Q4 2022 Brady Corp Earnings Call
Yeah.
Good day and thank you for standing by welcome to the Q4 2022 Brady Corporation earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the.
Session, you will need to press star 11 on your telephone.
Please be advised that today's conference is being recorded I would now.
Like to hand, the conference over to your speaker today Ian toward please go ahead.
Thank you.
Good morning, and welcome to the Brady Corporation fiscal 'twenty, two fourth quarter earnings conference call. The slides for this morning's call are located on our website at Www Dot Brady Corp, Dot com slash investors, we will begin our prepared remarks on slide number three.
Please note that during this call we 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 forward looking statements.
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 and in Brady's fiscal 'twenty to 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.
Now I'll turn the call over to Brady's, President and Chief Executive Officer, Russell Sheller Russell. Thank you Ann Good morning, everyone and thank you for joining us.
This morning, we released our fiscal 2022 fourth quarter financial results, which was another quarter of strong organic sales growth and record earnings per share.
I'm proud of how the entire Brady team worked through this challenging macro environment, all the while delivering for both our customers and our shareholders organic sales grew 9%. This quarter, we increased GAAP earnings per share by 53% and we increased non-GAAP .
Earnings per share by 16%.
This quarter was a great end to an outstanding year, our full year GAAP EPS of $2 90 was an all time record high and our non-GAAP EPS of $3 15 was also an all time record high.
For the full year, we grew organic sales by nine 4%, which was our highest organic growth rate in more than two decades, we performed well in our I'd solutions business and made nice progress moving a portion of our portfolio in the faster growing end markets with cyclical tailwind. We also finished the year with positive momentum.
In our WPS business, where segment profit increased to 13, 2% of sales in Q4. This is a great improvement over the first half of our fiscal year.
And we returned more than $155 million to our shareholders in the form of dividends and buybacks and we still finished the year in a net cash position.
We're proud of what we've accomplished at Brady, we've had strong organic sales growth over the last several years and we now have businesses that are growing in excess of GDP with innovative new products and is highly engaged professionals that should enable us to continue to grow in excess of GDP for years to come.
As we look ahead, our priorities remain clear first and foremost is to continue our evolution into a fab.
Faster growing company, we are definitely on track to achieve this goal.
Second is to improve our capabilities to enable our customers automation initiatives, where we believe there will be a tailwind for years to come.
Third is to take necessary pricing and efficiency actions to offset the impact of this inflationary environment, all while ensuring that we have the products available to meet customer demands and that we're providing the best possible customer service and finally to effectively deploy our capital in order to drive long term.
Shareholder value, which would include organic investments acquisitions, and returning funds to our shareholders.
We demonstrated our commitment to returning funds to our shareholders. This year as we repurchased more than four 4% of our total diluted share count.
And yesterday, we announced an increase to our dividend, which represents the 37th consecutive year of dividend increases.
As you can see from our guidance, we expect fiscal 2023 to be another all time record earnings per share year for Brady and we're confident that we have the positive momentum to make this happen.
Of course, what we can't control is the global economy much like many of you. We also have concerns about headwinds from energy prices in Europe to the highest U S. Inflation in 40 years, we are definitely living in challenging times, although I can't tell you where the economy is headed I can assure you that Brady is well positioned to adapt to economic uncertainty.
I'll now turn the call over to Aaron to provide more details on our financial results.
And then I'll return to provide specific commentary about our identification solutions and workplace safety businesses Erin. Thank you Russell and good morning, everyone. This quarter. We once again had very strong sales growth. We also increased our gross profit margins, while reducing our SG&A expense as a percent of sales to pose.
Strong earnings growth and GAAP EPS of <unk> 81.
non-GAAP EPS, which is calculated as our GAAP EPS less the after tax impact of amortization expense was 87.
Each of our two divisions performed very well <unk> grew segment profit by 18, 4%, while WPS increased segment profit by more than 65% this quarter and as Russell mentioned, we took advantage of the market pullback last quarter and repurchased another 535.
