Graco, Inc. Q4 FY2024 earnings call

• Graco reported fourth quarter sales of $549 million, with acquisitions contributing 3% growth. Excluding acquisitions, sales fell 6%. Net earnings decreased 1% to $109 million. - Adjusted non-GAAP net earnings were $110 million, a 20% decrease. Gross margin rate declined 200 basis points due to sales volume declines, product and channel mix, and acquisition impacts. - Welcomed Corob acquisition in November, with integration underway and initial results as expected. - Moved to a global customer-centric operating structure effective Jan 1, 2025, with a $8 million nonrecurring business reorganization charge, expecting annual savings of ~$16 million. - Segment operating results to be reported under new structure starting Q1 2025.

Graco reported fourth quarter sales of $549 million, a 3% decrease from the prior year. Acquisitions contributed 3% sales growth, but excluding acquisitions, sales decreased 6%. Reported net earnings were $109 million, a 1% decrease. Adjusted non-GAAP net earnings were $110 million, a 20% decrease. The gross margin rate decreased 200 basis points. Industrial segment revenue declined 13% for the quarter and 6% for the full year. Process segment was flat for the quarter but down 8% for the year. Contractor segment declined 3% for the quarter and was down 1% for the year. Corob acquisition contributed 3% revenue growth in the fourth quarter.

• Foreign currencies to have unfavorable impact of ~1 percentage point on net sales and 2 percentage points on net earnings for full year 2025. - Unallocated corporate expenses projected at $39 million to $42 million. - Effective tax rate expected to be 19.5% to 20.5%. - Capital expenditures expected to be $50 million to $60 million. - New operating structure consisting of Industrial, Expansion Markets, and Contractor segments begins reporting Q1 2025.

• Currency translation had no significant impact on sales but foreign currency movement could affect 2025 net sales and earnings. - Business landscape softness in end markets, including weakness in China industrial markets and semiconductor business. - Litigation costs in the Contractor segment totaling $16 million for the year.

Q: Jeff Hammond asked about Contractor new products timing and Powder Coatings business.

A: Mark Sheahan said new product launches were late last year, creating easier comps, and Powder Coatings had higher backlog and positive order trends.

Q: Andrew Buscaglia asked about Corob's sales contribution and M&A accretion.

A: Mark Sheahan said Corob expected low single-digit sales contribution, Chris Knutson said accretive to EPS in 2026. David Lowe talked about buyer's discipline in M&A and looking for good merchandise with margin improvement potential.