurate data that drives better decision-making. The first project identified under this strategic enabler is our new cloud-based enterprise resource planning system, which the company is in the process of implementing and Sara will discuss with you in a moment. To summarize, our Four-by-Four Strategic Framework is designed to help us deliver on our long-term revenue compound annual growth rate for maintenance products in the mid-to-high single-digits on a non-GAAP constant currency basis. This is supported by the growth outlook for each trade block where we anticipate the Americas to grow between 5% to 8%, EMEA to grow 8% to 11%, and Asia-Pacific to grow 10% to 13%. In addition, our Four-by-Four Strategic Framework will drive EBITDA margin expansion as we improve our gross margins and invest across the business to gain efficiencies and productivity improvements. With that, I will now turn it over to Sara.

Sara Hyzer, CFO

Thank you, Steve, and thank you for that overview of our sales results. As I approach my one-year anniversary as CFO for WD-40 Company, I reflect on the strong bench of leaders across this organization that have supported me in my transition, as well as all our global employees that I've had the pleasure of working with for the past two years. This past year has been a year of transition, not just for me, but for the Company, and as Steve noted fiscal year 2023 has been somewhat a tale of two halves where the first half was met with volatility and uncertainty, especially as we've worked through implementing price changes across markets, currency fluctuations, and the exit of our Russian business. However, we started to see signs of recovery in demand and volumes in the second half of fiscal year 2023, giving us conviction as we head into fiscal year 2024. We turned in a strong performance in the fourth quarter resulting in a solid fiscal year 2023. I'm happy to report that we grew our top line for the year despite the headwinds we faced due to currency. Furthermore, each of our financial results performed within the targeted guidance ranges that we provided mid-year, even as we continue to invest across the business. Now, let me walk you through our fourth quarter results and provide an update on our capital deployment. I will close by providing an updated view on our 55-30-25 business model and providing fiscal year 2024 guidance. Turning first to our fourth quarter gross margin performance. Once again, we experienced strong gross margin growth over the prior year fourth quarter. Our fourth quarter gross margin of 51.4% performed within the expected range we communicated. This margin performance reflects a 400 basis point improvement compared to the prior year fourth quarter and a sequential improvement of 80 basis points compared to the third quarter of this fiscal year. A 400 basis point improvement from the prior year fourth quarter was driven by continued actions we've taken throughout the course of the year, including price increases across all our markets and geographies, which positively impacted gross margin by 460 basis points. These positive impacts were partially offset by changes in major input costs. Higher costs associated with specialty chemical costs and aerosol cans when combined negatively impacted our margin by 90 basis points. Finally, we recognized marginal benefit from lower costs associated with warehousing, distribution, freight, and other miscellaneous input costs, which were offset by higher filling fees. Now, let's take a deeper dive into margin for the fourth quarter by trade block as we continue to focus on our margin improvement plans. Each trading block is at a different stage in recovery in our gross margins and I'm happy to see improvements in all three trading blocks this quarter over the prior year fourth quarter. Within the Americas, gross margin was 49%, an improvement of 110 basis points. EMEA's gross margin was 53.6%, an improvement of 860 basis points. Finally, Asia-Pac's gross margin was 55.7%, an improvement of 460 basis points. We are incredibly pleased with the improvements we have made to gross margin over our fiscal year 2023. Recovering our margin continues to be a priority for us, but we continue to believe returning our gross margin to our 55% target will be a multi-year task. Turning to our cost of doing business, which we define as total operating expenses, excluding depreciation and amortization, and measure as a percentage of net sales. At WD-40 Company, cost of doing business is primarily comprised of three areas: investments in our employees, investments in building our brand, and freight expenses to get our products to our customers. For the fourth quarter, our cost of doing business was 34%, which increased from 31% in the comparable quarter of last year. This increase was largely due to higher employee-related expenses associated with our earned incentive compensation, increased professional service fees, and higher travel and meeting expenses as we continue to get back to our normal travel schedules in a post-pandemic world. We also continue to incur higher costs associated with implementation and licensing of our new cloud-based enterprise resource planning software system. Net sales growth is the most important factor in managing our cost of business towards our long-term target of 30%. We are making deliberate investments in the business to support growth, but we expect to see improvements in the cost of doing business over time as net sales growth. Turning now to EBITDA. For the fourth quarter, EBITDA margin, which we measure as a percentage of net sales, was 18%, which improved from 16% in the comparable quarter of the previous year. This is the result of the improvement in net sales as volumes recovered in the back half of the fiscal year and stronger gross margin performance, partially offset by an increase in our cost of doing business as I previously noted. Before fiscal year 2022, we consistently delivered EBITDA margins of between 20% and 22%. However, EBITDA margins continue to be under pressure due to the current inflationary environment and the intentional investments we have made to support our new Four-by-Four Strategic Framework. These investments are important growth accelerators for our future. Getting EBITDA above 20% remains a priority as we are