Summary of Brady Corporation Conference Call - March 19, 2026 Company Overview - **Company**: Brady Corporation (NYSE: BRC) - **Industry**: Manufacturing of high adhesives and printing solutions for safety and identification applications - **Revenue**: $1.5 billion with 48% generated outside the U.S. in fiscal year 2025 [1][2][6] Core Business Insights - **Product Range**: Includes wire identification, specialty adhesive labels, printers, safety and facility ID products, healthcare identification wristbands, and more [1][2] - **Market Diversification**: No single customer accounts for 10% of total sales, indicating a broad customer base [2] - **Geographic Distribution**: 52% of revenue from the U.S., 30% from Europe, and 12% from Asia and Australia [6] Financial Performance - **Earnings Growth**: Achieved five consecutive years of record EPS, with a 9% increase in EPS from 2024 to 2025 [3][4] - **Cash Position**: Net cash position of $98 million as of January 31, 2026, allowing for continued investment in organic growth [4][26] - **Dividend Policy**: Announced the 40th consecutive annual dividend increase, reflecting a strong commitment to returning value to shareholders [4] Research and Development - **R&D Investment**: Increased to 5.3% of sales in fiscal year 2025, the highest in company history, aimed at improving organic growth [3][20] - **Product Development**: Focused on innovation and efficiency in product development, with new products like the i4300 printer expected to fill market gaps [40][41] Operational Efficiency - **SG&A Reduction**: Reduced SG&A as a percentage of sales by 800 basis points over eight years, enhancing profitability [3][20] - **Gross Profit Margins**: Improved gross profit margins to above 50% in 2024 and 2025, despite challenges from tariffs [18][19] Market Trends and Challenges - **Geographic Performance**: Noted differences in market performance between the U.S. and Europe, with European manufacturing down impacting sales [31][32] - **Macro Environment**: Acknowledged the need for macroeconomic improvement to drive organic sales growth, particularly in Europe [33][34] Strategic Focus - **Acquisitions**: Recent acquisitions (Gravotech and Mecco) aimed at enhancing product offerings in direct part marking and optical scanning capabilities [14][15] - **Long-term Strategy**: Committed to sustainable growth through innovation, automation, and a diversified product portfolio [16][17] Conclusion - **Future Outlook**: Positioned well for future growth with a strong balance sheet, diverse product lineup, and ongoing focus on organic sales growth and profitability [27][28]

Core Insights - The Royce Small-Cap Trust aims for long-term capital growth by investing primarily in small-cap and micro-cap companies, with at least 65% of its assets allocated to equity securities in this category [9]. Performance Summary - As of January 31, 2026, the Net Asset Value (NAV) is $18.82, while the market price (MKT) is $17.37 [1]. - The average annual total return for the Fund is as follows: - One-Month: NAV 6.39%, MKT 7.89% - One-Year: NAV 18.73%, MKT 16.85% - Three-Year: NAV 14.63%, MKT 15.30% - Five-Year: NAV 9.00%, MKT 10.12% - Ten-Year: NAV 13.18%, MKT 14.47% [1]. Portfolio Diagnostics - The average market capitalization of the portfolio is $3,498.7 million [3]. - The weighted average Price-to-Earnings (P/E) ratio is 20.0x, and the weighted average Price-to-Book (P/B) ratio is 2.4x [3]. - The total net assets of the Fund amount to $2.30 billion [3]. Top Holdings - The top ten positions in the portfolio and their respective percentages of net assets are: - IES Holdings: 2.0% - Assured Guaranty: 1.3% - APi Group: 1.2% - ESAB Corporation: 1.1% - Arcosa: 1.1% - Brady Corporation Cl. A: 1.1% - SEI Investments: 1.0% - Quaker Houghton: 1.0% - Powell Industries: 1.0% - International General Insurance Holdings: 1.0% [6]. Sector Allocation - The top five sectors by percentage of net assets are: - Industrials: 26.2% - Financials: 19.7% - Information Technology: 14.3% - Health Care: 9.3% - Consumer Discretionary: 9.3% [8].

