Brady (BRC) Conference June 11, 2025 02:30 PM ET Speaker0 Good afternoon, everyone, and welcome back to Sidoti's Virtual Investor Conference. I do see there's still some people filling into the room. But I'll take this time right now and just remind everyone if you have questions, we expect a few minutes after the informative presentation. You press that q and a button at the bottom of your screen, type in the questions, and we'll get to as many as we can, time permitting. So happy to welcome CFO Anne Thorn ...

I have a masters degree in Analytics from Northwestern University and a bachelors degree in Accounting. I have worked in the investment arena for over 10 years starting as an analyst and working my way up to a management role. Dividend investing is a personal hobby and I look forward to sharing my thoughts with the Seeking Alpha community.Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the ne ...

Financial Data and Key Metrics Changes - The company reported record high adjusted earnings per share, increasing by 11.9% from $1.09 to $1.22 [11][17] - Organic sales growth was 1.6%, with acquisitions contributing 10.5% to sales growth, resulting in total sales growth of 11.4% [12][18] - Adjusted operating income in the Americas and Asia region grew by 20.2% [5][26] Business Line Data and Key Metrics Changes - The Americas region achieved organic sales growth of 5.4%, while Europe and Australia experienced a decline of 5.4% in organic sales [5][11] - Adjusted operating income in Europe increased by 3.8% despite the sales decline, attributed to restructuring actions [6][29] - Research and development (R&D) investment increased by over 8% this quarter, totaling $19.2 million [6][15] Market Data and Key Metrics Changes - Revenue by geography showed 52% from the US, 30% from Europe, 8% from Asia, and 10% from Australia and the rest of the Americas [10] - The Asia business reported organic sales growth of nearly 23%, with a return to growth in China [26][52] Company Strategy and Development Direction - The company is focused on integrating R&D functions and building new product roadmaps, including direct part marking technologies [6][25] - The acquisition of Funai's microfluidic solution business is expected to enhance the company's capabilities in custom part marking [7][40] - The company aims to mitigate tariff impacts through strategic sourcing and price adjustments while maintaining a focus on operational efficiency [21][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the global tariff environment but expressed confidence in the company's ability to mitigate impacts through geographic diversification [10][60] - The company tightened its adjusted diluted EPS guidance range for the fourth quarter due to anticipated tariff expenses and economic uncertainties [21][22] Other Important Information - The company returned $44.5 million to shareholders through dividends and share buybacks during the quarter [19][20] - Incremental tariff expenses were approximately $3 million in the third quarter, impacting diluted earnings per share by about $0.05 [20][21] Q&A Session Summary Question: Impact of tariffs on top line - Management indicated no significant demand destruction from tariffs yet, as inventory levels have buffered the immediate effects [33][34] Question: Sustainability of SG&A actions - Management noted ongoing efforts to drive down SG&A costs, with expectations for continued operational efficiency [36][37] Question: Details on the Funai acquisition - The acquisition is expected to enhance the company's product offerings in industrial inkjet solutions, with a purchase price of $11.6 million and estimated first-year sales of $15 to $20 million [38][54] Question: Fourth quarter guidance discrepancies - Management explained anticipated headwinds in the Americas due to tariffs, while expecting a flat performance in Europe [44][46] Question: Current situation in China - The company has reduced its footprint in China, focusing on multinational customers while maintaining a small presence [51][52]

Financial Data and Key Metrics Changes - The company reported record high adjusted earnings per share of $1.22, an increase of 11.9% from $1.09 in the same quarter last year [9][14] - Total sales growth for the quarter was 11.4%, driven by a 1.6% organic sales growth and a 10.5% contribution from acquisitions [10][11] - Gross profit margin decreased slightly to 51% from 51.6% year-over-year, with restructuring actions impacting costs [11] - Operating cash flow was $59.9 million, down from $72.7 million in the previous year [15] Business Line Data and Key Metrics Changes - The Americas and Asia region achieved organic sales growth of 5.4%, while Europe and Australia experienced a decline of 5.4% in organic sales [4][9] - Adjusted operating income in the Americas and Asia grew by 20.2%, while Europe saw a 3.8% increase in adjusted operating income despite the sales decline [5][28] - Research and development expenses increased by 8.5% to $19.2 million, reflecting ongoing investments in new product development [13] Market Data and Key Metrics Changes - Revenue by geography showed 52% from the US, 30% from Europe, 8% from Asia, and 10% from Australia and the rest of the Americas [8] - The Asia business reported organic sales growth of nearly 23%, with a return to growth in China after a previous decline [25] Company Strategy and Development Direction - The company is focused on integrating R&D functions and expanding product offerings, including the recent acquisition of Funai's microfluidic solution business [5][6] - Strategic actions are being taken to lower costs and improve efficiency, particularly in Europe, to drive future earnings growth [5][28] - The company aims to mitigate tariff impacts through targeted price increases and strategic sourcing alternatives [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth despite current uncertainties related to tariffs and economic conditions [60] - The company anticipates continued exposure to incremental tariff expenses but believes its geographic diversification will help mitigate impacts [19][60] Other Important Information - The company returned $44.5 million to shareholders through dividends and share buybacks during the quarter [17] - The acquisition of Funai's microfluidic solutions is expected to enhance the company's capabilities in custom part marking [6][37] Q&A Session Summary Question: Impact of tariffs on top line - Management noted no significant demand destruction from tariffs yet, as inventory levels have buffered the immediate effects [31][32] Question: Sustainability of SG&A actions - Management indicated ongoing efforts to drive down SG&A costs, with expectations for continued operational efficiency [34][35] Question: Details on the recent acquisition - The acquisition of Funai is seen as a growth opportunity, enhancing the company's capabilities in high-performance inks and direct part marking [36][37] Question: Q4 guidance rationale - Management expects headwinds in the Americas due to tariffs while anticipating a recovery in Europe to flat growth [42][44] Question: Performance in China - The company has reduced its footprint in China, focusing on multinational customers while maintaining a small presence [49][50]