laser-focused on improving sales volumes, rebuilding gross margins, and disciplined cost management. Once we are consistently back at our historic 20% to 22% level, then we will look to leverage scale and returns on our investments across the business as we target 25% EBITDA margins over the longer term. Now, let me discuss some items that fall below the EBITDA line. Net income improved to $16.6 million in the fourth quarter, which was an increase of 12% over the previous year's fourth quarter. On a constant currency basis, net income would have improved 10% compared to the fourth quarter last year. Our net income reflects a rate of 25.4% for the provision of income taxes. Diluted earnings per common share for the quarter were $1.21 compared to $1.8 for the fourth quarter last year, which reflects an increase of 12%. Our diluted EPS reflects 13.6 million weighted average shares outstanding. Now let's look at our balance sheet and capital allocation strategy. Our resilient and asset-light business model, coupled with actions we have taken to grow our top line while improving gross margin are all contributors to maintaining a strong balance sheet and liquidity position. Maintaining a disciplined and balanced capital allocation approach is a priority for us. We will make the necessary near-term investments to drive long-term profitable growth while also providing strong returns to our shareholders. This year we saw liquidity from operations improve, as we made considerable progress in lowering our inventory levels, which we had invested in to stabilize our US supply chain in prior years. Our inventory levels peaked in the first quarter of fiscal year 2023 and since then, we have reduced inventory by $32.5 million or 27%. We will continue to make progress on our inventory levels in conjunction with our strategic enabler number three that Steve shared with you earlier. Our cash flow from operations in fiscal year 2023 was $98.4 million and we elected to use $28.4 million of that cash to pay down a portion of our short-term higher interest rate borrowings. During the fiscal year, we invested $6.6 million in capital projects, which is in line with our asset-light strategy of investing between 1% and 2% of sales. In addition to investments made in capital projects, since fiscal year 2021, we have been investing in a new cloud-based enterprise resource planning system, which is expected to go live in the first half of fiscal year 2024. Our investments to date include approximately $9 million in costs, which have been capitalized and will begin to amortize once we go live with the new system. As part of this project, we have incurred and will continue to incur costs that need not qualify for capitalization. We expect to incur these costs through the first and second wave of implementation over the upcoming year. This is a significant project for the company that is necessary as we continue to grow and support our business. For the foreseeable future, we expect maintenance CapEx of between 1% and 2% of net sales per fiscal year, which is in line with our asset-light strategy. In addition, we continue to return capital to our shareholders through regular dividends and buybacks. On October 6th, our Board of Directors declared a quarterly cash dividend of $0.83 per share payable on October 31st to stockholders of record at the close of business on October 20th. During the fourth quarter, we repurchased approximately 14,000 shares of our stock at a total cost of approximately $3 million under our current share repurchase plan. This concludes my discussion on our reported results. Before I share fiscal year 2024 guidance with you, I would like to discuss an updated view on our 55-30-25 business model. As Steve shared earlier today, we introduced our new Four-by-Four Strategic Framework which is designed to help us achieve our expected long-term revenue and profitability objectives. We see significant opportunities for sustainable growth, which over time will align with our 55-30-25 business model objectives. Steve and I think about our 55-30-25 business model as a long-term beacon that we will move toward and align with over time. In the short to mid-term, we think about each critical component of the model in a range. Near term, we're targeting a range of 50% to 55% for gross margin, 30% to 35% for cost of doing business and 20% to 25% for EBITDA. We believe these ranges represent a more realistic short-term view of the business in the current economic environment and they will also allow us to make the necessary investments to support our new Four-by-Four Strategic Framework. Strategic investments we made this year around ESG, information technology, innovation, and organizational design, these investments were significant year-over-year but are not anticipated to grow at the same level going forward now that we have the right people in the right roles to drive our strategy forward. We believe these investments were necessary to jumpstart our Four-by-Four Strategy. As we move forward, we will use the myriad of strategic levers at our disposal to move each component in the correct direction over time. Ultimately, we are focused on long-term value creation. We know that when we consistently grow our top line, manage our 55-30-25 business model for EBITDA growth and leverage our asset-light model, we can continue to drive an ROIC of greater than 25%. That will generate continued strong and stable free cash flow, which we will continue to optimize for our best return on investments and to our stockholders. Looking more closely at our outlook for fiscal year 2024. Net sales growth is projected to be between 6% and 12% with net sales between $570 million and $600 million in constant currency. We also expect gross margin to be between 51% and 53%. Advertising and promotion investment is projected to be between 5% and 6% of net sales. The provision for income tax is expected to be between 24% and 25%. Net income is expected to be between $65 million and $70 million and diluted earnings per share is expected to be between $4.78 and $5.15 which is based on an estimated 13.6 million weighted average shares outstanding. Also as a reminder, 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 2024. That completes the financial overview. Now, I would like to turn it back to Steve.

