Q4 2023 Brady Corporation Earnings Call

September 5, 2023

Okay.

Yeah.

Good day and welcome to the Brady Corporation fourth quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.

You will then hear an automated message advising your hand is raised.

Draw. Your question. Please press star one again.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Ann Thornton Chief Financial Officer. Please go ahead.

Thank you.

Good morning, and welcome to the Brady Corporation fiscal 2023 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 me 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.

Factors were noted in our news release. This morning hand in Brady's fiscal 2023 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, Russell Sheller Russell. Thank you Anne and thank you for joining us today.

We released our fiscal 2023 fourth quarter results. This morning, which represented another company record earnings per share result.

Organic sales growth grew six 9% this quarter due to strong results throughout our global business, we increased our GAAP earnings per share of <unk> 23, 5% and we grew our non-GAAP earnings per share by 19, 5%.

This quarter represented an excellent finish to another great year, our full year 2023, GAAP EPS of $3 51 with another all time record high following two consecutive years of all time record EPS.

Our non-GAAP EPS of $3 64 was also an all time record high.

This year, we grew organic sales five 5% with growth driven by both regions throughout all of our major businesses.

We returned $120 million to our shareholders through dividends and share buybacks, while still finishing the year in a net cash position.

I am proud of our results. This year. This is a direct result of the hard work and dedication of the entire company, we continue to improve profitability, while increasing our investment in R&D, expanding our sales force and investing in our digital capabilities, our focus on new products and sales generating investments position.

US to continue to generate consistent organic sales growth into the future.

Our cash generation. This quarter was an excellent was excellent with operating cash flow of 161% of net income and free cash flow of 148% of net income our priorities for the next year or consistent which are.

To generate top line growth in excess of GDP and continue our evolution into a faster growing company.

To develop our product offering to support our customers automation initiatives, which we believe is a growth opportunity for years to come.

To execute operational effectiveness opportunities to ensure we continue to improve profitability as we grow.

To effectively deploy our capital in order to drive long term shareholder value, which includes organic investments acquisitions, and returning funds to our shareholders through dividends and share buybacks, we demonstrated our commitment to returning funds to our shareholders. This year as we repurchased more than 3% of our diluted share count.

Operator: Good day, and welcome to the Brady Corporation fourth quarter 2023 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. So, withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

<unk> by nearly exhausting our existing buyback authorization.

And we announced a new $100 million share back buyback authorization and yesterday, we announced an increase in our dividend, which represents the 38 consecutive year of annual dividend increases we're committed to consistently returning cash to our shareholders, while delivering a strong shareholder return.

Now I'll turn the call over to Anne to provide more details on our financial results and.

Ann Thornton: I would now like to hand the conference over to your speaker today, Ann Thornton, Chief Financial Officer. Please go ahead. Thank you.

Thank you Russell.

This quarter, we had strong organic sales growth of six 9%, while improving our gross profit margins and reducing our SG&A expense as a percentage of sales, resulting in earnings growth and a quarterly record GAAP EPS of $1 per share, which was up 23, 5% compared to the fourth quarter of last year.

Ann Thornton: Good morning, and welcome to the Brady Corporation fiscal 2023 fourth quarter earnings conference call. The slides for this morning's call are located on our website at www.bradycorp.com slash investors. We will begin our prepared remarks on slide number three.

Ann Thornton: Please note that during this call, you 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 2023 form 10K, which was filed with the SEC this morning.

non-GAAP EPS, which is calculated as our GAAP EPS less the after tax impact of amortization expense was $1 <unk> per share this quarter, which was up 19, 5% over the fourth quarter of last year.

Both regions performed extremely well with strong sales and profit growth compared to last year's fourth quarter, Our Americas and Asia region grew organic sales five 6% and increased segment profit by 17, 2%.

Ann Thornton: Also, please note that this teleconference is copyrighted by Brady Corporation and may not be rebroadcast without 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.

And our Europe , and Australia region grew organic sales nine 5% and increased segment profit by nine 1%.

Our teams are executing extremely well throughout our global businesses.

So the key financial takeaways. This quarter are strong revenue growth record EPS excellent performance within both of our regions.

Russell Schaller: I'll now turn the call over to Brady's president and chief executive officer, Russell Schaller. Russell? Thank you, Ann, and thank you for joining us today.

And a continued commitment to return funds to our shareholders.

Russell Schaller: We released our fiscal 2023 fourth quarter results this morning, which represented another company record earning per share result. Organic sales growth grew 6.9% this quarter due to stronger results throughout our global business. We increased our gap earnings per share 23.5% and we grew our non-gap earnings per share by 19.5%. This quarter represented an excellent finish to another great year. Our full year 2023 gap EPS of 351 was another all-time record high following two consecutive years of all-time record EPS.

Move to slide number four for our quarterly sales trends.

Organic sales grew six 9% and foreign currency translation increased sales, 0.6% this quarter, while the impact of our premises divestiture that we closed in the third quarter reduced sales by 0.7%, resulting in total sales growth of six 8%.

The recent weakening of the U S dollar versus other major currencies resulted in a slight positive to our total sales growth this quarter, which follows six consecutive quarters of the opposite FX impact due to the strengthening U S dollar.

On slide number five you'll find our quarterly gross profit gross margin trending our gross profit margin increased 40 basis points to 58% compared to 54% in the fourth quarter of last year.

Russell Schaller: Our non-gap EPS of 364 was also an all-time record high. This year we grew organic sales 5.5% with growth driven by both regions throughout all of our major businesses. And we returned 120 million to our shareholders through dividends and share buybacks while still finishing the year in a net cash position. I'm proud of our results this year.

Consistent with the third quarter, we were able to offset the majority of our input cost increases through reduced freight charges and other efficiency gains.

Slide number six details.

Our SG&A expense trending SG&A was $97 5 million this quarter compared to $94 5 million in the fourth quarter of last year.

Russell Schaller: This is a direct result of the hard work and dedication of the entire company. We continue to improve profitability while increasing our investment in R&D, expanding our sales force and investing in our digital capabilities. Our focus on new products and sales generating investments positions us to continue to generate consistent organic sales growth into the future. Our cash generation this quarter was excellent with operating cash flow of 161% of net income and pre-cash flow of 148% of net income.

As a percent of sales SG&A declined to 28, 2% compared to 29, 2% of sales in the fourth quarter of last year.

If you exclude amortization expense from each of the periods presented than SG&A would have decreased from 28% of sales in the fourth quarter of last year to 27, 5% of sales this quarter.

So overall, we're making nice progress with our cost structure, we've reduced our SG&A expense from over 36% of sales seven years ago to 27, 8% in the full year fiscal 2023.

Russell Schaller: Our priorities for the next year are consistent which are to generate top-line growth in excess of GDP and continue our evolution into a faster growing company to develop our product offering to support our customers' automation initiatives which we believe is a growth opportunity for years to come to execute operational effectiveness opportunities to ensure we continue to improve profitability as we grow. To effectively deploy our capital in order to drive long-term shareholder value, which includes organic investments, acquisitions, and returning funds to our shareholders through dividends and share buybacks.

Meanwhile, we are still investing in sales generating resources by growing our sales force, while identifying ongoing efficiency opportunities throughout our sales and other support functions.

Slide number seven details the trending of our investments in research and development.

This quarter, we once again increased our investment in R&D to $16 3 million, which was 4% of sales.

We believe that the investments with the best ROI are almost always organic investments in particular research and development.

We're committed to new product development, and we have an exciting pipeline of new products set to launch in fiscal 2024.

Russell Schaller: We demonstrated our commitment to returning funds to our shareholders this year as we repurchased more than 3% of our diluted share count by nearly exhausting our existing buyback authorization and we announced a new 100 million shareback buyback authorization and yesterday we announced an increase in our dividend which represents the 38 consecutive year of annual dividend increases. We're committed to consistently return cash to our shareholders while delivering a strong shareholder return.

On slide number eight.

Pretax earnings increased 18, 2% on a GAAP basis from 54 million to $63 8 million.