Financial Data and Key Metrics Changes - Organic sales increased by 1.6%, marking the 20th consecutive quarter of organic sales growth [7][8] - Adjusted diluted earnings per share grew by 9% to $1.09 from $1 in the previous year [12][13] - Gross profit margin improved to 50.6% from 49.3% year-over-year [8][12] - Operating cash flow increased by 34.7% to $53.3 million compared to $39.6 million in the prior year [14][15] Business Line Data and Key Metrics Changes - The Americas and Asia region saw organic sales growth of 3.1%, while Europe and Australia experienced a slight decline of 1.1% [7][19] - R&D expenses increased to $24.3 million, or 6.3% of sales, up from $18.7 million, or 5.2% of sales in the previous year [11][12] - SG&A expenses were $107.9 million, representing 28.1% of sales, down from 29.7% in the previous year [9][10] Market Data and Key Metrics Changes - Sales in the Americas and Asia region were $251.6 million, up 7.6% year-over-year, with organic growth driven by wire identification products [19][20] - Europe and Australia reported sales of $132.5 million, with organic sales declining 1.1% but benefiting from foreign currency translation [21][22] Company Strategy and Development Direction - The company aims to continue investing in R&D, increasing its focus on engineered products to drive organic sales growth and profitability [6][25] - The launch of the i4311 Transportable Industrial Desktop Label Printer exemplifies the company's commitment to innovation and meeting customer needs [4][5] - The company is focused on strategic acquisitions and maintaining a strong balance sheet to support growth initiatives [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the year, despite challenges in the manufacturing sector, particularly in Europe [44][54] - The company anticipates organic sales growth in the low single-digit percentages for the fiscal year ending July 31, 2026 [17][18] - Management noted that the U.S. manufacturing capacity utilization is a key factor influencing growth, currently at 77%-78% [35][36] Other Important Information - The company is in a net cash position of $97.8 million, allowing for continued investment in growth opportunities [15][16] - The company has announced its 40th consecutive annual dividend increase, reflecting its commitment to returning value to shareholders [16] Q&A Session Summary Question: Concerns about organic sales growth in the Americas - Management clarified that organic sales in the Americas were up 1.4%, with Asia contributing significantly to overall growth [30][32] Question: Confidence in Europe and Australia returning to growth - Management indicated modest growth expectations in Europe, with some regions showing improvement despite ongoing challenges [44] Question: Performance of recent acquisitions - Management reported that the Gravotech acquisition has met technology goals, although some segments are impacted by weak automotive markets [45][46] Question: Pricing and memory supply issues - Management confirmed no current issues with memory pricing or shortages, as they maintain a low usage of memory in their products [47][48] Question: R&D investment versus organic growth - Management emphasized that R&D investments are long-term and correlate with improved gross margins, focusing on engineered products for future growth [49][50]

Financial Data and Key Metrics Changes - Organic sales increased by 1.6%, marking the 20th consecutive quarter of organic sales growth [7][16] - Adjusted earnings per share grew by 9% to $1.09 from $1 in the previous year [12][13] - Gross profit margin improved to 50.6% from 49.3% year-over-year [8][12] - Operating cash flow increased by 34.7% to $53.3 million compared to $39.6 million in the prior year [13][14] Business Line Data and Key Metrics Changes - The Americas and Asia regions saw organic sales growth of 3.1%, while Europe and Australia experienced a slight decline of 1.1% [7][18] - R&D expenses rose to $24.3 million, or 6.3% of sales, up from $18.7 million, or 5.2% of sales in the previous year [11] - Segment profit in the Americas and Asia increased by 16.9% to $53.8 million, with a profit margin increase from 19.7% to 21.4% [19] Market Data and Key Metrics Changes - Sales in the Americas were $251.6 million, up 7.6% from the previous year, with organic growth of 3.1% [18] - Europe and Australia reported sales of $132.5 million, with a total growth of 7.9% driven by foreign currency translation [21] - Asia's organic sales growth was notably strong at 14.2%, with India leading at nearly 25% [18][19] Company Strategy and Development Direction - The company is focused on creating world-class products for