Q4 2021 Brady Corp Earnings Call

[music].

Thank you for standing by and walking through the Q4 2021 Brady Corporation earnings Conference call. At this time, all participants on a risk at all they might ask.

So to speak the presentation there'll be a question and answer session to ask a question at that time. Please press Star then one when your Touchstone telephone.

What amount of today's conference call is being recorded I would now like to turn the conference over to your host Ms. Ann Thornton Chief Accounting Officer, you may begin.

Thank you good morning, and welcome to the Brady Corporation fiscal 2021 fourth quarter earnings Conference call.

Slides for this morning's call are located on our website at Www Dot Realty Corp, Dot com slash investors, we will begin our prepared remarks on slide number three.

Please note that during this call we may make.

May make comments about forward looking information words, such as expect will May believe forecast and anticipate are just a few examples of words identifying a forward looking statement.

It's important to note that forward looking information is subject to various risk factors and uncertainties, which could significantly impact expected results.

Risk factors were noted in our news release this morning, and in Brady's fiscal 2021 Form 10-K, which was filed with the SEC. This morning.

Also please note that this teleconference is copyrighted by Brady Corporation and May not be rebroadcast without the consent of Brady.

We will be recording this call and broadcasting it on the Internet as such your participation in the Q&A session will constitute your consent to being recorded.

I'll now turn the call over to Brady's, President and Chief Executive Officer, Michael Nauman. Thank you Ann Good morning, and thank you all for joining US today. This morning, we released our fiscal 2021 fourth quarter financial results capping off a record earnings per share year I'm proud of how the Brady team was able to navigate.

This challenging economic environment and deliver for both our customers and our shareholders.

Brady played a very important role in the global fight against this pandemic throughout the last year and a half.

In our WPS business, we worked tirelessly to manufacturers source and deliver many of the products that our customers needed to aid in social distancing or to help provide a more hygienic environment for employees returning to work we provided support to first responders health care workers food processing companies logistics.

Companies retail establishment schools and virtually every other essential industry by helping solve their safety and identification needs to ensure that they could fulfill their missions are for marking safety sides and many other products were used throughout the world.

In our identification solutions business. We also provided many products into the healthcare industry and laboratories to identify and track samples and to help keep patients safe Brady safety and identification products were in demand and our team stepped up to deliver the products that help make the world a safer place.

To put it mildly this was a challenging year as we navigated through a rapidly evolving environment, all while never wavering from our primary goals of keeping our employees safe and ensuring that we meet the demands of our customers. It is clear that this pandemic is not yet behind us as new variance of emerged.

And Covid cases are still high and rising in many countries around the globe plus we and many other companies are dealing with supply chain disruptions caused by the abrupt shutdowns and then the rapid reopening which resulted in an inflation in areas such as resin freight paper based materials certain services.

And wages.

Some of these cost increases may be temporary but we see many of these cost increases is almost certainly permanent as you can see we continue to maintain a healthy gross profit margin in fact, our gross profit margin was up 110 basis points versus the same quarter last year.

We never slowed down on our push to automate our facilities and drive sustainable efficiency gains, which when combined with targeted price increases are offsetting most input cost increases.

As I said fiscal 2021 was a challenging year, but Brady did its part and we will continue to do our part to make the world a safer place.

This quarter revenues were up a robust 21, 6% we had growth of 35% in our identification solutions business and a decline of six 8% in our workplace safety business. The revenue decline in our workplace safety business was primarily due to tough.

<unk> as Q4 of last year, which when we experienced peak COVID-19 related product sales.

Earnings were also very strong this quarter with earnings per share up 32, 1% on a non-GAAP basis and cash generated from operating activities was also very robust this quarter, finishing at $58 million and capping off a year, where cash flow from operating activities exceeded.

$200 million.

Overall, our fourth quarter financial results were once again very strong and provide a strong jumping off point as we enter fiscal 'twenty two with positive momentum.

As we look ahead.

Our priorities are to drive organic sales growth continue to become a more.

Efficient manufacturer integrate our recent acquisitions and deploy our capital to drive long term shareholder value to.

To drive organic sales, we're upgrading our websites, we're improving our marketing capabilities, we're developing new products, we're investing in capital enhancing machinery, and we're making the marketing investments necessary to grow our top line now and into the future.

Profitable sales growth is definitely our number one financial priority in fiscal 2022 for instance, in our IV solutions business, we've been increasing our R&D spend and seen the fruits of that labor as we are launching new products at an increasing rate and we're continuing to distance ourselves.

From our competitors, who don't have the scale or financial wherewithal to invest as heavily in R&D, particularly during a downturn.

We're improving our inline presence by upgrading our websites and investing more in digital marketing talent. We're also expanding our sales force and expanding geographically into underserved markets with strong future growth potential in areas, such as southeast Asia and Eastern Europe, our strong new product lineup come.

Bind with investments in sales marketing and our online presence gives us confidence that our IV solutions business will continue to generate strong organic sales growth in fiscal 2022 and beyond.

In our workplace safety business, we're capitalizing on our common web platform by using our much stronger market intelligence to quickly adapt and pivot to changing market dynamics.

We're increasing our investments in new product development, and we're increasing the pace of new product launches and an effort to increase the percentage of proprietary high value products.

To our customers by WPS.

We're adding new salespeople around the globe to accelerate our sales even further.

Our focus on serving our customers extremely well and aggressively working to increase our customer base is paying off. We also believe that we will soon see another leg up in organic sales growth with some of our other end markets improve for instance, in our IVF business, we sell in many niche identification markets aimed at identifying.

People in the workplace and entertainment venues. These markets have remained depressed and have not yet recovered quite like our core industrial markets have in addition, our product offering focused on micro businesses in the U S has remained depressed as these businesses have been impacted the most so when these markets bounce back which we believe.

We'll we should see another increase inorganic sales, while we're investing in our organic sales growth. We're also working to streamline our SG&A cost structure. So that we can fund our sales growth initiatives, while still driving down SG&A expense and we're focused on becoming a more efficient manufacturer.

We're automating wherever we can in an effort to reduce manufacturing costs in a sustainable manner and to protect our strong gross profit margins.

In addition to our focus on driving organic sales growth and becoming a more efficient organization. We're also in the process of integrating the three acquisitions that we completed last quarter as it relates to the acquisitions of Nordic idea and code. We're building out our track and trace solution set which is an important initiative to help.

US move into faster growing end markets with the additions of codes barcode scanning technology and Nordic Ids RFID scanning technology, we will create a portfolio of industrial readers that are fully integrated with our printers and our existing software driven by the adoption.

<unk> of industry 4.0, and the trend of onshoring to reduce supply chain vulnerabilities, the barcode and RFID markets are growing quickly as a result of emerging use cases to provide better workflow visibility.

The value of Covid in Nordic IV come from their strong technology and complementary products that will help us expand in track and trace applications within industrial settings. So there are natural synergy opportunities once combined with Brady's global footprint. We're very excited about how these acquisitions combined with additional R&D.

Efforts will help us develop global solutions in the industrial track and trace space.

We also completed the acquisition of Magic card last quarter Magic card is a well known globally for its innovative and differentiated products and the IV card printing space as they have a full range of desktop devices to meet local on demand secure I'd card issuance requirements.

Specialized an I'd card printers, and consumables with high resolution full color image capabilities that are built in security features and the ability to encode smart cards. There are natural synergies with our people identification product offerings previously.

We lacked rigid card printers, and our product portfolio and magic card absolutely helps build the GAAP.

It's a combination of technology acquisitions, such as <unk> co.

Code and Magic card the investments we've made through the pandemic in R&D sales and marketing and our recently expanded customer base that results in a strong future for both our IV solutions.

And workplace safety businesses.

I am confident we will see continued revenue growth in future quarters. As a result of our focus on growing organic sales plus a rock solid balance sheet and strong cash flow gives us significant dry powder to accelerate growth through further R&D efforts and additional business.

<unk>, all while continuing to return funds to our shareholders.

Brady is well positioned as we look to fiscal 2022 and beyond.

Yesterday, we announced an increase in our annual dividend for the 36th consecutive year and today, we announced an increase in the amount of authorized shares available for repurchase at or coming out with guidance for fiscal 2022 as you can see from our guidance we expect.

Fiscal 2020 to be another all time records earnings per share year for Brady overall, I'm confident in our ability to deliver results for our customers our employees and of course, our shareholders I'll now turn the call over to Aaron to give a little more detail on our financial results then I'll.

Return to provide specific commentary about our identification solutions and workplace safety businesses Erin. Thank you Michael Good morning, everyone I'll start the financial review on slide number three.

Sales in the fourth quarter were $307.0 million, which was an increase of 21, 6% compared to the same quarter last year GAAP pre tax earnings were $47.0 million, which was an increase of 19, 4% when compared to Q4 of last year non.

Non-GAAP pretax income was $49.0 million, which was an increase of 30% when compared to Q4 of last year. The only adjustment to arrive at non-GAAP pre tax income is the removal of truly nonrecurring costs, such as acquisition related legal fees tax fees and accounting fees as well as the <unk>.

<unk> impact from reporting inventories at fair value.

GAAP diluted EPS finished at 53.

While non-GAAP EPS increased 32% to 70 this quarter the only adjustments to arrive at non-GAAP EPS with the removal of the acquisition costs that I, just mentioned removal of a nonrecurring tax charge related to one of the acquisitions and the removal of an impairment charge related to an equity method.

We also had another very strong quarter of cash generation cash provided by operating activities was $58.0 million, which was 12, 6% higher than the $46.0 million of operating cash flow generated in the fourth quarter of last year. So financially Q4 was a very strong quarter move.

Going to slide number four you'll find our quarterly sales trends are 20 plus percent sales increase consisted of organic sales growth of 12, 6% an increase from acquisitions of four 7% and an increase from foreign currency translation of four 3% organic sales continued to improve.

In our I'd solutions business and finished up a robust 24, 5% in Q4, our workplace safety business benefited from strong COVID-19 related product sales in last year's fourth quarter. As a result of these tough comparable as we saw a decline in WPS organic sales of 12, 7%. However, we remain.

Quite optimistic about the future of our WPS business as we've increased our customer base improved our digital presence and have many new proprietary products, all of which bode well for the future.

Turning to slide number five you'll see our gross profit margin trending our gross profit margin increased by 110 basis points. This quarter, finishing at 48, 2% compared to 47, 1% in the fourth quarter of last year. If you exclude the purchase accounting charges from our recent acquisitions, our gross profit margin.

Would've been approximately 20 basis points higher than the reported GAAP figures.

The improvement over the fourth quarter of last year was a direct result of increased sales volumes and many efficiency activities that we've been driving throughout our manufacturing facilities. As you would expect we are seeing inflationary pressures in raw materials freight and certain services. We're also seeing wage inflation and were finding it difficult to fill open manufacture.

Enrolls, but we're automating wherever we can we're driving efficiencies at a strong pace and we're putting through targeted price increases. We believe that these actions will offset any inflationary forces and enable us to maintain our gross profit margin in the approximate 50% range.

On slide number six you'll find our SG&A expense trending SG&A was $100.0 million this quarter compared to $84.0 million in the fourth quarter of last year SG&A was heavily impacted by both the recent acquisitions as well as an increase in incentive based compensation last year as a result of the pen.

Our incentive based compensation was down significantly in fact in the fourth quarter of last year, our incentive comp was negative, whereas this year incentive based comp is running at more normalized levels.

And as a percent of sales SG&A was 36% this quarter. If you would exclude the nonrecurring costs that I mentioned earlier SG&A would have been below 30% of sales this quarter, which would've continued the general trend of declining SG&A as a percent of sales even as we're increasing investments in sales and marketing.

To accelerate sales growth.

Moving on to slide number seven you'll find the trending of our investments in research and development. This quarter, we invested $15.0 million in R&D.