Shares, bringing our total shares purchased in fiscal 2022 to more than $2 3 million.
So the key financial takeaways. This quarter are strong revenue growth record EPS strong performance in each of our two divisions and a continued commitment to returning funds to our shareholders, let's move to slide number four for our quarterly sales trends, our five 8% sales increase consisted of growth from <unk>.
Acquisitions of two 5% and organic growth of 9% organic sales grew in each of our two segments, but with the recent strengthening of the U S dollar, especially against the Euro foreign currency translation reduced total company sales by five 7% the impact of foreign currency.
<unk> reduced the Ids sales by four 5% and reduced WPS sales by 9%. The reason for the outsized foreign currency impact on WPS is because more than half of WPS sales are in western Europe , even with the significant foreign currency challenge, our WPS business still.
Armed quite well this quarter.
Please turn to slide number five for our gross profit margin trending our gross profit margin increased 220 basis points to 54% compared to 48, 2% in the fourth quarter of last year. This improvement over the prior year was a direct result of increased sales volumes pricing actions.
A reduction in the use of air freight and the many efficiency actions that we've been driving throughout our manufacturing facilities. However, we continue to experience scarce labor in certain geographies, including the U S and we're seeing inflationary pressures continue across many different cost categories from shipping cost to raw.
Real costs and everything in between and our supply chain continues to be challenged especially for critical components from Asia, Although we're using less air freight at this point, we've seen few tangible signs of reduced inflation.
This increase is partially offset this inflation and helped us improve our gross profit margins. This quarter, we realized approximately five 1% sales growth from pricing.
On slide number six you'll find our SG&A expense trending SG&A was $94 $5 million this quarter compared to $93 7 million in the fourth quarter of last year.
As a percent of sales SG&A was nine was 29, 2% compared to 36% in the fourth quarter of last year. If you exclude amortization expense and last year's acquisition related charges than SG&A would have declined from 28, 6% of sales in Q4 of last year.
<unk>, 28.0% of sales this quarter overall, we're making nice progress as we've reduced our SG&A expense from over 36% of sales just a half dozen years ago to 29%. Today. However, we have been increasing selling resources and we're certainly feeling and freight inflationary pressures in SG.
As well going forward, we will continue to identify efficiency opportunities throughout SG&A.
Slide number seven is the trending of our investments in research and development.
This quarter, we invested $15 8 million in R&D, which equates to about four 9% of sales we believe that the investments with the best ROI are almost always organic investments such as those we are making in research and development to drive new product launches as such we remain committed to new product development.
As we continue to see opportunities across our businesses, including building out a comprehensive industrial track and trace platform that encompasses our printers high quality materials, RFID scanners and barcode scanners.
Slide number eight illustrates our pretax income trends pre tax earnings increased 29, 7% on a GAAP basis.
In order to compare against Q4 of last year, we need to adjust for the one off items in the prior year first off there was a large increase in amortization expense from the three acquisitions completed last year plus in Q4 of last year, we incurred a number of one time charges to complete these acquisitions. If you exclude these prior year.
Our charges and exclude amortization expense from both the current year and the prior year than our non-GAAP pre tax earnings would have increased by 19, 2% increasing from $48 4 million in Q4 of F. 'twenty, one to $57 $7 million this quarter.
Slide number nine illustrates earnings and EPS on an after tax basis GAAP diluted EPS increased by 52, 8% this quarter and if you exclude the after tax impacts of.
Last year's one off items and amortization expense than our EPS would've increased by 16% this quarter.
On slide number 10, you will find a summary of our cash generation. This quarter, we continued to increase our inventory levels to support our increased sales volumes as well as to ensure that we can support our customers in the event of further supply chain challenges cash flow from operating activities was $53 $2 million this quarter.