Financial Performance - Net sales for the three months ended April 30, 2025 increased 11.4% to $382.6 million compared to $343.4 million in the same period in the prior year, driven by organic sales growth of 1.6% and acquisition-related growth of 10.5%[68] - For the nine months ended April 30, 2025, net sales increased 11.9% to $1,116.3 million compared to $998.0 million in the same period in the prior year, with organic sales growth of 2.6% and acquisition-related growth of 10.2%[69] - Operating income for the three months ended April 30, 2025 increased 5.7% to $67.2 million, while for the nine months it remained relatively stable at $177.3 million, reflecting organic sales growth in higher gross margin product lines[73] - Net income for the three months ended April 30, 2025, was $52.3 million, or 13.7% of sales, compared to $50.9 million (14.8% of sales) in the same period of 2024[74] - Total company organic sales growth was 1.6% in the three months ended April 30, 2025, compared to 4.5% in the same period of 2024[80] Expenses - Gross margin for the three months ended April 30, 2025 was $195.1 million, a 10.2% increase from $177.0 million in the same period last year, although the gross margin percentage decreased to 51.0% from 51.6%[70] - Research and development (R&D) expenses increased 8.5% to $19.2 million for the three months ended April 30, 2025, and 13.2% to $56.8 million for the nine months ended April 30, 2025, reflecting a commitment to new product development[71] - Selling, general and administrative (SG&A) expenses rose 13.4% to $108.7 million for the three months ended April 30, 2025, and 15.2% to $326.4 million for the nine months ended April 30, 2025, primarily due to increased headcount and acquisition-related costs[72] Cash Flow and Liquidity - The company had cash of $152.2 million and total available liquidity of $1,237.4 million as of April 30, 2025, supporting its growth strategy and ability to manage economic challenges[63] - Cash and cash equivalents decreased by $98.0 million to $152.2 million at April 30, 2025, primarily due to changes in working capital and increased inventory outflows[91] - Net cash provided by operating activities was $122.9 million in the nine months ended April 30, 2025, down from $171.1 million in the same period of 2024[91] - Net cash used in investing activities was $165.1 million in the nine months ended April 30, 2025, primarily for business acquisitions of $147.2 million[92] Debt and Financial Obligations - As of April 30, 2025, the outstanding balance on the Company's credit agreement was $102.8 million, with a maximum outstanding amount of $144.8 million during the nine months ended April 30, 2025[98] - The Company has $195.2 million available for future borrowing under the credit agreement, which can be increased to $1,085.2 million at the Company's option, subject to certain conditions[98] - The Company is in compliance with financial covenants, maintaining a debt to EBITDA ratio of 0.3 to 1.0 and an interest expense coverage ratio of 71.5 to 1.0 as of April 30, 2025[99] - The credit agreement has a final maturity date of November 14, 2027, and includes an increase in lending commitments to $300 million[96] - The Company had letters of credit outstanding under the credit agreement of $2.0 million as of April 30, 2025[98] Strategic Focus - The company is focused on integrating recent acquisitions to enhance its strategic position and accelerate long-term sales growth[61] - The company plans to mitigate inflationary pressures and tariff impacts through targeted price increases, strategic sourcing adjustments, and operational efficiency gains[62] - The Company aims to enhance its digital capabilities and customer service through improved sales channels and data-driven marketing automation tools[61] Tax and Compliance - The company's income tax rate was 20.5% for the three months ended April 30, 2025, down from 21.0% in the same period of 2024, with an expected ongoing annual rate of approximately 21%[78] - The Company does not believe that cash requirements for uncertain tax positions will be material[94] Future Outlook - The Company anticipates future financial position and business strategy changes, including projected sales and capital expenditures, as part of its forward-looking statements[100] - The Company has material cash requirements for known contractual obligations, including capital expenditures and lease obligations, and expects net cash from operating activities to be adequate for liquidity needs over the next 12 months[94] - The Company does not have significant agreements for minimum order quantities for inventory purchases, indicating flexibility in managing cash flow[94]