Approximately $4.0 million of R&D expense came from our three fourth quarter acquisitions, we continue to have opportunities to invest in new product development and we're committed to increasing these investments while at the same time, ensuring that we get the most out of every dollar spent on R&D. These investments in R&D are critical to help propel Brady.

Long term sales growth and protect our gross profit margins.

Number eight illustrates our pre tax income trends non-GAAP pre tax earnings increased 30% from $43.0 million last year to $49.0 million this quarter.

The only items, we're adjusting for it to get to non-GAAP pre tax earnings are the truly nonrecurring costs related to our recently completed acquisitions.

30% increase in pre tax earnings was a direct result of our very strong sales growth combined with our ongoing focus on automation and sustainable efficiency gains.

<unk> number nine illustrates our after tax income and EPS trends as I mentioned non-GAAP diluted EPS was <unk> 70, this quarter compared to 53 in last year's fourth quarter, an increase of 32% on.

On slide number 10, you'll find a summary of our cash generation, which continues to be quite strong we generated $58 million of cash flow from operating activities and free cash flow was $45 million. This quarter. The conversion of net income into operating cash flow was once again very strong with operating cash flow well in excess.

Both GAAP and non-GAAP net income.

Now if you'll turn to slide number 11, you can see the impact that the strong cash generation is having on our balance sheet, even after using $244 million of cash for act for the acquisitions of Magic card Nordic Ids and code on July 31, we were still in a net cash position of $112.0 million.

Our strong balance sheet puts us in a fantastic position to execute additional value enhancing activities, including investing in R&D, completing additional acquisitions and returning funds to our shareholders our approach to capital allocation is consistent.

First we use our cash to fully fund organic sales and efficiency opportunities throughout the economic cycle, where funding investments in new product development sales generating resources, it improvements capability enhancing capex and capex to further automate our facilities, we will absolutely keep funding these investments where it makes sense.

And where the investments are ROI positive and second we focus on returning cash to our shareholders in the form of dividends and as we just announced last night, we're increasing our annual dividend for the 36th consecutive year.

After funding organic investments and dividends, we then deploy our cash in a disciplined manner for for either buybacks or acquisitions, where we believe that we have strong synergistic opportunities.

Slide number 12 provides an overview of our financial results for the full year ended July 31, 2021 overall sales increased five 9% and we finished with all time record earnings per share of course, both our revenues and our earnings were significantly impacted by the COVID-19.

Demick throughout most of fiscal 2021, which makes these record EPS results all that much more impressive plus we're exiting fiscal 'twenty one with positive momentum Q4 was our strongest revenue quarter of the year with Ids posting organic sales growth of 24, 5% and WPS running at a sales rate.

Higher than what we experienced prior to the pandemic.

The acquisitions, we completed in the fourth quarter should provide positive momentum as we move into fiscal 2022 with that let's move to our outlook for this upcoming fiscal year.

Which is on slide number 13.

We're forecasting diluted earnings per share excluding amortization to range from $15.0 to $35.0 per share, which equates to a GAAP EPS range of $92.0 to $13.0 per share for the fiscal year ending July 31.2022.

This implies that we expect GAAP EPS to improve somewhere in the range of 17, 4% to 25, 5% in fiscal 2022, and if you exclude the impact of amortization expense, which increases significantly as a result of our three fourth quarter acquisitions, then our EPS would increase from 21%.

The 29%.

Included in our earnings per share guidance is an increase in after tax amortization expense from our recent acquisitions of approximately $6 million. After tax amortization is increasing from about $10.0 million in fiscal 2021 to about $16.0 million in fiscal 'twenty, two which is a delta of about <unk> 12 per share.

As we look at phasing throughout the upcoming fiscal year, we expect the majority of our EPS growth to come in the second half of the fiscal year and we also expect that our workplace safety business will experience a decline in organic sales in the first quarter of this year due to the strong prior year comparable driven by Covid related product sales last.

Year.

We are also anticipating total sales growth in excess of 12% for the year ending July 31, 2022, which is inclusive of both organic sales growth as well as sales from the recently completed acquisitions. This guidance is based on foreign currency exchange rates as of July 31, 2021 and is of course contingent.

Upon continued macroeconomic expansion.

We'll continue to make the investments necessary to drive organic sales growth will continue to search for acquisitions that advance our strategies and we will continue to drive sustainable efficiency gains while being tight on non revenue generating expenses as for capital allocation, we do not foresee any major changes in our capital allocation strategy.

We will keep investing in our organic business I just mentioned our dividend increase for fiscal 2022, and we'll be opportunistic with buybacks, we're looking for acquisitions, where the prices right and the strategic fit is clear we have a strong balance sheet and we'll use it as a tool to drive long term shareholder value I will now turn the call back.

Over to Michael to cover our divisional results and to provide some closing comments before the Q&A session Michael.

Thank you Erin slide number 14 outlines of fourth quarter financial results for our identification solutions business.

Net sales increased 35%, finishing at $231 million.

This sales growth is comprised of organic growth of 24, 5% acquisition growth of six 9% and an increase of three 6% from foreign currency translation organic sales in our Ids Division were very strong not only versus the fourth quarter of last year, but all.

Also against previous sequential quarters and.

And on the cost side, our strong focus on efficiencies led to a 20 basis point increase in segment profit as a percentage of sales when compared to the fourth quarter of last year.

<unk> organic sales in Asia were strong this quarter with growth of over 10% compared to the fourth quarter of last year. This is the third quarter in a row of Asian organic sales growth in excess of 10% and Europe, our organic sales were up more than 25%. Despite several lockdowns.

<unk> throughout the fourth quarter, our European team did an excellent job driving sales growth while handling the periodic interruptions caused by the lockdown.

We also had organic sales growth of approximately 25% in the Americas, we saw growth in all product lines and geographies throughout the quarter and we were pleased with the bounce back and our healthcare product line for organic sales increased approximately 30%.

In general our sales trends and Ibs are very positive.

We continue to focus on driving efficiency activity and keep their cost structure lean while never sacrificing sales generating investments we've been investing in sales and marketing personnel research and development activities and selected geographic expansion. These investments combined with improved market condition.

<unk> are absolutely paying off with stronger sales growth.

Segment profit was 42.4 million compared to $32.0 million in last year's fourth quarter segment profit as a percentage of sales increased from 18, 2% of sales last year to 18, 4% of sales. This quarter. This continued improvement in profitability.

<unk> is a testament to the hard work of the entire Ids solutions team as it constantly work on becoming more efficient and profitable organization.

Our commitment to R&D remains a top priority to drive future growth in the fourth quarter. We continued our steady stream of new printer introductions with the launching of the <unk> hundred 5300 bench top industrial label printer.

This is a significant enhancement over previous models, it's intuitive auto calibrating and precise and it can print barcodes on labels as small as two tenths of an inch with a solid metal frame construction. It can handle both high volume and high mixed labeling applications in a wide variety of industries include.

<unk> electronics product identification Wired panel identification lab identification and safety and facility identification.

<unk> focus on niche applications. This quarter, we also launched tough stripe for marking tape specifically designed for challenging applications within freezers and cold storage areas. This is just another example of the niche applications, where Brady products really shine. This is.

Extremely durable for marketing Kate can be used to mark refrigerators, freezers and other cold surfaces and is ideal for food and beverage refrigerated warehouses and other cold storage facilities do you.

Aggressive adhesive performance of this tape allows for very easy application and easy removal, while withstanding heavy foot traffic as well as vehicle traffic.

We're innovating throughout Brady and bring solutions that our customers want and need these products demonstrate <unk> ability to engineer high performance printers and materials for a wide range of applications are under R&D pipeline is strong and we continue to launch innovative new solutions that help our customers solve problems and be more.

More efficient and effective IMAX.

Im excited about what we're doing in our IV solutions business and how our acquisitions of cold Nordic IV and Magic card will further accelerate our growth, we're improving our customer service investing in our future and streamlining the rest of our cost structure. These positive revenue trends combined with our strong cost.

But definitely bode well for the future of our IV solutions business moving.

Moving to slide number 15, you'll find a summary of our workplace safety financial performance WPS sales declined six 8%, which consisted of organic sales decline of 12, 7% and foreign currency growth of five 9%.

This decline was primarily driven by challenging comparable from last year's fourth quarter. Our WPS sales were $76.0 million this quarter, which were above the pre print to make sales experienced in the fourth quarter of fiscal 2019.

Last year's fourth quarter was the peak of Covid related product sales. If you exclude the impact of Covid related products are double our WPS business would've shown double digit sales growth this quarter.

Despite periodic shutdowns in the U K, France, Germany, and other countries in western Europe throughout much of the fourth quarter, our European business was still able to perform quite well our team has done an outstanding job of increasing its customer base and for those customers, who initially came to purchase COVID-19 related products are key.

<unk> has done a nice job, providing these same customers with our core safety and identification products as well overall, we're very pleased with how these newly acquired customers are performing and are expected to perform in the future or.

Our Australian business performed similar to your European business during the height of the pandemic last year, our Australian business grew organic sales nearly 25% in last year's fourth quarter, given the challenging Comparables. We were pleased with this quarter's sales volumes as they were well above pre pandemic.

Levels overall, the last quarter, we substantially increased our Australian customer base, and we continue to find opportunities to enhance our digital marketing approach to ensure that we retain our new customers and turn them into long term repeat customers. The sale of Covid related products declined in North America as well.

This quarter and this decline was not fully offset by sales within our non COVID-19 product offerings, thus leading to a decline in organic sales in the Americas as well.

Workplace safety team continues to focus on new product offerings and this quarter, we launched a number of new products aimed at our core spaces. For instance, this quarter, we launched a proprietary speed bump, which leverages our existing patented design to also protect sensitive cables that must be streamed over areas with auto traffic.

We also launched a whole series of safety and identification products aimed at food preparation and hospitality industry to help our customers with food segregation temperature monitoring and the avoidance of cross contamination or workplace safety teams continues to come up with.

And quickly to launch new innovative product ideas that help our customers improve safety and become more efficient and effective.

<unk> segment profit was $11.0 million this quarter compared to $6 million in last year's fourth quarter. This reduction in segment profit was directly related to the reduced sales volumes as a result of the reduction in COVID-19 related product sales as a percentage of sales segment profit was consistent with.

Last year's seven 5%.

Our WPS team members are listening to their customers to identify what they need they are modifying their market campaigns to reach entirely new customers in entirely new industries, and they're working hard to address underperforming businesses within the portfolio. Our workplace safety business has some very difficult comparable as ahead of it.

The first half of fiscal 2022, even without elevated COVID-19 related product sales, our fourth quarter revenues were above pre pandemic levels and we expect to see this positive momentum build as we move through fiscal 2022.

We've laid the foundation for a solid recovery from this pandemic, our core workplace safety business is healthy which positions us well for long term profitable growth.

I'm proud of the role that Brady played and continues to play in the fight against COVID-19, our identification solutions and workplace safety products help companies with social distancing our products help schools reopen safely and our safety and identification products were used by frontline workers.

All around the globe.

This pandemic is not over and the financial impact stemming from the pandemic are certainly not over throughout the pandemic, we invested in growth and efficiencies and it's this continued level of investment that will enable us to keep the strong positive momentum.

Brady is in an enviable financial position.

Our cash flow was up our earnings are up our balance sheet is extremely strong we're in a net cash position, even after making three acquisitions last quarter. We will continue to invest in R&D sales generating resources and capability enhancing capex.

All while being tight on non revenue generating expenses and we intend to further put our balance sheet to work by returning funds to our shareholders and investing in both organic and inorganic growth opportunities again.

Very proud of how our team performed throughout this challenging period their ability to deal with certainty I think on their feet and solve problems quickly all while never compromising the long term has built a strong solid foundation for <unk> future with that I would like to start the Q&A.

