BRC - Earnings call 2 2024 | Brady Corporation

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Operator

Good day, and thank you for standing by. Welcome to Brady Corporation's Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to Ann Thornton, CFO and Treasurer of Brady Corporation. Please go ahead.

Ann Thornton

you. Thank welcome Call. Corporation and Quarter XXXX the Conference Earnings to morning, Fiscal Brady Second Good for morning's slides www.bradycorp.com/investors. The this website on at our call are located

will #X. on We prepared Slide our begin remarks

results. may forward-looking Please XXXX during important which forward-looking Words as is examples are factors will, subject morning risk note expect, various in significantly statement. news of were with Risk to anticipate information which about believe, and a expected this our we It's such factors and forecast that may, just forward-looking make call, words noted information. September. that comments filed could and impact uncertainties, SEC in note Form to few the release was in the this Brady's XX-K, fiscal identifying

that by may copyrighted note please Brady the of is teleconference be not Brady. this and consent without rebroadcast Corporation Also,

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

will recorded. As Q&A participation consent session the your being such, in constitute to your

I'll Shaller. President now turn the Executive Russell? Officer, Brady's Chief and call over to Russell

Russell Shaller

Ann, joining thank us today. you Thanks, all for and

XXXX another second report morning, I'm this and quarter and results profit. financial to our sales of pleased improved organic quarter released growth We

global grew share pretax be increased This we non-GAAP our margin and team. the gross hard earnings without possible by of per our we entire by dedication to our improved earnings our XX.X%. These XX.X% wouldn't XX.X%, profit quarter, we results and work

to just important, about our to earnings environment creating the success and has and we've we've last regional it's opportunities which of do effort It time me me made absolutely to put our differently the to the our where day. contributed is the of we're proud continue cash excite part. flow. they the think incredibly ensure which has identified best day, and I'm progress at every improved became And as team reorganization, The every single encouraging year. this what motivate teams effective an to in

together, brought ever. thoughts we're it's cultivating within and better our more regions businesses teams all our working our Combining has than together innovative

increasing This quarter, sales in we, once research both again, force. while development our grew and per our investment share, earnings and

nearly We a increased quarter, number business. spend global the our throughout second R&D and XX% salespeople we in of by our new added

to several a have pipeline which the are some launch innovative quarters to over long growth and products new strong of over next term. new exciting essential future drive sales We the products,

the turn more over now details Ann? Ann results. call provide financial I'll on to to our

Ann Thornton

GAAP compared quarter, our Thank last you, and second Russell. our this We share, profit of was up which EPS XX.X% improving in per gross organic grew while, again, overall quarter margin X.X% sales $X.XX resulted year. of This once the profitability. to

last is of excluding Non-GAAP EPS, calculated our quarter of $X.XX compared the amortization share to this XX.X% after-tax the expense, as second quarter, GAAP which EPS, was up was which impact per year.

X.X% organic & And Americas sales increased Australia quarter. Asia second year's Our compared year's grew profit region segment to quarter. last and our & and XX.X% organic second sales increased by grew last compared profit by segment X.X% X.X% region to Europe

growth. minimum well with are despite a in extremely macro We executing Europe environment

customers integrate and as to new opportunities our to existing businesses our to well sales continue solutions. with We customers identify high-performance convert as grow to

our XX.X%, commitment to growth quarter financial continued macroeconomic funds a shareholders. in revenue non-GAAP this Our and continued significant margin, despite growth EPS organic profit slowing takeaways trends, key gross of return are: to improvement

sales sales resulting a by X.X% foreign and grew for sales Organic trends. Now increased X.X%, sales decline the currency impact of X.X% to divestitures sales Slide our of reduced in we'll quarter, translation while quarterly total turn X.X%. this #X

trending. Slide #X outlines our quarterly gross margin

product of with in profit last to our significant mix. second the factors, margin being of compared quarter XX.X% Our the XX% gross margin result gross was favorable improvement XXX several by points improved This profit year. basis to the in primary

to find our to of $XX.X million year. #X, this second Turning million SG&A SG&A quarter you'll in last was the compared expense $XX.X trending. quarter Slide

sales, a last through our XX.X%. reducing throughout SG&A with global efficiency businesses. As initiatives ongoing of while was SG&A year additional consistent percent overall at expenses selling We're resources, funding