Steve Brass, CEO

Thank you, Sara. If we've learned anything over the last 70 years is that WD-40 Company is a resilient business. I'm proud of what we've accomplished over the last year. Once again, I want to thank our employees as they are our most powerful assets and continue to be the real magic formula that drives our company forward. In summary, what did you hear from us on this call? You heard that despite a difficult first half and the negative impact from currency of nearly $18 million, we grew revenue by 4% over prior year; excluding the impact of currency, revenue grew 7%, which is in line with our long-term revenue growth target. You heard that we saw improvements in volumes and sales in the second half of fiscal year 2023 and are encouraged by these trends as we enter fiscal year 2024. You heard that we've introduced our new Four-by-Four strategic framework, which is tied to our purpose and values and will guide our future performance, investments, and drive long-term value creation. You heard that we're making investments across our organization and our people, products, processes, productivity, and planet and that we will continue to make the necessary investments to capture the tremendous runway for revenue growth and margin expansion in front of us. You heard that we saw liquidity from operations return as we made considerable progress in lowering our inventory levels over the fiscal year. You heard that our asset-light model provides a cash flow for us to invest in the business, while also providing returns to our stockholders. You heard that we consider our 55-30-25 business model a long-term beacon that we will move toward and align with over time, but that our short-to-medium-term focus is on driving EBITDA margins back above 20%. And you heard that we issued guidance for fiscal year 2024 and that we expect revenue growth of 6% to 12% on a constant currency basis, which equates to net sales of $570 million to $600 million. Thank you for joining our call today, we'd now be pleased to answer your questions.

Operator, Operator

Our first question comes from Daniel Rizzo with Jefferies. Please go ahead with your question.

Daniel Rizzo, Analyst

Hi, guys. Thank you for taking my questions. If we look out into 2024 with what you're expecting, are you assuming input and filling costs decrease or kind of flatten out from here, just given kind of the different dynamics within the environment?

Sara Hyzer, CFO

Hi Daniel, this is Sara. From an input cost perspective, as we look at the guidance we've provided, we are not seeing a notable decrease in input costs or filling fees. The filling fees are slightly higher compared to last year, and while the trend is not significant, we do anticipate them to be somewhat elevated as we move into next fiscal year compared to our current levels.

Daniel Rizzo, Analyst

Okay. And then I think you mentioned the 55-30-25 framework, that's not changed, right? I mean, I'm just misremembering I think, but I think that's kind of what you guys were always kind of pushing towards, correct?

Sara Hyzer, CFO

The 55-30-25 framework is not changed and it continues to be our longer-term beacon as to what we're striving for long-term.

Daniel Rizzo, Analyst

Okay. In terms of revenue related to geographic expansion, you mentioned a $1 billion sales opportunity, which I assume is the addressable market. That's roughly double your current sales. I'm curious about how you plan to pursue that and how viable it really is.

Steve Brass, CEO

Yeah, thanks Daniel, this is Steve. And so the $1 billion growth opportunities are long-term growth aspiration based upon our internal benchmark in terms of what's possible. So it's not a number we're going to put out there in terms of achieving within three or five years; it's a long-term growth opportunity, it's based on benchmarked opportunity for all countries we're operating at a similar level to the US. So, it is aspirational, but what it does do is give us a prioritized list of geographies for us to target and where to invest in.

Daniel Rizzo, Analyst

Okay. For my final question, you mentioned aiming for inventories on hand to be below 90 days. I was wondering what our current status is compared to our historical figures.

Sara Hyzer, CFO

So, we are currently just a bit over four months globally. The trading conditions vary by region. When considering the Americas, EMEA, and Asia-Pacific, we've experienced the most significant challenges with our inventory levels in the Americas, where we are just under six months of inventory. This area presents a significant opportunity for us to reduce our inventory levels, aiming to get closer to our three-month target.

Daniel Rizzo, Analyst

Okay. Thank you very much.

Sara Hyzer, CFO

Thank you, Daniel.

Operator, Operator

Our next question comes from Linda Bolton Weiser with D.A. Davidson. Please proceed with your question.