And if you exclude amortization from both periods pre tax earnings increased 14, 8% on a non-GAAP basis from $57 7 million to $66 2 million.

Slide number nine details the trending of earnings and EPS.

You can see a clear trend of increasing earnings and you can also see that the fourth quarter is our strongest quarter on record on both a GAAP and non-GAAP basis, our fourth quarter EPS was an all time record high.

Ian: I'll now turn the call over to Ian to provide more details on our financial results. Thank you Russell. This quarter we had strong organic sales growth of 6.9% while improving our growth profit margins and reducing our SGNA expense as a percentage of sales resulting in earnings growth and a quarterly record gap EPS of $1 per share which was up 23.5% compared to the fourth quarter of last year. Non-GAP EPS which is calculated as our gap EPS less the after-tax impact of amortization expense was $1.4 per share of this quarter which was up 19.5% over the fourth quarter of last year.

This quarters GAAP EPS increased by 23, 5% and if you exclude the after tax impact of amortization from both periods, our fourth quarter non-GAAP EPS increased by 19, 5% compared to last year.

On slide number 10, you will find a summary of our cash generation.

Operating cash flow increased substantially this quarter from $53 2 million in Q4 of last year to $79 3 million this quarter and free cash flow increased as well from $32 2 million in last year's fourth quarter to $73 million this quarter.

Operating cash flow was 161% of net income and free cash flow was 148% of net income this quarter.

Ian: Both regions performed extremely well with strong sales and profit growth compared to last year's fourth quarter our Americas and Asia region grew organic sales 5.6% and increased segment profit by 17.2% and our Europe and Australia region grew organic sales 9.5% and increased segment profit by 9.1%. Our teams are executing extremely well throughout our global businesses.

Turning to slide number 11, you can see the impacts of that Brady is historical cash generation has had on our balance sheet.

We're currently in a net cash position of $101 $8 million to put this in perspective, even with returning more than $56 million to our shareholders in the form of dividends and buybacks. This quarter, we still increased our net cash position by more than $17 million.

Ian: So the key financial takeaways this quarter are strong revenue growth, record EPS, excellent performance within both of our regions and a continued commitment to return funds to our shareholders. Let's move to slide number 4 for our quarterly sales trends. Organic sales grew 6.9% and foreign currency translation increased sales 0.6% this quarter while the impact of our premises to vestiture that we closed in the third quarter reduced sales by 0.7%. Resulting in total sales growth of 6.8%.

Our approach to capital allocation is to first 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. Despite.

Despite the economic and any other economic uncertainty will continue to deploy capital to drive productivity and sales growth.

And second we focus on consistently increasing our dividends. We've now increased our dividends annually for 38 consecutive years, which is the streets that we're very proud of.

Ian: The recent weakening of the US dollar versus other major currencies resulted in a slight positive to our total sales growth this quarter which follows six consecutive quarters of the opposite effects impact due to the shrinks in the US dollar. On slide number five, you'll find our quarterly gross margin turning. Our gross profit margin increased 40 basis points to 50.8% compared to 50.4% in the fourth quarter of last year. Consistent with the third quarter, we were able to offset the majority of our input cost increases through reduced freight charges and other efficiency gains.

After fully funding organic investments and dividends. We then deploy our cash in a disciplined manner for either in acquisitions, where we have clear synergies or for opportunistic buybacks. When we see a disconnect between intrinsic value and Brady as trading price.

Our strong balance sheet positions us to be able to execute additional value enhancing activities, such as R&D investments and other organic sales opportunities to acquire companies strategically when the prices right and the synergies are clear and to return funds to our shareholders through dividends and share buybacks.

Ian: Slide number six details are S-GNA expense trending. S-GNA was 97.5 million this quarter compared to 94.5 million in the fourth quarter of last year. As a percent of sales, S-GNA declined to 28.2% compared to 29.2% of sales in the fourth quarter of last year. If you exclude amortization expense from each of the periods presented, then S-GNA would have decreased from 28% of sales in the fourth quarter of last year to 27.5% of sales this quarter.

Slide number 12 provides an overview of our financial results for the full year ended July 31 2023.

Overall sales increased two 3% and organic sales grew five 5%.

This organic sales growth was partially offset by the negative impact of foreign currency translation of 3% and a decline of 0.2% due to the sale of our premises business in the third quarter.

We finished fiscal 2023 with all time high GAAP and non-GAAP EPS.

Ian: So overall, we're making nice progress with our cost structure. We've reduced our S-GNA expense from over 36% of sales seven years ago to 27.8% in the full year fiscal 2023. Meanwhile, we're still investing in sales generating resources by growing our sales force while identifying ongoing efficiency opportunities throughout our sales and other support functions.

These strong earnings results were even after increasing our investment in R&D by nearly 5% this year.

Fiscal 2023 was another record EPS year end, our fourth quarter was another record quarter as well.

We're confident that our actions this year and our consistent priorities will set us up for success in the future.

Ian: Slide number seven details the trending of our investments in research and development. This quarter, we once again increased our investment in R&D to 16.3 million, which was 4% of sales. We believe that the investments with the best ROI are almost always organic investments in particular research and development.

It takes us to our guidance for next year on slide number 13.

We are forecasting GAAP EPS to range from $3 72.

To $3 95 per share in fiscal 2024, which would represent an increase of five 4% to 12, 5% next year.

Ian: We're committed to new product development and we have an exciting pipeline of new products set to launch in fiscal 2024. On slide number eight, three tax earnings increased 18.2% on a gap basis from 54 million to 63.8 million. And if you exclude amortization from both periods, pre-tax earnings increased 14.8% on a non-gap basis from 57.7 million to 66.2 million. Slide number nine details the trending of earnings and EPS. You can see a clear trend of increasing earnings and you can also see that the fourth quarter is our strongest quarter on record.

We also anticipate organic sales growth in the mid single digit percentages for the year ending July 31 2024.

And based on foreign currency exchange rates as of July 31, we expect the weakening of the U S dollar to increase fiscal 'twenty for our sales by an additional approximately 2%.

Other elements of our guidance include an income tax rate of approximately 22% depreciation and amortization expense of approximately $32 million to $34 million and capital expenditures of approximately $75 million.

Our Capex estimate is inclusive of the purchase of a previously leased facility and the build out of a new facility totaling approximately $55 million.

Ian: On both a gap and non-gap basis, our fourth quarter EPS was an all time record high. This quarter's gap EPS increased by 23.5% and if you exclude the aftertax impact of amortization from both periods, our fourth quarter non-gap EPS increased by 19.5% compared to last year.

Our capital allocation strategy remains unchanged, which are to continue to invest in our organic business through both research and development and our sales force.

Continue to pay the dividend, which we just mentioned increased for the 38th consecutive year.

Ian: On slide number 10, you'll find a summary of our cash generation. Operating cash flow increased substantially this quarter from 53.2 million in Q4 of last year to 79.3 million this quarter. And free cash flow increased as well from 32.2 million in last year's fourth quarter to 73 million this quarter. Operating cash flow was 161% of net income and free cash flow was 148% of net income this quarter.

Continue to be opportunistic with share buybacks, while identifying potential acquisitions, where the price is right and the strategic fit is clear.

We have a strong balance sheet and we'll continue to use it to drive long term shareholder value.

Potential risks to our guidance among others include a potential strengthening of the U S. Dollar inflationary pressures that were unable to offset in a timely enough manner or an overall slowdown in economic activity.

Ian: Turning to slide number 11, you can see the impact that Brady's historical cash generation has had on her balance sheet. We're currently in a net cash position of 101.8 million dollars, to put this in perspective, even with returning more than 56 million to our shareholders in the form of dividends in buybacks this quarter, we still increase our net cash position by more than $17 million. Our approach to capital allocation is to first use our cash to fully fund organic sales and efficiency opportunities.

I'll now turn the call back over to Russell to cover our regional results and to provide some closing thoughts before Q&A Russell. Thanks, Anne Slide 14 details the financial results of our Americas and Asia region.

Sales were $227 5 million this quarter and organic sales growth was five 6%.

