BRC - Earnings call transcript Q4 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Brady Corporation Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session [Operator Instructions]. Please be advised that today's conference is being recorded [Operator Instructions]. to Chief conference Accounting like today, your now Thornton, Ann Officer. would hand to the speaker I Please go ahead, ma'am.

Ann Thornton

for conference Thank you. fiscal The located earnings Corporation Web site the to call at slides on call. www.bradycorp.com/investors. our Good morning, XXXX and fourth welcome this are morning's Brady quarter

are X. and forecast with as may to that a We this about noted make statements. and just will rebroadcast number XXXX morning. forward-looking Brady's begin factors Risk and expect, fiscal may note during significantly news words the that results. information. forward-looking Also various information XX-K, be remarks consent please prepared and note expected our factors such in of risk will, was which note Brady is SEC in which comments Form were by Corporation believe, may, this not anticipate, Slide this Words of the examples Brady. the on filed Please uncertainties, call, forward-looking few release could to that teleconference we impact subject identifying our important this copyrighted is without morning It's

broadcasting We Internet. the call will and it be this recording on

the being will and the Q&A participation your consent Officer, constitute Michael to Executive Chief As your over to such, recorded. in turn now President I'll session call Brady's Nauman. Michael?

Michael Nauman

financial joining Good Thank quarter thank morning, This us. for released everyone we you, fiscal all morning, fourth results. Ann. you our XXXX and

all dedicated I'm deal has compromising navigate think never how long-term work challenge. stepped their been to the with through both such up and a group. to of is to for problems the extremely and the global and team's solve on continued We team focused proud times, uncertainty, ability impressive. quickly, feet The And Brady proud while economically operationally. unprecedented entire I'm to

essential response of have business. remotely, still globe. did on where we manufacturing in get an an the running me effectively stoppages Brady our has around we and And stand the financial people COVID-XX throughout our working minor into results, of our and factories let and the we several is number to our globally up pandemic. update work first provide we significant Before a although, have been pandemic

tirelessly need. worked that needs virtually industry every support healthcare deliver workers, first has and and processing essential that the solve they companies, schools and team can products manufacturer identification helping our to retail fulfill source by ensuring their safety their We Our food to companies, logistics customers establishments, other and responders, missions.

governments products and Our businesses, distancing. social schools used to are with help

help to patients to environment are challenging provide and and our more a employees safer world laboratories times. are and safe. and equipment a used demand is products place safety during and Brady’s to are to keep when medical in signage identification samples returned the to hospitals products hygienic track Our used be identify helping and work. help And these

remained priorities our position and ramp Our up and growth to investments. unchanged focus allows on have long-term us the our strong financial

surviving, companies focused thriving. other focused be on may While we're on

we believe added. can to we our that customer the customer continue separate great customers because talked to new us capability Last marketing investing capabilities. We're sites growth. investing new our we We're our we're We're And the investing We're in we're Web globe. enhancing First, whatever in improving will that plus satisfaction, service competition. increase in improving from products. XX,XXX quarter, we doing about around machinery.

help signage products them businesses. and their focused our new safety developed workplace safety quarter, operate quickly as needs added types including helping social our of and safely floor additional we new launched many an customers customers This specifically markings other in business we distancing on XX,XXX with and products, their and

and times, that come. they time and years long-term to as customers, by so will navigate back if they we identification their challenges customer Brady well, COVID-XX establish can the that make are and keep presented easier time needs. for pay and can we serve to job and safety These off lives we of customers relationships our new believe that to will Now coming to extremely our it's our all old unusual fulfill again

auto Second, investments we're driving around take globe. even facilities before investments, ROI time are some to efficiencies realized. benefits make the continuing if in automations through positive those We're may the

implementations live July of For months will than to become because locations. earlier financial are to our trends ability operations them them as our example, disruption value. which with reducing dividends teams ERP the leaner We've streamlining on types in journey costs. when our on today been pay our clearly capture We're shareholder were business. and time margins on focused focus investments a long-term opportunity Thus, have and a improved the of declining. be structure cost went strong pulled in took short-term, to without are system cost swift SG&A drive a common our the grow. of multiyear planned, taking IT but our expenses advantage XXst, in impacting future. have and actions cost up These can which we long-term the on the to organization, seen least European in our actions to gross These These long-term the our growth while set on in and we two that had six our

business consistently returning dividend XXth our annual capital. organic incredibly investing consecutive year to in this for proud we our through deploying We're we're Lastly, announced increases. We're streak. buybacks. and of dividends our our of Yesterday, funds shareholders

financial while financial our funds strong both shareholders. to Our our our should continue gears Shifting to business, returning results. allow to us to position invest in also organic

progressed quarter sales Our our our in was saw this sales as our trends, the month. we our May July declined fourth improvement daily throughout month quarter as quarter, weakest of XX.X% was organic strongest we and

month business, growth while IDS in at organic our at sales sales industrial our the work the the an sector. our quarter, of sales still in consistent XX.X% of work XX.X%. have patterns look each business, quarter. relatively through challenges and were We reduced WPS the by you lot in sales down line as a trends of us If top growth we in saw demand quarter we to division, is In finishing improvements organic ahead of daily

Our I'll to what structure resources from our can, workplace development to we research solutions safety Aaron I'll pandemic specific in so decisions emerge these started. cost discuss return to stronger businesses. and improve. use over we Then make than provide when that Aaron? call and reduce turn the We financial to and our we sales to results. decisive our identification operate quick, to efficiently opportunities to about commentary now response and can we control invest can as is the to as

