BRC - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Q1 2021 Brady Corporation Earnings 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] I would now like to shift this conference call today, Ms. Ann Thornton you may begin ma'am.

Ann Thornton

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

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

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

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

Michael Nauman

away COVID-XX release pre-tax and and want key earnings morning, was first we we XX% over last Thank the are income you, the for year. morning. that you of XXXX cash This joining were to our this strong than us. we operating messages you quarter. Ann. more Good able our this by flow And increase cash increase released flow quarter results. virus, four thank growing environment operating Even extremely by from challenging caused quarter take all financial with morning There to first fiscal our in this

extremely performed Safety First, our business well. Workplace

to grow customers both campaigns and bring This have They've reach value multi-channel to shown to their we new their customer. as products they've WPS growth. and customers marketing positive increase expanded subside. entrepreneurship just even be as strong customer in new to existing base, every XX% fight their on critical COVID-XX is in new our are after teams nearly sales customer seen leveraged in to momentum product by many base and have growth strong driving related approach outstanding in momentum margins sales they earnings that developed can help COVID-XX. increase ensure Our and segment under our And gross maintaining XX% our our profit

revenue to X.X% as in month of month decline solutions IDS down in the our the continue only revenue with this quarter. improve segment Even as IDS trends business sales after Second, revenues profit our increased were as percentage a to steady great reason managing R&D and marketing in give did driving combined us job optimistic with this gains. about the investment efficiency quite improvements team future of cost sustainable and a structure their sales, These business. our be

products are our cost the cost focusing Even cost quarter. seen to trends swift machinery capacity clearly us and us sets to reduced continue enhancing structure drive earnings SG&A declining. margins and income enabled improve long-term and strong on short-term, with a on which increase long-term, operating capabilities, our in structure Third, in to capture upgrade can marketing up journey develop multiyear shareholder and as while actions equipment. invest to in this taking the our websites our We've is growth which value. reduced we new pre-tax been become organization, our expense be financial a our gross We're leaner and this

All future of earnings. this improve will

have Lastly, balance rock-solid we sheet. a

flow. ongoing the keep sheet balance the In outsized profitability. keep will to allows returns to conditions This generate generate investing tremendous and COVID-XX enable and pandemic we uncertainty future fact, to in had as we to our to put work. we're to to in future and us risks and and Economic which our net revenues a continue cash funds cash returning position shareholders, us strong

into is stronger sales letting to marketing a and can; to to back avoid from response invest efficiently the quick business, control make operate Our what that can will we research our resources, and cost so structure, resources we to and our in to pandemic as company. development creep as overhead we emerge reduce and as decisions to much

never the impressive. proud very I this with quickly give financial performed fulfill workers, deal I'll that worked to have companies, Aaron establishments, compromising and companies, has logistics the you to long-term source our mission. these customers products virtually needs unique Solutions ensure and specific first safety to ability responders, to about world they on Aaron? times. Then, of uncertainty, helping to return helping more teams safer industry Our and We commentary on suite Identification feet our other Workplace full bit are are am now solve every that identification our and deliver a during and period, of, detail products, their retail manufacture, demand the turn their schools team while a our businesses. healthcare and solve problems to support their provide food has to need. identification essential Brady's by place and been how call the throughout tirelessly be challenging I'll their can safety all over results. processing Safety think in

Aaron Pearce

Diluted of the we X.X% $XXX.X low We'll tax year's an Sales and increase sales first of X.X% unusually with consisted of Michael. increased X. the a organic been quarter of tax from from normal finished when Last primarily quarter, than a to tax by approximately rate our income this EPS have compensation. $X.XX. first and of the would were was to quarter $X.XX Thank If an of EPS the X.X% tax in to first income quarter impact year compared due rate financial last quarter to first of review foreign increased translation. equity-based have X.X% on an of of decline year's increased you, this settlement Operating our XX.X% favorable quarter. million, consistent number rates year, realization of the had tax X.X% and rate this In the first by and last quarter which would last year. last currency year's start pre-tax compared slide first lower at audit the benefits between compared in $X.XX quarter.

to find Moving declined our sales you'll this X, sales number slide quarter. trends. Total quarterly X.X%

declined supporting related fight look the grew were sales of sales WPS sales, exclude driven you COVID-XX virus. Safety while currency our business X.X%. see and in organic you'll the organic If division in X.X% our Solutions our just division against by Identification Workplace sales that to Organic to products directly at

and strong team and existing moved value. personal WPS to and excellent reaching for delivering Our did offerings quickly product customize social job safety, new customers distancing an