Ian: This includes investing in new product development, sales generating resources, capability enhancing capital expenditures, and automation-focused cap-ax. Despite the economic and any on economic uncertainty, we'll continue to deploy capital to drive productivity and sales growth. And second, we focus on consistently increasing our dividends. We've now increased our dividends annually for 38 consecutive years, which is a streak that we're very proud of. After fully funding organic investments and dividends, we then deploy our cash in a disciplined manner for either acquisitions where we have clear synergies, or for opportunistic buybacks when we see a disconnect between intrinsic value and Brady's trading price.

The divestiture of our premises business decreased sales by 1% and foreign currency translation reduced sales by 2%, resulting in total sales growth of four 4% this quarter.

<unk> profit increased by 17, 2% to $50 million organic sales growth resulted in a significant increase in profit in the fourth quarter, while another contributing factor where freight rates returning to normal in fiscal 'twenty three.

During any drastic change in macro and logistics environment, we expect freight rates to remain at these normalized level, which will not provide the year over year benefit in fiscal 'twenty four that we realized this year.

As we disclosed in the third quarter, our new regional structure became effective on February one, but this quarter. We will provide a few additional details regarding the sales performance of our previous segments.

Ian: Our strong balance sheet positions us to be able to execute additional value enhancing activities such as R&D investments and other organic sales opportunities to acquire companies strategically when the price is right and the synergies are clear, and to return funds to our shareholders through dividends and share buybacks.

Our former identification solutions business in the American Asia region grew sales in the mid single digits and our former workplace safety business declined in the mid single digits in this quarter.

<unk>, 90% of the revenue in our Americas and Asia region.

Represents the former ideas solutions division and the remaining 10% of the revenue in this region represents the former workplace safety Division.

Ian: Slide number 12 provides an overview of our financial results for the full year ended July 31st, 2023. Overall, sales increased 2.3 percent and organic sales grew 5.5 percent. This organic sales growth was partially offset by the negative impact of foreign currency translation of 3 percent, and a decline of 0.2 percent due to the sale of our premises business in the third quarter.

We realized growth in most of our product lines and end markets, except for our health care identification product line. The health care industry has struggled to fully recover from a variety of challenges that have impacted it over the last several years, starting with the pandemic and then moving into supply chain and logistics challenges and most recently inflationary.

Ian: We finished fiscal 2023 with all-time high gap and non-gap EPS. These strong earnings results were even after increasing our investment in R&D by nearly 5 percent this year, fiscal 2023 was another record EPS year and our fourth quarter was another record quarter as well. We're confident that our actions this year and our consistent priorities will set us up for success in the future.

<unk> also our Asia business struggled in the fourth quarter reporting a mid single digit decline primarily due to weakness in China I think in the consumer electronics industry in Southeast Asia.

The exception in Asia, as our business in India, which continues to grow organically between 15, and 20% quarter over quarter. We're looking forward to our expansion in India and the additional growth potential in fiscal 'twenty four.

Ian: This takes us to our guidance for next year on slide number 13. We're forecasting gap EPS to range from $3.70 to $3.95 per share in fiscal 2024, which would represent an increase of 5.4 percent to 12.5 percent next year. We also anticipate organic sales growth in the mid-single-digit percentages for the year ending July 31st, 2024, and based on foreign currency exchange rates as of July 31st, we expect the weakening of the US dollar to increase fiscal 24 sales by an additional approximately 2 percent.

Moving to slide 14, you'll find a summary of the performance of our Europe and Australia region.

Sales were $118 4 million this quarter organic sales growth was nine 5% and foreign currency increased sales by 2% for a total growth of 11, 5%.

As far as the sales performance of our previous segments, both of our former identification solutions and workplace safety businesses grew sales organically in the high single digits in the quarter.

More than half of the revenue in Europe , and Australia region represents the former identification solutions Division and the remainder represents the former workplace safety Division.

Ian: Other elements of our guidance include an income tax rate of approximately 22 percent, depreciation and amortization expense of approximately 32 to 34 million and capital expenditures of approximately 75 million. Our CAPEX estimate is inclusive of the purchase of a previously leased facility and the build-out of a new facility totaling approximately 55 million dollars.

Throughout Europe , we continued to realize organic growth across our major product lines and we're benefiting from many similar trends that we're seeing in the U S. Many companies are working to shorten their supply chain and find workers, resulting in real demand for our productivity solutions.

Ian: Partners. Our capital allocation strategy remains unchanged, which are to continue to invest in our organic business through both research and development and our sales force. Continue to pay the dividend, which we just mentioned, increased for the 38th consecutive year. Continue to be opportunistic with share buybacks, while identifying potential acquisitions where the price is right and the strategic fit is clear. We have a strong balance sheet and will continue to use it to drive long-term shareholder value.

Our Australian business grew sales organically by nearly 13% this quarter and contributed significant increase in segment profit.

In total Europe , and Australia segment profit increased nine 1% to $18 4 million this quarter.

Europe is realizing the impact of inflation as the impact has occurred slightly later than the impact of inflation in the U S.

This results in segment profit as a percentage of sales decreasing slightly from 15, 9% to 15, 6% this quarter.

Ian: Potential risks to our guidance among others include potential strengthening of the US dollar, inflationary pressures that were unable to offset in a timely enough manner, or an overall slowdown in economic activity.

We're actively working to address these cost pressures through operational efficiencies and selective price increases by near term inflation expectations bring profitability challenges along with it.

Russell Schaller: I'll now turn the call back over to Russell to cover our regional results and to provide some closing thoughts before Q&A.

In total our fourth quarter for our entire global business.

Our historical global solutions business would have had organic sales growth of seven 3% and our historic global workplace safety business would have had organic sales growth of five 1%.

Russell Schaller: Russell? Thanks, Ann.

Russell Schaller: Slide 14 details the financial results of our Americas and Asia region. Sales were 227.5 million this quarter in organic sales growth was 5.6%. The divestiture of our premises business decreased sales by 1% and foreign currency translation reduced sales by 0.2%.

With that we'd like to start the Q&A operator would you please provide instructions to our listeners.

Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Russell Schaller: Resolving in total sales growth of 4.4% this quarter. Segment profit increased by 17.2% to 50 million. Organic sales growth resulted in the significant increase in profit in the fourth quarter, while another contributing factor were freight rates returning to normal in fiscal 23.

One moment, our first question.

Our first question comes from Keith <unk> with Northcoast Research Your line is open.

Good morning, guys and congratulations on a great quarter.

Russell, perhaps you can touch on some of the growth initiatives that you've put in place I guess, it's your tenure as CEO has started and perhaps we're proud of the color in terms of how it's driving growth that we're seeing here what we can expect next year.

Russell Schaller: As we disclosed in the third quarter, our new regional structure became effective on February 1. But this quarter will provide a few additional details regarding the sales performance of our previous segments. Our former identification solutions business in the American Asia region who sales in the mid-single digits and our former workplace safety business declined in the mid-single digits in this quarter. Approximately 90% of the revenue in our Americas and Asia region represents the former IDF Solutions division and the remaining 10% of the revenue in this region represents the former workplace safety division. We realize growth in most of our product lines and then markets except our healthcare identification product line.

Hi, Keith Yes, sure and thanks for joining the day after vacation [laughter].

Yes. So you know traditionally Brady has been very good at selectively targeting customers to both.

Improved there.

Overall plant safety as well as improve their automation.

Initiatives in their plant.

And really by focusing in on those areas for the whole company rather than just Ibs were starting to see the translation into growth for the company. So if you were to look back at <unk> over many years in <unk>.

Russell Schaller: The healthcare industry has struggled to fully recover from a variety of challenges that have impacted it over the last several years, starting with a pandemic and then moving into supply chain and logistics challenges and most recently inflationary pressures. Also, our Asia business struggled in the fourth quarter, reporting a mid-single digit decline, primarily due to weakness in China and in the consumer electronics industry in Southeast Asia. The exception in Asia is our business in India which continues to grow organically between 15 and 20% quarter of a quarter.

A pretty decent growth track record now what Youre seeing is the expansion of that across really the consolidated group of companies within Brady. So that's that is helping US second part that's helping is the tailwind or excuse me the drag that we had hired by some of our traditional catalog.