We also incurred higher than normal capex as we spent nearly $18 million on two new facilities $8 million in Belgium, where we're constructing a new facility and the remaining $10 million on the purchase of a strategic manufacturing facility in southeast Asia looking.
Looking to next year, we expect to accelerate the timing of our annual employee bonus payments effectively moving the payments from Q2 to Q1 as such we expect our first quarter cash generation to appear weaker than normal and our second quarter cash generation to be stronger than you would normally expect to see all due to this timing item.
Now if you turn to slide number 11, you can see the impact that <unk> historically strong cash generation has had on our balance sheet, even after stepping up our share buybacks and building up inventories to ensure that we are poised to meet future customer demand on July 31, we were still in a net cash position of $19 one.
<unk> million dollars.
Our approach to capital allocation is to first and foremost use our cash to fully fund organic sales and efficiency opportunities. This includes investing in new product development sales generating resources capability enhancing capital expenditures and automation focused capex, we will absolutely keep funding these investments.
<unk>, where it makes sense and where the investments are ROI positive and second we focus on consistently increasing our dividends we've increased our dividend every year since going public.
After fully funding organic investments and dividends. We then deploy our cash in a disciplined manner for either acquisitions, where we have strong synergistic opportunities or for buybacks in a highly opportunistic manner. When we see a disconnect between intrinsic value and Brady as trading price, our strong balance sheet positions us well to execute additional value.
<unk> enhancing activities, including investing in R&D, completing additional acquisitions and returning funds to our shareholders slide.
Slide number 12 provides an overview of our financial results results for the full year ended July 31, 2022 overall sales increased 13, 7% and organic sales grew nine 4%. This strong organic sales growth was the result of the recovery coming out of the pandemic.
Combined with the benefits from the investments we've been making in innovation.
And a three 7% annual impact from pricing. We finished fiscal 2022 with all time high GAAP and non-GAAP EPS and these strong earnings were after we increased R&D spend by 31, 4%. This year. So fiscal 2022 was a record EPS year and our <unk>.
Fourth quarter was the strongest quarter of the year as we look to the future. We're confident that the actions we've taken set us up for success, which takes us to our guidance for next year on slide number 13.
We're forecasting diluted earnings per share excluding amortization to range from $3 32.
To $3 60 per share, which equates to a GAAP EPS range of $3 13 to $3 43 per share for the fiscal year ending July 31, 2023. This implies that we expect GAAP EPS to improve somewhere in the range of seven 9%.
To 18, 3%.
And we expect non-GAAP EPS to improve between four 8% and 14, 3% in fiscal 2023, we also anticipate organic sales growth in the mid to high single digit percentages for the year ending July 31, 2023, and based on foreign currency exchange rates as of July 31.
We expect the strengthening of the U S dollar to reduce fiscal 'twenty three sales by approximately three 5% and.
And we also expect foreign currency to reduce F. 'twenty three EPS by between 15 and 18 per share.
Other elements of our guidance include an income tax rate of approximately 20% depreciation and amortization expense of approximately 32% to $34 million and capital expenditures of approximately $32 million, which is inclusive of facility construction cost of approximately $10 million.
This guidance range is a bit wider than we would typically announce which as a result of the many macro uncertainties that we're facing today, we'll 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.
<unk> expenses as for capital allocation, we don't foresee any major changes in our capital allocation strategy, we will keep investing in our business. We just mentioned our dividend increase for fiscal 'twenty, three and we'll be opportunistic with buybacks, while 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 potential.
Potential risks to this guidance among others include further strengthening of the U S. Dollar worsening logistics that don't allow us to meet our commitments to our customers inflationary pressures that we can to offset in a timely enough manner through price increases or an overall slowdown in economic activity.
I'll now turn the call back to Russell to cover our divisional results and to provide some closing thoughts before Q&A Russell. Thank you Eric Slide 14 outlines the fourth quarter financial results for our identification solutions business Ids sales increased nine 6% to $253 2 million.