Operator would you please provide instructions to our listeners.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your Touchtone telephone again to ask a question. Please press Star then one.

One moment for our first question.

Our first question comes from George Staphos from Bank of America. Your line is open.

Hi, everyone. This is actually <unk> sitting in for George today, Congratulations on the quarter.

Thank you I guess in terms of my first question I guess can you speak to what incremental trends Youre seeing senior.

So in your key end markets early in the first quarter and Relatedly in your discussions with.

Customers would you be able to provide any color on what they are saying in terms of budget increases for fiscal 'twenty, two and the various product categories that they would buy from Brexit.

We are we feel very good as we indicated in our prepared remarks about the economy going forward there are absolutely challenge.

The markets, but we add.

In regards to logistics as far as our customers.

One of the largest challenges.

As far as our products being able to be utilized by them.

We're doing a very good job of being able to get our products to them, but there are industries as you well know that are struggling mightily with everything from chips to resins to paper materials to imported products from Asia to really make sure that they can get their product sets out overall.

It appears that most of our markets are very strong right now.

With these issues being the one governor that we're watching very very carefully that said, it's our job to make sure. We're not part of the bottleneck and I feel incredibly proud of the team and that we.

Without knowing the pandemic was coming worked hard to forward deploy our resources and internalized resources and capabilities for the last several years.

In addition to automating many of our process to become more efficient and effective and those efforts have directly made us a stronger player and able to help our customers more so markets are good to answer.

A question specifically, but there are real challenges in logistics that they are all facing and they are facing obviously cost pressures across the board as well.

Great that's helpful.

And then I guess on the last call that you had.

You said that you expect $96 million and combined revenue from your recently acquired businesses in fiscal 'twenty. Two so I guess, assuming if brady captures all of that that would be around 3% to 4%.

Revenue growth in 2002 so.

First is that still the assumption and then I guess could you disaggregate how much of this do you expect to come from pricing and volume. Thanks.

Well, we certainly expecting we still expect a $96 million increase in.

I'm, sorry, $96 million of revenue from the acquisitions that we closed in the third I'm sorry in the fourth quarter in fiscal 2022, I think it comes to a bit more than 4% to 5% of sales growth is.

So it's going to it's going to be higher than that as a percent.

And we still feel very obviously, we feel very good about these acquisitions and we're super excited about them going forward.

You did mentioned a question about pricing and volume in general and I'll be glad to answer that as well. There is no question, we're seeing strong.

Inflationary pressures, particularly in lines that have a lot of resin involved in them. There is some there is some definite dynamics there chip costs are going up and are being a little more problematic.

But we have been very.

Proactive about addressing those there is always a lag.

And in any time, I've seen inflation and by the way for most people on this call you Havent experienced inflation, it's been a long time since we've really seen that but what I have always experience is there is some lag between being able to increase your prices after getting some cost increases but our team.

Is very proactive about it very active about making sure our customers understand why we are increasing the prices and making sure that those price increases are closing the gap. In addition, our continual automation efforts, particularly during the downturn have put us in a much better position because the other big.

Area for inflation as wages.

So it is a little more challenging to increase prices, there, but our automation efforts.

To tell you the team has been extraordinary and what they pulled off during the downturn.

And that has helped us have enough employees around the globe. Despite the shortages to do a stellar job. So we definitely expect our prices at our prices have gone up.

But we're also seeing our volume go up.

It's a it's a dual bang for us.

Yes.

Great. Thanks, Thank you.

Thank you. Our next question comes from clean.

That's an early on about that.

Good morning, Michael and thanks for all the color on the call good morning.

Just wanted to ask a little I know, it's very tricky time to be trying to put out full year guidance. So I'm just trying to think about how you're thinking about the uptick in infection rates with Delta and just general concerns how that sort of plays into your guidance, particularly on the on the.

So at the hospital and workplace Heidi side.

I'd like to say that we're going to be through this quickly.

I am not medical in any way so any comment I made at May may be an error, but if we take a look at the flu that we experience every year. It's my understanding that the variant from the $37.0, Spanish flu. So it's my personal nonmedical belief that we're going to be dealing with this.

For a long long time, obviously, we've found ways to deal with the flu we will.

As a world or find ways to deal more and more effectively with this but also as I understand it the second year of the Spanish.

Flew in 1918 was worse than the first year because of variance and mutations we are seeing a lot of that as you well know and that is having an impact we're having facilities that are in countries and locations and customers that are now being shut down again take a look at the situation in Australia. So.

What I would answer you is we believe I personally believe and we're reflecting that that coming out of this will be bumpy. The good news about that is take a look at our results from last year when it was extremely challenging.

Our products are critical to many industries and those industries need to function and perform well and we need to perform and function well and our people and I can't say this enough the pride in our people they have proven to be incredibly resilient nimble.

Reflective.

Doing an incredible job. So I would tell you absolutely we're going to see challenges. The globe is going to see challenges from the variations and lack of ability to either vaccinate sufficiently choose to vaccinate solutions or the vaccination is not working quite as effectively and variance.

As it had been that said I'm confident we'll be able to overcome everything that we're at least seeing at this point, but you did add a very big caveat that I will agree.

<unk> told me, where it would be at.

Financially or through the.

Covid right now at this point a year ago I would have been surprised were stronger than we expected to be financially and COVID-19 is more challenging than I expected it to be so both can take place at the same time.

Hope that helps Steve.

Fair enough. Thank you for that.

In terms of the margins on the two different segments.

Excluding the one time on Ibs and looked a lot like Q1 and Q2 should.

Should we be thinking about the Q3 higher number is a bit of an outlier or how do you want us to think about how were you thinking about the margins in that segment moving forward.

Yes, I think youre actually thinking about it the correct way Steve.

The vast majority of course of these acquisition charges that we that we called out that land in Ibs of course, because they are already Ids acquisition.

<unk>.

And actually if you exclude those we would have been somewhere in the neighborhood of 20% operating income level, our segment profit level and Thats about what we would anticipate in the future.

Okay, and then on the flip side with workplace safety, you're back in that sort of seven 5% range, which is where you are aware of the year before COVID-19.

A level Youre comfortable with do you think you can grow it from here on how you're thinking about the long term of that business with that type of margin level.

Well.

We're certainly not comfortable at seven 5% right I mean, it's never good enough for us. So we are constantly pushing to improve workplace safety is very much volume dependent though.

They have very nice.

Profit margins and as volumes go up it drops a lot to the bottom line. So we're really we're really working with our workplace safety team to drive the topline, which will drive obviously the bottom line and the bottom line as a percent.

And Steve Ive got to reiterate I am incredibly encouraged.

With what the team is able to do with growth in that if we do take out the COVID-19.

Materials and we know we've already told you we're going to have another challenge next quarter with that because we had a great quarter with COVID-19 products, but the base business Theyre stand your business is growing.

That is something that for several years.

We could not say and they have done a great job of really strengthening their capabilities our product sets their R&D.

Differentiating what they do in the marketplace, while at the same time.

Responding to all the needs of digital requests by customers and faster response rates by customers. So they are positioned very well to grow and that growth as Aaron pointed out will directly impact our margins in a good way that said I want to repeat next quarter remains a.

<unk> challenge because of the.

The wonderful work they did with Covid products something that I'm thrilled we were able to do.

And both support the company financially, but even more importantly, the world.

During during the heart of Covid.

Thanks, Michael Thanks Art I appreciate the responses.

Thank you.

Thank you. Our next question comes from Michael again of Wells Fargo. Your line is open.

Thank you I wanted to go back to the gross margin conversation.

Understanding a little bit of conservatism on price cost, but on the other hand, you also said you have confidence to maintain 50% gross margin levels. If I heard you right that that would be 100 basis point uptick year over year. So can you just square the conservative conservatism on price cost versus.

The optimism of being able to hold 50% gross margin.

We actually.

Have some great strengths and as I mentioned in my commentary or questions.

We foresaw the need.

Probably about four or five years ago now at this point Erinn.

To become much more automated to become much more.

<unk> as an organization that was not related to some brilliant at knowing a pandemic would come in there would be direct even harder labor shortages as a result, but it was based on the fact that you can look around the world seeing aging work populations and the place that people really missed this is the aging work populations in China.

Specifically.

I continue to tell people that the working age population of China will continue to decrease for at least the next 20 years. It has two unless we can figure out ways to pop out adults.

Instantly.

The demographics are such that it's going to go down that's true in most of the world. So we saw that we anticipated that the positive for you in regard to margins and everything else is as we automate with the need to eliminate people not for cost, but because we can't get those people knew.

We wouldn't be able to get them. It is also overcoming that in a much more cost effective way. So you bet. We've got some inflationary concerns we have an absolute concerns during inflation you cannot.

Keep up with price increases at a perfect matched manner. So there is some lag.

But we do have strong.

Proprietary products that can keep that value proposition with the lag. But then in addition, we're doing a really good job of becoming more efficient and effective in everything we do some of the new systems that I see we're deploying in everything from a warehousing to our production to our customer service really get me excited.

And a few years ago I was asked when can you stop this effort I said the answer is never I'm going to actually change the statement two we're accelerating the effort.

Okay.

We shared the color and then sticking with the APAC theme, you mentioned Youre investing head count sales force resources into that area and I guess my question is that kind of seems like brothers home home turf and you are pretty well defined supply distributional relations here domestically.

<unk>.

Are you taking the same product over there and layering on top of the Salesforce or what kind of strategy are you implementing.

Tearing our.

Indirect direct sales model any color there would be great, yes, well first of all we've been in Asia for a long time, and we do have a strong brand and strong reputation in Asia.

<unk> in Southeast Asia, We mentioned we are accelerating.

Let's take India as an example, we do extremely well in India, our products are well respected and the real issue. There is logistics, India is a very complex society and a very complex logistical challenge and so we need more resources, even closer to our customers in India.

That's the strategy that has paid off for us and is going to pay off for us. So that is one example.

We also make products that are unique in the industry not compared to any one other company compared to all of the other companies and that uniqueness is valued and we have a very high global a retention rate of those customers as you go from generation to generation of our Tech Tech.

Knowledge is so I would say the first issue is we make true unique exciting products that make a difference to our customers. The second is we know that forward deploying resources helps us with those customers and the third is our reputation is very very strong throughout Asia.

The customers are looking for true differentiation as opposed to pure cost place.

As you know, we're not in and don't plan it to be the paper labels space is a great example that is not an area, where we believe Brady adds a lot of value other competitors in general without naming any do very very well in the paper labels space, but thats, what theyre focused on Thats, what theyre setup for that's what they're good at so looking.

At Brady type applications, we actually have great belief that in particular in the southeast Asia area that we mentioned both as customers migrate their more and as we develop our resources. There we will do very very well.

So thank you for that question Michael Good question.

All right last one for me if I can sneak one more in the $2 million repo authorization I think if you were to execute that today in the open market and nearly matches kind of your net cash balance.

Incidents or not but looking at the financial profile of your company Youre going to maybe throw off another $150 million of free cash flow. This year. So can you just talk about the confidence the line of sight in the timetable you see for your capital allocation priorities.

As you very well know we are not a program buyer.

I won't tell you that we've always hit every dip for a variety of reasons at the right time, but we are looking for disconnect opportunity, we want that powder and that ability available. So if those opportunities come up we will take advantage of them. If there isn't a disconnect in the market I'm also happy.

With that I want to be quite quite clear.

Like the market to be aligned with our intrinsic value, but when it isn't we are going to take advantage of it and we do have the ability and you can see that in the amount you you did the math that we do have the ability to take full advantage of that amount. If we think it's appropriate but I want to repeat this.

As part of a total <unk>.

Model, we look at we look at acquisitions, where we have a lot of powder for acquisitions right. Now we look at R&D growth, we look at infrastructure support and we look at buybacks and we say what is the best use of our capital and where do we see the key opportunities and we definitely.

