Brady Corporation

F'24 Q2 Financial Results

February 22, 2024

Forward-Looking Statements

2

In this news release, statements that are not reported financial results or other historic information are "forward-looking statements." These forward-looking statements relate to, among other things, the Company's future financial position, business strategy, targets, projected sales, costs, income, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations.

The use of words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "project," "plan" or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements by their nature address matters that are, to different degrees, uncertain and are subject to risks, assumptions, and other factors, some of which are beyond Brady's control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For Brady, uncertainties arise from: increased cost of raw materials and labor as well as raw material shortages and supply chain disruptions; decreased demand for our products; our ability to compete effectively or to successfully execute our strategy; our ability to develop technologically advanced products that meet customer demands; difficulties in protecting our websites, networks and systems against security breaches; Brady's ability to identify, integrate, and grow acquired companies, and to manage contingent liabilities from divested businesses; risks associated with the loss of key employees; extensive regulations by U.S. and non-U.S. governmental and self-regulatory entities; litigation, including product liability claims; adverse impacts of regional epidemics or global pandemics; foreign currency fluctuations; potential write-offs of goodwill and other intangible assets; changes in tax legislation and tax rates; differing interests of voting and non-voting shareholders and changes in the regulatory and business environment around dual-class voting structures; numerous other matters of national, regional and global scale, including major public health crises and government responses thereto and those of a political, economic, business, competitive, and regulatory nature contained from time to time in Brady's U.S. Securities and Exchange Commission filings, including, but not limited to, those factors listed in the "Risk Factors" section within Item 1A of Part I of Brady's Form 10-K for the year ended July 31, 2023.

These uncertainties may cause Brady's actual future results to be materially different than those expressed in its forward- looking statements. Brady does not undertake to update its forward-looking statements except as required by law.

Q2 F'24 Highlights

3

Organic Sales Growth

Organic sales grew 1.6%, with organic growth in both regions.

Improved GPM

GPM of 50.2% compared to 48.0% in Q2 of F'23.

Healthy gross profit margins demonstrate our high value-add.

Expanding Earnings

GAAP EPS of $0.90 was up 18.4% over Q2 of last year.

Diluted EPS Excluding Certain Items* increased 14.8% to $0.93

per Share

in Q2 of F'24 compared to $0.81 in Q2 of F'23.

Americas & Asia organic sales growth of 1.2%; segment profit

Regional Results

increased 9.3%.

Europe & Australia organic sales growth of 2.5%; segment profit

increased 11.9%.

Returning Capital to

Purchased 143k shares for $7.7M.

Paid dividends of $11.4M.

our Shareholders

In a net cash position of $95.8M at January 31, 2024.

* Diluted EPS Excluding Certain Items is a non-GAAP measure. See appendix.

Sales Overview

4

SALES

(millions of USD)

$350

$325

$300

$275

$250

$225

Organic Growth (Decline)

$339

$337

$346

$326

$332

$324

$321

$318

$323

$323

$306

$296

$277

$266

Q1 F'21

Q2 F'21

Q3 F'21

Q4 F'21

Q1 F'22

Q2 F'22

Q3 F'22

Q4 F'22

Q1 F'23

Q2 F'23

Q3 F'23

Q4 F'23

Q1 F'24

Q2 F'24

(4.9%)

(6.3%)

6.5%

12.6%

7.0%

13.1%

9.0%

9.0%

6.9%

6.3%

1.9%

6.9%

2.7%

1.6%

Q2 F'24 SALES:

Total sales decreased 1.1%.

Organic sales increased 1.6%.

  • Americas & Asia - Organic sales increased 1.2%.
  • Europe & Australia - Organic sales increased 2.5%. Foreign currency translation increased sales 0.8%. Divestitures decreased sales 3.5%.

Q2 F'24 SALES COMMENTARY:

Organic sales were up 0.7% in the Americas with growth in all product lines except healthcare identification.

Asia organic sales were up 5.1% with growth throughout the region.

Organic sales were up 2.3% in Europe with growth in all major product lines.

Australia organic sales were up 3.7%.