Businesses.

Becomes increasingly a smaller share of the overall corporation and so while we're still seeing some of those businesses decline in.

In the low single digits.

The effect, it's having on the overall corporation is certainly less so I'm going to give it two things.

Russell Schaller: We're looking forward to our expansion in India and the additional growth potential in fiscal 24.

Positive impact of really focusing on customers and some of the customer solutions, we're delivering.

Russell Schaller: Moving to slide 14, you'll find the summary of the performance of our Europe and Australia region. Sales were 118.4 million in this quarter. Organic sales growth was 9.5% in foreign currency increased sales by 2% for a total growth of 11.5%. As far as the sales performance of our previous segments, both our former identification solutions and workplace safety businesses grew sales organically in the high single digits in the quarter. So I am more than half to the revenue in Europe and Australia region represents the former identification solutions division and the remainder represents the formal workplace safety division.

That's giving us a great tailwind and then on the.

On the flip side, having increasingly smaller percentage of our dragging businesses is helping us as well so.

Long winded answer but to give you guidance kind of into next year. We've always felt that we can do GDP of our underlying countries plus a couple of points.

What the total macro environment will be next year I think is anybody's guess Americas seems very strong Europe's okay in China is not doing too well.

Russell Schaller: Throughout Europe we continue to realize organic growth across our major product lines and we are benefiting from many similar trends that we are seeing in the US. Many companies are working to shorten their supply chain and find workers resulting in real demand for our productivity solutions. Our Australian business grew sales organically by nearly 13% this quarter and contributed significant increase in segment profit. In total Europe and Australia segment profit increased 9.1% to 18.4 million this quarter.

Yeah got you if I could just drill down on.

One of your comments before about expanding the sales force can you perhaps for a little bit more color in terms of how much you're expanding the sales force is a by.

Several percentage points above revenue growth or where is the salesforce growing in terms of the driver.

Yes, we continue sales for us as a great marginal investment.

Unfortunately, those salespeople are kind of granular. So if you hire two people in Texas.

Worth hiring a third person in Texas for instance.

Russell Schaller: Europe is realizing the impact of inflation as the impact has occurred slightly later than the impact of inflation in the US. This results in segment profit as a percentage of sales decreasing slightly from 15.9% to 15.6% this quarter. We are actively working to address these cost pressures through operational efficiencies and selective price increases. By near term inflation expectations bring profitability challenges along with it.

We look at that as we continue to invest in salespeople as long as we're getting a marginal return on them.

Is it an enormous increase in sales force absolutely not but we continue to push the bounds of saying.

Should we add another 5% to 7% to our.

Our sales force as we continue to grow our business and it is something that we look at every month.

Because they are they're very granular decisions about whether we would add say a salesperson in India or whether we would invest in digital marketing.

Russell Schaller: In total our fourth quarter for our entire global business, our historical global ID solutions business would have had organic sales growth of 7.3% and our historic global workplace safety business would have had organic sales growth of 5.1%.

<unk>.

In the U K for instance, so we have a great analytics team that is helping us tremendously.

In the resolution of where we're making our investments.

Operator: With that we would like to start the Q&A operator. Would you please provide instructions to our listeners. Thank you. At this time we will conduct the question and answer session as a reminder to ask a question. You will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1-1 again. One moment for our first question.

Great and if I could sneak one more in here and then I'll turn it over to others.

In terms of the profitability of the segments.

Europe , and Australia segment, obviously has a lower profit margin than the Americas and Asia can you, perhaps help us reconcile while that's the case is there an opportunity to get into more of a balance going forward.

Part of it is it's just a little bit tougher environment in Europe , the cost structures are a little bit higher.

Keith Housum: Our first question comes from Keith Hussam with North Coast Research. Your line is open. Good morning guys and congratulations on a great quarter.

I think both businesses are in a good place in terms of profit margins.

Russell Schaller: You know Russell, perhaps you can touch on some of the growth initiatives that you've put in place I guess or since your tenure is the EOS started and perhaps the private color in terms of how it's driving growth that we're seeing here and what we can expect next year. Yeah sure and thanks for joining the day after vacation. Yeah so you know traditionally Brady has been very good at selectively targeting customers to both you know improve their overall plant safety as well as improve their automation initiatives in their plant and really by focusing in on those areas for the whole company rather than just IDS we're starting to see the translation into growth for the company.

As always the question if you push profit margins do start destroying demand for some of our products and we do see that if you push pricing too far people will buy two printers instead of three or they will buy less consumables. So.

If you look at the European region in particular, and how cut up it is by the different countries in the different languages and the logistics costs and what have you. It's just a slightly more expensive place to do business, we love them and we love their growth opportunities I mean clearly.

Clearly did fantastic in the last quarter, but with that said, it's just slightly more difficult to do business. There then you'd have in the U S.

Great I appreciate it guys I'll turn it over thanks Yep.

Russell Schaller: So you know if you were to look back at IDS over many years you know it enjoyed a pretty decent growth track record. Now what you're seeing is the expansion of that across you know really the consolidated group of companies within Brady. So that's that's helping a second part that's helping is the tailwind that or excuse me the drag that we had by some of our traditional catalog businesses becomes increasingly a smaller share of the overall corporation and so you know while we're still seeing some of those businesses decline in the low single digits the effect is having on the overall corporation is certainly less.

One moment for our next question.

Our next question comes from Steve Ferranti with Sidoti Your line is open.

Good morning, Russell morning, Ann.

I wanted to ask a little bit about <unk>.

Cost management SG&A, obviously, you've continued to do a great job.

And reducing costs I want to go back to when you.

Announced the re segmentation and talked about it adding 10 to 20 in EPS to fiscal 2024 I'm.

Im assuming we've seen some of those benefits already in the second half.

This year, yes.

At a 10% to 20 benefit next year and what other efforts are being made here do you see further reductions in SG&A going forward.

Russell Schaller: So you know I'm going to give it two things that positive impact of really focusing on customers and some of the customer solutions we're delivering that's giving us a great tailwind and then on the the flip side having increasingly smaller percentage of our dragging businesses is helping us as well. So you know long winded answer but to give you guidance kind of into next year you know we've always felt that we can do GDP of our underlying countries plus a couple of points you know what the total macro environment will be next year. I think is anybody's gas America seems very strong Europe's okay in China. He's not doing too well.

Yes, so youre absolutely right, we did capture more of that savings in 'twenty three than we had originally expected. So I think when I had said that 10 to 20 in 2024, I was probably a bit pessimistic and how fast we were going to be able to realize the savings.

We certainly picked some of it up in 'twenty three the remainder will be in 'twenty four.

I feel fantastic so far with how that has come together in fact, it is absolutely exceeded our expectations and our business case and going through it. We always said this was going to be a pay as you go event.

Russell Schaller: Yeah, if I could just drill down on one of your comments before about expanding the sales force, can you perhaps provide a little bit more cover in terms of how much you're expanding the sales force? Is it by several percentage points above revenue growth or where is the sales force going in terms of the driver? Yeah, we continue, you know, sales for us is a great marginal investment. Unfortunately, those salespeople are kind of granular.

We've digested all of the costs that were associated with making this change and yet we've still been able to to churn out record profit. So.

I think we're well positioned in 'twenty four but explicitly answer to your question some of that gain absolutely we've seen in 'twenty three.

Great.

Russell Schaller: So if you hire two people in Texas, you know, is it worth hiring a third person in Texas, for instance, we look at that as we continue to invest in sales people as long as we're getting a marginal return on them, you know, is it an enormous increase in sales force? Absolutely not. But, you know, we continue to push the bounds of saying, you know, should we add another five, seven percent to our sales force as we continue to grow our business?

The $55 million in Capex related to the sector.

Conversion of our new facility can you provide a little more detail on.

What's your funding.

Yeah sure so.

We always do the decision I think as all companies do a make versus buy or excuse me lease versus buy on facilities and we had the opportunity of converting a pretty significant plant lease to a purchasing decision.

The return on capital, we thought was fantastic and we're doing that but it's still it's a significant cash outlay.