Aaron Pearce

in based compared to $X.XX overall fourth and write-off downs. on certain to in of XX% organic minimal Michael. $X.XX everyone. Thank a offset Sales sales declined before losses and in fourth effectively starts review affiliates Pre-tax of charges, reductions write results compensation. expenses, of by Brady's certain of XX.X% inventory X. this to were year's you, previously severance quarter's million, from The decline a impact an including in Thus, income Good financial results. unconsolidated the $XXX.X morning, EPS These the X% foreign translation. of Included last XX.X% oneoff financial declined number on and were netting decline which capitalized consisted incentive currency diluted quarter expenses quarter. were catalog Slide costs

our our offset approximately million results of reported total, However, the expenses these impact divisional did but of items IDS segment workplace did our it the the net to in with Brady expenses $X impact with these impact admin in million. in and reductions largest in Again, of safety being division by $X was segment. $X reductions profit charges being million in reduce corporate insignificant WPS the

in division of XX.X%, while $XX workplace to declined you'll was by safety against organic Moving directly Slide our Organic the grew business in quarterly our supporting solutions identification sales our find in to five, virus. million in sales the COVID-XX related driven trends. approximately division to Organic products XX.X%. fight number WPS growth sales sales our

Our source floor design, other and equipment unique for social custom including customers. product markings our protective manufacture other signage, requirements, with customize personal while existing distancing offerings WPS quickly moved to continuing with team XD along for to

Turning to you'll our margin number X, gross trending. profit Slide see

product XX.X% was combined quarter. costs reduced was fourth quarter margin with this this quarter mix. compared million quarter number year's XX.X% was seven, to decrease this million the compared last profit due volume On business Slide find sales and rightsize our you'll the in $XX.X SG&A gross trending. fourth our in expense last to $XX.X year. SG&A to of This mainly Our to quarter

the our with quarter at efficiency constant in The driving in of XX.X% fourth fourth for the the actions spend, this our travel last both years last due several percent over people. from to been year. quarter sales, ongoing year the was discretionary of SG&A benefits decline of majority and including SG&A combined of a the we've As sales remained reduction

we that I and have these in in such costs as the just of one-off comp reductions catalog certain offset the mentioned, did incentive-based costs by Although, were quarter. expenses, severance capitalized write-off

you'll to X, investments Moving development. Slide on find research the our in trending number and of

in $X.X R&D. This million invested quarter, we

most spent for committed get while out ensuring dollar to investments we every on continue opportunities we're new overtime, increasing the that of have We and time, product to investments in R&D. our at development same the

incentive-based Our due reduced R&D spend comp was reduced and to down headcount.

backing We investments in to our have these our away of are critical intention R&D, as success. from investments no long-term

have suspect investing to the when last the of of important, fourth that In year we income, smaller Slide our investing details in this to XX% $XX.X declined in don't is trending pretax quarter most from financial the throughout wherewithal fact, of million economic now is X, number innovation downturn. this $XX.X which year. continue competitors million many because

on and Affiliates. the an based $XX.X a allows technology. income last quarter, Equity investment and XX.X% made we after and employee our of income EPS investment Slide our cash had the net income resulted activities million year-after-year. flow year to organization, of called the from and This XX.X% geo developed flow was year location you'll our XX, cash in quarterly and technology million React quarter, free excess Mobile. in in generation. exact This $XX.X to to a Slide EPS summary $XX.X income, flow emergency no this of this declined quarter. year's million of in included pinpoint XX, number activities, of has exception. which small focus declined this On to is Cash decisions loss illustrates Losses income cash Net XXXX. which XX, quarter was to GPS of was full fiscal maintained We operating Seattle location Bluetooth our cash a from a through flow net tax generated right the businesses We that making statement consistently diluted to in number net This for flow a compared in for minority of utilization the company We've Unconsolidated XXX% of this line, cash $X.XX July equal cash the income on generated quarter, million and operating find excess trends. long-term this fourth titled $XX.X company quarter. ended

Turning find to million our the and no net you'll position. year Slide with the trending cash finished of outstanding $XXX.X debt. number We of XX, cash

balance excellent Our shape. sheet is in

Our and allocation patient. approach capital It is is we're disciplined consistent. to

First, challenging even in efficiency we like use cash fund experiencing sales the we're our opportunities organic and cycle, those fully economic throughout times today. to economic

further We in improvement, sales CapEx product capital IT to capability our generating fund continue facilities. automate expenditures to development, investments resources, new and enhancing

shareholders just it can strong in repurchase disciplined our It's of funding our positive. organic in our improve balance approximately of use pretax full number a And provides funding deploy XX, have After emerge the second, of an And to dividend. shares. investments cash and sheets excess annual long-term our we year, flow in we dividend, This during cash when share investments investments keep strong we then shareholders as we through form finished where opportunities. a we in income synergistic form believe $XX.X XX, for ended announced makes manner sales focus we XXth of challenging that our company. to will ROI with where increase consecutive net the investing shareholder keep $XX.X leaner returned Brady, July yet operating X.X% XXXX. consistently and are yesterday, overview X.X these And for million and dividends. mentioned, returned sense with This generate where of companies the on cash these Overall, like stronger our earnings opportunistic $XXX year Slide our acquisitions shareholder we million of returning and dividend. returns the to Michael cash in year, our we the results We super times repurchases. declined through million to million. organic financial we

course, pandemic of earnings COVID-XX fiscal both our backhalf year. our and our in impacted the Of significantly the revenues were by

As to September July revenues we the visibility XX, continue to for or XXth, lack we XXXX. here ended earnings fiscal on sit today year full as

we fiscal EPS such, at As XXXX are formal this not or time. sales guidance providing

of we 'XX, exiting saw as to least we we of trends fiscal first would However, look do at the the continue through the the start last that anticipate half year QX.