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

continual million first $XX.X trending. by On quarter number factories. Our last quarter our find our margin of XX.X% year. volumes year. focus $XX in to due quarter to SG&A our with gross profit ID compared million slight SG&A Safety business, in was business, mix our of decrease quarter mainly nicely was reduced in efficiencies on in to the to Solutions in expense down this driving this the offset our slide was compared last Workplace This first XX.X% sales product combined you'll X,

salespeople. of benefits our the As quarter first the the XX.X% ongoing SG&A The been spend, a ticked down travel for the with including our the we've of efficiency result in was years, SG&A of reduction percent last to majority last decline our actions, of driving sales, several XX.X% in over from year. discretionary from combined

approximately expense sequentially SG&A vast as compensation. Last i.e. result increased million. of from Looking pandemic, at of eliminated This last comparing of of year $XX fourth this a the to million year we the almost increase in was $XX QX to year, bonuses. in exclusively the majority SG&A QX quarter, incentive-based

back of While levels. we in reinstated normal bonuses most the first year, quarter to this

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

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

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

R&D spend, compared last was sequentially first as compared down of year of year. of and QX reduced to slightly quarter headcount to when but Our a result up the project of was spend the last timing

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

which to impact X.X% decline is profitability improved direct of cost from from year we In the nine result our reduced in income throughout offset investing this X.X% fact, now year. $XX.X more quarter that many sales. of first innovation have because our is pretax suspect trends. of continue number is Pretax the smaller income competitors don't when downturn. important, most investing million than Slide $XX.X million illustrates our to last increased in This wherewithal a the this the financial structure, economic in

in to income to and our this last first quarter, to increased this year. a first to last compared quarter after-tax year's illustrates income to sales, of XX percent XX.X% Net As $XX.X Slide first EPS EPS million and quarter pretax quarter in declined trends. XX.X% $XX.X in XX.X% number year's million $X.XX from $X.XX quarter income last of compared this declined X.X% diluted the quarter.

decrease between be free find flow very you'll to This this year's cash meet we by demands equal EPS operating quarter. last our of compared the increase have flow of earnings $XX.X tax Helping XXX% levels cash X%. XX, flow increased quarter. was in We periods, generation $XX.X our EPS this had increase cash a ensure of all of this the low last million first had our operating operating to when QX On activities strong. represents we number was been reduction in quarter. from generated $XX.X of a quarter. and activities income early an and which up built income Cash that to that operating customers. this drive then due in and cash our a could after-tax contributed XX% from in inventories year. consistent from in cash As tax pandemic, strong rate previously million was was of continues our flow the generation, intentional I XX% flow activities rate reduction flow mentioned, slide an free If would unusually net inventory cash to in million approximately to summary in This to cash

helps that It's flow. discipline cash-based us Our focused. processes consistently and term investment long cash are strong generate this decision

slide of to you'll position. of debt. $XXX.X number no XX, On we and Turning outstanding had cash million October our the find net XX, trending cash

by million $XX.X our increased quarter in dividends buybacks. shareholders the of after and balance returning $XX.X This million, cash even our form to

to approach is disciplined allocation are capital patient. and Our we

efficiency First, economic we cycle. organic to fund throughout opportunities the and our fully cash sales use

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

the dividend where investments where year are in increases. manner buybacks the cash organic then positive. consecutive And and We it synergistic or we that long-term to on shareholders marks will believe annual investments we our investments funding cash strong Fiscal our and dividends, keep sense deploy XXXX focus XXth dividends. of for have these funding where makes of returning acquisitions, either a second, we After ROI opportunities. disciplined the in we form

As Michael mentioned, is right uncertainty now. high very

we're provide As XXXX unable formal to such, fiscal guidance.

of or in related albeit although However, at by fight recede our sales sales COVID-XX. when last, the industrial by will replaced row know general we long a of the sector. the we directly continues rate, buoyed business, in to do pace products these where WPS through slowing in how today, have growth don't And be now growth sales our have they'll sale several at been quarters they products which the COVID-related against will a organic

business. As ID Safety Workplace Solutions over visibility our also quarters. we the lack our We've improving such, in experienced last trends couple business of in