Financial Performance - Sales for the third quarter ended April 30, 2025, increased by 11.4% to $382.6 million, compared to $343.4 million in the same quarter last year[3]. - Adjusted Diluted EPS for the third quarter was $1.22, an increase of 11.9% compared to $1.09 in the same quarter last year[6]. - Adjusted Net Income for the third quarter was $58.8 million, up from $52.7 million in the same quarter last year[5]. - For the nine-month period ended April 30, 2025, sales increased by 11.9% to $1.12 billion compared to $998.0 million in the same period last year[7]. - Adjusted Income Before Income Taxes for the nine-month period was $205.4 million, an increase of 10.0% compared to the same period last year[8]. - Adjusted Net Income for the nine months ended April 30, 2025, was $161,098 million, compared to $147,201 million for the same period in 2024, reflecting a 9.4% increase[26]. - Adjusted Diluted EPS for the nine months ended April 30, 2025, was $3.34, compared to $3.03 in the same period of 2024, indicating a 10.3% increase[27]. Shareholder Returns - The Company returned $44.5 million to shareholders through dividends and share repurchases during the quarter[6]. - The Company repurchased 476,000 shares for $33.2 million during the quarter[10]. Guidance and Projections - The Company tightened its Adjusted Diluted EPS guidance for the fiscal year ending July 31, 2025, to a range of $4.48 to $4.63 per share[11]. - Fiscal 2025 guidance for Adjusted Diluted EPS is projected between $4.48 and $4.63, with a GAAP measure expectation of $3.95 to $4.10[28]. - Amortization expense for fiscal 2025 is expected to remain constant at $0.30 per Class A Nonvoting Common Share[28]. - Facility closure and other reorganization costs are projected at $0.15 per Class A Nonvoting Common Share for fiscal 2025[28]. - Non-recurring acquisition-related costs and other expenses are expected to be $0.08 per Class A Nonvoting Common Share for fiscal 2025[28]. Income and Expenses - Income before income taxes for the third quarter increased by 2.1% to $65.7 million compared to $64.4 million in the same quarter last year[4]. - Adjusted Income Before Income Taxes for the three months ended April 30, 2025, was $74.43 million, compared to $66.78 million in the same period of 2024[24]. - The company reported a net income of $139.38 million for the nine months ended April 30, 2025, slightly down from $141.76 million in the same period of 2024[21]. - The company reported a GAAP net income of $52,263 million for Q3 2025, compared to $50,890 million in Q3 2024, a 2.7% increase[26]. - The company incurred $2,947 million in facility closure and reorganization costs for Q3 2025, compared to no such costs in Q3 2024[26]. Cash and Liabilities - The company’s net cash provided by operating activities for the nine months ended April 30, 2025, was $122.87 million, down from $171.09 million in the same period of 2024[21]. - Cash and cash equivalents decreased to $152.15 million as of April 30, 2025, from $250.12 million at the beginning of the period[21]. - Total liabilities increased to $530.56 million as of April 30, 2025, compared to $448.91 million as of July 31, 2024[20]. - The company’s long-term debt increased to $102.82 million as of April 30, 2025, from $90.94 million as of July 31, 2024[20]. - The company’s total stockholders' equity rose to $1.17 billion as of April 30, 2025, up from $1.07 billion as of July 31, 2024[20]. Regional Performance - The Americas & Asia region saw organic sales growth of 5.4%, while Europe & Australia experienced an organic sales decline of 5.4%[3]. - The Americas & Asia segment reported net sales of $253.65 million, up 12.9% year-over-year, while Europe & Australia segment sales increased by 8.7% to $128.94 million[22]. - The company’s segment profit margin for the Americas & Asia was 22.5% for the three months ended April 30, 2025, compared to 22.1% in the same period of 2024[22].