Slide and development. our research details in #X investments

investment products quarter, fully This once R&D to year. fiscal $XX.X of in in efforts of this X.X% second which R&D launch have our $XX.X we, several to we million, from to sales. again, innovative increased our was We're half the million committed and new planned

on from the XX.X% Moving quarter. $XX.X to $XX.X pretax to find which Slide you'll basis second million earnings, million #X, our a in increased GAAP

from both from amortization to million. $XX.X earnings Excluding pretax $XX.X periods, on basis million non-GAAP a XX.X% increased

earnings details #X and Slide EPS.

a increasing trend quarter. continued quarter-over-quarter this basis Our earnings on of

excluding GAAP Our XX.X% second from And increased year. both quarter compared last non-GAAP to of amortization impact after-tax our EPS EPS the increased by XX.X%. periods,

Slide -- onetime summary been one generation. find that of #XX, quarter facilities previously cash this leased, cash this to cash purchased our increased Capital because to in Operating resulting the from a $XX.X flow had million to of that Turning $XX.X of year quarter due million purchase. expenditures negative increased you'll our this we second we free last in flow quarter.

closing have location the term. for secures transaction forward long to it us been this because for We looking manufacturing a primary

in #XX, find cash of $XX.X on a net sheet. our you'll consistently that balance Slide has We're the On strong impacts million. cash generation our had currently position

reducing capital gives in returning in this with This the dividends flexibility and share incredible the of over quarter, position. our in we to net debt, decision. buybacks us a $XX and purchase an facility shareholders are amount cash even form our allocation our million So of still

Our consistent, sales well as development, opportunities. sales capital remains product investing capability-enhancing includes our to allocation is new in resources, fund capital organic CapEx. automation-focused efficiency expenditures generating to which fully as first This use approach cash and to

throughout to the capital productivity to continue opportunities economic and We growth sales deploy will cycle.

our This and funding opportunistic price. share synergies we when we on buybacks Next, see our investments intrinsic between for focus increasing in manner a in we or organic value annual our a dividend. have disciplined cash After deploy announced either disconnect dividends, consecutive where increase fully acquisitions our for we we trading dividends. and our consistently our clear fiscal our then year, our XXth

growth incredibly and synergies dividends in is puts price through companies the clear through Our execute buybacks. R&D and our sheet sales are and the to opportunities acquire our additional to resources, position when strategically right share and to to return shareholders balance investments strong us funds a

On you'll Slide #XX, guidance. find XXXX our fiscal

We our are GAAP increasing $X.XX XXXX $X.XX basis of on to $X.XX a year full and to GAAP $X.XX basis. basis on $X.XX to our fiscal $X.XX range non-GAAP EPS the on bottom range non-GAAP of $X.XX basis end $X.XX to new a and to of a on guidance a

assumes upon rates, expansion. it is Our outlook based continued exchange economic January foreign XX currency and

slow parts and Europe. continue to conditions certain in Macroeconomic markets end do of

now be organic full low single in we digits sales that So expect the year growth XXXX. for fiscal will the

$XX a CapEx of us leased as facility, consistent, of combine which guidance our approximately approximately of mentioned, the approximately new build-out with which rate locations well which depreciation the an million, income of million purchase will XX%, of for elements million allow and tax amortization $XX of facility, owned and capital of X the $XX of to other The as is previously million expenditures approximately leased remain location. $XX inclusive I to into X

to of the Potential guidance, enough or timely include potential overall unable manner offset slowdown activity. in dollar, U.S. in that our were risks an to others, a strengthening economic pressures inflationary among