Russell Schaller: And it's something that we look at every month because they're very granular decisions about whether we would add, say, a salesperson in India or whether we would invest in digital marketing in the UK, for instance. So, you know, we have a great analytics team that is helping us tremendously in the resolution of where we are making our investments.

Approximately $37 million.

For the for the plant, which previously would have been a lease and we have another facility that we've been in the process of constructing four.

A little bit over a year, but the significant parts of the bill is due this year and occupancy will happen towards the end of next year. So those two are onetime bytes. They wouldn't be typical of our company. We tend to have planned purchases are significant investments.

Keith Housum: Great. And if I can speak one more in here, and I'll turn over to you others.

Russell Schaller: In terms of the profitability of the segments, you know, the European Australia segment obviously has a lower cement profit margin than America, the Asia. He perhaps will help us reconcile while that's the case. And, you know, is there an opportunity to get into more of a balance going forward? Part of it is, it's just a little bit tougher environment in Europe. The cost structures are a little bit higher. I think both businesses are in a good place in terms of profit margins.

Once every few years it just.

Incidentally these two wind up at the same time.

Is that supporting any particular growth segment product.

No. It is these are on both our ongoing operations now they will certainly help us streamline.

Streamline a little bit of our activities, but both locations where previously occupied by Brady and so it doesn't appreciably change our footprint. It just gives us a little bit more long term control over the cost of doing business.

Russell Schaller: You know, it's always the question, if you push profit margins, do start destroying demands for some of our products. And we do see that, you know, if you push pricing too far, people will buy two printers instead of three or they'll buy less consumables. So, you know, if you look at the European region in particular and how cut up it is by the different countries and the different languages and the logistics costs and what have you, it's just a slightly more expensive place to do business. We love them and we love their growth opportunities. I mean, clearly did fantastic in the last quarter. But with that said, it's just slightly more difficult to do business there than you'd have in the US.

Okay got you. Thank you.

You talked about still having a pretty good.

Our pipeline of new product launches coming in fiscal 'twenty four.

Can you give us any kind of a preview also if you can comment a little bit on.

Products tied to code in Nordic acquisitions, and where you are with industrial track and trace kind of a weird question.

So obviously, we have a myriad of smaller products that we launch every months and throughout the year from locks to safety devices and what have you are more significant launches are our printers and optical and RFID readers.

Operator: Great. I appreciate that. I'll turn it over. Thanks. Yep. One moment for our next question.

A few product launches this year in terms of printers. Its a combination of both new printers as well as some product refresh on one of the things that we're super excited is the capability too.

Steve Ferazani: Our next question comes from Steve Ferranti with Cidodi. Your line is open. Morning. Morning, Russell. Morning, Ann. I want to ask a little bit about cost management, SGNA. Obviously, you've continued to do a great job in reducing costs. I want to go back to when you announced the resegmentation and talked about it adding 10 to 20 cents in EPS to fiscal 2024. I'm assuming we've seen some of those benefits already in the second half this year.

Print from voice, we're in prototyping right now, but they are talking to some of our devices and allowing that print technology to occur.

I personally I'm Super excited about that.

Also this fiscal year, we will be launching the industrial versions of our RFID and optical readers.

Steve Ferazani: Is it a 10 to 20 cent benefit next year? And what other efforts are being made here? Do you see further reductions in SGNA going forward? Yeah, so you're absolutely right. We did capture more of that savings in 23 than we had originally expected. So I think when I had said that 10 to 20 cents in 2024, I was probably a bit pessimistic in how fast we were going to be able to realize the savings.

As a long journey that started with the purchase of code in Nordic We knew it was going to take a substantial amount of development effort to make them sufficiently rugged that they were.

Industrial use contractor use case products, but you can look to see those in the coming year.

Are you guys excited about tracked industrial track and trace that market.

I guess when the previous CEO announced purchased.

Steve Ferazani: So we certainly picked some of it up in 23. The remainder will be in 24. I feel fantastic so far with how that has come together. In fact, it has absolutely exceeded our expectations and our business case and going through it. We always said this was going to be a pay-as-you-go event. We've digested all of the costs that were associated with making this change, and yet we've still been able to turn out record profits.

Yes, we absolutely are for us it's all part of our automation solutions now it's important to recognize what that means for us we're not really in distribution centers, that's not part of our business or freight shipping or what have you. We're very intimately involved in manufacturing environment.

And what I'll call niche manufacturing of parts.

There is a tremendous opportunity for Brady in what I'll call. The medium size corporations out there that manufacture things. So those would be the one to a couple of billion dollar companies.

Steve Ferazani: So I think we're well positioned in 24, but to explicitly answer your question, some of that gain absolutely was seen in 23. Great. The 55 million in cat-backs related to the conversion and the new facility, can you provide a little bit more detail on what you're funding? Yeah, sure. So we always do the decisions, I think, as all companies do, of make versus buy, or excuse me, least versus buy on facilities.

We actively engaged with many of them and I think the overall trends towards improving productivity saving labor.

Is something that will help us for years to come.

Thanks Ross.

Thank you that concludes the question and answer session. At this time I would like to turn it back to Russell shower for closing remarks.

Sure. Thanks, everyone for your time today and your questions. We performed very well this quarter and we have positive momentum throughout the entire organization. We're also incredibly strong financial position fiscal 'twenty, one 'twenty two and now 23 were all record EPS years, and we are once again guiding to another record.

Steve Ferazani: And we had the opportunity of converting a pretty significant plant lease to a purchasing decision. The return on capital we thought was fantastic, and we're doing that, but it's still, it's a significant cash outlay, approximately 37 million for the plant, which previously would have been at least. We have another facility that we've been in the process of constructing for a little bit over a year, but the significant parts of the bills do this year and occupancy will happen towards the end of next year.

Year in 2024.

Like many other companies, we have to navigate through an uncertain and rapidly changing macro environment.

We're focused on controlling what we can control and consistently delivering on our priorities, which are to continue to invest and grow the top line and continue our evolution into a faster growing company to further develop our product offering to support our customers automation initiatives to execute operational efficiencies and ensure.

Steve Ferazani: So, you know, those two are one-time bites. They wouldn't be typical of our company. We tend to have plant purchases or significant investments once every few years. It just, incidentally, these two lined up at the same time. Is that supporting any particular growth segment products? Now, it is, these are both are ongoing operations. Now, they will certainly help us streamline a little bit of our activities, but both locations were previously occupied by Brady, and so it doesn't appreciably change our footprint.

We grow profitably.

And to effectively deploy our capital to drive long term shareholder value through organic investments acquisitions, and returning funds to our shareholders through dividends and share buybacks.

I'm looking forward to the future and I know that our global team has the ability to overcome challenges and continue to deliver results.

You all for your time this morning and for your interest in Brady Operator, you may disconnect the call.

Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Steve Ferazani: It just gives us a little bit more long-term control over the cost of doing business. Yep. Okay. Gotcha. Thank you. You talked about it still having a pretty good pipeline, new product launches coming in fiscal 24. Can you give us any kind of a preview also if you can comment a little bit on product tied to code and Nordic ID acquisitions and where you are with industrial track and trace. So, obviously we have a myriad of smaller products that we launch every month and throughout the year from locks to safety devices and what have you are more significant launches are our printers and optical and RFID readers.

Okay.

Yes.

Okay.

Steve Ferazani: We're having a few product launches this year in terms of printers. It's a combination of both new printers as well as some product refresh. One of the things that we're super excited is the capability to print from voice. You know, we're in prototyping right now, but talking to some of our devices and allowing that print technology to occur. I personally am super excited about that. Also this fiscal year will be launching the industrial versions of our RFID and optical readers.

Yes.

Okay.

Yes.

Okay.

Yes.

[music].

Okay.

Dan.

Okay.

Steve Ferazani: You know, this is a long journey that started with a purchase of code and Nordic. We knew it was going to take a substantial amount of development effort to make them sufficiently rugged that they were industrial use contractor use case products. But you can look to see those in the coming year. Are you as excited about industrial track and trace that market as you were, I guess, when the previous CEO announced the purchase?