Organic sales in our <unk> Division are once again very strong up 10, 8% versus the fourth quarter of last year.
And on the cost side, our focus on efficiency and pricing led to a 140 basis point increase in segment profit as a percent of sales when compared to the fourth quarter of last year, we're definitely experiencing ongoing inflationary property prices, however were driving automation inefficiencies and increasing prices.
Where feasible to offset as much of this inflation as we can.
Segment profit as a percentage of sales was 19, 8%, which was up from 18, 4%.
<unk> last year.
If you exclude amortization expense and the non routine charges from Q4 of F. 'twenty, one and segment profit as a percentage of sales would have been 21, 3% this quarter compared to 28% in last year's fourth quarter.
Regionally sales in Asia were strong despite periodic lockdowns in China Asia organic growth was approximately 10% this quarter.
In Europe organic sales were also up approximately 10% our European team did a very nice job driving sales growth, while managing their cost structure.
In the Americas performed well with organic growth in the upper single digits this quarter.
We've been working hard to secure the critical parts, we need to manufacture our goods and meet customer demands. However, there are still components that we've been unable to obtain in the desired quantities, which have delayed some of our initiatives for instance sales at our recent acquisition Code Corp were effectively in line with our initial.
<unk> business case, but we were forced to slowdown some of our expansion plans due to our limited supply of certain chips, where.
We are starting to see improvement in component availability and of course. The team is committed to continuing to work through these supply chain challenges, while providing outstanding customer service to our core markets and customers.
Our commitment to R&D remains a top priority to drive future growth, we're making solid progress on enhanced software package for our track and trace products suite and in developing more rugged versions of our code and Nordic IDE scanners to meet the exacting demands of our industrial customers.
Earlier in fiscal 'twenty, two we launched the <unk> 211 printer, which continues our steady stream of upgraded industrial printers. This new printer is the size of the large tape measure can be clipped your belt and allows you designed preview in print labels all from your phone. This tough printer supports both Android and Apple mobile <unk>.
Operating systems to deliver customized print solutions based on an embedded base of over 14000 symbols and 'twenty two barcode QR code types plus.
Plus this compact label or allows you to print over 300 labels on a single charge and still weighs only one two pounds. These are the types of projects that continue to set <unk> apart from our competitors.
We're innovating throughout Brady and bringing solutions that our customers want and need these products demonstrate <unk> ability to engineer of high performance printers and materials for a wide range of applications.
Our expanded new product lineup investments to drive sales and our expansion into faster growing industrial segment.
Gives us confidence that we'll continue to generate strong organic sales with healthy margins for years to come.
Moving to slide 15, you'll find a summary of our workplace safety financial performance.
<unk> declined five 7% this quarter solely due to significant appreciation of the U S dollar versus the euro and the pound if you strip out foreign currency, our WPS business had organic sales growth of three 3% this quarter.
<unk> also increased nicely growing from $5 6 million in Q4 of last year to $9 $3 million in the current quarter.
Looking at our WPS business geographically, we saw continued strong organic growth in Europe with organic sales increasing in the mid single digit percentages and continued strong profitability as the business shifted back into more sales of core workplace safety products and fewer COVID-19 related products.
Our business in the U S is where we've historically struggled. However, these are also businesses, where our team has been making the most progress.
We've been focused on a three pronged approach.
We're simplifying the business through SKU optimization with a focus on identifying skus that provide the most value to our customers second we are ensuring that our pricing reflects market dynamics and customer expectations, and lastly, we're driving efficiency and reducing overhead cost including personnel and.
Catalog distribution costs.
While we've been able to control costs and nicely improved segment profit in the U S. Our growth rate continues to trail industrial distributor peer companies with our new focus the foundation of our WPS business is improving with a number of key brands in several businesses that have been performing quite well.
Our internally produced custom solutions provide significantly more value to our customers than the simple buy and resell items.
