BRADY CORP Q3 FY2025 earnings call

• Organic sales grew 1.6%, acquisitions boosted sales by 10.5%, and adjusted earnings per share increased by 11.9% in the third quarter. - The Americas and Asia region saw excellent organic sales growth of 5.4% and adjusted operating income growth of 20.2%. - The Europe and Australia region had organic sales decline of 5.4% but adjusted operating income rose 3.8% due to restructuring to lower costs. - R&D investment increased by over 8% this quarter, with ongoing integration of R&D functions and new product roadmaps including direct part marking technologies. - Acquired Funai's microfluidic business to round out the portfolio for custom part marking. - Discussed global operations and supply chain in relation to tariffs, with most products manufactured in the country of ultimate sale. - Launched the I6100 industrial desktop label printer and HH86 handheld RFID reader.

In the Americas and Asia region, organic sales grew 5.4% with sales of $253.7 million in the third quarter, and adjusted operating income grew by 20.2%. The Europe and Australia region had an organic sales decline of 5.4% with sales of $128.9 million in the third quarter, but adjusted operating income increased by 3.8% due to restructuring actions. Through the first three quarters of 2025, 52% of revenue was generated in the US, 30% in Europe, 8% in Asia, and the remaining 10% in Australia and the rest of the Americas.

• Adjusted diluted EPS guidance range was tightened from $4.45 - $4.70 per share to $4.48 - $4.63 per share for the fourth quarter. - Organic sales growth is expected to be in the low single-digit percentages for the year ending July 31, 2025. - Depreciation and amortization expense is approximately $40 million, capital expenditures are approximately $25 million, and the full-year income tax rate is approximately 20%. - Risks to guidance include strengthening of the US dollar, inflationary pressures, continued changes in tariffs, and overall slowdown in economic activity.

• Strengthening of the US dollar. - Inflationary pressures. - Continued changes in tariffs or other downstream impacts of global trade disruption. - Overall slowdown in economic activity.

Q: In terms of the tariff, can you provide color on potential impact on top line, demand destruction or additional revenue from manufacturing moves?

A: No demand destruction seen yet, both Brady and industrial companies carry inventory so haven't seen full effect of tariffs yet, and price increases are likely as tariffs continue.

Q: How sustainable are adjusted SG&A actions?

A: Brady has a long-term journey to drive down SG&A and will continue to look for operational efficiency, with some noise in data points but goal is to continue driving down SG&A.

Q: Walk through acquisition of Funai's microfluidic business?

A: Funai makes industrial inkjet cartridges, integrated with Brady's inkjet printer, providing an opportunity for growth in custom part marking.

Q: About 4Q guide, why opposite directions in Americas and Asia vs Europe?

A: Anticipate headwinds in Americas due to tariffs, expecting moderate recovery in Europe.

Q: Impact of WPS on Europe and Americas?

A: WPS factor is minor in Americas, strong in Europe except UK, with industrial production declines in Germany affecting Europe.

Q: Break out $3.9 million facility closure and reorg cost to segments?

A: Reorg costs are split evenly between regions.

Q: Guess on acquisition's revenue contribution?

A: Estimating first-year sales within $15 - $20 million.