I want to be prepared for any potential disconnect in our in our stock price versus our understanding of our intrinsic value. So thank you.

I appreciate the time.

Absolutely. Thank you.

Thank you again, if you'd like to ask a question Star then one our next question comes from Keith <unk>.

Northcoast research your line is open.

Good morning, guys.

I want you to look into your Crystal ball here and kind of talk about some of the inflationary pressures you guys have seen over the past year is your expectation that you're going to see these inflationary pressures continue and perhaps even accelerate or is there anything that youre seeing on the horizon that says perhaps things are starting to stabilize there Europe.

Killing me Keith and all the questions today, you're asking me to look at it critical ball, but I will do my best a full disclosure my Crystal ball broke when I was a small child, but I will literally try my best we see logistical issues.

I'm answering your question, but I want to be clear of how I'm answering it for the next six months to 18 months easily.

Those logistical issues are definitely cause of inflation. They absolutely are a very primary cause with inflation. We also were seeing labor shortages and not just because in the U S. We have compensation models that people are by the way you think people don't know there are there are financial.

Gain in return.

They change their pattern when they don't get as much from staying at home if they get to work so that will change we think.

Got it.

There is a shortage of people.

Have a belief that that shortages, partly caused by something we didn't do Brady did not have massive layoffs like many companies did we did what we believe is the right thing at the time and it's paid off for us, but many companies laid off as many 20% of their people the more experience part of that workforce.

I think has made some decisions to never come back. If you are 60.62 63.64, you may have kept working for five to seven more years, but youre not coming back that is creating one level of shortage. The other level is around the world with a few exceptions countries like India Philippines.

Exit co. The actual workforce is aging out anyway, and so I think we're going to see some pressures from that so to answer your question, Yes, I, absolutely anticipate that we're going to continue to see inflationary pressures not just us but in industrial companies throughout the world.

And I believe Brady is positioned.

With our two multiple lever levels.

Ability to control. This we're in sourcing more products as you well know mainly to control the technological future, but that does add a margin advantage to us.

Automating things that people never believe.

Just a few years ago when I got here.

That they could automate I mean, they are now up really understanding how powerful that that that opportunity is and coming at me with ideas and approaches and sets that are super strong and the third thing is we have.

Strong value to our customers and therefore, we are able because our products by and large are not commodities.

Able to pass on as COO.

Quickly and effectively as possible real cost increases that said there is absolutely a lag in that part of the equation I don't want to Kid you about that.

You have to work with people no matter how bad the situation is to get the prices up and for some strange reason no matter, how strong our value as they like to drag their feet about having that process take place.

Okay.

Keith I hope that helps with full disclosure it is a crystal ball.

I hear you on that one in terms of you talked earlier about the disconnect. When you guys are experiencing increases in let's say raw materials in your ability to raise prices. If you look at your gross margins you guys were up year over year, but it's still on a historical basis, youre down probably 100 basis points or so versus other quarters.

What do you think the impact was in the quarter in terms of your gross margin in terms of a disconnect in your ability to raise prices versus the price increases European.

You know what it is it is a complex to answer it is literally product line by product line.

In the case of where we have and I'm not going to list the product line.

We do have some commoditized product lines not many but we do those we saw a significant loss.

Lag.

We have covered most if not all of the lag.

But we but gifts twice seen major spikes in our materials at twice had to go back and really make some significant increases and we saw a bigger lag there, whereas other areas that we have.

More control.

Do better I would like to give you other spaces healthcare, we have contracts that make it take a little longer.

It just is required by the contracts there is a foot dragging process literally built in.

So it literally depends on the product set the materials.

The end customer so it's a pretty complex so I wouldn't want to come out and try to break out a number for you right now Keith.

But there is an absolute impact, though im not sure absolutely unequivocal I don't want to I'm not denying that at all I just didn't I thought you asked for specific number and they don't want to try to try to parse that.

Yes.

Thank you.

Yes, sure I understand.

Last question for you you guys have forgive my skepticism WP acrobat challenge for many.

Many years here and I hear your enthusiasm for it sounds like you really believe that you've actually ask we have a turnaround in the WPS segment.

I guess, what I would help craft, Mike I understand the contract going through government more is can you quantify or give us more context in terms of the impact is from the corporate closure as you saw in Europe on the business.

This year, it's at WPS segment versus two years ago is only up 2% after being down 35% over the past 10 years or so so.

It's a good call look turning your skepticism is real and I understand it.

You heard me for years, they were working on it.

I'll go back and check my comments I don't think I ever said we're here.

But I feel better now than ever before the biggest part I feel really good about Keith is that if I do lop off and we can do that very very efficiently lop off the true COVID-19 related sales.

We are growing.

And that is something that I Couldnt look you in the eye and say five years ago for instance in fact the opposite.

I had to look in the eye and say were declining less than in fact, you can look at quarter after quarter, where I said were declining less were declining yet also declining yet.

Have to take in my mind, the Covid sales off they are truly an anomaly to look at what's really under the lid and we are growing and so very very positive about that it's still a challenging space you know that and I know that but we've got the best team we've ever had we're moving in the right direction to both internalizing our.

Action for cost and responsiveness, even more importantly to me is responsiveness.

We're adding new technology, they're something that three and four years ago that organization was like stunned at how strong I was as we are going to become a technological player.

And it took a while for me to get that organization really to understand how valuable that is in selling all of their products because it's a pull along effect. So Keith I do feel like we're developing new unique and proprietary products I do feel like we're using Brady bench are proprietary products more effectively in that space and I do.

Do believe Thats dragging along the rest of the business I'm not going to tell you that as in a challenging industry.

Even the biggest players in that industry.

Make most of their money in unrelated areas and not necessarily in selling but where our advantage is we truly are a value added distributor and that is a big differentiation in that space.

Becoming much more so and we have strong targets to become even significantly more of a value added reseller as opposed to a pass through reseller going down the future.

Do I think we have the right team to I think we're seeing the rate momentum absolutely and can I say and I get it I have the lop off the COVID-19 sales, but can I say that we are growing as opposed to our closing the gap of reducing yes, now how long will it take Keith to make.

Up that 35%.

I'm not going to give you a prognosis, but what I can tell you is we are where we are today.

I'm going to grow from where we are today, but I can't make up for years before I, even got here of decline.

Yep.

But.

Honest question I Hope I gave you a very straightforward answer.

As a part of that I guess I didn't hear any answer to what in terms of the closures that happened in Europe over the quarter, what kind of impact that they have on WPS for core.

Give me exact numbers.

I mean, you look at France, I think we were at five kilometer restrictions.

For large periods of time, the UK has been off and on and struggling.

Every country every country has particularly are bigger the Germany, the U K as the Belgium.

We have large facilities in Belgium, we're able to run those but they've been under some some great restrictions and that has been adding some superb challenges to them and at the same time.

Even with the second round of <unk>.

Covid youre not seeing the COVID-19 related sales at all and Thats not just with us thats across the board and we can speculate.

Speculate as to why that is but it isn't it isn't happening so even though youre getting the shutdowns were not getting the next level of Covid sales from those shutdowns, while youre right in Europe, we are having some some challenges.

I think we would have grown more without that spa.

Speculating yes.

Alright, I've asked them only already I appreciate your time as always and good luck, Michael Hey, Thank you Keith I appreciate your time.

Thank you. Our next question comes from Michael again at Wells Fargo. Your line is open.

Yeah.

Alright, Thank you for the follow up.

I wanted to do some housecleaning here I looked at the deck posted three acquisition.

It looks like you had the run rate EBITDA of about 14, 5%, but that was inclusive of some discrete charges is there an updated number that's more reflective of how youre reporting earnings and then.

Any early profit improvements that would push that number higher.

We're still looking at a F 'twenty to run rate EBITDA of about $14 million.

Which is the exact percent that you just mentioned and then same with revenue our revenue estimates for this year fiscal 'twenty two we have not changed as well they are at about $96 million for the summation of the three deals no change.

Add a little color, we're pleased with how those.

Companies are performing we loved the teams.

As always about people for me because we have the right people the right organizations and Theyre doing very well, but we expected them to do well and they're meeting those expectations, but very very positive on the teams the product sets they offer and their excitement for what they see as a great combination opportunity.

Okay, and then on the topline guidance.

Greater than 12% overall, you mentioned some positive inflections in healthcare.

The big.

End market verticals that would push you materially above that number or the ones that are growing faster now or need a little bit of help self help so well.

We got to be careful you know Brady is in every key code. There is Ed some faces are larger and smaller.

Obviously general manufacturing is one of our biggest opportunity sets and is doing reasonably well, we'd love to perform even better that would certainly lift the boat more than other areas. There are other areas that the people areas.

<unk> lagged behind I don't want to oversell those areas because they are massive markets to us, but we do have businesses in those areas to do well.

So anything that is people identification and office space.

<unk> still is a challenge.

We could argue work at home or not work at home how that will come back when it will but EMEA and most people will have to have some kind of credentials identification.

Because if they're not going to be working exclusively at home and so we think theres going to be some uptick there Vince or getting better. If you look at the results from Disney and all of that I'm not an expert on Disney but I can tell you that they also raised prices. So I think I had an earlier I did have an earlier question.

How much is price versus volume.

I'd like to see their underlying price versus volume equation, because overall the industries that do that such as festivals are still not open our concerts are very limited.

Vince are very limited.

Conferences for industrial applications is very limited. So we do expect that to come up a medical has recovered, but we hope that it will it will continue to grow even more.

As it's recovered, but it's not <unk>.

Stronger than it was and we think theres a lot of hopefully been up.

<unk> there there are two factors that govern that right now the hospitals are back to in many locations focusing on Covid and there was an absolute shortage of people capacity in our healthcare industry and we think that's going to govern that situation more than we'd like I think if there were.

More providers available, but once again providers have seem to go backwards for a lot of understandable reasons in that space and so that's going to be a big challenge I mean, I know a lot of hospitals are looking at bolstering their colleges for nurses et cetera, I think because of because of those challenges but that takes.

Time, and then other spaces I know there is some questions about <unk>.

The long term of the oil and gas industry I would say this I have no question that in the short term it is definitely a high used industry.

The world and I do think that with prices going up in those areas, we will see more opportunities as a refurbished plant plants et cetera.

That type of space number of others aerospace will take longer.

It's interesting the airlines are very optimistic because of all the summer traffic and they thought COVID-19 was going down but both from their statements in my experience business travelers are not back until the fall is not nearly as good as.

There are now no longer anticipating defaults be nearly as good as the people with the pent up demand for tourism I'll have to go back to work and school and the business travelers aren't going up so I think our aerospace business, particularly the commercial side is still going to remain challenged for probably about as long as they originally thought.

But you can get some great numbers of that obviously from them.

Great I appreciate the time.

Thank you I hope that helps thank you Michael.

Thank you I'm showing no further questions at this time I'd like to turn the call back over to Michael <unk> for any closing remarks.

Thank you so much I appreciate a valerie thank you I'd like to leave with a few concluding comments this morning.

We're certainly living in interesting times.

We're still in the back half of a global pandemic, we just posted the best earnings per share in Brady history, and our guidance for next year would be another record year at the same time, we're experiencing supply chain challenges and we're seeing inflationary pressures all around us.

We're confident we can offset these inflationary pressures with our relentless focus on automation and efficiencies combined with targeted price increases.

I don't know what the future holds for the global economy or the Corona virus, but I do know we're controlling what we can by prioritizing investments in growth and focusing on cash generation. We are confident that Brady is well positioned to capitalize on global market trends. We just finished fiscal <unk>.

One with strong momentum we came out very very strong and we're well positioned to generate significant future value for both our customers and our shareholders.

I am excited about our future.

Please stay safe and thank you for your time. This morning have a great day operator, you may disconnect the call.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all for participating you may all disconnect have a great day.

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Okay.