Russell? and to thoughts our regional Q&A. to back provide the turn to call I'll cover some closing before Russell results over now

Russell Shaller

Thanks, Ann.

including Asia impact in Sales delays. of X.X% foreign result, currency, detailed and decline was sales million grow automation sales of end major region consistently our divestitures Our product the lines project was in and a regional the and $XXX.X Americas industrial We impact some markets, we're reduced despite of X.X%. by X.X%. as were to this on well & are organic total in weakness able results the as Slide growth quarter The were seeing XX. sales

health we hospital core Our demand setting. well, quarter. care in reimbursement declined area care a the where the continues weakness is some overall providers, identification impact line, identification health admissions, in in care performing to the The lower our saw which products decrease rates for for coupled with our product business health of reduce within

have Outside and remaining health that growth Identification our for did looking and quarters as was products Solutions offering, product Safety few key product our in throughout new excellent our analyzing to forward some well of the We're next areas care, to trend. we this launching in the we're development mitigate quarter.

Our business the where quarter in with growth nicely X.X% and just the growth. We on saw we recovered in in region quarter sales India, China, Asia incredibly throughout another sales with sales growth. over mid-single-digit strong second the with in organic turned corner grew along XX% growth

clear Asia in Our leader several in for growth has India years. been business business a our

So future India. we're about the excited in

XX.X% & Asia increased profitability to Americas to of XX.X% segment in from this and profit $XX.X sales quarter. Segment million of sales improved X.X%

in increase significant the in resulted margin profit profit. gross in improvement continued Our segment

focus $XXX Slide organic XX X%, X.X% our of were total slower Sales Europe growth economic sales for details X.X%. by in able we million grow absolutely growth in Australia quarter, Organic was well was still sales performance Europe, that the region. X.X% foreign require products. is through Europe to Despite the this organic and ideal & was in use a of conditions currency and increased our geographies were X.X% our solution, end Brady on above and specialized markets in growth which Australia cases quarter. GDP growth a key for in

XX.X% percentage to Our the solid profit segment million $XX.X increase organic as in increased And from growth of for to XX.X%. segment a in profit resulted sales, from sales quarter million. $XX.X

Although price cost able more efficiencies pressures, we're increases. than targeted facing we them to operational offset were and through

as in to our I'm sales made. continue to as of well the with we've opportunities progress new businesses proud to provide current identified by Europe, integrate particular. continue solutions for our customers in team. grow customers the really be We And

has execution been Our Australia & in strong. incredibly Europe

forward as and another We the high second year the of and quarter the well. to first definitely on had finishing a note I'm half looking of half year, great

instructions we'd start would like listeners? to that, Operator, Q&A. please our provide With to you the

Operator

Sidoti. question And Steve of Instructions] Ferazani from [Operator the our with line first coming

Steve Ferazani

you by the you guidance. end wanted the guidance sales when high start I because if asking about achievable was I issued of end know you it, expected EPS your hit the high of to

end, So moving raising to high the and end. the we've guidance not end the seen low go you lower you're now of but

So at pace? to clearly higher move what the you end I X. as the growing the square to sales guess is to how enable to guidance to not -- trying I'm same the are else going right What

Russell Shaller

Yes.

on. that going a things quite couple So growing weaker actually continue areas least profitable of are of bit are more businesses. And above The to fortunately, businesses. or growth, are there's sales our that terms nicely little plan profitable and in a be plan at are ones

the of that equal, the which Again, all made. into feel that we range in a nudge being some X, there. performed with of next X quarters, and wasn't that is how and we we've things in seeing project it, why the at top comfortable first adjustment line we margin do you're feel the though So we we to look that gross the that improvement the consequence could has then quite our lot with in the if even

Steve Ferazani

a what is it's you're and So product geographic saying? mix

Russell Shaller

Right.