Looking ahead, we will continue to drive profit improvements and we will look critically at our product portfolio, even if it means walking away from unprofitable or marginally profitable skus and product offerings.
<unk> team did a nice job this quarter and finished the year strong we're confident that we're on the right track as you can see from our significant increase in profitability, but we still have more work ahead of us.
<unk> performed well this quarter and we clearly have positive momentum building across the entire organization Brady is in an enviable financial.
Position fiscal 2021, and fiscal 2022 were both record EPS year, and we are once again guiding to another record year in 2023.
With our ability to generate strong cash flows even during the pandemic. We have the ability to continue to invest in research and development geographic expansion and improve our capabilities, while shifting a portion of our portfolio deeper into improving our customers automation journey.
With these initiatives, we expect to have a tailwind for years to come as companies work to shorten their supply chain to increase automation and drive efficiency.
With that I'd like to start the Q&A operator would you please provide instructions to our listeners.
And thank you as a reminder to ask a question you will need to press star one one on your telephone please standby, while we compile the Q&A roster.
One moment for our next question.
Okay.
Yeah.
And our next question comes from George Staphos from Bank of America. Your line is now open.
Hi, Good morning, this is actually cash and killer for George This morning.
So first off I guess now that we're only one month into the quarter share can you just given give us an update on how things are trending thus far.
Yes.
August is really with Europe , and I would say people on vacation it.
Really it's too short of a month to provide much commentary are trending. So we usually feel like we don't know how the economy's headed until late September October .
Okay fair enough.
And then I guess you had a nice pickup in gross margin this quarter and it sounded like you had a positive price cost dynamic. So just looking out to fiscal 'twenty. Three do you expect to remain positive on price cost or just what's embedded in guidance on that front.
Yes, we're obviously we provided the guidance is looking forward.
We had I think a fantastic Q4, but if you look at <unk> performance over several quarters, even pre COVID-19. There is a fair amount of variability in our gross profit margin.
I think $50 forward is pretty much a high watermark for us annually.
We had a very favorable mix in product conditions I Wouldnt expect continued growth over that type of figure.
Okay understood and then I guess on R&D again, there's been a pickup there obviously a function of the acquisitions and building out the track and trace.
But I guess is there any kind of normalized level of range.
Can expect moving forward on that front.
Directionally, we feel around 5% of our sales.
As a comfortable and manageable R&D, so R&D will continue to grow along with the corporations.
Growth so it's not stabilizing at a certain dollar figure I think it's more of a percentage of our <unk>.
Revenue.
Got it understood that's helpful I'll turn it over.
And thank you.
One moment for our next question.
And our next question comes from Keith <unk> from Northcoast Research. Your line is now open.
Good morning, guys I appreciate it.
In our Russell looking at the WPS segment products, the 13% and change is the best that I can remember in several years in your viewpoint, how sustainable is that and is there an opportunity to grow from there or should we expect some volatility.
I think what we really need to be focused on WPS is the combination of growth and profitability, we feel pretty comfortable that we can ratchet up the profitability, but if you look at the figures in the U S. The growth definitely lagged peers.
So we're still looking at what's the right balance of reinvestment advertising versus.
Overall margins so the 13%.
And I think given the industry, they're in puts them peer competitive.
It's we need to squeeze out some growth with that same profitability.
Yes, I appreciate that in terms of the pricing action and generally you guys have taken how far along have you would you say you guys are on the process because if I remember correctly you were thinking that was your price increases we're going to lag. The raw material increases you guys are missing if you guys caught up to that or is there still some more catch up to go yes.
Yes, we've.
Obviously, there's a few outliers in our raw materials, but for the bulk of the products, we definitely caught up there.
There is still some I would say.
Unusual pricing in the semiconductor market of where youre seeing some vast purchased variances too to be able to acquire some scarce chips.
Obviously, our pricing has been fully captured that nor is it likely to because we think some of those premiums are going to be short lived in.