Gross Profit Margin

5

GROSS PROFIT & GPM%

(millions of USD)

$200

50.8%

51.7%

52%

50.4%

50.4%

50.3%

50.2%

48.9%

48.7%

48.4%

$176

50%

48.2%

48.2%

48.1%

48.0%

$172

$175

47.0%

$170

48%

$164

$163

$156

$162

$155

$155

46%

$150

$149

$148

$149

44%

$135

$130

42%

$125

40%

$100

38%

Q1 F'21

Q2 F'21

Q3 F'21

Q4 F'21

Q1 F'22

Q2 F'22

Q3 F'22

Q4 F'22

Q1 F'23

Q2 F'23

Q3 F'23

Q4 F'23

Q1 F'24

Q2 F'24

Q2 F'24 - GROSS PROFIT MARGIN:

Gross profit margin of 50.2% compared to 48.0% in Q2 of F'23.

Improved product mix was the primary driver of the increase in gross profit margin in Q2 of F'24. Inflation continues, but we are experiencing a reduced rate of inflation in certain geographies.

SG&A Expense

6

SG&A EXPENSE AND SG&A EXPENSE AS A % OF SALES

(millions of USD)

$120

35%

$110

30.0%

30.9%

30.7%

30.6%

30.1%

29.1%

29.2%

29.0%

28.4%

28.3%

28.3%

30%

27.9%

28.2%

27.0%

$100

$94

$97

$93

$96

$95

$92

$97

$96

25%

$91

$91

$91

$90

$90

$80

$83

$82

20%

$70

15%

$60

Q1 F'21

Q2 F'21

Q3 F'21

Q4 F'21

Q1 F'22

Q2 F'22

Q3 F'22

Q4 F'22

Q1 F'23

Q2 F'23

Q3 F'23

Q4 F'23

Q1 F'24

Q2 F'24

10%

Q2 F'24 - SG&A EXPENSE:

SG&A expense was 28.3% of sales in both Q2 of F'24 and Q2 of F'23. Excluding amortization* from both periods, SG&A expense was 27.6% of sales compared to 27.3% of sales in the same quarter last year.

Inflation continues in certain geographies. We continue to focus on executing sustainable efficiency gains in order to offset cost increases, while making the necessary investments to drive future sales growth.

* See appendix for non-GAAP measures.

R&D Expense

7

R&D EXPENSE AND R&D EXPENSE AS A % OF SALES

(millions of USD)

$20.0

5.2%

5.5%

$18.0

4.9%

4.7%

4.7%

4.7%

4.7%

4.4%

$16.8

4.3%

4.3%

4.4%

4.3%

$16.3

4.5%

$16.0

$15.8

$15.7

$15.7

3.7%

3.8%

$14.9

$15.4

3.7%

$14.0

$14.0

$13.2

$13.9

$13.9

3.5%

$12.0

$11.3

2.5%

$10.2

$9.9

$10.0

$8.0

1.5%

Q1 F'21

Q2 F'21

Q3 F'21

Q4 F'21

Q1 F'22

Q2 F'22

Q3 F'22

Q4 F'22

Q1 F'23

Q2 F'23

Q3 F'23

Q4 F'23

Q1 F'24

Q2 F'24

Q2 F'24 - R&D EXPENSE:

We remain committed to our investments in R&D, our new product pipeline includes innovative products that solve problems for our customers.

We are focused on ensuring that our R&D spend is both efficient and effective.

Income Before Income Taxes

8

INCOME BEFORE INCOME TAXES (GAAP)

(millions of USD)

$70 $60 $50 $40 $30 $20 $10

Year-on-Year Growth (Decline)

$63.0

$63.8

$59.4

$54.0

$55.8

$47.8

$51.3

$50.3

$48.5

$44.7

$42.2

$41.6

$42.0

$39.4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

F'21

F'21

F'21

F'21

F'22

F'22

F'22

F'22

F'23

F'23

F'23

F'23

F'24

F'24

1.6%

(7.0%)

115.7%

19.4%

5.8%

6.7%

7.3%

29.7%

12.6%

15.4%

23.0%

18.2%

18.0%

15.1%

Q2 F'24 - INCOME BEFORE INCOME TAXES:

GAAP Income before income taxes was up 15.1% to $55.8M in Q2 of F'24 compared to $48.5M in Q2 of F'23.

Income Before Income Taxes Excluding Certain Items*, which only removes amortization expense from each period presented, increased 12.4% to $58.2M in Q2 of F'24 compared to $51.8M in Q2 of F'23.