Okay.

[music].

Okay.

Yes.

[music].

Okay.

[music].

Okay.

[music].

Okay.

Steve Ferazani: Yeah, we absolutely are, you know, for us, it's all part of our automation solutions. Now it's important to recognize what that means for us. We're not really in distribution centers, that's not part of our business or freight shipping or what have you. We're very intimately involved in manufacturing environments and what I'll call niche manufacturing of parts. I think there is a tremendous opportunity for Brady in what I'll call the medium-sized corporations out there that manufacture things.

Okay.

[music].

Okay.

Yes.

Okay.

Yes.

Okay.

Steve Ferazani: So those would be the one to a couple billion dollar companies. We're actively engaged with many of them. And I think, you know, the overall trends towards improving productivity, saving labor is something that will help us for years to come. Thanks, Russell. Thank you.

Okay.

Yes.

Okay.

Thanks.

Yes.

Okay.

Yes.

Okay.

[music].

Okay.

So.

And.

Okay.

Yes.

Okay.

Yes.

[music].

Okay.

Yes.

[music].

Okay.

[music].

Okay.

Yes.

Okay.

[music].

Okay.

Yes.

Okay.

Yes.

Okay.

[music].

Okay.

[music].

Okay.

[music].

Okay.

Yes.

[music].

Okay.

And.

Okay.

Yes.

[music].

Okay.

Sure.

Okay.

[music].

Okay.

[music].

Okay.

[music].

Okay.

[music].

Okay.

Sure.

Okay.

[music].

Yes.

Okay.

[music].

Yes.

Okay.

Sure.

Yes.

[music].

Okay.

Yes.

Okay.

[music].

Yes.

[music].

You will then hear an automated message advising your hand is raised.

Withdraw your question. Please press star one one again.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Ann Thornton Chief Financial Officer. Please go ahead.

Thank you.

Good morning, and welcome to the Brady Corporation fiscal 2023 fourth quarter earnings Conference call.

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 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.

Factors were noted in our news release this morning, and in Brady's fiscal 2023 Form 10-K, which was filed with the SEC. This morning.

I'll now turn the call over to Brady's, President and Chief Executive Officer, Russell Sheller Russell. Thank you Anne and thank you for joining us today.

We released our fiscal 2023 fourth quarter results. This morning, which represented another company record earnings per share result, orgs.

Organic sales growth grew six 9% this quarter due to stronger results throughout our global business, we increased our GAAP earnings per share of <unk> 23, 5% and we grew our non-GAAP earnings per share by 19, 5%.

This quarter represented an excellent finish to another great year, our full year 2023, GAAP EPS of $3 51 with another all time record high following two consecutive years of all time record EPS.

Our non-GAAP EPS of $3 64 was also an all time record high.

This year, we grew organic sales five 5% with growth driven by both regions throughout all of our major businesses.

We returned to $120 million to our shareholders through dividends and share buybacks, while still finishing the year in a net cash position.

US to continue to generate consistent organic sales growth into the future.

Our cash generation. This quarter was an excellent was excellent with operating cash flow of 161% of net income and free cash flow of 148% of net income our priority for the next year or consistent which are.

To generate topline growth in excess of GDP and continue our evolution into a faster growing company to develop our product offering to support our customers automation initiatives, which we believe is a growth opportunity for years to come to.

To execute operational effectiveness opportunities to ensure we continue to improve profitability as we grow.

We demonstrated our commitment to returning funds to our shareholders. This year as we repurchased more than 3% of our diluted share count by nearly exhausting our existing buyback authorization.

And we announced a new $100 million share back buyback authorization and yesterday, we announced an increase in our dividend, which represents a 38 consecutive year of annual dividend increases we're committed to consistently returning cash to our shareholders, while delivering a strong shareholder return I'll now.

I'll turn the call over to Anne to provide more details on our financial results and.

Thank you Russell.

non-GAAP EPS, which is calculated as our GAAP EPS less the after tax impact of amortization expense was $1 <unk> per share this quarter, which was up 19, 5% over the fourth quarter of last year.

And our Europe , and Australia region grew organic sales nine 5% and increased segment profit by nine 1%.

Our teams are executing extremely well throughout our global businesses.

So the key financial takeaways. This quarter are strong revenue growth record EPS excellent performance within both of our regions.

Russell Schaller: That concludes the question and answer session.

And a continued commitment to return funds to our shareholders.

Move to slide number four for our quarterly sales trends.

Organic sales grew six 9% and foreign currency translation increased sales, 0.6% this quarter, while the impact of our premises divestiture that will be closed in the third quarter reduced sales by 0.7%, resulting in total sales growth of six 8%.

Russell Schaller: At this time, I would like to turn it back to Russell Shaller for closing remarks. Sure. Thanks, everyone, for your time today and your questions. We perform very well this quarter, and we have positive momentum throughout the entire organization. We're also an incredibly strong financial position, fiscal 21, 22, and now 23, we're all record EPS years, and we're once again guiding to another record year in 2024. Like many other companies, we have to navigate through an uncertain and rapidly changing macro environment.

On slide number five you'll find our quarterly gross profit gross margin trending our gross profit margin increased 40 basis points to 58% compared to 54% in the fourth quarter of last year.

Consistent with the third quarter, we were able to offset the majority of our input cost increases through reduced freight charges and other efficiency gains.

Slide number six details.

Our SG&A expense trending SG&A was $97 5 million this quarter compared to $94 5 million in the fourth quarter of last year.

As a percent of sales SG&A declined to 28, 2% compared to 29, 2% of sales in the fourth quarter of last year.

If you exclude amortization expense from each of the periods presented than SG&A would have decreased from 28% of sales in the fourth quarter of last year to 27, 5% of sales this quarter.

So overall, we're making nice progress with our cost structure, we've reduced our SG&A expense from over 36% of sales seven years ago to 27, 8% in the full year fiscal 2023.

Russell Schaller: We're focused on controlling what we can control and consistently delivering on our priorities, which are to continue to invest and grow the top line and continue our evolution to a faster growing company, to further develop our product offering to support our customers' automation initiatives, to execute operational efficiencies and ensure that we grow profitably, and to effectively deploy our capital to drive long-term shareholder value through organic investments, acquisitions, and returning funds to our shareholders through dividends and share buybacks. I'm looking forward to the future, and I know that our global team has the ability to overcome challenges and continue to deliver results.

Meanwhile, we are still investing in sales generating resources by growing our sales force, while identifying ongoing efficiency opportunities throughout our sales and other support functions.

Slide number seven details the trending of our investments in research and development.

This quarter, we once again increased our investment in R&D dollars to $16 3 million, which was 4% of sales.

We believe that the investments with the best ROI are almost always organic investments in particular research and development.

Russell Schaller: Thank you all for your time this morning, and for your interest in Brady.

We're committed to new product development, and we have an exciting pipeline of new products set to launch in fiscal 2024.

On slide number eight <unk>.

Pretax earnings increased 18, 2% on a GAAP basis from 54 million to $63 8 million.

And if you exclude amortization from both periods pre tax earnings increased 14, 8% on a non-GAAP basis from $57 7 million to $66 2 million.

Slide number nine details the trending of earnings and EPS.

Operator: Operator, you may disconnect the call. Thank you for your participation in today's conference.

This quarters GAAP EPS increased by 23, 5% and if you exclude the after tax impact of amortization from both periods, our fourth quarter non-GAAP EPS increased by 19, 5% compared to last year.

Operator: This does conclude the program.

Unknown Executive: You may now disconnect. John F. [inaudible] John F. [inaudible][inaudible] I'll be right back, I'll be right back. I'll be right back, I'll be right back.

Ann Thornton: The New York Times, The New York Times[inaudible] Please note that during this call you may make comments about forward-looking information, words such as expect, will, may, believe, forecast, and anticipate or 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 2023 form 10K 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 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 Russell Schaller Russell? Thank you Ann and thank you for joining us today We released our fiscal 2023 fourth quarter results this morning which represented another company record earning per share result Organic sales growth grew 6.9% this quarter due to strong results throughout our global business We increased our gap earnings per share 23.5% and we grew our non-gap earnings per share by 19.5% This quarter represented an excellent finish to another great year.

