• Organic Sales Growth: 3.6% in the quarter.
• Adjusted Pre-Tax Earnings Growth: 11% increase.
• Adjusted Earnings Per Share Growth: 12% increase.
• Americas and Asia Organic Sales Growth: 5.1%.
• Europe and Australia Organic Sales Growth: 0.7%.
• Total Sales Growth: 13.6% in the quarter.
• Gross Profit Margin: 50.3%, adjusted to 51.4% excluding non-recurring adjustments.
• SG&A Expenses: $111.8 million, 29.7% of sales.
• R&D Expense: $18.9 million, 5% of sales.
• Adjusted Net Income Growth: 10.4% increase to $54.2 million.
• Adjusted Diluted EPS: Increased from $1 to $1.12 per share.
• Operating Cash Flow: $23.4 million.
• Free Cash Flow: $16.1 million.
• Net Cash Position: $29 million as of October 31.
• Fiscal 2025 Adjusted EPS Guidance: $4.40 to $4.70 per share.
• Fiscal 2025 GAAP EPS Guidance: $4.02 to $4.32 per share.
• Americas and Asia Total Sales Growth: 10.7%.
• Europe and Australia Total Sales Growth: 19.3%.

• Warning! GuruFocus has detected 7 Warning Sign with BRC.

Release Date: November 18, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Brady Corp (NYSE:BRC) reported a strong start to fiscal 2025 with a 3.6% growth in organic sales.
• The Americas and Asia regions showed excellent performance with organic sales growth of 5.1%.
• The company successfully launched a new product bundle combining the i5300 printer with the V4500 barcode scanner, enhancing customer efficiency.
• Brady Corp (NYSE:BRC) completed the acquisition of Gravotech, expanding its capabilities in laser and mechanical part marking.
• The company maintained a strong balance sheet, ending the quarter in a net cash position of $29 million.

Negative Points

• Gross profit margin decreased to 50.3% from 51.7% due to purchase accounting adjustments related to the Gravotech acquisition.
• Operating cash flow decreased significantly from $62.3 million in the previous year to $23.4 million this quarter.
• The Europe and Australia region experienced a decline in segment profit by 21.7% due to sluggish macroeconomic conditions.
• The business in China saw a decline of over 6% in organic sales, impacting overall growth in Asia.
• SG&A expenses increased to $111.8 million from $96.3 million, reflecting higher costs as a percentage of sales.

Q & A Highlights

Q: Can you provide more detail on the strong organic growth in the Americas and Asia, particularly given the current industrial market conditions? A: Russell Shaller, President and CEO, explained that Brady's strength lies in targeting specific product areas and market segments that are performing well, such as data centers and aerospace applications. In Asia, growth is driven by increased penetration and demand, especially in India and Southeast Asia, benefiting from companies setting up additional factories outside of China.

Q: How is the integration of Gravotech progressing, and what about the smaller AB&R acquisition? A: Russell Shaller noted that Gravotech is expanding Brady's portfolio to include direct part marking, which complements their existing capabilities. The integration is progressing well, though it will take time to align systems and processes. The AB&R acquisition, while small, adds a niche sales force and technology, enhancing Brady's ability to provide customized solutions.

Q: Who is the target customer for the i5300 printer, and how does it integrate with Code technology? A: The i5300 targets mid-sized manufacturers needing direct part marking and label scanning solutions. The integration with Code technology allows Brady to offer a complete solution, combining label printing and scanning, which was the original goal of acquiring Code Corporation.

Q: Does the Gravotech acquisition change the seasonality of Brady's business? A: Russell Shaller indicated that Gravotech's seasonality aligns with Brady's, with August typically being a weaker month due to European vacations. The acquisition does not materially change the overall seasonality pattern.

Q: What drove the growth in gross profitability this quarter, and can Brady maintain a 50% gross margin post-Gravotech acquisition? A: The growth was driven entirely by volume, with no price increases. While Gravotech's margins are slightly lower, Brady aims to achieve a 50% gross margin through efficiencies and product improvements, positioning Gravotech in the middle range of their portfolio.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.