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

were continue Regardless quarter expenses. you we help As ending will impact when make normal by levels, that macro In to XX, will caused sustainable levels. government pre-pandemic organic QX, gains, we're challenges short economy, reduced the revenue of results pre-pandemic continue growth COVID-XX to and XXXX. in seasonality, the of will January macroeconomic lockdowns, for sales exceeded and clearly tight income drive efficiency there the non-revenue-generating we drive of on what results, operating combined still our while are We're financial in to happens products see the investments designed in necessary being seeing specifically recovering. we can we additional our but to for demand fight with

Brady's Michael I'll back cover and globe. to over on with headwinds, turn improves to comments the outsized and economic combined near-term now before be to our to Q&A continues some there Although, to returns growth Michael? balance strong sheet strong around the as organic the industrial efficiencies session. us provide call and our production investments, extremely our generation position well divisional results cash generate focus closing

Michael Nauman

Thank finishing Solutions quarter an Aaron. first million sales sales Identification Slide IDS the at in our last increase outlines of you, each a consistent business. at and $XXX.X six Overall, months. with organic X.X% X.X% results we our to decline number of financial progress from XX of organic an foreign declined IDS pace improve division sales of the currency translation. as through modest, continued but X.X%

the in clearly Americas cases, Europe. countries organic Asia in This cost sales the to sales of health to pandemic, while continue organic quite states with compared of when have of the both greatest challenged point decline impacts sequential admissions coronavirus to coping whereas the modest, the down the numbers were experienced is Asia, XX, year. profit side, focus the led Regionally, sales pre-pandemic to on performed year-on-year countries countries be with during our large product decline is of compared improvement various Overall, last a the Americas, increase quarter's relatively some this X% and line a declines In quarter quarter our XXXX. better declined were business XX appear in in strong was the better as and basis hospital Americas economy Europe. ended Elective Demand improvement decline and on volume are nearly patterns our sales the of once XX.X% to than Asian was deal sales percentage entered getting and saw both surgeries the lockdown. the efficiencies larger major over as XX% somewhat again order care decline a Sales levels. significantly this in the whereas an better, of healthcare And year. July and the Europe but where fourth in segment followed, last first organic normal our on in by approximately the quarter, remains also which quarter from quarter. we pandemic

This side, $XX.X to from last while the cost team was profitability to investments. structure, team the year's quarter. able to IDS profit efficiency in XX.X% we profitable to entire work cost quarter. of quickly efficient of million, and focus and This first increase sacrificing adjust profit ID year's constantly Segment this costs our percentage our last XX.X% keeping activities as sales cost sales-generating keep as in out. our never the improvement sales more become to on first hard On illustrates testament structure and year continue segment these million how a driving was lean, sales organization. increased Solutions a it continual in $XX.X of compared work of to is a

As was down a sales $X.X result, profit margin was our were XX% as million, while decremental only $XX.X segment down million. only

products several this quarter. Our R&D priority, a new commitment and to launched we remains top exciting

and don't Label Vial labels. to and iXXXX technicians the launched faster have vials to Applicator that saves It's time than just both reliable with automatically or we and more labels significantly hand tubes, labels. efficient money. technicians more It printer. instance, lab so and applies much For fumble This writing, applying prints

software our intricate set. These ourselves we're don't bring marry competitors, able quite and The We mark also process. the separate materials is strong the printers, components. our materials, printer, terminal BradyJet entire an printer a we printer. software solution blocks streamlines for panel JXXXX our really our Brady results that to control designed where launched the and JXXXX in of who service industrial solution workstation who combination customers, customer is applications, where and high-performance easy-to-use niche This from

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

rest Although, the I structure. streamlining what invest our We're cost I'm of the customer don't are continuing business. know, about improving economy, Solutions in for what and business our doing excited our our in the future – future ID holds we're service, to

with As dollars cost positive discipline strong should IDS bode and our our profitability These trends generate off, for the on growth we business. of incremental pay well the continue future of strong to initiatives economy sales. revenue combined definitely improves even our