industrial customers, with a commitment to R&D increasing from 3% to nearly 6% of revenue [6][11] - The launch of the i4311 Transportable Industrial Desktop Label Printer exemplifies the company's innovation strategy [4][6] - The company aims to provide easy-to-use solutions for complex identification requirements, adapting to changing standards and regulations [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to growth in Europe and Australia, despite current economic headwinds [41][42] - The company anticipates organic sales growth in the low single-digit percentages for the fiscal year ending July 31, 2026 [16] - Management highlighted the importance of U.S. manufacturing capacity utilization for future growth, currently at 77%-78% [33] Other Important Information - The company is in a net cash position of $97.8 million, allowing for continued investment in growth and shareholder value [14][15] - The company has increased its full-year adjusted diluted EPS guidance range from $4.90-$5.15 to $4.95-$5.15 [16] Q&A Session Summary Question: Concerns about organic sales growth in the Americas - Management clarified that organic growth in the Americas was 1.4%, and acknowledged a slowdown in momentum [30][31] Question: Factors influencing growth trajectory - Management indicated that growth is closely tied to U.S. manufacturing capacity utilization, which is currently low [33] Question: Margin health and pricing strategy - Management noted that margins improved due to a favorable product mix, with engineered products performing better than commoditized ones [36] Question: Confidence in European growth - Management expressed cautious optimism about modest growth in Europe, citing potential recovery signs [41] Question: Performance of recent acquisitions - Management reported that the Gravotech acquisition has met technology goals, although some segments are impacted by weak automotive markets [42] Question: Concerns about pricing for commodity products - Management acknowledged pricing pressures in the U.K. but emphasized a long-term shift away from commodity products [47]

Financial Data and Key Metrics Changes - Organic sales increased by 1.6%, marking the 20th consecutive quarter of organic sales growth [7][16] - Adjusted diluted earnings per share grew by 9% to $1.09 from $1 in the previous year [12][13] - Gross profit margin improved to 50.6% from 49.3% year-over-year [8][12] - Operating cash flow increased by 34.7% to $53.3 million compared to $39.6 million in the same quarter last year [13][14] Business Line Data and Key Metrics Changes - The Americas and Asia region saw organic sales growth of 3.1%, while Europe and Australia experienced a slight decline of 1.1% [7][18] - R&D expenses increased to $24.3 million, or 6.3% of sales, up from $18.7 million, or 5.2% of sales in the previous year [11][12] - Segment profit in the Americas and Asia increased by 16.9% to $53.8 million, with profit margin rising from 19.7% to 21.4% [19][22] Market Data and Key Metrics Changes - Sales in the Americas and Asia reached $251.6 million, up 7.6% from the previous year [18] - Organic sales in Asia grew by 14.2%, with India leading at nearly 25% organic sales growth [18][19] - In Europe and Australia, total sales were $132.5 million, with organic sales declining by 1.1% but benefiting from a 9% increase due to foreign currency translation [20][22] Company Strategy and Development Direction - The company is focused on creating new world-class products, exemplified by the launch of the i4311 Transportable Industrial Desktop Label Printer [3][4] - Investment in R&D has increased from approximately 3% to nearly 6% of revenue, indicating a commitment to innovation [5][11] - The company aims to provide easy-to-use solutions for complex identification requirements, adapting to changing market standards [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to growth in Europe and Australia, despite current economic headwinds [41][42] - The company anticipates organic sales growth in the low single-digit percentages for the fiscal year ending July 31, 2026 [16] - Management noted that U.S. manufacturing capacity utilization is a key factor for growth, currently at 77%-78% [34][36] Other Important Information - The company is in a net cash position of $97.8 million, allowing for continued investment in growth and shareholder value [14][15] - The company has announced its 40th consecutive annual dividend increase, reflecting a strong commitment to returning value to shareholders [15] Q&A Session Summary Question: Concerns about organic sales growth in the Americas - Management clarified that organic growth in the Americas was 