sales expect sales we strong continue remain to In our through of but first our last, prior business related or to business, if in business sector. sequentially WPS momentum by while these half ID In results year know the sales workplace the IDS we to industrial our business, least our to as COVID-XX. Solutions directly fourth the continue each they we in they'll QX safety Specifically, general down, below long year when experienced QX last products be growth in in of month slow will the today, were continued well. although, in against fight saw will of how through volumes our should buoyed quarter And at we sequential levels, sales QX. these don't improvements replaced by improve

recovery if are or at the into what will we pace future. continue this However, uncertain

not clearly in back near be not levels are we pre-pandemic are to to recovery in levels have We mode, but the reached yet pre-pandemic forecasting and term.

capital for capital allocation, foresee do any allocation strategy. not changes in As our we major

price with and in acquisitions will is I And be our just the the is We looking we buybacks, right increase. will while strategic for announced keep organic business. where clear. fit investing opportunistic mentioned dividend

our capital As to may we increase leased if manufacturing strategic relates our of we currently in opportunity it F'XX right the beyond expenditures, to own historical expenditures capital or levels facilities. get one more

Our critical or to our so warehouses office is own philosophy not buildings that facilities important, facilities. and lease to think are manufacturing strategically

it period of the some outsized balance Michael? turn over Q&A as a I'll and to before our to to results, depressed back call cover comments use provide tool we industrial and demand. sheet a We have strong when we will returns drive from the this emerge to Michael session, now divisional closing

Michael Nauman

per X.X% declined organic with Slide results sales XX.X% Thank Solutions from a sales the business. decrease quarter. foreign XX our IDS quarter you, XX.X%, outlines Identification decline million, translation for this in organic at and Aaron. fourth financial an of finishing in Overall, sales most quarter. number $XXX.X in improved of currency challenging the our quarter where as in were IDS down throughout division we organic mid-teens year. day progressed upper per month this May were range. was the sales organic compared to down sales our the last XX% Whereas, July, IDS day

sequentially economic throughout by Our industrial results manufacturing and as sales operating level. in revenue the progressed primarily top-line the we Europe but well still improved quarter throughout challenged but organic reduced IDS within both Regionally, our activity, the we're pre-pandemic improved quarter, below remains Americas sector.

organic low-teens sales in July. hand, by an and IDS May other followed the in growth On decline low-single-digit Asia in sales in our June, business had the

continue to throughout In to are XX.X% sales now illustrates from still last and shutdowns has Our XX.X% was to in year-on-year million were last response quarter. was our the Demand healthcare to profitability structure quarter. IDS the take of decline team compared resulting Segment the hospital incurred, declined year that incentive sales basis to cost of work the we profit profit decline segment offset costs compared business able points significantly our reduced of This for their XX% fourth $XX.X North XXX year's by have this considering quickly to incremental and this line reduced in quarter. in demand than demand, reduced as impact declined reduce Sales pre-pandemic revenues. Asian in realize million from remain in admissions product to Any the these down surgeries decline this Europe adjust levels our in fourth sales quarter. also quarter. to demand compensation year's Elective we quarter. to severance, normal in America. based more started cost to how of such response up levels. healthcare actions pent this challenged structure $XX.X XX.X% in by businesses business our approximately IDS

bundle a priority products quarter. We launch is easier This job IT quickly and this commitment troubleshoot market and and a consuming VELCRO is to be VELCRO, we exciting BradyGrip a datacom new Material, identify collaboration label of Print-on top BradyGrip remains new time issues. where installation datacom the makes launched for R&D can material the adhere bundles. to to is and to designed result technicians and Brady where Our between targeting several organize which professionals labeling Hook accuracy the high allows tech to cables a brand and material essential. is

XXXX. product temporary easy with residue costly handle Dissolvable waste to leaving product the labels BradyJet to for and lockout cleanup This And in of water, lab quarter, and we time warm line dissolve or laboratory reduce completely ideal applications also supplies. in we Labels for Paper launched help lockout adhesive environments test our These launched no removal the both valves. the tagout pull are safely

Our handles design applications, versatile stays better and beverage, applications, The one pull It of security. piece among and a including and locks others. added many padlocks can lockout handle utility variety butterfly place pharmaceutical, safety simple for fit fold hold in water four valve up process for and device in also over food a chemical, a any provides is targeted industries fluid the products pull that position. with and a

effective. remain is more Our innovative help we and solve customers to solutions committed and and our to pipeline developing new strong efficient R&D be problems

our financial number summary you'll Slide safety find performance. workplace of XX, to along Moving a

existing quarter. applying and customers XX.X%. during business European our pandemic. Europe midst unprecedented essential reported impressive by growth the this was businesses an by excellent team driven job this an gaining the global organic sales did Once in with in of they this in WPS our the Our in grew that reopen, WPS teens supporting growth new need the to began mid This business critical quarter customers time. product

Our XX% row Australian nearly quarter. business for performed this with a second well growth the organic sales extremely quarter in

to of found of and at new the the was each rate many quickly organic tapered and in customers, our down whom were of highest Our customize ways The growth customers. to the of sequentially. rose and month beginning meet needs creative team Australia occasion sales the quarter products

expect we year. mid of the sales quarterly an teens into growth quarter. given finished in declined this XX% continue improvement third sales a in decline low-single-digit the from as trend level North sales the So don't America which future in was this quarter, we the in the Organic