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

reported was in grew WPS X.X% This by and sales impressive our European business organic X.X%. midst WPS Our another pandemic. growth single driven sales grew this quarter. the of organic with upper quarter growth the business digits this in

they Our from supplying the team need time. did that sale and -- an existing our excellent critical last essential job of identification quarter, by we this during benefited customers COVID products. Much products gaining new and the related like customers safety supporting initial

a well customer highest over was we tapered sales the extremely the growth continue this of organic Our sequentially. rate beginning performed each team of down Australian the Australia digits business profitability this and in America over increase in organic for a quarter. quarter in low-single ways North of to with improvement and XX% growth The experience But a quarter level month third declined as the row at service. high sales sales do grow this client grow last organically in to base was Organic provide our with finds very customers quarter. which and our slight quarter, the

these micro to they One their cost structure to business have customers rightsized struggle operating business This sells but their as reduced of are and our revenue do profitably companies. at levels. continues primarily

incremental against product at the standard market Barrier, workplace of we designed the as safety and Brady durable, specifically outdoor for numerous is barriers and significantly and and pending a It's aimed Safety team superior than and easy EasyProtect industrial is It products. barrier. comparable new COVID-XX a patent Seton highly general to portable, indoor launched safety easily this display stores market Our other products innovation and it's including to collapsible customizable competitors to that type better have hunkered fully the our strong keep store, other down customers proprietary continued of and come the is This that manufacture our launch transportable continuing fight new our messages. launch competition, as us to our proprietary to of products expect enables this new is from simple of increase represents sales a of to long-term. margins $X which while that profit margin we will $X.X protecting improving in our million profit over was on We last by of the quarter. keep products gross and very believe Brady. XX% reserve $X.X million driving ahead business $X.X million. first of to This invest WPS appreciate year's segment quarter to strong in cash keep compared segment million we'll we increased many and a

as increasing COVID-XX. every down We've Brady and economy. and necessary is it continue new are continue products a that Our we another fight global entirely once all many the WPS and and product new COVID-XX keep is customers to results. against customers they in our within marketing uncertain a well, behind along team day. environment the I'm pulled proud the ideas role They tremendous we The our momentum. generated is countries locking new listened and delivered investments spirit been serving many customers levels They promised playing new highly new Ideas of way. our what make entrepreneurial clear throughout delivered and generate and their far of They launched us The they many to to organization campaigns the from that delivered together they quarter. modified what products is to customer to reach in needed. strong again launched as base industries. identify positive extremely macroeconomic departments. were showed all team We've to entirely

workplace controlling with we're continue COVID-XX don't we The know we're will can. our demand We customers but future our in Brady. but how for remain related that also is confident safety products of newly acquired many business long will uncertain what

extremely flow incredibly is position. balance are is and up, We our are sheet financial cash in Earnings robust. up, strong

to instructions will both inorganically start capacity I We expenses. will CapEx, tight through the non-revenue enhancing our please generating And put now our through you look we growing balance sheet to to resources, listeners. being to while in R&D, funds and generating value-added work shareholders that, our and opportunities all would acquisitions. continue to sales With provide invest on returning like to would Q&A. accretive Operator, efficiency

Operator

[Operator Michael Fargo. Instructions] from with question comes Our McGinn first Wells

Michael McGinn

Good morning everybody.

Michael Nauman

Good morning, Michael.

Michael McGinn

sales with changing giving missed are I that monthly -- Did guys but guidance I here? not I points kind this. things -- you a an know know Sorry, or give order incremental of if cadence rapidly any really you're uncertain, data

Michael Nauman

Sure. we've improvements the in we did our actually our IDS late worst-case decline -- in improved Every from in particular. talked We month sequential about spring.

space. of so a pattern seen And we have improvement in good steady that very

very declined, addition, the the still products WPS In strong remain COVID-related that although have strong. business and they very still remains business

Michael McGinn

the frame then WPS, stuff differential can saying have don't obviously the COVID product masks XX-plus help And I non-COVID some up safety and ancillary Okay. within are they're is other percent, selling. product? versus know but kind on distributors you you some what of of the of us PPE

that with variation can you towards? point any So us segment

Michael Nauman

do our actually masks. Gel, in it first-line the sell in of call sell related WPS as our to in space, We are lot We workers helping EU. that products we protect Well particular. a they sell

products marking of and but tapes we that modifying we've of we are do those floor sell a such core So a lot lot signage, been sell extremely as well products. yes, products, doing

different few the we're a our some to tooling, assembly used are of have like throughout We into products proud modified so our to more fountain our things them. are people do that COVID-related protected cover modified We've out able we've lockout pivot world from the patented core tagouts, components. lockout are the from water and quite We've products. able They been tag but of. are that that

the been of and variety identification clearly and space. would large we safety-related what a So COVID say I specifically selling have into products

products related. We are COVID clearly aren't breaking out that not

of looking what always as we've it marking So COVID, increase we're at an they're at why when example from that's tape going that differentiate and the we sold. from part numbers floor say specificity and and into looking

Michael McGinn

pass it on. your Appreciate it. time. I'll Got

Michael Nauman

Absolutely. Michael. you, Thank

Operator

next Keith with Research. Housum comes question Our Northcoast from

Keith Housum

good on congratulations and relatively. guys, morning Good a quarter

Michael Nauman

morning, Thank so Good Keith. you much.