Steve Ferazani

Or are there costs out? taken

Russell Shaller

operational always businesses improve any do continue like of slight -- that awful efficiency good and has There But fact lower-margin can with and higher-margin our we an mix lot we areas the it our to are manufacturer, outperforming there's businesses. so. the do that to

Steve Ferazani

Okay.

sales this only give that that last regional little is quarter, little of not a was Can impact. the was recall on one -- on on the X% touch the bit On having that March line? a you premises, number and an divestiture, big which impact I

Russell Shaller

Yes.

is small business, going divested CEO as we us. to a with It's wasn't Concepts. portfolio. for good I our Again, took So not And over growth another Personal really that I X when vector said, almost significant fit which called a ago, with we're our also basis. look years fit at didn't an there businesses access move really just business. ways we our future And personal forward. portfolio -- decide and what for portfolio and ongoing thought both And our that control fit were the better the us concepts to on -- to really as

Ann Thornton

last that quarter, did Steve. And close acquisition

mentioned. one, the financials But just to the that second impact the immaterial. one was total was The

our then out but the So just growth impact -- are call of -- sales organic divestitures. and we we

seeing quarter. So this it you're where that's

Steve Ferazani

Okay.

seasonally taking is much before. How the lower-performing very was in margin? to QX strong businesses above it don't slower gross recall you a Okay. number. ever mean Because out these contributing I doing I XX% margin

Russell Shaller

Yes.

overhead Concept", margin. high we business high "Personal It the a ironically, sales was was a So gross also business. divested,

the prior is current So think calls, big deal. Yes, inflationary that And I of us given gross target the margin, a think as good cost product in spoke right as I structure. a with place our a reasonable net XX% wasn't for our feel, I is it to profit conditions kind stands that mix now. we and

future. looking I'm more that So of the to in see

Steve Ferazani

get If more one in. I just can

moving a on in this How obviously full are great the point? terms is you're forward. M&A? developed flow cash Where number, In pipeline at shape like? What's strong looking year it of you

Russell Shaller

okay. M&A -- On

So of properties. what we're yes, we clear idea in number a a terms looking tremendous M&A. There have of of for aren't

think, either as strategy. buy, surprised that I additive to direct is that's before, businesses again, clear anybody something I've are These made our then a if said be we have adjacent overall to mistake. or we

anything So in do business. core people which products, be the our that will we things, make in of of space or the this is and really identification

point than So I will tremendous to we number a not much ago. even valuations year getting we say properties. the did a are a comfortable of more that where feel

be stewards we want Brady, So of it's -- cash. "With we've always to our said, good

use own acquisition." best the is look to the sometimes sometimes and best is cash back our to shares buy an our of to And

Operator

our next from question from Keith Housum coming Research. Northcoast And

Keith Housum

at Russell, a you guys obviously, look the us had of I impacted little growth can around bit of But neck. context as is or performance the of size decline. noticed that's the was decline? of this we a by PDC growth, that How give you that quarter? Americas this probably weight the the your one much

Russell Shaller

Yes. did away of from. kind group everything to well, PDC I'm the say the took identification going that

So is rest compared -- unfortunate, size of business. the that of given to which the particularly PDC

don't of it? we that think level And I some question couple I things distributors. we I were headwinds happens a the you some quarters. the with of have of trends do that combination because the cyclical next think in foresee our of like the and do see some why importantly, more of stocking about that get business,

some very we good a at next merging the a think together, it our them progress. not their the from idea benefit gives couple and at business I still we work in think with It their strategies, larger relooking some go-to-market take much of several And where can both been years. of I of great It's of integrated a business can strength. additional America where But the a Brady they -- in for portfolio has have business organization. years. we're performer where take they product

Keith Housum

are All expenditure-driven? that. more driven Remind your versus right. end OpEx how terms spending, so I your me by a markets, of of in appreciate of consumable capital much sales

Russell Shaller

Yes.

that but... [Technical don't probably we Difficulty] kind resolution, So break that into of down

Keith Housum

or OpEx-driven sales. asked just the Russell I went regarding to out. that answer CapEx and started question question

Russell Shaller

Yes, I apologize for that.