One of our much be micro fourth government through which primarily in by resulting required shutdown very small the quarter, sales. companies, our to impacted sell businesses of continued to in decline

schools, grade, areas. commercial and that quarter traffic Our against to safety impact, making designed, surfaces and more floor workplace slip resistant They of this in or asphalt, high metal, tile to a that We new marking social concrete, for many other have launched specifically peeling are for be applications designed and level launched visual are they high stone, them are team without perfect distancing fight retailers other products XD COVID-XX. tailings. and applied so can are

and high in fountain WPS schools, to We patented use which and offices, the presented venues and they their needs. for with were are $X.X also for drinking touch distancing This decreased COVID-XX compared drinking fountain while traffic this drinking complex of congregate. potential catalogs segment increased is a accelerate. took million direct and constant has digital the lockout rates one year's reduce challenges of quarter, to people problems a our the advertising last a fountain meet solution Brady of of XD touch buying high hands of understood needs. and through a team floor to sales turns This was trying businesses, effectiveness these developed product in where continued in quarter. which off traditional device were profit customers, customer device contamination quarter solutions action to products as this proprietary to to social and catalogs prevent retailers, other our of launched attaches area. response device quarter. a traditional related increased technology, keep marking the Both to new where countless examples areas lockout utilizes problem sporting customers. Both to this quickly COVID spread into simple manufacturers, for solve high for patterns a interaction lockout $X the to to spout million to Brady shift to customized that from develop fourth online the Response our signs tend

to wrote our in Aaron off catalog in As the response earlier, we of buying previously costs mentioned capitalized shift patterns customers.

other offs including write recognized severance quarter. also We fourth and in certain inventory costs, the

$X sales. Excluding these WPS $XX million, would million approximately been totaling our approximately have of profit onetime or segment costs XX%

Our the and industries, modified together they they to part along several to listen against identify playing were to new Ideas generated entirely in a entrepreneurial and of team what is spirit they what delivered delivered fight all Brady the quarter. delivered. to pulled tremendous all showed COVID-XX. the entirely customers needed, They throughout and team of WPS that departments. new new and proud launched promised organization in their I'm customers marketing they role reach The they a be very good the so levels products way. campaigns within

many every macroeconomic the customers uncertain our quality to better is and The as every ideas continue but are of environment We customer daily world with committed the does new strong we're challenges in day. of position. financial and Brady changing we a that highest constantly. service, make day, generate do are very safer delivering to

demand overall economy. we sheet newly strong. WPS our industrial believe demand products how with in pandemic business, remain related will our do for pre know of COVID-XX don't We know levels long our many return remain and customers is We will will solid the Brady. the balance Our that to when cash flow acquired remains don't very in

buying increase. to the are levels prepared We when perform

uncertain, what we the are future controlling can. is Although, we

to and would listeners? enhancing take know to like and you extremely will provide financial deliver generating for actions instructions R&D, that, value our non-revenue can sales please resources in so to start we Q&A. right opportunities, the being efficiency With invest long-term the on all continue We I'd and shareholders. are our in while these our now tight CapEx capability improved expenses. drive results to Operator, We

Operator

you Thank [Operator instructions].

Our with first question Sidoti. from Joe comes Mondillo

now Your open. line is

Joe Mondillo

Michael, I'm about like wondering and you could you're if what September, talk look in August that IDS trends and may mentioned your you in seeing July.

Just wondering if half mid-teen idea Could of an -- so, down trends mid-teens in in last July, like? and and how give did August us the just month things or get September? better you a look those

Michael Nauman

Absolutely, Joe.

throughout in saw sequentially daily trend an month-after-month I very and really As the upward sales. consistently said, quarter, our we

continue we'll through the We're that see a pattern gradual at anticipating that and And seeing that see of September. and September. to steady August in early least definitely We we're end improvement.

Joe Mondillo

in the So September and then? declines -- from improved in mid-teen the year-over-year have down August July, mid-teens

Michael Nauman

Absolutely.

Joe Mondillo

first. WPS questions, of Couple Okay.

at of end 'XX You trend the said the end fiscal itself? to overall quarter continue into the strength Was quarter at will the of XQ. the the similar

Michael Nauman

know Yes, the is, place. absolutely. when COVID-XX the products related don't from issue will Really take transition we here

We we that some a strong customer in our there. strong that been customers are segment, improve able generating we've are that think very also And that actually are happens, gains the confident make as and to we'll if be we industrial base. customers

Joe Mondillo

really million severance. Okay. And then catalog and mentioned the write-offs side at with on $X the the you cost WPS,

XX%. traditionally, of think you been fourth that quarter normalized If sort do margin the would about average usually than have margin year. over we that, stronger sort How do you segment? of see margins the And the exclude throughout the at

sort about you margins understand of us you think it? How there? So normalized could help

Michael Nauman

see trend. to think, you're I Joe, going positive continued that a

very probably remember increases waterfall well, As revenue when effect. a great get you we

increased We revenue. seeing are

We decline are very those and that see proud put and our of teams do that in specific forth not therefore a margin. effort the we effort have

on industries well So in our that area, apologize, to our businesses, micro to we going with margins. one And improvement businesses think I particular as or forth. do that in focused improves, micro we're see as go we continued going in of we're

Joe Mondillo

React front. is for minority me, your acquisition of regarding looking wording. very that stake? it of acquisition minority then have That talked been stake quiet about said, forward, acquisition much And the and of been you just you've question very Okay. guys the distribution capital then -- or one How last on the Mobile. consistent And with you've the

we anticipate in years now the forward? where given we strong acquisitions you've progress are more sheet. the over that should anticipate and made you going everything and very maybe So balance the Should

Michael Nauman

we this We invested It sure place we've Joe, just able of again make to group helping very technology, about the really great good we're be in world it. XX% a a the people. is that current great once under make direction business. our to feel And think world that is right in to a safer for everyone.