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Thank you for standing by and welcome to the Q4 2021 Brady Corporation earnings Conference call and there's some all participants on a dollar amount.

The presentation there'll be a question and answer session.

So that's a question at that time print for Star then one when you touch tone telephone.

As a reminder, today's conference call is being recorded I would now like to turn the conference over to your house with Anthony.

Sir you may begin.

Thank you good morning, and welcome to the Brady Corporation fiscal 2021 fourth quarter earnings Conference call. The slides for this morning's call are located on our website at Www Dot Brady Corp, Dotcom first investors.

We'll begin our prepared remarks on slide number three.

Please note that during this call we may make profit.

May make comments about forward looking information words, such as expect will May believe forecast and anticipate are just a few examples of words identifying a forward looking statement.

It is important to note that forward looking information is subject to various risk factors and uncertainties, which could significantly impact expected results.

Risk factors were noted in our news release this morning, and in Brady's fiscal 2021 Form 10-K, which was filed with the SEC. This morning.

Also please note that this teleconference is copyrighted by Brady Corporation and May not be rebroadcast without the consent of Brady will.

We will be recording this call and broadcasting it on the Internet as such your participation in the Q&A session will constitute your consent to being recorded.

I'll now turn the call over to Brady's, President and Chief Executive Officer, Michael Nauman. Thank.

Good morning, and thank you all for joining US today. This morning, we released our fiscal 2021 fourth quarter financial results capping off a record earnings per share year I'm proud of how the Brady team was able to navigate this challenging economic environment and deliver for both our customers and our.

Shareholders.

Brady played a very important role in the global fight against this pandemic throughout the last year and a half.

In our WPS business, we worked tirelessly to manufacturers source and deliver many of the products that our customers needed to aid in social distancing or to help provide more hygienic environment for employees returning to work we provided support to first responders health care workers food processing companies logistics.

Companies retail establishment schools and virtually every other essential industry by helping solve their safety and identification needs to ensure that they can fulfill their missions are for marking safety times and many other products were used throughout the world.

In our identification solutions business. We also provided many products into the healthcare industry and laboratories to identify and track samples and to help keep patients safe Brady safety and identification products were in demand and our team stepped up to deliver the products that help make the world a safer place.

Put it mildly this was a challenging year as we navigated through a rapidly evolving environment, all while never wavering from our primary goals of keeping our employees safe and ensuring that we meet the demands of our customers. It's clear that this pandemic is not yet behind us as new variance of emerge and <unk>.

Covid cases are still high and rising in many countries around the globe plus we and many other companies are dealing with supply chain disruptions caused by the abrupt shutdowns and then the rapid re openings, which resulted in inflation in areas such as resin freight paper based materials certain services.

And wages some of these cost.

The increases may be temporary, but we see many of these cost increases is almost certainly permanent as you can see we continue to maintain a healthy gross profit margin in fact, our gross profit margin was up 110 basis points versus the same quarter last year, because we never slowed down.

On a push to automate our facilities and drive sustainable efficiency gains, which when combined with targeted price increases are offsetting most input cost increases.

And as I said fiscal 2021 was a challenging year, but Brady did its part and we will continue to do our part to make the world a safer place.

This quarter revenues were up a robust 21, 6% we had growth of 35% in our identification solutions business and a decline of six 8% in our workplace safety business. The revenue decline in our workplace safety business was primarily due to tough comparable.

As Q4 of last year, which when we experienced peak COVID-19 related product sales.

Earnings were also very strong this quarter with earnings per share up 32, 1% on a non-GAAP basis and cash generated from operating activities was also very robust this quarter, finishing at $58 million and capping off a year, where cash flow from operating activities exceeded.

At $200 million.

Overall, our fourth quarter financial results were once again very strong and provide a strong jumping off point as we enter fiscal 'twenty two with positive momentum.

As we look ahead.

Our priorities are to drive organic sales growth continue to become a more.

Efficient manufacturer integrate our recent acquisitions and deploy our capital to drive long term shareholder value to.

To drive organic sales were upgrading our websites, we're improving our marketing capabilities, we're developing new products, we're investing in capital enhancing machinery, and we're making our marketing investments necessary to grow our top line now and into the future.

Profitable sales growth is definitely our number one financial priority in fiscal 2022 for instance, in our IV solutions business, we've been increasing our R&D spend and seeing the fruits of that labor as we are launching new products at an increasing rate and we're continuing to distance ourselves.

From our competitors, who don't have the scale or financial wherewithal to invest heavily in R&D, particularly during a downturn.

We're improving our inline presence by upgrading our websites and investing more in digital marketing talent. We're also expanding our sales force and expanding geographically into underserved markets with strong future growth potential in areas, such as southeast Asia and Eastern Europe, our strong new product lineup <unk>.

Bind with investments in sales marketing and our online presence gives us confidence that our IV solutions business will continue to generate strong organic sales growth in fiscal 2022 and beyond.

In our workplace safety business, we are capitalizing on our common web platform by using a much stronger market intelligence to quickly adapt and pivot to changing market dynamics.

We're increasing our investments in new product development, and we are increasing the pace of new product launches and an effort to increase the percentage of proprietary high value products sold to our customers by WPS and we're adding new salespeople around the globe to accelerate our sales even further.

Our focus on serving our customers extremely well and aggressively working to increase our customer base is paying off. We also believe that we will soon see another leg up in organic sales growth with some of our other end markets improve for instance, in our IVF business, we sell in many niche identification markets aimed at.

Buying people and workplace and entertainment venues. These markets have remained depressed, but have not yet recovered quite like our core industrial markets have in addition, our product offering focused on micro businesses in the U S has remained depressed as these businesses have been impacted the most so when these markets bounce back which we believe.

They will we should see another increase inorganic sales, while we're investing in our organic sales growth. We're also working to streamline our SG&A cost structure. So that we can fund our sales growth initiatives, while still driving down SG&A expense and we're focused on becoming a more efficient manufacturer.

We're automating wherever we can in an effort to reduce manufacturing costs in a sustainable manner.

And to protect our strong gross profit margins and.

In addition to our focus on driving organic sales growth and becoming a more efficient organization. We're also in the process of integrating the three acquisitions that we completed last quarter as it relates to the acquisitions of Nordic IGN code. We're building out our track and trace solution set which is an important initiative to help.

Move into faster growing end markets with the additions of coach barcode scanning technology and Nordic Ids RFID scanning technology, we will create a portfolio of industrial readers that are fully integrated with our printers and our existing software driven by the adoption.

<unk> of industry 4.0, and the trend of onshoring to reduce supply chain vulnerabilities, the barcode and RFID markets are growing quickly as a result of emerging use cases to provide better workflow visibility.

The value of code and Nordic IV come from their strong technology and complementary products that will help us expand in track and trace applications within industrial settings. So there are natural synergy opportunities once combined with Brady's global footprint. We're very excited about how these acquisitions combined with additional R&D.

Efforts will help us develop global solutions in the industrial track and trace space.

We also completed the acquisition of Magic card last quarter Magic card is a well known globally for its innovated and differentiated products and the IV card printing space as they have a full range of desktop devices to meet local on demand secure I'd card issuance requirements. They specialized in I'd card.

Printers, and consumables with high resolution full color image capabilities that are built in security features and the ability to encode smart cards. There are natural synergies with our people identification product offerings previously we lacked rigid <unk>.

Our printers, and our product portfolio and magic card absolutely helps build the GAAP.

It's a combination of technology acquisitions, such as <unk> co.

Code and Magic card the investments we've made to the pandemic in R&D sales and marketing and our recently expanded customer base that result in a strong future for both our IV solutions and workplace safety businesses.

I am confident we will see continued revenue growth in future quarters. As a result of our focus on growing organic sales plus a rock solid balance sheet and strong cash flow gives us significant dry powder to accelerate growth through further R&D efforts and additional business acquisition.

All while continuing to return funds to our shareholders.

Brady is well positioned as we look to fiscal 2022 and beyond.

Yesterday, we announced an increase in our annual dividend for the 36th consecutive year and today, we announced an increase in the amount of authorized shares available for repurchase at or coming out with guidance for fiscal 2022 as you can see from our guidance we expect.

Fiscal 2020 to be another all time records earnings per share year for Brady overall, I'm confident in our ability to deliver results for our customers our employees and of course, our shareholders I'll now turn the call over to Aaron to give a little more details on our financial results then I'll.

Return to provide specific commentary about our identification solutions and workplace safety businesses Erin. Thank you Michael Good morning, everyone I'll start the financial review on slide number three.

Sales in the fourth quarter were $307.0 million, which was an increase of 21, 6% compared to the same quarter last year GAAP pre tax earnings were $47.0 million, which was an increase of 19, 4% when compared to Q4 of last year non.

Non-GAAP pretax income was $49.0 million, which was an increase of 30% when compared to Q4 of last year. The only adjustment to arrive at non-GAAP pre tax income is the removal of truly nonrecurring costs, such as acquisition related legal fees tax fees and accounting fees as well as the <unk>.

<unk> impact from reporting inventories at fair value.

GAAP diluted EPS finished at 53.

While non-GAAP EPS increased 32% to 70 this quarter the only adjustments to arrive at non-GAAP EPS were the removal of the acquisition costs that I, just mentioned removal of a nonrecurring tax charge related to one of the acquisitions and the removal of an impairment charge related to an equity method.

We also had another very strong quarter of cash generation cash provided by operating activities was $58.0 million, which was 12, 6% higher than the $46.0 million of operating cash flow generated in the fourth quarter of last year. So financially Q4 was a very strong quarter move.

The slide number four you'll find our quarterly sales trends are 20 plus percent sales increase consisted of organic sales growth of 12, 6% an increase from acquisitions of four 7% and an increase from foreign currency translation of four 3% organic sales continued to improve.

In our I'd solutions business and finished up a robust 24, 5% in Q4, our workplace safety business benefited from strong COVID-19 related product sales in last year's fourth quarter. As a result of these tough comparable as we saw a decline in WPS organic sales of 12, 7%. However, we remain.

Quite optimistic about the future of our WPS business as we've increased our customer base improved our digital presence and have many new proprietary products, all of which bode well for the future.

Turning to slide number five you'll see our gross profit margin trending our gross profit margin increased by 110 basis points. This quarter, finishing at 48, 2% compared to 47, 1% in the fourth quarter of last year. If you exclude the purchase accounting charges from our recent acquisitions, our gross profit margin.

Would've been approximately 20 basis points higher than the reported GAAP figures.

The improvement over the fourth quarter of last year was a direct result of increased sales volumes and many efficiency activities that we've been driving throughout our manufacturing facilities. As you would expect we are seeing inflationary pressures in raw materials freight and certain services. We're also seeing wage inflation and were finding it difficult to fill open manufacture.

Enrolls, but we're automating wherever we can we're driving efficiencies at a strong pace and we're putting through targeted price increases. We believe that these actions will offset any inflationary forces and enable us to maintain our gross profit margin in the approximate 50% range.

On slide number six you'll find our SG&A expense trending SG&A was $100.0 million this quarter compared to $84.0 million in the fourth quarter of last year SG&A was heavily impacted by both the recent acquisitions as well as an increase in incentive based compensation last year as a result of the pen.

Our incentive based compensation was down significantly in fact in the fourth quarter of last year, our incentive comp was negative, whereas this year incentive based comp is running at more normalized levels.

And as a percent of sales SG&A was 36% this quarter, if you'd exclude the nonrecurring costs that I mentioned earlier SG&A would have been below 30% of sales this quarter, which would've continued the general trend of declining SG&A as a percent of sales even as we're increasing investments in sales and marketing.

To accelerate sales growth.

Moving onto slide number seven you'll find the trending of our investments in research and development. This quarter, we invested $15.0 million in R&D.

