BRADY CORP Q2 FY2025 earnings call

• We saw organic sales growth of 2.6%, with Americas and Asia region having 4.3% organic growth and Europe and Australia region having a slight organic decline of 0.8%. - Launched the I7500 industrial label printer, which is designed for high volume and high mix labeling, has proprietary label sense technology, a seven-inch touchscreen, and is versatile for various applications. - R&D expense increased by more than 11% this quarter, driven by investment in organic business and the acquisition of Gravitech. - Took actions to address cost structure, including closing the manufacturing facility in Beijing, China, closing the manufacturing facility in Buffalo, New York, and reorganizing overhead in Europe. - Adjusted diluted earnings per share increased by 7.5%, with investments in research and development and the sales force continued.

Americas and Asia region reported organic sales growth of 4.3% and adjusted operating income growth of 12% in the quarter. Sales were $133.8 million. Reported segment profit increased 4.8% to $46 million, with segment profit as a percentage of sales at 19.7%. Europe and Australia region had a slight organic decline of 0.8% in the quarter. Sales were $122.8 million. Reported segment profit declined 24.4% to $11.4 million, with segment profit as a percentage of sales at 9.3%.

• Increased the low end of the full-year fiscal 2025 adjusted diluted EPS guidance range from $4.40 per share to $4.70 per share, and the range is now $4.45 per share to $4.70 per share. - Updated GAAP EPS guidance range to $3.99 per share to $4.24 per share due to facility closure and other reorganization charges. - Anticipate organic sales growth in the low single-digit percentages for the year ending July 31, 2025. - Depreciation and amortization expense is expected to be approximately $40 million, capital expenditures are approximately $35 million, and the full-year income tax rate is expected to be approximately 21%.

• Potential impact of tariffs, with the ability to mitigate to some extent but concern about a global economic slowdown. - Geopolitical and trade environment uncertainties that could affect Brady. - Macroeconomic environment fluctuations impacting business performance.

Q: Keith Housum asked about tariffs and their impact on Brady.

A: Russell Schaller said they have the ability to move production around and manufacture locally for higher profit margin products to mitigate tariffs, but the bigger concern is a global economic slowdown if tariffs are significant.

Q: Keith Housum asked about the I7500 cannibalizing existing sales and revenue potential.

A: Russell Schaller said the I7500 is unique and appeals to certain customers, hoping for tens of millions in revenue.

Q: Steve Ferazani asked about FX headwinds and guidance.

A: Ann Thornton said the Americas and Asia region's performance offset the impact of FX headwinds.

Q: Steve Ferazani asked about Australia's situation.

A: Russell Schaller said Australia's economy is tied to China and exports, and is not in a great place.

Q: Steve Ferazani asked about Europe's situation.

A: Russell Schaller talked about Germany's energy issues and Europe's GDP.

Q: Steve Ferazani asked about Gravitech traction and track and trace.

A: Russell Schaller said the Gravitech story is early and industrial automation investment has been slow.