under good XX%. a the and as one just said Mobile is I us investment React So for

to we are very far, right pipeline of about The seeing the of challenge we do real to around able cannot investors. feel some diligence and a the due we being good companies. now, do the right, biggest that opportunity. and good in get capital, you're is not and job good by acquisitions, being It's move forward get As disciplined logistics. do efforts proper we our challenge Physically out

we really able So working regard. do are with to in we'll be as that efforts the some strong opens up, anticipation that world

Joe Mondillo

acquisitions? bigger or year land maybe characterize you more hunger to ago? priority a your to that two would Is compared now, And

Michael Nauman

community felt that the our same effort Joe, had one shutdown investor I had the I acquisition way. purposely say not And for Well, been felt that When came had us. and efforts. the clearly first we would positive this. here, street, a I I think

you're But in focused we niche a business. did on So disciplined that disciplined, business good how company, now very markets. is needed we to manufacturing oriented, become innovation again I right. feel very our

be in off ball So good our to I really at better not would that to a that markets all, would while to that be strength, some buy think externally willing price. a is although, at technologies it focus are our mistake, tremendous take we on efforts do internally looking think I that able are our reasonable eye to because add us a to a for for of position time the

able If intelligent at find correct. will Brady, elements the a have I right you philosophy here. to do we a technology help price. will smart are not Those have feel to only together but we think, good that be we we like company you're do all we it and coming have Joe, acquiring, our remember help we're more have It's to to be able now. to opportunities. And also

like to right the deal As logistics. our was impediment I mentioned before, now literally that closing biggest

Joe Mondillo

thanks great. back my taking queue. for Okay, Good luck. I'll hop Well, questions. in

Michael Nauman

Appreciate Joe. Thanks, you.

Operator

Thank you.

Michael Fargo. question with next Our McGinn Wells

open. now is line Your

Michael McGinn

Good morning, Allison Mike on here. everyone. for

Michael Nauman

Good morning, Mike.

Michael McGinn

needs in morning. Good essential up on kind sales sort new that portfolio a inventory vertical the good seeing, help there. upward a and of those already versus those that were new of pretty core frame serving inflected you receivables was and to of how there what could step lot the like was us capital you're you what of on to you working wondering kind managing verticals It was There customers I if and looks discussion for side? industries.

great. there, So or would any be color just comment any there

Michael Nauman

Great.

every literally serve served we is have SIC and those. Mike, code So there

That in us based. areas those portfolio, where from have much areas around the But restaurants, broad like within incredibly stronger seen marketplaces. are board opportunities we've are Brady's that areas give also, bigger much new customers and The we're that, across world. certainly focus. areas existing uptick the new we're have seeing a small said, we retail, relatively So we that major

advantage So for that has been good us. a very

make management to as credit, control of we the their but needs credit far our proud of As our and of finance our combination with much in ability I'm to customers properly teams’ keep the team line pay. our very quite our sure efforts also of

correct. inventory, you're as far As

continuing You did see an quarter. uptick in inventory the throughout

has customers first Our to our priority been sure make are served.

the not be during not of One did throughout serviced be suppliers. properly this with disconnects not that have we've things many of downturn industries different is being suppliers. their to by and one been able We seen there those customers will

world. we've that we a to That making put down remember customers. said, about closer inventory that be is And right the moving more world for ahead to of we only coming focus three more years, is that of looking not as our was an sure but doing out, Also, you past properly. that was curve once the situation. the the So really number now our we about the are it at again and a us, giving and very we people serving lot years. been more from it do did after reasoning something But turns forepositioned more us on stabilizes. really opportunity customers inventory, pandemic end now a throughout We're lot that products more talking already if accelerate working this for is to have about this of large and because

level is inventory the A yes, is inventory. this our a So higher But as of that. result

and good, we So high very quality down inventory as speak. are it we moving

Michael McGinn

and two talk what thank the dichotomies beyond Great, you. large variability businesses second the of flex flex just seem between the and differential, Then Can is gross each one very down businesses Just margin we headline more a because in me. different specifically? up right top-line. there's two from terms like for SG&A now segments two obviously the they about the margin

you expect temporary back structural if what or of address timing in? each roll out maybe level and can in that? costs the for business when So And to took you just that you

Aaron Pearce

of to that. I course is SG&A higher go service a to standpoint, how our structural/directional WPS profit gross Aaron, they of business can handle result is solutions, their this From market has identification higher expense in also margins how which customers. they a Mike, and comparison

that I struggle mean, temporary cost a with reduction. look the you versus what's cost frankly, at the organization, of permanent we a costs as come have out reduction So

example. So an you I'll give

people of is XXX last down of approximately XXst year. from July XXst year July to this Our headcount

Some come of those likely headcount some will most the economy not. may as back recovers,

quite as salespeople travel Our are you restrictions. travel. adding imagine Clearly, as a of given travel substantially, need the to It’s well, component our critical expenses would down value.

can, taking into that sustainable we don't what would determine Some can come won't. costs as difficult to come long-term, remain most come we won't back absolutely as keeping out the some the focused back, in costs will possibly organization. out actually back. tell and costs roaring of or that this will so on many It's over the you they manner very we But can I travel

here every it's was an it mentioned a the where steady keep organization. we in to is short-term. example to fourth as year. sit cost today, And cost is to quarter. Michael the the IT But structure March that projects invest efficient this keeps right we getting Those do As just become last even down. shape we are it we'll going thing And time just better more we though than continue single think our in implemented over the it of examples better in year couple long-term, a a the frankly, perfect as

is reduction. a pinpoint cost it's So answer versus a to long the really but temporary winded difficult reality permanent

Michael McGinn

gross mix And or Are view product Okay. should profit higher, with think I was Slide any I mix segment X you more how a on the you that said negative. that? WPS talking

Aaron Pearce

referring specifically within each segment. to are the mix We

Operator

Thank you.