Most companies I think that are acquiring semiconductors have chosen to absorb those.
Temporary costs into their portfolio.
Okay. Appreciate it and then final question for me on gross margins I guess, the gross margin recovery from premium at Diavik levels.
A little bit quicker than I anticipated and I noticed you said.
Mix was definitely one of those components do you expect gross margins to be roughly in the same area going forward.
Again, if you go back over the quarters.
There is a decent amount of variability in our gross margin so I'm not going to hang my hat on another 54.
I do think we had to.
Again, a favorable mix and a favorable set of conditions. So I'm going to say that certainly our guidance is a little bit lower than that type of figure.
With the understanding that given we have some very high gross margin products and some very low gross margin products, depending on what the mix as you can see.
A 100 basis points of variability.
And then maybe if I can sneak one more in here I know in years past some of your a smaller businesses in terms of the osha posters and things of that nature kind of trailed off during the pandemic have you seen any of that business recover here.
Yes, it is definitely.
Definitely much better than it was.
A year and a half ago for obvious reasons.
Caters that particular business caters to small businesses, which were most affected.
Those shutdowns.
Is it fully recovered to pre pandemic levels, absolutely not there is still.
In the small business segment, there is still a lot of pain in recovery that needs to happen.
Great. Thank you and good luck.
And thank you.
And one moment our next question.
And our next question comes from Steve <unk> from Sidoti. Your line is now open.
Good morning, Russell Erinn, Thanks for all the color on the call.
I do want to dig back into that 13% operating margin in workplace safety to us that was quite a surprise I'm going back years, and I think you've only.
13% net margin maybe one for any years. So clearly there is more going on here and I would have thought it would be shrink to grow but even if that you were growing topline minus FX I mean can you give us a little bit more detail, how you're getting to that number that quickly.
Yes so.
That business is very reliant on advertising and traditional banks I mean can you give us a little bit more detail, how you're getting to that number that quickly.
Yes so.
That business is very reliant on advertising and traditionally print catalogues.
One of the things that we can change pretty quickly and did was too.
Shift more emphasis to digital which is less expensive all things being equal then catalogs.
That was part of it part of it was also that they took cost out of that business operating costs, which improved the profitability.
And lastly.
We've moved to a more.
I would say market.
<unk> pricing and so some of the things that we've done have helped us so I wouldn't point to any one of them is the major drivers the three of them put together.
Help to do the improvement but again.
What we really need to see is yes, they did grow but not as fast as we would like to see.
Recipe for us is those kind of profit but <unk>.
Industry growth at the same time.
But how are you I mean, there's two elements here right, which is if you're trying to move away from the resale model right I mean, you're trying to probe, which we're also trying to cut some staff out Ryan.
Correct.
Correct, so when I mean grow when there.
There may be an additional sales decline.
Going to project, one way or another but.
It's really the recipe of how we can best resonate with our customers in this particular channel and like I said I think the team has done a tremendous job, particularly in Europe in really focusing and.
Making sure they are.
In tune to the dynamics of both in market and their their customers, but with that said I think there is still room for improvement and we are looking at ways, where we can improve the overall relevancy of this channel.
Fair enough, thanks, and if I can turn to IV solutions, obviously, you're finishing up a really really strong year, having said that even if I back off back out the FX. It looks like there was a little bit of a sequential pullback there are there certain areas, where youre seeing a little bit.
Of slowing or was there some seasonality.
A teeny bit of it seasonality traditionally Q3 is.
Really really strong and you start to see him.
In our Q4 as people start to head into vacations and what have you.
Yeah.
I think we are still very concerned about European energy prices and whether that will be a constraint.
So far the U S market seems to be holding up very well.
<unk>.
We just have our fingers crossed that we'll continue to see these trends.
Going through into the coming year.
Okay, and then if I can get one in on cash flow.
Alright.
I heard this right. It sounded like you said Q1 would be lower than traditional as some timing element and then Q2 stronger can you just give a little color on that because I might have missed it.