Approximately $4.0 million of R&D expense came from our three fourth quarter acquisitions, we continue to have opportunities to invest in new product development and we're committed to increasing these investments while at the same time, ensuring that we get the most out of every dollar spent on R&D. These investments in R&D are critical to help propel Brady.

Long term sales growth and protect our gross profit margins.

Number eight illustrates our pretax income trends non-GAAP pre tax earnings increased 30% from $43.0 million last year to $49.0 million. This quarter again, the only items, we're adjusting for it to get to non-GAAP pre tax earnings are the truly nonrecurring costs related to our <unk>.

Recently completed acquisitions.

30% increase in pre tax earnings was a direct result of our very strong sales growth combined with our ongoing focus on automation and sustainable efficiency gains slide.

Slide number nine illustrates our after tax income and EPS trends as I mentioned non-GAAP diluted EPS was <unk> 70, this quarter compared to <unk> 53 in last year's fourth quarter, an increase of 32%.

On slide number 10, you will find a summary of our cash generation, which continues to be quite strong we generated $58.0 million of cash flow from operating activities and free cash flow was $45 million. This quarter. The conversion of net income into operating cash flow was once again very strong with operating cash flow well in excess.

Both GAAP and non-GAAP net income.

Now if you'll turn to slide number 11, you can see the impact that the strong cash generation is having on our balance sheet, even after using $244 million of cash for the acquisitions of Magic card Nordic Ids and code on July 31, we were still in a net cash position of $112.0 million.

Our strong balance sheet puts us in a fantastic position to execute additional value enhancing activities, including investing in R&D, completing additional acquisitions and returning funds to our shareholders.

Our approach to capital allocation is consistent first we use our cash to fully fund organic sales and efficiency opportunities throughout the economic cycle, where funding investments in new product development sales generating resources, it improvements capability enhancing capex and capex to further automate our facilities we have.

We'll absolutely keep funding these investments where it makes sense and where the investments are ROI positive and second we focus on returning cash to our shareholders in the form of dividends and as we just announced last night, we're increasing our annual dividend for the 36th consecutive year.

After funding organic investments and dividends, we then deploy our cash in a disciplined manner for either buybacks or acquisitions, where we believe that we have strong synergistic opportunities.

Slide number 12 provides an overview of our financial results for the full year ended July 31, 2021 overall sales increased five 9% and we finished with all time record earnings per share of course, both our revenues and our earnings were significantly impacted by the COVID-19.

Demick throughout most of fiscal 2021, which makes these record EPS results all that much more impressive plus we're exiting fiscal 'twenty one with positive momentum Q4 was our strongest revenue quarter of the year with Ids posting organic sales growth of 24, 5% and WPS running at a sales rate of <unk>.

Higher than what we experienced prior to the pandemic.

The acquisitions, we completed in the fourth quarter should provide positive momentum as we move into fiscal 2022 with that let's move to our outlook for this upcoming fiscal year.

Which is on slide number 13.

We're forecasting diluted earnings per share excluding amortization to range from $15.0 to $35.0 per share, which equates to a GAAP EPS range of $92.0 to $13.0 per share for the fiscal year ending July 31, 2022. This imply.

That we expect GAAP EPS to improve somewhere in the range of 17, 4% to 25, 5% in fiscal 2022, and if you exclude the impact of amortization expense, which increased significantly as a result of our three fourth quarter acquisitions, then our EPS would increase from 'twenty one to 'twenty nine.

9%.

Included in our earnings per share guidance is an increase in after tax amortization expense from our recent acquisitions of approximately $6 million. After tax amortization is increasing from about $10.0 million in fiscal 2021 to about $16.0 million in fiscal 'twenty, two which is a delta of about <unk> 12 per share.

As we look at phasing throughout the upcoming fiscal year, we expect the majority of our EPS growth to come in the second half of the fiscal year and we also expect that our workplace safety business will experience a decline in organic sales in the first quarter of this year due to the strong prior year comparable driven by Covid related product sales last.

Year.

We are also anticipating total sales growth in excess of 12% for the year ending July 31, 2022, which is inclusive of both organic sales growth as well as sales from the recently completed acquisitions. This guidance is based on foreign currency exchange rates as of July 31, 2021 and is of course contingent.

Upon continued macroeconomic expansion will continue to make the investments necessary to drive organic sales growth will continue to search for acquisitions that advance our strategies and will continue to drive sustainable efficiency gains while being tight on non revenue generating expenses as for capital allocation, we do not foresee any more.

Changes in our capital allocation strategy, we will keep investing in our organic business I just mentioned our dividend increase for fiscal 2022, and we'll be opportunistic with buybacks, we're looking for acquisitions, where the prices right and the strategic fit is clear we have a strong balance sheet and we'll use it as a tool to drive <unk>.

Long term shareholder value I will now turn the call back over to Michael to cover our divisional results and to provide some closing comments before the Q&A session. Michael Hey, Thank you Erinn slide number 14 outlines of fourth quarter financial results for our identification solutions business Ids sales increased 35%.

Finishing at $231 million.

The sales growth is comprised of organic growth of 24, 5% acquisition growth of six 9% and an increase of three 6% from foreign currency translation organic sales in our Ids Division were very strong not only versus the fourth quarter of last year, but.

Also against previous sequential quarters and.

And on the cost side, our strong focus on efficiencies led to a 20 basis point increase in segment profit as a percentage of sales when compared to the fourth quarter of last year.

<unk> organic sales in Asia were strong this quarter with growth of over 10% compared to the fourth quarter of last year. This is the third quarter in a row of Asian organic sales growth in excess of 10% and Europe, our organic sales were up more than 25%. Despite several lockdowns continue.

<unk> throughout the fourth quarter, our European team did an excellent job driving sales growth while handling the periodic interruptions caused by the lockdowns.

We also had organic sales growth of approximately 25% in the Americas, we saw growth in all product lines and geographies throughout the quarter and we were pleased with the bounce back and our healthcare product line for organic sales increased approximately 30%.

In general our sales trends in Ids are very positive we continue to focus on driving efficiency activity and keep their cost structure lean while never sacrificing sales generating investments we have been investing in sales and marketing personnel research and development activities and selected Geographics.

Expansion. These investments combined with improved market conditions are absolutely paying off with stronger sales growth.

Segment profit was $46.0 million compared to $32.0 million in last year's fourth quarter.

<unk> profit as a percentage of sales increased from 18, 2% of sales last year to 18, 4% of sales this quarter.

This continued improvement in profitability is a testament to the hard work of the entire ideas solutions team as it constantly work on becoming more efficient and profitable organization.

Our commitment to R&D remains a top priority to drive future growth in the fourth quarter. We continued our steady stream of new printer introductions with the launching of the <unk> hundred 53, <unk> hundred bench top industrial label printer.

This is a significant enhancement over previous models. It is intuitive auto calibrating and precise and it can print barcodes on labels as small as two tenths of an inch with a solid metal frame construction. It can handle both high volume and high mix labeling applications in a wide variety of industries include.

<unk> electronics product identification wire and panel identification lab identification and safety and facility identification.

Europe focus on niche applications. This quarter, we also launched top striped floor, marking tape specifically designed for challenging applications within freezers and cold storage areas. This is just another example of the niche applications, where Brady products really shine This X.

Streamlet durable for marking tape can be used to mark refrigerators, freezers and other cold surfaces and is ideal for food and beverage refrigerated warehouses and other cold storage facilities.

The aggressive adhesive performance of this tape allows for very easy application.

And easy removal, while withstanding heavy foot traffic as well as vehicle traffic.

We're innovating throughout Brady and bring our solutions that our customers want and need these products demonstrate <unk> ability to engineer high performance printers and materials for a wide range of applications are under R&D pipeline is strong and we continue to launch innovative new solutions that help our customers solve problems and be.

More efficient and effective.

I am excited about what we're doing in our IV solutions business and how our acquisitions of code Nordic IV and Magic card will further accelerate our growth, we're improving our customer service investing in our future and streamlining the rest of our cost structure. These positive revenue trends combined with our strong cost is.

<unk> definitely bode well for the future of our IV solutions business moving.

Moving to slide number 15, you'll find a summary of our workplace safety financial performance WPS sales declined six 8%, which consisted of organic sales decline of 12, 7% and foreign currency growth of five 9%.

This decline was primarily driven by challenging comparable from last year's fourth quarter. Our WPS sales were $76.0 million this quarter, which were above the pre print to make sales experienced in the fourth quarter of fiscal 2019.

Last year's fourth quarter was the peak of Covid related product sales. If you exclude the impact of Covid related products are double our WPS business would have shown double digit sales growth this quarter.

Despite periodic shutdowns in the U K, France, Germany, and other countries in western Europe throughout much of the fourth quarter, our European business was still able to perform quite well our team has done an outstanding job of increasing its customer base and for those customers, who initially came to purchase COVID-19 related product our team.

<unk> has done a nice job, providing these same customers with our core safety and identification products as well overall, we're very pleased with how these newly acquired customers are performing and are expected to perform in the future or.

Our Australian business performed similar to European business during the height of the pandemic last year, our Australian business grew organic sales nearly 25% in last year's fourth quarter, given the challenging Comparables. We were pleased with this quarter's sales volumes as they were well above pre pandemic.

Levels overall, the last quarter, we substantially increased our Australian customer base, and we'll continue to find opportunities to enhance our digital marketing approach to ensure that we retain our new customers and turn them into long term repeat customers. The sale of Covid related products declined in North America as well.

This quarter and this decline was not fully offset by sales within our non COVID-19 product offerings, thus leading to a decline in organic sales in the Americas as well.

Place safety team continues to focus on new product offerings and this quarter, we launched a number of new products aimed at our core spaces. For instance, this quarter, we launched a proprietary speed bump, which leverages our existing patented design to also protect sensitive cables that must be streamed over areas with auto traffic.

We also launched a whole series of safety and identification products aimed at food preparation and hospitality industry to help our customers with food segregation temperature monitoring and the avoidance of cross contamination or workplace safety teams continues to come up with.

And quickly to launch new innovative product ideas that help our customers improve safety and become more efficient and effective.

Bps segment profit was $11.0 million this quarter compared to $6 million in last year's fourth quarter. This reduction in segment profit was directly related to the reduced sales volumes as a result of the reduction in COVID-19 related product sales as a percentage of sales segment profit was consistent with.

Last year's seven 5%.

Our WPS team members are listening to their customers to identify what they need they are modifying their market campaigns to reach an entirely new customers in entirely new industries, and they're working hard to address underperforming businesses within the portfolio. Our workplace safety business has some very difficult comparable as ahead of it throughout.

The first half of fiscal 2022, even without elevated COVID-19 related product sales, our fourth quarter revenues were above pre pandemic levels and we expect to see this positive momentum build as we move through fiscal 2022.

We've laid the foundation for a solid recovery from this pandemic, our core workplace safety business is healthy which positions us well for long term profitable growth.

I'm proud of the role that Brady played and continues to play in the fight against COVID-19, our identification solutions and workplace safety products help companies with social distancing our products help schools reopen safely at our safety and identification products were used by frontline workers all around the globe.

This pandemic is not over and the financial impact stemming from the pandemic are certainly not over throughout the pandemic, we invested in growth and efficiencies.

This continued level of investment that will enable us to keep the strong positive momentum.

Brady is in an enviable financial position.

Our cash flow was up our earnings are up our balance sheet is extremely strong we're in a net cash position.

Even after making three acquisitions last quarter, we will continue to invest in R&D sales generating resources and capability enhancing capex, all while being tight on non revenue generating expenses and we intend to further put our balance sheet to work by returning funds.

To our shareholders and best in both organic and inorganic growth opportunities again.

Very proud of how our team performed throughout this challenging period their ability to deal with certainty I think on their feet and solve problems quickly all while never compromising the long term has built a strong solid foundation for <unk> future with that I would like to start the Q&A.

Operator would you please provide instructions to our listeners.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your Touchtone telephone again to ask a question. Please press Star then one.