Housum with Our next Northcoast Keith question Research. comes from

Keith Housum

referenced quarter this you and I the was XX,XXX think Michael, in last XX,XXX. guys. morning quarter Good new customers

give you there count? fourth getting any then order these us customers can customers? that that is -- know customer quarter? new made And to does perspective? the I you’ve an recurring First, in being proof potentially overall the quarter compare second, any customer have after your of third in don’t are How

Michael Nauman

I I but value was you, don't that, doing to correct quarter. Keith, customer. this it We want hate every XX,XXX

X,XXX out don't want I So shut customers. to

we're already for recurrence know beyond We better-than-average a COVID, continues, that way, and things So that. know the that rate we're high-quality about those these them I by say in already seeing that -- trend revenue We and getting out customers. would goes are total two of customers.

from we're So the about of of can we both rate good feel getting very orders the quality customers. those see those the that repeat and customers that out we about

Keith Housum

to intended anybody. does count? I shortchange never And compare total then to your how it customer

Michael Nauman

is do is large We of a number high to customers, uniquely have but a us. It this number. significant very actually

is call but never we this significant. numbers, very know out You those

Keith Housum

terms months visibility referenced that have first not six usually normal beyond like? your In of more of what's visibility in Do your much out? than you visibility terms half you year, of the

Michael Nauman

other right, visibility don't up really much having You're we companies. as end as

think able to react as to I advantage because Some need very be would always that's very, a an result, actually it's a quickly. say difficulty. we

you So and we're visibility investment particularly base ups quickly of little That I at, set that looking in think very can react in the open find up you're very, to to your market. from industrials, downs. all said, there's really

in about hit May, right had For was I that we I the projected that. instance, bottom. had

for been for to going I'm give give and since But C for around the that. we've So process literally an the next up improvements bounce six I A thought the myself to for going slow probably seeing going statement, myself to and a were I'm throughout yet we to steady months, bottom May.

a to challenging the on love I think but would than or is now, Nostradamus So I right have this, be ball usual. crystal more visibility

Keith Housum

can if you perhaps compared others want we look kind whole out And for you XX% an within and to challenged. or for ourselves? that we one then of care I was that two industrial to for industrial is guys And called to as as improvement much cash-strapped guys. more you Understood. down look as verticals opportunity was forward year-over-year, vertical just there that obviously health a that's significant understand being But just a

Michael Nauman

side. this, Well, bright aerospace not is a I'll tell you certainly

percentage. Now of naive, incredibly our entertainment business down a maybe little I'm all has giving all leisure and been that without hit, and of a specific

not come That excited again, for small that little can't when this maybe airlines, pie I'm giant I'm been I some tell as pent-up for I think is come suppliers diversified for will you amusement the catastrophic pretty I it's imagine those to parks, for demand think sky travel, When businesses are I said, in to but on for back not those a this. for you tend to of one, safe be. will we tell going when the can But do. there that are. you businesses people they're back, that love things hard. happen, hotels, I all people feel that

will see out have to that you're The in it's The quickly of XX be I If will things to group, real any effect. personnel. think people to safe? they key very want happen infrastructure, happens, just back a to feel it and herd. the Very, all going going waterfall going future. cut you do But when be tremendously. will a question you're to industries, when they've go that like survey is limiter they see these In not

airlines working major So are hotels about to is are working on do short staff. a -- Everyone layoff.

infrastructure not news will to it have them. will a on be challenge they So but ramp up. back Good for

aerospace, a I of going if that. be you'll the will limit in to other though, the of see But lot the longer that's area. think very planes. be some because grind, the builders take in big that of excess the pitch-ups end Obviously, airlines themselves you a actual capacity So have equipment,

Keith Housum

Last me then. Yeah. question from

margin of terms the your gross margin. such gross In by items, as much How onetime was the your write-offs? impacted inventory

Aaron Pearce

if was being mentioned we and half it you pretty between or and the -- last the our about items actually, mix versus and of down basis margin close volume. it onetime Well, year, nonrecurring, was other quarter was to the fourth XXX points will, half and then

Operator

Staphos with America. Our Bank George of from comes next question

now Your line open. is

Unidentified Analyst

a volume segments? I And This IDS speak behalf just George. to you new the XXXX? is particularly some and on into of pipeline for else both you actually is [Kashin heading anything Thanks. talked on about quick Keller] exit the there just secondly, in IDS, rates know WPS there I had sitting then you're Can products excited in about that but question.

Michael Nauman

good As that. think it where to we're to to rapid back getting that are feel being far continuing about but super as things very were, feel as see I We moving look I we strong. up. exit we We rates, good very said, don't

the been we've significantly the few far last As pipeline, as years. more in investing

coming excited So but we out. about issues, we IP-related products. mainly speak IP our those obviously of can't are of to of a variety great pipeline for We time ahead have very

to our products bills that every easier designed all products are customers' our of at as have help on making of customers jobs our Most aren't products, really our day. almost We material. look we

believe that. not we to that and with So only make products coming effective lives want products want to we but easier, durable we make we're out make their

that in segments. broad that say with of reach is got all our I'd pretty thing other we've product The

one So segment alone I interesting in. products think we're there that isn't developing

We of products our segments. literally in have interesting all

year's next development. So very excited the product about

Unidentified Analyst

Great. Okay.