No.
Absolutely heard it correctly the timing of our annual bonus payments is shifting from what it was historically the second quarter of the year into the first quarter. So youll see a slightly.
Slightly weaker Q1, and a slightly stronger Q2, all as a result of the timing of the bonus payments.
Okay and couple more on that.
One is <unk>.
Obviously reasons you on every other company has to build up your inventory given the supply chain constraints.
And component shortages and any thoughts on when that might start reimbursing because you have I mean, there has been a pretty substantial inventory build which has affected cash flow.
Yeah, So all things being equal equal, we're carrying I'm going to say nominally 40% to $50 million more inventory than we would historically like.
That's proven to be with supply chain issues are great investments, the carrying cost of something like that or a few million dollars.
But it enabled us to make sure that we don't stock out and we've been able to sell throughout.
The last several quarters.
We are and continue to look at how we can draw that down as freight.
<unk> becomes more predictable and our supply chain becomes more predictable.
It will definitely come down one of the irony is in it though is last year, we were shipping air which is something we really prefer not to do that.
Very expensive way to ship our products.
As we convert from air to sea.
It actually drives down our cost.
Ali but.
You wind up now you pick up nominally six to eight weeks in transit for inventories so that pushes your inventory numbers back up.
From an operating perspective, and an operating margin of being able to move from C. Two or excuse me from air to sea.
Absolutely the right thing to do but at the same time, you can see an uplift in inventory very specifically due to that.
I know that's a long winded answer I'd love to say, we were going to Peel off $10 million in the next quarter, but we're not quite there yet.
Fair enough and then last one is on the share repurchase how far along you are on the current authorization and whether theres any share repurchases built into that guidance.
We have very little share repurchases built into our guidance. We had a 100 million authorization back in may of that $100 billion of purchases, we have $85 million remaining today.
Okay and in terms of how youre thinking about capital allocation next year.
Offer.
We have basically the same philosophies that we've that we've had and continue to have which is first and foremost continued to invest in our organic growth engine. So think R&D sales geographic expansion et cetera at.
At the same time, continuing to increase our dividend Russell mentioned, our dividend increase this year as well 37th consecutive year and then we still look at buybacks and acquisitions. The same way that we always have acquisitions must have strong strong synergies they need to make sense. We typically don't look at just straight direct competitors we look.
For acquisitions that bring some form of technology to the table that will that will drive Brady forward and then of course buybacks. We look at it in an opportunistic manner. We have an awesome balance sheet today $19 million of net cash at July 31, So a very enviable position to be and so we clearly have.
Dry powder and when we look at the buybacks it it's the price needs to be right.
And thats in comparing what we're trading at to intrinsic value so pretty similar.
Philosophies that we've that we've had in the past and a great balance sheet to execute it.
I know there was a lot of questions I appreciate all the detailed answers. Thanks.
Thank you.
Thank you.
And I am showing no further questions I would now like to turn the call back over to Russell shallow CEO for closing remarks.
Perfect. Thank you. Thank you all very much for your time today and for your thoughtful questions.
Live in a highly uncertain world, but Brady is a business that is well positioned to drop to thrive regardless of which direction. The economy has.
We're changing our portfolio to faster than GDP growing company with an increasing foothold in faster growing end markets are pricing and efficiency actions are improving our gross margins are ideas division continues to perform extremely well and the actions we've taken to improve our workplace safety business are also working.
We're aggressively investing in R&D to ensure our products exceed our customers' expectations and finally, we have a strong balance sheet, which enables us to keep investing in both organic and inorganic growth. While also returning funds to our shareholders our balance sheet and strong cash generation make Brady a safe port from future market.
Turbulence, even though the future of the macro economy is uncertain I am optimistic about our future. Thank you for your time this morning and for participating you may now disconnect disconnect the call.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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The conference will begin shortly to raise Johan during Q&A you can dial one one.
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