One moment for our first question.

Our first question Hudson George Staphos with Bank of America. Your line is open.

Hi, everyone. This is actually <unk> sitting in for George today, Congratulations on the quarter.

Thank you I guess in terms of my first question I guess can you speak to what incremental trends youre seeing.

And your key end markets early in the first quarter and Relatedly in your discussions with.

Customers would you be able to provide any color on what they are saying in terms of budget increases for fiscal 'twenty, two and the various product categories that they would buy from Brexit.

We are we feel very good as we indicated in our prepared remarks about the economy going forward there are absolutely challenge.

The markets, but we add.

In regards to logistics as far as our customers.

One of the largest challenges.

As far as our products being able to be utilized by them.

We're doing a very good job of being able to get our products to them, but there are industries as you well know that are struggling mightily with everything from chips to resins to paper materials to imported products from Asia to really make sure that they can get their product sets out overall.

It appears that most of our markets are very strong right now.

With these issues being the one governor that we're watching very very carefully that said, it's our job to make sure. We're not part of the bottleneck and I feel incredibly proud of the team and that we.

Without knowing the pandemic was coming worked hard to forward deploy our resources and internalized resources and capabilities for the last several years.

In addition to automating many of our process to become more efficient and effective and those efforts have directly made us a stronger player and able to help our customers more so markets are good to answer.

A question, specifically, but there are real challenges in logistics that they're all facing and they are facing obviously cost pressures across the board as well.

Great that's helpful.

And then I guess on the last call that you had.

You said that you expect $96 million and combined revenue from your recently acquired businesses in fiscal 'twenty. Two so I guess, assuming if brady captures all of that that would be around 3% to 4%.

Revenue growth in 2002 so.

First is that still the assumption and then I guess could you disaggregate how much of this do you expect to come from pricing and volume. Thanks.

Well, we certainly expect we still expect a $96 million increase in.

I am sorry of $96 million of revenue from the acquisitions that we closed in the third I'm sorry in the fourth quarter in fiscal 2022, I think it comes to a bit more than 4% to 5% of sales growth is.

So it's going to it's going to be higher than that as a percent.

And we still feel very obviously, we still very good about these acquisitions and we're super excited about them going forward.

You did mentioned a question about pricing and volume in general and I'll be glad to answer that as well. There is no question, we're seeing strong.

Inflationary pressures, particularly in lines that have a lot of resin involved in them. There is some there is some definite dynamics there chip costs are going up and are being a little more problematic.

But we have been very.

Proactive about addressing those there is always a lag.

And in any time, I've seen inflation and by the way for most people on this call you Havent experienced inflation, it's been a long time since we've really seen that but what I have always experience is there is some lag between being able to increase your prices after getting some cost increases but our team.

It is very proactive about it very active about making sure our customers understand why we are increasing the prices and making sure that those price increases are closing the gap. In addition, our continual automation efforts, particularly during the downturn have put us in a much better position because the other big <unk>.

Area for inflation as wages.

So it is a little more challenging to increase prices, there, but our automation efforts.

I have to tell you the team has been extraordinary and what they pulled off during the downturn.

That has helped us have enough employees around the globe. Despite the shortages to do a stellar job. So we definitely expect.

Our prices at our prices have gone up but we're also seeing our volume go up.

It's a dual bang for us.

Yes.

Great. Thanks, Thank you.

Thank you. Our next question comes from Puneet <unk>.

<unk>.

And early on about that.

Good morning, Michael and thanks for all the color on the call good morning.

Just wanted to ask a little I know, it's very tricky time to be trying to put out full year guidance I'm just trying to think about <unk>.

How you're thinking about the uptick in infection rates with Dell, but in just general concerns how that sort of plays into your guidance, particularly on the on the.

So at the hospital and workplace Heidi side.

I'd like to say that we're going to be through this quickly.

I am not medical in any way so any comment I made at May may be an error, but if we take a look at the flu that we experience every year. It's my understanding that the variant from the $37.0 Spanish flu.

So it's my personal nonmedical belief that we are going to be dealing with this for a long long time, obviously, we've found ways to deal with the flu we will.

As a world or find ways to deal more and more effectively with this but also as I understand it the second year of the Spanish.

Flu 1918 was worse than the first year because of variance and mutations we are seeing a lot of that as you well know and that is having an impact we're having facilities that are in countries and locations and customers that are now being shut down again take a look at the situation in Australia. So.

What I would answer you is we believe I personally believe and we're reflecting that that coming out of this will be bumpy. The good news about that is take a look at our results from last year when it was extremely challenging.

Our products are critical to many industries and those industries need to function and perform well and we need to perform and function well and our people and I can't say this enough the pride in our people they have proven to be incredibly resilient nimble.

Reflective.

Doing an incredible job. So I would tell you absolutely we're going to see challenges. The globe is going to see challenges from the variations and lack of ability to either vaccinate sufficiently choose to vaccinate solutions or the vaccination is not working quite as effectively on variance.

As it had been.

That said I'm confident we'll be able to overcome everything that we're at least seeing at this point, but you did add a very big caveat that I will agree.

You told me we would be at.

Financially or through the Covid right now at this point a year ago I would have been surprised were stronger than we expected to be financially and COVID-19 is more challenging than I expected it to be so both can take place at the same time.

I hope that helps Steve.

Fair enough. Thank you for that.

In terms of the margins on the two different segments.

Excluding the one time on Ibs and look a lot like Q1 and Q2 should.

Should we be thinking about the Q3 higher number is a bit of an outlier or how do you want us to think about how were you thinking about the margins in that segment moving forward.

Yes, I think youre actually thinking about it the correct way Steve.

The vast majority of course of these acquisition charges that we that we called out that land in Ibs of course because of their I D Ibs acquisitions.

And actually if you exclude those we would have been somewhere in the neighborhood of 20% operating income level, our segment profit level and Thats about what we would anticipate in the future.

Okay, and then on the flip side with workplace safety, you're back in that sort of seven 5% range, which is where you are aware of the year before COVID-19.

A level you're comfortable with do you think you can grow it from here and how do you think they'll go.

The long term of that business with that type of margin level.

Well.

We're certainly not comfortable at seven 5% right I mean, it's never good enough for us. So we are constantly pushing to improve workplace safety is very much volume dependent though.

They have very nice.

Profit margins and as volumes go up it drops a lot to the bottom line. So we're really we're really working with our workplace safety team to drive the topline, which will drive obviously the bottom line and the bottom line as a percent.

And Steve Ive got to reiterate I am incredibly encouraged.

With what the team is able to do with growth in that if we do take out the COVID-19 materials and we know we've already told you we're going to have another challenge next quarter with that because we had a great quarter with COVID-19 products, but the base business Theyre stand your business is growing.

And that is something that for several years.

We could not say and they have done a great job of really strengthening their capabilities or product sets their R&D differentiating what they do in the marketplace while at the same time.

Responding to all the needs of digital requests by customers.

Customers and faster response rates by customers. So they are positioned very well to grow and that growth as Aaron pointed out will directly impact our margins.

Good way that said I want to repeat next quarter remains a comparable challenge because of the wonderful work. They did with Covid products something that I am thrilled we were able to do.

And both support the company financially, but even more importantly, the world.

During during the heart of Covid.

Thanks, Michael Thanks Art I appreciate the responses.

Thank you.

Thank you. Our next question comes from Michael Mcginn of Wells Fargo. Your line is open.

Thank you I wanted to go back to the gross margin conversation.

Understanding a little bit of conservatism on price cost, but on the other hand, you also said you have confidence to maintain 50% gross margin levels. If I heard you right that that would be 100 basis point uptick year over year. So can you just square the conservative conservatism on price cost versus.

The optimism of being able to hold 50% gross margin.

We actually.

Have some great strengths and as I mentioned in my commentary or questions.

We foresaw the need.

Probably about four or five years ago now at this point are and.

To become much more automated to become much more.

<unk> as an organization that was not related to some brilliant knowing a pandemic would come in there will be direct even harder labor shortages as a result, but it was based on the fact that you can look around the world seeing aging work populations and the place that people really missed this is the aging work populations in China.

Specifically.

I continue to tell people that the working age population of China will continue to decrease for at least the next 20 years. It has two unless we can figure out ways to pop out adults.

Instantly.

The demographics are such that it's going to go down that's true in most of the world. So we saw that we anticipated that the positive for you in regard to margins and everything else is as we automate with the need to eliminate people not for cost, but because we can't get those people knew.

We wouldn't be able to get them. It is also overcoming that in a much more cost effective way. So you bet. We've got some inflationary concerns we have an absolute concerns during inflation you cannot.

Keep up with price increases at a perfect matched manner. So there is some lag.

But we do have strong.

Proprietary products that can keep that value proposition with the lag. But then in addition, we're doing a really good job of becoming more efficient and effective in everything we do some of the new systems that I see we're deploying in everything from a warehousing to our production to our customer service really get me excited.

And a few years ago I was asked when can you stop this effort I said the answer is never I'm going to actually change the statement too we are accelerating the effort.

Okay.

The color and then sticking with the APAC theme, you mentioned Youre investing head count Salesforce resources into that area.

And I guess my question is that kind of seems like brothers home home turf and you have pretty well defined supply distribution relations.

Quickly.

Are you taking the same product over there and layering on top of the Salesforce or what kind of strategy are you implementing.

Theres a tearing our.

Indirect direct sales model any color there would be great, yes, well first of all we've been in Asia for a long time, and we do have a strong brand and strong reputation in Asia, particularly in southeast Asia, We which we are accelerating so.

Let's take India as an example, we do extremely well in India, our products are well respected and the real issue. There is logistics, India is a very complex society and a very complex logistical challenge and so we need more resources, even closer to our customers in India.

That's the strategy that has paid off for us and is going to pay off for us. So that is one example.

We also make products that are unique in the industry not compared to any one other company compared to all of the other companies and that uniqueness is valued and we have a very high global retention rate of those customers as you go from generation to generation of our Tech Tech.

Knowledge is so I would say the first issue is we've made truly unique exciting products that make a difference to our customers. The second is we know that for deploying resources helps us with those customers and the third is our reputation is very very strong throughout Asia.

Where the customers are looking for true differentiation as opposed to pure cost plays as.

As you know, we're not in and don't plan to be the paper labels space is a great example of that is not an area, where we believe Brady adds a lot of value other competitors in general without naming any do very very well in the paper labels space, but thats, what theyre focused on Thats, what they are set up for that's what they're good at so looking.

At Brady type applications, we actually I have great belief that in particular in the southeast Asia area that we mentioned both as customers migrate their more and as we develop our resources there will do very very well.

So thank you for that question Michael Good question.

All right last one for me if I can sneak one more in the $2 million repo authorization I think if you were to execute that today in the open market at nearly matches kind of your net cash balance.

Coincidence or not but looking at the financial profile of your company Youre going to maybe throw off another $150 million of free cash flow. This year. So can you just talk about the confidence the line of sight in the timetable you see for your capital allocation priorities.

You very well know we are not a program buyer.

We'll tell you that we've always hit every dip for a variety of reasons at the right time, but we are looking for disconnect opportunities, we want that powder and that ability available. So if those opportunities come up we will take advantage of them. If there isn't a disconnect in the market I'm also happy with.

That I want to be quite quite clear we.

We like the market to be aligned with our intrinsic value, but when it isn't we are going to take an advantage of it and we do have the ability and you can see that in the amount you did the math that we do have the ability to take full advantage of that amount. If we think it's appropriate but I want to repeat.

This is part of a total model we look at we look at acquisitions, where we have a lot of powder for acquisitions right. Now we look at R&D growth, we look at infrastructure support and we look at buybacks and we say what is the best use of our capital and where do we see the key opportunities.

And we definitely want to be prepared for any potential disconnect in our in our stock price versus our understanding of our intrinsic value.