Just do COVID in increase with no the construction likely facilities? you one in months, are decrease, on or over seeing spending new CapEx plants few to or from to more. you next facilities What customers flare-up outlook And XXXX? assuming regard and think, is

Michael Nauman

improvement, that's real into goes would I ball improvement. CapEx a and because give a on, facility able production it our small answer goes and equipment into that you production Well, good crystal of to not a lot honestly be

as far So future be on. definite you a look for as would not to a specific that's at we the really good CapEx, or see model that area an

Operator

Thank you.

next question with Mondillo Joe comes from Sidoti. Our

Your now open. line is

Joe Mondillo

of couple appreciate follow-up questions. a you taking them. Just I

you Europe waned. so Just Asia or an about indication July sort North at inflection of September? of regions happening talked sort Any IDS, Asia. These how saw demand August, in a of the of in that America lagged in pent-up all after sort

little of bit? that indication happening, sort of that a any waning demand So pent-up

Michael Nauman

North that lead large and quite economy into China's based is people is Europe. recovery. America way this I because a of going heard to We Asia part lot interesting. Joe, the a the that of from personally understood was never on And

had down. and declining, to are a North seeing Europe numbers still as pent they very dependent particularly and they their America on had model long-term know so that recover Europe us were Asia up but improve we had still are our those is they America from, and pent-up for yes, but North for And we demand products

And all. me was America I we're second fact in July still so that at and why anything wasn't down the opposed else, to I Europe, that in or And steady round improvement. continued of to COVID we North think a went as surprising seeing think

Joe Mondillo

is IDS parts about to can XX% how But moving the in about at of think in the IDS? way quarter. decremental lot structure. sort the -- how decremental there cost -- there's near-term at I know Okay. margins of with a term, fourth any in And your we near the margins think then were

Aaron Pearce

Yeah, I can answer that.

You're pretty that XX% close at range.

to were way mentioned. strong, maybe that items that other with workplace course, of out that factor our nonrecurring above of the that the after And you And flips I incremental term. adjust Michael mentioned, see in margins changing north the very respect we're you think I the where $X I when that XX%. near for just the million don't safety slightly business then,

Joe Mondillo

accelerated costs. much us And me. up just structure? is idea accelerated an then of I cost the catalog onto opportunity accelerated But Is from give there know you there reduce how this pandemic has catalog an an this been an time. forces customers to Okay. is the as opportunity over platform? Can opportunity an of online last The And question -- makes your cost? there

Michael Nauman

over fact, answer then answer believe me to we must second in -- flip it a that you half I'll accelerated and Yes, here Aaron pandemic that We the to eavesdrop. Let to microphone have believe in first half. transition. the has

realize into is to way, but So workforce are the years seven by Zs. the olds. up to don't And now, many the millennials, imagine, Zs five some the generational, the it XX-year if people of you right it

more move with also forward, digitally into comfortable really focused, shifting to Internet different they took be this in an learn where a pandemic them they moved quickly approach. before comfortable were environment. home people the more focused to a much and -- situation But they are generations As

So into see we forward shift based driving a digitally do faster that a approach.

Something hard very we've years. been working for on several

half? able positioning hit that. want to be that pleased first happening, to in we're to So we're ourselves that's accelerate and if you Aaron, the

Aaron Pearce

Sure.

shouldn't have costs, as million, north And much actually in the our impact than out advertising. total really may year, of costs. we released next catalog... just is results. catalog on cost catalog an break out have which bit of don't do it this it’s normal, majority lumpier the little But expense $XX in an all catalog a K year is what at much morning, break full the from total look It's as actually make you but at an quarters impact As far It it aggregate. and total we that shouldn't the standpoint of we of

Joe Mondillo

why you you expect do material it Why think not Michael's impact would 'XX? you down? would to to not answer, relative a And fiscal why -- would be

Aaron Pearce

specifically the What was the to in impact I accounting. change of referring was

costs, catalog or does that way, 'XX So off by fiscal any shape our the impact form. in results writing not

produce Now will mail go course, of our course, catalogs, then if we less we costs catalog if of less catalogs, down.

Michael Nauman

You’re created was that just treatment. the -- Aaron new the referred by is to just lumpiness accounting

Joe Mondillo

sort maybe I the... total you of at or total advertising catalog look described based understand. on But down as to those just dollars far costs, what if sort maybe Michael as relative of be would

Michael Nauman

Yeah.

into philosophy. more point, they our as customers that reached. what as to more want or expect to our be reach want, move how customers we be a a to continue customers to our going digital need and digital You to they should We're move how reached. the approach. more decline reflect into We basic obviously That approach, our to is want

Joe Mondillo

far terms it just half as Or that of half? catalog you advertising of Is over of as dollar, that? of directional? And Is Okay. give more sort size? us is lastly, can total any than it percentage? a just small Any sort idea in

Aaron Pearce

It's well than more half.

Joe Mondillo

All right. Great. Okay.

Michael Nauman

to It's number significant a Yes. us.

Joe Mondillo

Okay. Thanks.

Michael Nauman

Thank you.