On slide number 10, you will find a summary of our cash generation operating.

Ann Thornton: Our full year 2023 Gap EPS of 351 was another all-time record high following two consecutive years of all-time record EPS. Our non-gap EPS of 364 was also an all-time record high. This year we grew organic sales 5.5% with growth driven by both regions throughout all of our major businesses. And we returned 120 million to our shareholders through dividends and share buybacks while still finishing the year in a net cash position. I'm proud of our results this year.

Operating cash flow was 161% of net income and free cash flow was 148% of net income this quarter.

Ann Thornton: This is a direct result of the hard work and dedication of the entire company. We continue to improve profitability while increasing our investment in R&D, expanding our sales force, and investing in our digital capabilities. Our focus on new products and sales generating investments positions us to continue to generate consistent organic sales growth into the future. Our cash generation this quarter was excellent with operating cash flow of 161% of net income and free cash flow of 148% of net income.

Turning to slide number 11, you can see the impacts of that Brady is historical cash generation has had on our balance sheet.

Ann Thornton: Our priorities for the next year are consistent, which are, to generate top-line growth in excess of GDP and continue our evolution into a faster growing company, to develop our product offering to support our customers automation initiatives, which we believe is a growth opportunity for years to come, to execute operational effectiveness opportunities to ensure we continue to improve profitability as we grow. To effectively deploy our capital in order to drive long-term shareholder value, which includes organic investments, acquisitions, and returning funds to our shareholders through dividends and share buybacks.

Ann Thornton: We demonstrated our commitment to returning funds to our shareholders this year, as we repurchased more than 3% of our deluded share count by nearly exhausting our existing buyback authorization. And we announced a new 100 million shareback buyback authorization, and yesterday we announced an increase in our dividend, which represents the 38 consecutive year of annual dividend increases. We're committed to consistently return cash to our shareholders while delivering a strong shareholder return.

Russell Schaller: I'll now turn the call over to Ian to provide more details on our financial results, Ian. Thank you, Russell. This quarter we had strong organic sales growth of 6.9%, while improving our growth profit margins and reducing our SGNA expense as a percentage of sales, resulting in earnings growth and a quarterly record gap EPS of $1 per share, which was up 23.5% compared to the fourth quarter of last year. Non-gap EPS, which is calculated as our gap EPS less the after-tax impact of amortization expense, was $1.4 per share this quarter, which was up 19.5% over the fourth quarter of last year.

Right.

The economic and the Indiana economic uncertainty will continue to deploy capital to drive productivity and sales growth.

And second we focus on consistently increasing our dividend. We've now increased our dividends annually for 38 consecutive years, which is a street that we're very proud of.

Russell Schaller: Both regions performed extremely well with strong sales and profit growth, compared to last year's fourth quarter, are Americas and Asia region grew organic sales 5.6%, and increased segment profit by 17.2%. And our Europe and Australia region grew organic sales 9.5%, and increased segment on. Our teams are executing extremely well throughout our global businesses.

Ian: So the key financial takeaways this quarter are strong revenue growth, record EPS, excellent performance within both of our regions, and a continued commitment to return funds to our shareholders.

Ian: Let's move to slide number four for our quarterly sales trends. Organic sales grew 6.9% and foreign currency translation increased sales 0.6% this quarter, while the impact of our premises to vestiture that we closed in the third quarter reduced sales by 0.7%. Resulting in total sales growth of 6.8%. The recent weakening of the US dollar versus other major currencies resulted in a slight positive to our total sales growth this quarter, which follows six consecutive quarters of the opposite effects impact due to the strength in the US dollar.

Ian: On slide number five, you'll find our quarterly growth margin turning. Our growth profit margin increased 40 basis points to 50.8%, compared to 50.4% in the fourth quarter of last year. Consistent with the third quarter, we were able to offset the majority of our input cost increases through reduced freight charges and other efficiency gains.

Our strong balance sheet positions us to be able to execute additional value enhancing activities, such as R&D investments and other organic sales opportunities to acquire companies strategically when the price is right and the synergies are clear and to return funds to our shareholders through dividends and share buybacks.

Ian: Slide number six details are our S-GNA expense trending. S-GNA was 97.5 million this quarter compared to 94.5 million in the fourth quarter of last year. As a percent of sales, S-GNA declined to 28.2%, compared to 29.2% of sales in the fourth quarter of last year. If you exclude amortization expense from each of the periods presented, then S-GNA would decreased from 28% of sales in the fourth quarter of last year to 27.5% of sales this quarter.

Slide number 12 provides an overview of our financial results for the full year ended July 31, 2023 overall.

Overall sales increased two 3% and organic sales grew five 5%.

This organic sales growth was partially offset by the negative impact of foreign currency translation of 3% and a decline of 0.2% due to the sale of our premises business in the third quarter.

We finished fiscal 2023 with all time high GAAP and non-GAAP EPS.

These strong earnings results were even after increasing our investment in R&D by nearly 5% this year.

Fiscal 2023 was another record EPS year end, our fourth quarter was another record quarter as well.

We're confident that our actions this year and our consistent priorities will set us up for success in the future.

It takes us to our guidance for next year on slide number 13.

We are forecasting GAAP EPS to range from $3 72.

To $3 95 per share in fiscal 2024, which would represent an increase of five 4% to 12, 5% next year.

We also anticipate organic sales growth in the mid single digit percentages for the year ending July 31 2024.

Ian: On slide number eight, three tax earnings increased 18.2% on a gap basis from 54 million to 63.8 million. And if you exclude amortization from both periods, pre-tax earnings increased 14.8% on a non-gap basis from 57.7 million to 66.2 million.

And based on foreign currency exchange rates as of July 31, we expect the weakening of the U S dollar to increase fiscal 2000 and for our sales by an additional approximately 2%.

Ian: Slide number nine details the trending of earnings and EPS. You can see a clear trend of increasing earnings and you can also see that the fourth quarter is our strongest quarter on record. On both a gap and non-gap basis, our fourth quarter EPS was an all-time record high.

Our Capex estimate is inclusive of the purchase of a previously leased facility and the build out of our new facility totaling approximately $55 million.

Ian: This quarter's gap EPS increased by 23.5% and if you exclude the after tax impact amortization from both periods, our fourth quarter non-gap EPS increased by 19.5% compared to last On slide number 10 you'll find a summary of our cash generation. Operating cash flow increased substantially this quarter from 53.2 million in Q4 of last year to 79.3 million this quarter. And free cash flow increased as well from 32.2 million in last year's fourth quarter to 73 million this quarter. Operating cash flow was 161% of net income and free cash flow was 148% of net income this quarter.

Our capital allocation strategy remains unchanged.

As you are to continue to invest in our organic business through both research and development and our sales force.

Continue to pay the dividend, which we just mentioned increased for the 38th consecutive year.

Continue to be opportunistic with share buybacks, while identifying potential acquisitions, where the price is right and the strategic fit is clear.

We have a strong balance sheet and we'll continue to use it to drive long term shareholder value.

Potential risks to our guidance among others include potential strengthening of the U S. Dollar inflationary pressures that we are unable to offset in a timely enough manner or an overall slowdown in economic activity.

Ian: Turning to slide number 11 you can see the impact that Brady's historical cash generation has had on her balance sheet. We're currently in a net cash position of $101.8 million. To put this in perspective, even with returning more than 56 million to our shareholders in the form of dividends and buybacks this quarter, we still increased our net cash position by more than $17 million.

Sales were $227 5 million this quarter and organic sales growth was five 6%.

Ian: Our approach to capital allocation is to first 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 focus cap acts despite the economic and any on economic uncertainty will continue to deploy capital to drive productivity and sales growth. And second, we focus on consistently increasing our dividends. We've now increased our dividends annually for 38 consecutive years, which is a streak that we're very proud of.

The divestiture of our premises business decreased sales by 1% and foreign currency translation reduced sales by 2%, resulting in total sales growth of four 4%. This quarter segment profit increased by 17, 2% to $50 million organic sales growth resulted in the significant increase.