Thank you.

I appreciate the time.

Absolutely. Thank you.

Thank you again, if you'd like to ask a question Star then one.

Our next question comes from Keith <unk>.

Northcoast research your line is open.

Good morning, guys.

And I want you to look in your Crystal ball here and kind of talk about what some of the inflationary pressures you guys have seen over the past year is your expectation that youre going to see these inflationary pressures continue and perhaps even accelerate or is there anything that youre seeing on the horizon that says perhaps things are starting to stabilize there you are.

Killing me Keith and all the questions today, you're asking me to look at a crystal ball, but I will do my best a full disclosure my Crystal ball broke when I was a small child, but I will literally try my best we see logistical issues.

I'm answering your question, but I want to be clear of how I am answering it for the next six months to 18 months easily.

Those logistical issues are definitely cause of inflation. They absolutely are a very primary cause with inflation. We also were seeing labor shortages and not just because in the U S. We have compensation models that people are by the way you think people don't know there are there are financial.

Gain in return.

They change their pattern when they don't get as much from staying at home as they get to work so that will change we think but.

There is a shortage of people.

Have a belief that that shortages, partly caused by something we didn't do Brady did not have massive layoffs like many companies did we did what we believe is the right thing at the time and it's paid off for us, but many companies laid off as many 20% of their people the more experience part of that workforce.

I think has made some decisions to never come back. If you are 60.62 63.64, you may have kept working for five to seven more years, but you are not coming back that is creating one level of shortage. The other level is around the world with a few exceptions countries like India, Philippines met.

Sicko, the actual workforce is aging out anyway, and so I think we're going to see some pressures from that so to answer your question, Yes, I, absolutely anticipate that we're going to continue to see inflationary pressures not just us but in industrial companies throughout the world.

And I believe Brady is positioned.

With our two multiple lever levels of ability to control. This we're in sourcing more products as you well know mainly to control the technological future, but that does add a margin advantage to us.

Automating things that people never believe.

A few years ago, when I got here.

<unk>.

They could automate I mean, they are now up really understanding how powerful that that opportunity is in coming to me with ideas and approaches and sets that are super strong and the third thing is we have strong value to our customers and therefore, we are able because our prior.

By and large are not commodities.

Able to pass on as quickly and effectively as possible real cost increases that said there is absolutely a lag in that part of the equation I don't want to Kid you about that.

You have to work with people no matter how bad the situation is to get the prices up and for some strange reason no matter, how strong our value as they like to drag their feet about having that process take place.

Okay.

Keith I hope that helps with full disclosure it is a crystal ball.

No I hear you on that one in terms of you talked earlier about the disconnect.

You guys are experiencing increases in let's say raw materials in your ability to raise prices.

Looking at your gross margins you guys were up year over year, but it's still on historical basis, Youre down probably 100 basis points or so versus other quarters.

What do you think the impact of more than a quarter in terms of your gross margin in terms of a disconnect there and your ability to raise prices versus the price increase was European.

You know what it is it is a complex to answer it is literally product line by product line.

In the case of where we have and I'm not going to list the product line.

We do have some commoditized product lines, not many but we do though which we saw a significant lag.

We have covered most if not all of the lag.

But we but gifts twice seen major spikes in our materials at twice had to go back and really make some significant increases and we saw a bigger lag there, whereas other areas that we have.

More control, we do better let's give you other spaces healthcare, we have contracts that make it take a little longer.

It just is required by the contracts there is a foot dragging process literally built in.

So it literally depends on the product set.

<unk> and the <unk> customer so its a pretty complex so I wouldn't want to come out and try to break out our <unk>.

Number for you right now Keith.

But there is an absolute impact though.

Sure absolutely unequivocal I don't want to do.

Denying that at all I just didn't I thought you asked for a specific number and they don't want to try to try to parse that.

Yes.

Thank you.

Sure I understand that.

Last question for you I mean, you guys forgive my skepticism WPS has been challenged for many.

Many years here and I hear your enthusiasm for.

It sounds like you really believe that you've actually absolutely have a turnaround in the WPS segment.

I guess, what I would help craft, Mike I'm, just going to contact our enthusiasm, but more is can you quantify or give us more context in terms of what was the impact us in the Covid closures you saw in Europe on the business because if I look at it this year. It's at WPS segment versus two years ago is only up 2% after being down 35% of the past 10 years or so so.

It's a good call turning your skepticism is real and I understand it.

You heard me for years, they were working on it.

If you go back and check my comments I don't think I ever said we're here.

But I feel better now than ever before the biggest part I feel really good about Keith is that if I do lop off and we can do that very very efficiently lop off the true COVID-19 related sales.

We are growing.

And that is something that I Couldnt look you in the eye and say five years ago for instance, in fact GAAP. If I had to look into I would say were declining less than in fact, you can look at quarter after quarter, where I said were declining less were declining yet we're declining yes I have to take in my mind, the COVID-19 sales off they are.

Really an anomaly to look at what's really under the lead and we are growing and so very very positive about that it's still a challenging space you know that and I know that but we've got the best team. We've ever had we're moving in the right direction to both internalizing, our production cost and responsiveness.

Even more importantly, Paul to me is responsiveness, and we're adding new technology, they're something that three and four years ago that our organization was like stunned at how strong I was as we are going to become a technological player and.

It took a while for me to get that organization really to understand how valuable that is in selling all of their products because it's a pull along effect. So Keith I do feel like we're developing new unique and proprietary products I do feel like we're using Brady bench of proprietary products more effectively in that space and I do believe.

<unk>, that's dragging along the rest of the business I'm not going to tell you that as in a challenging industry.

Even the biggest players in that industry.

Make most of their money in unrelated areas and not necessarily in selling but where our advantage is we truly are a value added distributor and that is a big differentiation in that space, we are becoming much more so and we have strong targets to become even.

Gently more of a value added reseller as opposed to a pass through reseller going down in the future.

Do I think we have the right team to I think we're seeing the rate momentum absolutely and can I say and I get it I have the lop off the COVID-19 sales, but can I say that we are growing as opposed to our closing the gap of reducing yes, now how long will it take Keith to make.

Cup that 35%.

I am not going to give you a prognosis, but what I can tell you is we are where we are today.

I'm going to grow from where we are today, but I can't make up for years before I, even got here of decline.

Yep.

But.

Honest question I Hope I gave you a very straightforward answer.

You did as a part of that I guess I didn't hear any exits here with in terms of the closures that happened in Europe over the quarter, what kind of impact did that have on WPS per quarter.

The exact number.

I mean, you look at France, I think we were at five kilometer restrictions.

For large periods of time, the UK has been off and on and struggling.

Every country every country has particularly are bigger the Germany, the UK the Belgium.

We have large facilities in Belgium, we're able to run those but they've been under some some great restrictions and that has been adding some superb challenges to them and at the same time.

Even with the second round of <unk>.

Covid youre not seeing the COVID-19 related sales at all and Thats not just with US that's across the board and we can speculate.

Speculate as to why that is but it isn't it isn't happening so even though youre getting the shutdowns were not getting the next level of Covid sales from those shutdowns, while youre right in Europe, we are having some some challenges.

I think we would have grown more without that speculating.

Speculating yes.

Alright, I've asked too many already I appreciate your time as always and goes off Michael Hey, Thank you Keith I appreciate your time.

Thank you. Our next question comes from Michael again, I won't bother you line is open.

Yes.

Alright, Thank you for the follow up.

I wanted to do some housecleaning here I looked at the deck posted here through acquisition.

It looks like you had the run rate EBITDA of about 14, 5%, but that was inclusive of some discrete charges is there an updated number that's more reflective of how you are reporting earnings and then any early profit improvements that would push that number higher.

We're still looking at a F 'twenty to run rate EBITDA of about $14 million.

Which is the exact percent that you just mentioned and then same with revenue our revenue estimates for for this year fiscal 'twenty. Two we have not changed as well there are about $96 million for the summation of the three deals no change.

Add a little color, we're pleased with how those.

Companies are performing we love the teens, it's always about people for me that we have the right people the right organizations and Theyre doing very well, but we expected them to do well and they're meeting those expectations, but very very positive on the teams the product sets they offer and their excitement for what they see.

He is a great combination opportunity.

Okay, and then on the top line guidance.

Greater than 12% overall, you mentioned some positive inflections in healthcare.

Some of the big.

End markets verticals that would push you materially above that number or the ones that are growing faster now or need a little bit of help self help so well.

We've got to be careful you know Brady is in every site C code. There is ed some spaces are larger and smaller.

Obviously general manufacturing is one of our biggest opportunity sets and is doing reasonably well, we'd love it to perform even better that would certainly lift the boat more than other areas. There are other areas that the people areas.

<unk> lagged.

A lag behind I don't want to oversell those areas because they are massive markets to us, but we do have businesses in those areas to do well.

So anything that is people identification and office space.

<unk> still is a challenge.

We could argue work at home or not work at home how that will come back when it will but EMEA and most people will have to have some kind of credentials identification.

Because if they're not going to be working exclusively at home and so we think theres going to be some uptick there Vince or getting better. If you look at the results from Disney and all of that.

Not an expert on Disney, but I can tell you that they also raised prices. So I think I had an earlier I did have an earlier question how much is price versus volume I would like to see their underlying price versus volume equation, because overall the industries do that such as festivals are still not open.

Concerts are very limited.

Vince are very limited.

Conferences for industrial applications is very limited. So we do expect that to come up a medical has recovered, but we hope federal it'll continue to grow even more.

Is it as it's recovered but it's not.

Stronger than it was and we think theres a lot of hopefully been up.

Opportunity there there are two factors that govern that right now the hospitals are back to in many locations focusing on Covid and there was an absolute shortage of people capacity in our healthcare industry and we think that's going to govern that situation more.

Wed like I think if there were more providers available, but once again providers have seemed to go backwards for a lot of understandable reasons in that space and so that's going to be a big challenge I mean, I know a lot of hospitals are looking at bolstering their colleges for nurses et cetera, I think because of because of those <unk>.

<unk>, but that takes time and then other spaces I know there is some questions about the long term of the oil and gas industry I would say this I have no question that in the short term. It is definitely a high used industry in the world and I do think that with prices going up.

Those areas you will see more opportunities as a refurbished plants et cetera in that type of space number of others aerospace will take longer.

It's interesting the airlines are very optimistic because of all the summer traffic and they thought COVID-19 was going down but both from their statements in my experience business travelers are not back until the fall is not nearly as good as they are now no longer anticipating defaults be nearly as good.

As is the people with the pent up demand for tourism I'll have to go back to work and school and the business travelers aren't going up so I think our aerospace business, particularly the commercial side is still going to remain challenged for probably about as long as they originally thought.

But you can get some great numbers of that obviously from them.

Okay I appreciate the time.

Thank you I hope that helps thank you Michael.

Thank you I'm showing no further questions at this time I'd like to turn the call back over to Michael <unk> for any closing remarks.

Thank you so much I appreciate the Valerie Thank you I'd like to leave with a few concluding comments this morning.

We're certainly living in interesting times.

We're still in the back half of a global pandemic, we just posted the best earnings per share in Brady history, and our guidance for next year would be another record year at the same time, we're experiencing supply chain challenges and we're seeing inflationary pressures all around us.

We're confident we can offset these inflationary pressures with a relentless focus on automation and efficiency combined with targeted price increases I don't know what the future holds for the global economy or the Corona virus, but I do know we're controlling what we can by prioritizing.

Investments in growth and focusing on cash generation. We are confident that Brady is well positioned to capitalize on global market trends. We just finished fiscal 'twenty one with strong momentum we came out very very strong and we're well positioned to generate significant future.

<unk> for both our customers and our shareholders.

I am excited about our future.

Please stay safe and thank you for your time. This morning have a great day operator, you may disconnect the call.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all for participating you may all disconnect have a great day.