1.4%, with Asia contributing significantly to overall growth [30][32] Question: Confidence in Europe and Australia returning to growth - Management noted modest expectations for growth in Europe, with some regions showing improvement despite challenges [41][42] Question: Performance of recent acquisitions - Management reported that the Gravotech acquisition has met technology goals, although some segments are impacted by weak European automotive markets [43][44] Question: Issues with memory pricing or shortages - Management confirmed no current issues with memory supplies, as they are a low user of memory [45] Question: Reconciling R&D investment with organic growth - Management emphasized that R&D investments are long-term and correlate with improved gross margins, focusing on engineered products [47][48] Question: Pricing concerns for commodity products in Europe - Management acknowledged some pricing deterioration in the UK but indicated a long-term shift away from commodity products [49]

Financial Performance - Net sales for the three months ended January 31, 2026 increased 7.7% to $384.1 million compared to $356.7 million in the same period in the prior year, driven by organic sales growth of 1.6%, acquisition growth of 2.3%, and a 3.8% increase from foreign currency translation[63] - Gross margin for the three months ended January 31, 2026 increased 10.5% to $194.4 million, with a gross margin percentage of 50.6%, up from 49.3% in the prior year[65] - Operating income for the three months ended January 31, 2026 increased 21.4% to $62.2 million, representing 16.2% of net sales, compared to $51.2 million or 14.4% in the same period last year[68] - Net income for the three months ended January 31, 2026 was $48.1 million, or 12.5% of net sales, compared to $40.3 million, or 11.3% in the same period last year[70] - Total company net sales growth was 7.7% in the three months ended January 31, 2026, compared to 10.6% in the same period in the prior year[72] Expenses - R&D expenses increased 29.8% to $24.3 million in the three months ended January 31, 2026, representing 6.3% of net sales, up from 5.2% in the prior year[66] - SG&A expenses increased 1.9% to $107.9 million in the three months ended January 31, 2026, but decreased as a percentage of net sales to 28.1% from 29.7% in the prior year[67] Sales by Region - Americas & Asia net sales increased 7.6% to $251.6 million in the three months ended January 31, 2026, compared to $233.8 million in the same period in the prior year[73] - Europe & Australia net sales increased 7.9% to $132.5 million in the three months ended January 31, 2026, compared to $122.8 million in the same period in the prior year[77] Segment Profit - Segment profit for Americas & Asia increased 16.9% to $53.8 million in the three months ended January 31, 2026, compared to $46.0 million in the same period in the prior year[76] - Segment profit for Europe & Australia increased 35.5% to $15.4 million in the three months ended January 31, 2026, compared to $11.4 million in the same period in the prior year[80] Cash Flow and Financial Position - Cash and cash equivalents were $176.5 million at January 31, 2026, an increase of $2.1 million from July 31, 2025[82] - Net cash provided by operating activities was $86.7 million in the six months ended January 31, 2026, compared to $63.0 million in the same period of the prior year[82] - Net cash used in investing activities was $41.3 million in the six months ended January 31, 2026, which included the acquisition of a business for $17.4 million[83] - As of January 31, 2026, the outstanding balance on the Company's credit agreement was $78.7 million, with a maximum amount outstanding during the six months of $119.6 million[89] - The Company was in compliance with financial covenants, with a debt to EBITDA ratio of 0.2 to 1.0 as of January 31, 2026[90] Risks and Challenges - The company anticipates ongoing inflationary pressures and supply chain disruptions, which may impact financial performance[55] - Increased costs of raw materials, labor, and supply chain disruptions impacting overall profitability[94] - Decreased demand for the Company's products noted in the recent performance summary[94] - Challenges in developing technologically advanced products that meet customer demands[94] - Risks associated with the loss of key employees affecting operational stability[94] - Potential write-offs of goodwill and other intangible assets highlighted as a financial risk[94] - Foreign currency fluctuations posing a risk to financial performance[94] - Changes in tax legislation and tax rates could impact future earnings[94] - Ongoing litigation, including product liability claims, may affect financial outlook[94] - Global climate change and environmental regulations are becoming increasingly relevant to operations[94] - No material changes in market risk disclosures since the 2025 Form 10-K[95] Strategic Focus - The company plans to invest in organic growth through enhanced R&D and customer feedback to develop innovative products[57] - The company is focused on integrating recent acquisitions to enhance strategic position and accelerate long-term sales growth[59] - The company aims to improve digital capabilities and customer experience as part of its growth strategy[54]