* Income Before Income Taxes Excluding Certain Items is a non-GAAP measure. See appendix.

Net Income & Diluted EPS

9

NET INCOME (GAAP)

(millions of USD)

DILUTED EPS (GAAP)

$50

$48.1

$49.4

$47.2

$1.00

$0.96

$1.00

$0.97

$0.90

$43.6

$0.81

$0.79

$40

$40.1

$41.1

$39.4

$38.0

$0.80

$0.71

$0.78

$0.76

$37.3

$0.64

$0.67

$0.65

$35.0

$0.59

$33.5

$33.8

$0.60

$0.53

$30.9

$30

$28.0

$0.40

$20

$0.20

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

F'21

F'21

F'21

F'21

F'22

F'22

F'22

F'22

F'23

F'23

F'23

F'23

F'24

F'24

F'21

F'21

F'21

F'21

F'22

F'22

F'22

F'22

F'23

F'23

F'23

F'23

F'24

F'24

Q2 F'24 - NET INCOME & DILUTED EPS:

GAAP Net Income was $43.6M in Q2 of F'24 compared to $38.0M in Q2 of F'23 (an increase of 14.9%).

  • Net Income Excluding Certain Items* was $45.4M in Q2 of F'24 compared to $40.5M in Q2 of F'23 (an increase of 12.3%).

GAAP Diluted EPS was $0.90 in Q2 of F'24 compared to $0.76 in Q2 of F'23 (an increase of 18.4%).

  • Diluted EPS Excluding Certain Items* was $0.93 in Q2 of F'24 compared to $0.81 in Q2 of F'23 (an increase of 14.8%).

* Net Income Excluding Certain Items and Diluted EPS Excluding Certain Items are non-GAAP measures. See appendix.

Cash Generation

CASH FLOW FROM OPERATING ACTIVITIES

(millions of USD)

$95

$79.3

$70

$62.8

$72.5

$56.0

$50.8

$53.2

$62.3

$45

$36.1

$27.5

$40.9

$28.0

$29.4

$36.1

$20

($3.2)

-$5

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

F'21

F'21

F'21

F'21

F'22

F'22

F'22

F'22

F'23

F'23

F'23

F'23

F'24

F'24

% of Net

188%

117%

150%

181%

78%

(9%)

102%

130%

71%

77%

151%

161%

132%

83%

Income

(millions of USD)

3 Mos. Ended

3 Mos. Ended

6 Mos. Ended

6 Mos. Ended

Jan. 31, 2024

Jan. 31, 2023

Jan. 31, 2024

Jan. 31, 2023

Cash Balance - Beginning of Period

$

175.4

$

114.5

$

151.5

$

114.1

Cash Flow from Operating Activities

36.1

29.4

98.4

57.4

Capital Expenditures

(49.6)

(4.3)

(60.8)

(8.2)

Dividends

(11.4)

(11.4)

(22.7)

(22.8)

Share Repurchases

(7.7)

(5.8)

(21.8)

(17.9)

Debt Repayments

(4.1)

(21.7)

(1.6)

(17.7)

Effect of Exchange Rates on Cash

3.5

5.2

(2.2)

2.0

Other

1.7

2.3

3.1

1.3

Cash Balance - End of Period

$

143.9

$

108.2

$

143.9

$

108.2

10

CASH FLOWS IN Q2 OF F'24:

Overview:

Cash flow from operating activities was up 22.8% in Q2 of F'24; increasing from $29.4M in Q2 of last year to $36.1M in the current quarter.

Free cash flow* was ($13.5M) in Q2 of F'24 compared to $25.1M in Q2 of F'23.

Free cash flow was negative in Q2 of F'24 due to the purchase of a previously leased facility.

Returning Funds to our Shareholders:

In Q2 of F'24, we returned a total of $19.0M to our shareholders in the form of dividends and share buybacks.

Dividends - Increased our annual dividend for the 38th consecutive year.

Share Buybacks - Repurchased 143,115 shares in Q2 of F'24 for $7.7M (average price of $53.63/share).

  • Free cash flow is calculated as Net Cash Provided by Operating Activities less Capital Expenditures.

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Disclaimer

Brady Corporation published this content on 22 February 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 March 2024 22:44:40 UTC.