Operator

you. Thank

question next Wells with Michael Fargo. Our McGinn comes from

is line now open. Your

Michael McGinn

you number. appreciate end you're I'm follow-up. a low giving some were Understanding have end if if wondering framework high that of the the if complete about usually a maybe you not those I guidance, missed earlier. CapEx you I facility and give then or the for transactions talking but you

Aaron Pearce

a you end. give to tough It's high Yes.

moment. facilities, an are of a unknown If you which the bit at exclude the

which say, for, been call and either I'll that to it, add or our is, to in expect to for, And sales, If what would to range. X% close new our you the be specifically in of normal expenditures automate equipment facilities. for be exclude that, line think CapEx we that somewhere in type of our with would capabilities machinery it's past,

Michael Nauman

far reason is our investments we control of make allows to do leased sense to themselves, critical And that we in continue it us our our we And facilities. as them own. talked factories the buildings The our modify that not looking us to about put make allows call would to us then allows actual in the in as easier, it some really, destiny. structure

do. to to timing, And that position, do this ones cash matter and doesn't year. can we that actuate several have like As hurt we're opportunity looking It's we our dividends buybacks. of left need the anything our a that to ability big in get that, impact, could significant a and it do we right acquisitions at but have certainly

Michael McGinn

the last X authorization you are X.X time I guys idea have an Okay. way shares expectations did million of million essentially you standpoint The top was, so in of remaining. back you And what authorization XXXX, on debt-free Any an from forward? of buybacks, here. going the think,

Michael Nauman

We powder. up don't add powder until we use our

out So there. you are quarter we the about correct the of as that the number of end had

after same our our major We're we job. philosophy. philosophy. don't We in that's market our do disconnect our the go if investors' to look continue But and opportunistically we at look disconnect. the to market, for see We We change that a a set don't stock. do We believe major opportunistic. expect

Michael McGinn

in. can And Okay. me, sneak if last one from it I

there these with calls been You done this. out add-on two timing the smaller And A they've be actually. learned feature? was from an on think full-scale Can a companies you onboarding Any comments like mentioned we've pushed of have an and talk process? just or or ERP conversion what you great. this about leaned rationale, on would just an or I transition, to seem if in phases, lot that you

Michael Nauman

are do is total and the absolutely not. answer full-scale say you and contrarian conversion, do sometimes complete. People this We're opportunistic. is we we No, do? Why what

efficiency strategic the at our happy, keep but in. these we And competitors months, hard move push that this So six new to effectiveness, knew your is by us allow and to about bandwidth projects make in through them moment we continue use could effectiveness. really other efficiency, some we and against downturn developments of the it moves by to moving where would to customers forward, wanted we had some because product opportunities

them, have in actually dramatically not we And well. forward have so others projects only moved we've as those moved completed that and

we I to so doing we're continually refuse don't efficient part to all forward continuing that hear that's to us It so foot worry, effective more a to And our just survive, is it we're a it ahead going say And just said, people bandwidth, competition. the we're we have really what And survive. people tell to of do we puts have why internal our I at becoming our of than sooner And and the needed and I a mentality much skill effort time. is Like organization. going not we critical sets that thrive. doing do the time, it, later. a

Operator

Thank you.

comes Our Housum Research. Northcoast from next with question Keith

Your line is now open.

Keith Housum

guys. Thank

to that Obviously, back it's I to coming there in really your acquired healthcare -- the very it here? Is Michael, this XX%. just Or the is think you regarding follow-up. that quarter one Just all challenged was. being XXXX, it it's been within industry? since comments guys downfall any related the permanently down this challenges sign are broken

Michael Nauman

I of exception no business, know the pretty us were interesting sales sales strong in hard. than You nature. There think healthcare It hospitals very the business see methodology lot good anticipated. cosmetic they the and starting challenging ramp-up tend to actually But slower a is scheduling been have really, with a because us, older and say, it's in COVID Keith. would situation an in model, of customers products. It's long-term methodology their come is hit progress. I'd coming We're the have a people for right, approaching marketplaces And out be but in, you're we that many to marketplace has a the logical that. model been of, has

the a off money we you to "hey, your And fine, another one spouse months. that are elected of, go the surgeries can so of make may three that knees lot other of are say spouse many

said seeing. think situation longer. months. have myself in a Anecdotally, regular typical what out they thought checkup It's kidding. You And But usual I I to weeks. that's a we're stay it's out they you've schedule two three a They taking a months, got where it be we to just of didn't and that three lot schedule hospital." for

thinking just there are do but is And stretched people older, which So I come customer line. us, a pretty of think users correlations, quick as predominantly users we closer they're than the is mass. just see out base, of time reluctant even to industry Certainly, still because our to products. primarily hospitals their are industry an in back

to we take longer is And the overall going back. would anticipated have many think to come so hospital than industry

Keith Housum

But any no competitive signs share? that you’re losing

Michael Nauman

all. all. not No, Not at at

Keith Housum

Thank you. Great.

Michael Nauman

Thank you, Keith.

Operator

showing Thank Michael further Nauman for would at you. time. remarks. questions any not the I like this over I'm to closing now back call to turn

Michael Nauman

concluding unprecedented that dealing this in leave living morning. exaggeration. basis a with few daily and in lives to comments much. so you We're businesses. is and with like our all uncertainty Thank you certainly times, on an I'd in a and not our disruption We're

Our Brady focus at unchanged. remains

chains will your morning. the safety will resources. will supply habits many decisions our automation products controlling pandemic We're But customers. execute we will Please disconnect for gains. will at we great demand and Operator, changed sustainable global right for won't we the thank for will both Have R&D of right stay investments challenge. long-term of We you can can have and safe, buying and We'll customers. of what great change, a make We'll return what or lose continue that subside you on today future. to as allow invest We us promised call. our has opportunities our what today, day. the time We'll increase the this distracted sight we're facilities, and for Customer may up doing and in and sales-generating cost and and identification invest for we're generate pre-COVID demand levels. deliver all will to efficiency from our we perspective. to to increased. this customer it when undoubtedly focused capability-enhancing and don't in present what in our machinery we to know our and what opportunities when a the We and And makes ourselves become us or challenges do. stay base

Operator

this gentlemen, and you conference concludes participating. today's Ladies for Thank call.

may disconnect. You now

Brady (BRC) 16 Sep 202020 Q4 Earnings call transcript