Keith Housum

Absolutely.

about to we're of walk But potential from few lockdown the next through us some changed ability months I you as may kind we think uncertain and like sales How will we terms the in in think further business can you in has of how the strategy And lockdowns a additional it where the or what of all kind for hold us. be, of of U.S. guys back a sales provide go some perspective? to your do Europe. a have decline? changed

Michael Nauman

Excellent.

So Keith, first from internal lockdowns of we in and been a it of all, looking perspective, have in at variety lockdowns an in are locations.

running motivated our service our and making keeping the because our base critical world home place. Others ended. lit real were employee very -- around at gone that where factories and But already also work have our Some to never industries, ago. situations we of drive better proven our we're at in couple around we've challenged months and concept opening back but a keeping safer a they

the on us. And would customers far to WPS' strong in in direct customers. are not IDS had other efficient product experience, our digital campaigns, same as campaigns, So interact through in we've that be growth, in from We the our telephone very we've able to do to. with the to overcome extent new making hear being in proactive that really and difficulty really although sure bringing a But highlighted we our very e-mail way as sets campaigns. We able through some sets, see although our in people to our sales product through like that. take we're effort customers able the

the from products parties. need it So to they as in the opportunity and an we're customers actually aren't using other service bring that getting that

Keith Housum

to Appreciate we're WPS the confidence you regarding customers it. want Xand going review giving issues? to able those you. then you Got be COVID the past And you're retain customer What's comment the when made expansion. the I that to

Michael Nauman

non-COVID COVID, our than it's already from the Brady clear are getting or very the COVID. a seeing customers. any we're know. we're comments driven patterns business we Actually So historical the those customers. as initial of business we're getting And non-COVID the entry that although of business customer data was a lot it was getting you we into than really more strong And from through see, are stronger repurchase typically as

Keith Housum

in stronger Got is it in Europe or Is geographically you. board? Is North it across is than limited, America? it the that

Michael Nauman

It is board. across the

know core America. of you North as better its through know America than in is decline business stronger. because But also our it European one in really micro been looks that the been actually North has hurt in businesses you of Our dramatically as businesses has

Keith Housum

Got you. and Thanks, good Mike luck.

Michael Nauman

Have Keith. you, a great Thank day.

Operator

not like I'd call over any Michael this time. to further the at I'm And back questions showing any turn to comments. for closing

Michael Nauman

uncertainty Thank in daily times you. with disruption this we're comments like and few and you concluding with to a on living dealing I'd leave morning. We're unprecedented a basis.

Our unchanged. focus at Brady remains

We will deliver what we promise to our customers.

to We will drive sales-generating invest resources R&D and in growth.

take our base from perspective. will we're subside will don't what in controlling we but cost amazing this a We constantly pre-COVID increase invest customer to automation of today and and we can demand will when ultimately and to employees. and levels efficiencies care know what We we when can pandemic we're doing will return our

our quarter year. nicely This over the business grew prior WPS

business revenue of IDS its sequential and improvements continued Our trend strong profitability.

customers, and our the focus us to maintaining on long are At help a and It's cash for Making a we'll your through what that our cost right decisions safer our enabled we're the the pandemic. we're a time, to the and place We're and is long-term not communities stay focus we Brady. term earnings. the to employees, same continue the time another right making world can our for strong day. this morning. you great quarter in and world slogan doing better reduced and make make had a Please success. today investments us we'll call. Our the grow structure of day every that for will safe disconnect pre-tax up And sure net set our efficiency you cash and we focus position. Operator, and very this thank generation may Have reality.

Operator

does presentation. this gentlemen, and today's conclude Ladies

day. You may all have wonderful disconnect a and

Brady (BRC) 19 Nov 202021 Q1 Earnings call transcript