Keith Housum

No worries.

Russell Shaller

right I'll And I but I guess there's gave answer, national cell phone great myself. And now. repeat problem a

businesses, So business. at about better And of if or really have hardware. think consumables I at or it, probably our X look fixed thinking call way a you Brady's we different, it's I'll looking

they consumables those where last of a might years. facility might what semi because that. they're -- we significant They -- last and our forever. them, We tended you, than less MRO couple have They in safety of space, do companies not ID portion the locks, might last and I'll have to call products, a

gets they our because refresh most buy ]. of will And -- with customers their regular whatnot facilities so from to a redo and us continue rate customers we our if [ that

and razor, to blade Then up with which our get consumables, the And a significant razor part last printer that those you printer essentially get the they're makes our printer basis, of of our next the regular course, goes the part, used which on business. is sales.

X And for X last, the refresh. on the case, to years the something tend printers use depending between and

nor do are So products forever. of are while them none they really our durable, last intended

-- business. the in a again, rate regular on depending get you pretty there's our So category, refresh

of that's answers your at helpful. that so It's question. kind it. Hopefully, we look how And

Keith Housum

It I will that like does. appreciate Do producing acceleration confidence It's to that. it we're step. step, up. we're guess R&D. you question is And Yes, We've that frame mean is the next growth we been several gives need do it final coming I seeing? years the it next what R&D it? an is of feels now. you see me. around growth? do what excitement I been that to for excitement translate guess, the to helps the the always the the that or numbers I close to hearing how

Russell Shaller

Yes.

things So say there's that want to about X the I probably R&D.

is first The in journey. long a we're

money when it years new less bit a R&D, printer, little refreshing. devote For roughly to us, we X a to takes develop for

products, them. the time. new revenue, like product very generation product And number the again, regular so a X industrial about And lot to where something and iPhone store I'm category, of in next runs also typically what depending pops to But super slower we have you're adoption. have of and X out see, It's We does product a not new take few seeing buys and launches years launch. it the of everybody is between These a an their quarters. after excited them. cycle. on the iPhone peak like

So in much than cycle a see different consumer you'd product.

same the an an I and that not our to had ability commoditized to to new effect in our and margins point, ability products ability has terms capital. and on had think return effect our our absolutely our maintain R&D our At be of gross price,

our same are things seeing ones anymore. you some of more not commoditized the even because, part of we to just divested play at or products the are the those So come story time,

on of which Brady absolutely works. So our already will the product I our nudge But growth you're overall think profitability, growth you to really see for them explosive needle that's are introductions? we not looking and any from No, way the seeing.

Operator

of the with of Keeler is And coming Bank America. line question Cashen our next from

Cashen Keeler

Just back for the year. the growth get to guidance organic wanted to

continued low your guess, revised expect as that organic So And year bit gives get you single-digit a little particularly for I we the tougher on back year, comps guidance, what the in growth back can the in the your of half growth half here? end? of confidence kind on of

Russell Shaller

crystal we of -- literally our our We And have touch thousands don't the direct closely we Yes. points obviously, had distributors but our we with ball, and magic customers. sales. work through

I a lot regions which recession, investments which doesn't think quarters thoughts. people some lot course, I And been same the seem have a has of and people some with our U.S. economy But there's demand. time, the the give murky the happened past election, of interesting, and originally predicting at you think of also might of a to few in have then, countries.

the put space we something has other when seeing. of which sales, this declines But happened not in in what some reporting the year-over-year and companies, all I industrial at together, look of are that significant we're

fact, because Brady, much of breadth other the again, products but our stronger comparison In I is quite of the think companies are similar. product we're like think, lot similar in than of that offering, and similar categories. anybody don't a are I seeing, a

you if guidance. these So felt with all into factors take we account, our comfortable

so something And new. we're barring

good for be I think the we're second half. going to

Cashen Keeler

trying Are of Okay. terms X sense. guess, Makes it comment just And in you demand able you're I to bit here. across little now just back quarter-to-date regions? to end months that of or the seeing more, a kind at into markets quarter peel what almost all we're your

Russell Shaller

Yes.