Financial Performance - Sales for the quarter ended January 31, 2026, increased by 7.7% to $384.1 million, compared to $356.7 million in the same quarter last year[3]. - Net income for the quarter was $48.1 million, up from $40.3 million in the same quarter last year, representing an increase of 19.5%[5]. - Diluted EPS increased by 21.7% to $1.01 in the second quarter of fiscal 2026, compared to $0.83 in the same quarter of the prior year[5]. - Adjusted Net Income for the quarter was $52.0 million, compared to $48.1 million in the same quarter last year, reflecting a growth of 3.9%[5]. - Sales for the six-month period ended January 31, 2026, increased by 7.6% to $789.4 million, compared to $733.7 million in the same period last year[7]. - Net income for the six months ended January 31, 2026, increased to $101,987,000, up from $87,117,000 in the same period last year, representing a growth of 16.5%[21]. - Total net sales for the six months ended January 31, 2026, reached $789,424,000, compared to $733,740,000 in the prior year, reflecting an increase of 7.6%[22]. - Adjusted Net Income for Q2 2026 was $51.976 million, up from $48.121 million in Q2 2025, representing a 3.8% increase year-over-year[26]. - For the first half of fiscal 2026, Adjusted Net Income reached $109.964 million, an increase of 7.4% from $102.278 million in the same period of fiscal 2025[26]. Guidance and Outlook - The low end of Adjusted Diluted EPS Guidance for the full year ending July 31, 2026, was raised from $4.90 to $4.95 per share[11]. - The company expects Adjusted Diluted EPS for fiscal 2026 to be between $4.95 and $5.15, indicating a positive outlook for earnings growth[28]. Cash and Assets - The company reported a net cash position of $97.8 million as of January 31, 2026[10]. - Total current assets rose to $662,323,000 as of January 31, 2026, from $621,835,000 as of July 31, 2025, an increase of 6.5%[20]. - Cash and cash equivalents at the end of the period increased to $176,492,000 from $174,349,000, a slight increase of 1%[21]. Expenses and Costs - Research and development expenses for the quarter were $24.3 million, an increase from $18.7 million in the same quarter last year[19]. - Amortization expense for Q2 2026 was $3.925 million, slightly higher than $3.546 million in Q2 2025[26]. - The company reported no facility closure and reorganization costs in Q2 2026, while such costs were $4.241 million in Q2 2025[26]. - Non-recurring acquisition-related costs were not present in Q2 2026, compared to $3.794 million in the first half of fiscal 2025[26]. Profitability Metrics - Income before income taxes for the six-month period increased by 17.7% to $130.5 million, compared to $110.8 million in the same period last year[8]. - Adjusted Income Before Income Taxes for the six months ended January 31, 2026, was $140,994,000, compared to $130,944,000 in the prior year, an increase of 7.9%[24]. - The company reported a total segment profit margin of 18.7% for the six months ended January 31, 2026, compared to 17.1% in the same period last year[22]. - Segment profit for the Americas & Asia increased to $113,614,000 for the six months ended January 31, 2026, compared to $100,886,000 in the same period last year, a rise of 12.6%[22]. Debt and Dividends - The company’s long-term debt decreased to $78,706,000 as of January 31, 2026, from $99,766,000 as of July 31, 2025, a decline of 21.1%[20]. - Total liabilities decreased to $512,180,000 as of January 31, 2026, down from $542,042,000 as of July 31, 2025, a reduction of 5.5%[20]. - The company paid dividends totaling $23,084,000 during the six months ended January 31, 2026, compared to $22,867,000 in the same period last year, a slight increase of 0.9%[21]. Product Launch - The company launched the i4311 industrial label printer, featuring LabelSense technology, aimed at reducing waste during adhesive material changeover[10]. Growth Strategy - The company aims to maintain a consistent growth trajectory, as indicated by the positive adjustments in both net income and EPS metrics[27].

