Graco, Inc. Q1 FY2025 earnings call

• Quarterly sales were $528 million, up 7% year-over-year. Excluding acquisitions, sales grew 3%.
• Net earnings increased 2%, adjusted non-GAAP net earnings up 8%.
• Gross margin declined due to higher product costs and acquisition impacts.
• Corab integration is meeting expectations; all segments/regions grew except contractor EMEA.
• China accounted for ~6% of global revenue and COGS; teams are mitigating tariff impacts by qualifying suppliers, moving manufacturing, and pricing surcharges.
• One Graco initiative is driving savings and operational efficiency.

Graco reported first-quarter sales of $528 million, a 7% increase from the prior year. Excluding acquisitions, sales grew 3%. Reported net earnings increased 2% to $124 million or $0.72 per diluted share. Adjusted non-GAAP net earnings were $120 million or $0.70 per diluted share, up 8%. The gross margin rate decreased 150 basis points. Contractor segment operating margin rate was 24% (down from 29% last year). Industrial segment sales increased 5%, Expansion Markets segments saw 12% growth. Corab integration is proceeding as expected.

• Maintaining full-year revenue guidance of low single-digit growth on organic constant currency basis.
• Evolving trade policies with China could negatively impact revenue guidance by ~1-2%.
• Anticipate capital expenditures to be $50 million to $60 million in 2025.

• Tariffs between US and China pose risks to revenue and COGS, with China accounting for ~6% of revenue and COGS.
• Uncertainty around trade policy implementation and its impact on demand and supply chain.

Q: Clarify pre-positioning by customers due to tariffs and inventory levels in China.

A: Six-week order activity uptick likely included pre-buying; Graco proactively moved inventory to non-bonded status in China to avoid retaliatory tariffs and has ~3 months of finished goods inventory there.

Q: How did industrial margins increase?

A: Revenue growth, lower expenses from One Graco initiative, and strong margin performance on gross margin line contributed, with areas like automotive liquid finishing and mining pumps driving it.

Q: Corab integration progress?

A: Early days but teams are working well, revenue is as expected, and financial integration is proceeding with good support from Corab teams.

Q: Tariff impact on sourcing and export?

A: China is major sourcing country outside US; 10% US tariff on imports is minimal, but China tariff impact is key; Graco has global supply chain with facilities in Italy, India, etc., to flex as needed.