So I are for but we have was January And weak. December certain wasn't XXX% distributor very if and ended rebalancing us well. there us some what for would say not you,

feel is January is good. months we're we if predictive future, so the But would the just predictive very, if very January together, okay. I -- And X of say,

Cashen Keeler

you're there sense. regions? terms else adding anything to end your besides sales Makes headcount resources, doing across that additional of is And Okay. generating just adding in just

Russell Shaller

Yes.

So some closing of I'm take kind my to out comments. of going

everybody which how sales like automate sales interesting on some depending have occasionally experiments certainly confusing we're and is that both tools, We comes generative are think with -- fascinating, AI, looking our the We actually new and to answer at up. it tools. else, I

to But whenever improve we the in language Because see the interaction our a quickly of in things opportunity one for large see a customers with of sales have customers. as to SKU you Brady, important And getting I SKUs, and investment have that way. most help portfolio the them great of you to can right what can is absolutely a our different terms our augmentation tools. do thousands of models I knowledgeable having

Cashen Keeler

kind just of Got looking and update targets to you it. can the And provide last Got next the trace? guess, the over just it. track for couple on any able here? next are or And of mile I one for what, industrial that quarters be markers me. Are we

Russell Shaller

it -- A of tremendous pushout sure of I'm of headwind. the slowdown us, because wasn't you. couple in a the much hasn't been our We're last on companies in Yes. percentage projects the a quarter had year-over-year for some some smaller it's comps. space definitely quarter lost seeing a big it bad in revenue, pretty

product of believe adoption is right get and some with we and few is up long-term the it I our users, that good automation rates with because if portfolio have particularly a up. And launches pause the to some there's I But that think, labor advantage bit next in for as fantastic, the we availability. now, industrial rest actually, us little coming shored our labor works actually trend do of of the the end of quarters.

Operator

further Mr. this the call queue I showing time. Russell over I'm questions now closing turn no in remarks. for will to the Shaller back at

Russell Shaller

apologize we had. thanks interruption everyone, And the for and today. that again, time Thanks, about we brief your

have saying But more pleased opportunities we single into hoped am place to we the teams I on made put We're that was executing We actually with our and regional identify incredibly year. reorganization to half end our first our last every initiatives. that bringing strong. we've want of would than day. made do to together, results progress progress I of the -- with I continue XXXX improve

continue to M&A. our businesses to and invest share Our strong, balance with remain as to opportunistic well committed through existing is our financial execute as in and resources, sales to incredibly R&D position provides dividend and buybacks us our to flexibility sheet also

exactly all what value long Our to the fund simultaneously, we'll of to cash over us term. do shareholder order which generation ability our capital the gives is generate allocation in priority

the impressed as macroeconomic commented that excited ability personally I trial we efforts, will with I of future. certainly, our to Brady's generative in environments technologies. our consistently will Brady in future. which AI impact of and ever-changing enable questions, believe types during And the customers I'm to and adapt our Brady, customers been better the to the solutions serve I've offer with several

to grow continue Our products to sales; we to value shareholders invest product and and map drive our execute operational and capital further organic and efficiencies; through deploy shareholder develop to priorities of and profitability; remain have buybacks. dividends increase effectively long-term our to investments, pipeline; to acquisitions organic consistent, in our our to which are: our returning road offering funds ensure through new to share innovative

our present call. in can Thank interest these know macroeconomics The to Brady. Operator, may for challenges, challenges and team the we I place right for the your morning but your this time in you for you and that deliver meet have disconnect shareholders.

Operator

gentlemen, and that Thank for today. does our you Ladies conclude conference participation. for your

may disconnect. You now

Brady (BRC) 22 Feb 242024 Q2 Earnings call transcript