Core Viewpoint - Brady Corporation reported a strong financial performance for the second quarter of fiscal 2026, with significant increases in sales, income, and earnings per share, driven by organic growth, acquisitions, and favorable foreign currency translation effects [2][4][8]. Financial Results for the Quarter Ended January 31, 2026 - Sales increased by 7.7% to $384.1 million compared to $356.7 million in the same quarter last year, with organic sales growth of 1.6%, acquisition growth of 2.3%, and a 3.8% increase from foreign currency translation [2][8]. - Income before income taxes rose by 19.1% to $62.0 million, up from $52.0 million in the same quarter last year. Adjusted income before income taxes increased by 7.7% to $67.2 million [3][8]. - Net income for the quarter was $48.1 million, compared to $40.3 million in the same quarter last year. Adjusted net income was $52.0 million, up from $48.1 million [4][8]. - Earnings per diluted Class A Nonvoting Common Share increased by 21.7% to $1.01, while adjusted diluted EPS rose by 9.0% to $1.09 [4][8]. Financial Results for the Six-Month Period Ended January 31, 2026 - Sales for the six-month period increased by 7.6% to $789.4 million from $733.7 million in the same period last year, with organic sales growth of 2.2%, acquisition growth of 2.8%, and a 2.6% increase from foreign currency translation [5][8]. - Income before income taxes increased by 17.7% to $130.5 million, compared to $110.8 million in the same period last year. Adjusted income before income taxes rose by 7.7% to $141.0 million [6][8]. - Net income for the six-month period was $102.0 million, compared to $87.1 million in the same period last year. Adjusted net income was $110.0 million, up from $102.3 million [7][8]. - Earnings per diluted Class A Nonvoting Common Share was $2.14, compared to $1.81 in the same period last year, with adjusted diluted EPS at $2.30, up from $2.12 [7][8]. Cash Flow and Guidance - Net cash provided by operating activities increased to $53.3 million in the second quarter, compared to $39.6 million in the same quarter last year, reflecting a nearly 38% increase in cash flow from operating activities for the first half of the fiscal year [8][9]. - The company raised its full-year guidance for adjusted diluted EPS from a range of $4.90 to $5.15 per share to $4.95 to $5.15 per share, and for GAAP earnings per diluted Class A Nonvoting Common Share from $4.57 to $4.82 per share to $4.62 to $4.82 per share [10][8]. Commentary and Strategic Focus - The company has achieved 20 consecutive quarters of organic sales growth and is focused on increasing investment in research and development for innovative products, including the recent launch of the i4311 industrial label printer [9][8]. - The strong balance sheet, with a net cash position of $97.8 million, provides opportunities for continued investment in organic growth and strategic acquisitions [9][8].

Group 1 - The core viewpoint of the article highlights that Brady Corporation (BRC.US) has recently released its fiscal year 2025 financial report, showing a revenue of $1.514 billion, which represents a year-over-year growth of 12.90%, while net profit decreased by 4.06% to $189 million [1] Group 2 - The company has a debt-to-asset ratio of 3.20 and a current ratio of 1.891, indicating its financial leverage and liquidity position [1] - Based on historical reporting cycles, the company is expected to release its next quarterly report in the first half of 2026, although the specific date has not yet been announced [2]

Core Viewpoint - The company Brady Corporation (BRC.US) has reported a decline in net profit despite an increase in revenue for the fiscal year 2025, with no announcement regarding a record high dividend payout [1][2]. Financial Performance - The fiscal year 2025 report indicates a net profit decrease of 4.06% to $189 million [1][2]. - Revenue has increased by 12.90% to $1.514 billion [1][2]. - The current dividend yield stands at 1.02%, with no mention of a record high dividend payout [1][2].