Core Viewpoint - Brady Corporation reported strong financial results for the third quarter of fiscal 2025, with significant sales growth driven by acquisitions and organic growth in the Americas and Asia regions, despite challenges from foreign currency translation [2][8]. Financial Results - Sales for the third quarter ended April 30, 2025, were $382.6 million, an increase of 11.4% from $343.4 million in the same quarter last year. This growth included organic sales growth of 1.6%, acquisition-related growth of 10.5%, and a decline of 0.7% due to foreign currency translation [2][4]. - For the nine-month period ended April 30, 2025, sales increased by 11.9% to $1.12 billion from $998.0 million in the same period last year, with organic growth of 2.6% and acquisition growth of 10.2% [5][7]. Income Metrics - Income before income taxes for the third quarter increased by 2.1% to $65.7 million compared to $64.4 million in the same quarter last year. Adjusted income before income taxes rose by 11.5% to $74.4 million [3][6]. - Net income for the third quarter was $52.3 million, up from $50.9 million in the same quarter last year. Adjusted net income increased to $58.8 million from $52.7 million [4][7]. Earnings Per Share - Earnings per diluted Class A Nonvoting Common Share for the third quarter was $1.09, compared to $1.05 in the same quarter last year, reflecting a 3.8% increase. Adjusted diluted EPS reached a record high of $1.22, up 11.9% from $1.09 [4][29]. Regional Performance - Sales in the Americas and Asia increased by 12.9%, with organic growth of 5.4%. In contrast, sales in Europe and Australia grew by 8.7%, but organic sales declined by 5.4% [2][5]. Shareholder Returns - The company returned $44.5 million to shareholders through dividends and share repurchases during the quarter, including repurchasing 476,000 shares for $33.2 million [8][9]. Fiscal Guidance - The company tightened its Adjusted Diluted EPS guidance for the fiscal year ending July 31, 2025, to a range of $4.48 to $4.63 per share, and updated GAAP earnings guidance to $3.95 to $4.10 per share [10][11].

Group 1 - DICK'S Sporting Goods launched a new campaign called "Speed Shopping" featuring IShowSpeed and legendary athletes like Tom Brady and Kevin Durant, emphasizing the blend of sports, style, and culture [1][3] - The campaign aims to create an engaging shopping experience that goes beyond purchasing footwear, highlighting competition and passion among athletes [2][3] - The promotional content will be distributed across various platforms including Amazon Prime, Disney+, Hulu, Max, Netflix, and YouTube [4] Group 2 - DICK'S Sporting Goods, founded in 1948 and headquartered in Pittsburgh, operates over 850 stores and offers a wide range of sporting goods and apparel [5] - The company is committed to supporting youth sports and has donated millions through its Sports Matter program to assist under-resourced teams and athletes [6]

Group 1: Hertz Car Sales Overview - Hertz Car Sales is transforming the car-buying experience by leveraging its century-long automotive expertise, allowing customers to shop for premium pre-owned vehicles online or at over 40 retail locations nationwide [1][2] - Each Hertz Certified vehicle undergoes a rigorous 115-point certification process and comes with a 12-month/12,000-mile limited powertrain warranty, ensuring quality and value for customers [2] - The company emphasizes clear, upfront pricing and a seamless certification process, aiming to deliver exceptional service to customers [3] Group 2: Product Highlight - The 2023 Cadillac XT5, featured in Hertz's offerings, includes various entertainment and safety features such as a navigation system, power moonroof, and lane departure alerts, along with Tom Brady's handwritten signature on the driver’s side visor [4] Group 3: Sweepstakes Promotion - Hertz is running a sweepstakes where participants can enter for a chance to win a Cadillac XT5 valued at over $31,000, plus $5,000 cash, by completing an online entry form [9] - The sweepstakes is open to all legal U.S. residents who are licensed drivers aged 20 and older, with no purchase necessary [6]

Company Overview - Brady Corporation is an international manufacturer and marketer of solutions that identify and protect people, products, and places, with a diverse customer base across various industries including electronics, telecommunications, manufacturing, and medical [6] - The company was founded in 1914 and is headquartered in Milwaukee, Wisconsin, employing approximately 5,700 people as of July 31, 2024 [6] - For fiscal year 2024, Brady reported sales of approximately $1.34 billion [6] Board of Directors Update - Anne De Greef-Safft has joined Brady's Board of Directors, effective February 25, 2025 [1] - De Greef-Safft has extensive experience in strategic and operational consulting for private equity firms and has held leadership positions in global manufacturing companies, including Group President at Standex International and various roles at Danaher [2] - Her educational background includes a bachelor's and master's degree in electronics engineering and an MBA from Babson College [3] Leadership Insights - De Greef-Safft expressed her enthusiasm for collaborating with Brady's leadership team, highlighting the company's commitment to innovation and customer insights [4] - Bradley C. Richardson, Chair of Brady's Board, emphasized De Greef-Safft's broad business acumen and international experience as valuable assets to the Board [5] - Russell R. Shaller, President and CEO of Brady, noted that her experience in innovation-driven global industrial companies will be crucial for driving long-term shareholder value [5]