And profit in the fourth quarter, while another contributing factor where freight rates returning to normal in fiscal 'twenty three barra.

Barring any drastic change in macro and logistics environment, we expect freight rates to remain at these normalized level, which will not provide the year over year benefit in fiscal 'twenty four that we realized this year.

Ian: After fully funding organic investments and dividends, we then deploy our cash in a disciplined manner for either acquisitions where we have clear synergies or for opportunistic buybacks when we see a disconnect between intrinsic value and Brady's trading price. Our strong balance sheet positions us to be able to execute additional value enhancing activities such as R&D investments and other organic sales opportunities to acquire companies strategically when the price is right and the synergies are clear and to return funds to our shareholders through dividends and share buybacks.

As we disclosed in the third quarter, our new regional structure became effective on February one.

This quarter, we will provide a few additional details regarding the sales performance of our previous segments. Our former identification solutions business in the American Asia region grew sales in the mid single digits and our former workplace safety business declined in the mid single digits in this quarter approximately 90% of the revenue.

In our Americas, and Asia region represents the former IDF solutions Division and the remaining 10% of the revenue in this region represents the former workplace safety Division.

Ian: Slide number 12 provides an overview of our financial results for the full year ended July 31st, 2023. Overall sales increased 2.3% and organic sales grew 5.5%. This organic sales growth was partially offset by the negative impact of foreign currency translation of 3% and a decline of 0.2% due to the sale of our premises business in the third quarter. We finished fiscal 2023 with all time high gap and non-gap EPS. These strong earnings results were even after increasing our investment in R&D by nearly 5% this year. Fiscal 2023 was another record EPS year and our fourth quarter was another record quarter as well. We're confident that our actions this year and our consistent priorities will set us up for success in the future.

Pressures also our Asia business struggled in the fourth quarter reporting a mid single digit decline primarily due to weakness in China I think.

The consumer electronics industry in Southeast Asia.

The exception in Asia, as our business in India, which continues to grow organically between 15% and 20% quarter over quarter. We're looking forward to our expansion in India and the additional growth potential in fiscal 'twenty four.

Ian: This takes us to our guidance for next year on slide number 13. We're forecasting gap EPS to range from $3.70 to $3.95 per share in fiscal 2024 which would represent an increase of 5.4% to 12.5% next year. We also anticipate organic sales growth in the mid-single-digit percentages for the year ending July 31st, 2024, and based on foreign currency exchange rates as of July 31st, we expect the weakening of the US dollar to increase fiscal 24 sales by an additional approximately 2%.

Moving to slide 14, you'll find a summary of the performance of our Europe and Australia region.

Sales were $118 4 million this quarter organic sales growth was nine 5% and foreign currency increased sales by 2% for a total growth of 11, 5%.

As far as the sales performance of our previous segments, both of our former identification solutions and workplace safety businesses grew sales organically in the high single digits in the quarter slightly more than half of the revenue in Europe , and Australia region represents the former identification solutions Division and <unk>.

Ian: Other elements of our guidance include an income tax rate of approximately 22%, depreciation and amortization expense of approximately 32 to 34 million, and capital expenditures of approximately 75 million. Our CAPEX estimate is inclusive of the purchase of a previously leased facility and the build-out of a new facility, totaling approximately 55 million dollars. Our capital allocation strategy remains unchanged, which are to continue to invest in our organic business through both research and development and our sales force, continue to pay the dividend, which we just mentioned increased for the 38th consecutive year, continue to be opportunistic with share buybacks while identifying potential acquisitions where the price is right and the strategic fit is clear. We have a strong balance sheet and will continue to use it to drive long-term shareholder value.

The remainder represents the former workplace safety Division.

Our Australian business grew sales organically by nearly 13% this quarter and contributed significant increase in segment profit in total Europe , and Australia segment profit increased nine 1% to $18 4 million this quarter.

Europe is realizing the impact of inflation as the impact has occurred slightly later than the impact of inflation in the U S.

This resulted in segment profit as a percentage of sales decreasing slightly from 15, 9% to 15, 6% this quarter.

We're actively working to address these cost pressures through operational efficiencies and selective price increases by near term inflation expectations bring profitability challenges along with it.

Russell Schaller: I'll now turn the call back over to Russell to cover our regional results and to provide some closing thoughts before Q&A.

In total our fourth quarter for our entire global business.

Our historical global I'd solutions business would have had organic sales growth of seven 3% and our historic global workplace safety business. We would have had organic sales growth of five 1%.

Russell Schaller: Russell? Thanks, Sam.

Russell Schaller: Slide 14 details the financial results of our America's and Asia region. Sales were 227.5 million this quarter in organic sales growth was 5.6%. The divestiture of our premises business decreased sales by 1% and foreign currency translation reduced sales by 0.2%. Resolving in total sales growth of 4.4% this quarter. Segment profit increased by 17.2% to 50 million. Organic sales growth resulted in the significant increase in profit in the fourth quarter, while another contributing factor were freight rates returning to normal in fiscal 23.

With that we'd like to start the Q&A operator would you please provide instructions to our listeners.

One moment, our first question.

Our first question comes from Keith <unk> with Northcoast Research Your line is open.

Russell Schaller: Barring any drastic change in macro and logistics environment, we expect freight rates to remain at these normalized level, which will not provide the year-over-year benefit in fiscal 24 that we realize this year. As we disclosed in the third quarter, our new regional structure became effective on February 1st, but this quarter will provide a few additional details regarding the sales performance of our previous segments. Our former identification solutions business in the American Asia region who sales in the mid-single digits and our former workplace safety business declined in the mid-single digits in this quarter.

Good morning, guys and congratulations on a great quarter.

Russell, perhaps you can touch on some of the growth initiatives that you've put in place I guess, that's your tenure as CEO has started and perhaps with private the color in terms of how it's driving growth that we're seeing here what we can expect next year.

Hi, Keith Yes, sure and thanks for joining the day after vacation [laughter].

Yes. So you know traditionally Brady has been very good at selectively targeting customers to both.

Improve their.

Russell Schaller: Approximately 90% of the revenue in our Americas and Asia region represents the former IDF Solutions division and the remaining 10% of the revenue in this region represents the former workplace safety division. We realize growth in most of our product lines and in markets except for our health care identification product line. The health care industry has struggled to fully recover from a variety of challenges that have impacted it over the last several years, starting with the pandemic and then moving into supply chain and logistics challenges and most recently inflationary pressure, also, our Asia business struggled in the fourth quarter, reporting a mid-single digit decline primarily due to weakness in China and in the consumer electronics industry in Southeast Asia. The exception in Asia is our business in India, which continues to grow organically between 15 and 20% quarter over quarter.

Overall plant safety as well as improve their automation.

Initiatives in their plant.

<unk> had a pretty decent growth track record now what youre seeing is the expansion of that across really the consolidated group of companies within Brady. So that's that is helping US second part that's helping is the tailwind or excuse me the drag that we had hired by some of our traditional catalog.

Businesses.

Becomes increasingly a smaller share of the overall corporation and so while we're still seeing some of those businesses decline in.

In the low single digits.

The effect, it's having on the overall corporation is certainly less so I'm going to give it two things.

Russell Schaller: We're looking forward to our expansion in India and the additional growth potential in fiscal 24.

Positive impact of really focusing on customers and some of the customer solutions, we're delivering.

Russell Schaller: Moving this slide 14, you'll find the summary of the performance of our Europe and Australia region. Sales were 118.4 million in this quarter. Organic sales growth was 9.5% in foreign currency increased sales by 2% for a total growth of 11.5%. As far as the sales performance of our previous segments, both our former identification solutions and workplace safety businesses grew sales organically in the high single digits in the quarter. So I am more than half of the revenue in Europe and Australia region represents the former identification solutions division and the remainder represents the former workplace safety division.

And that's giving us a great tailwind and then on the.

The flip side, having increasingly smaller percentage of our dragging businesses is helping us as well so.

Long winded answer but to give you guidance kind of into next year. We've always felt that we can do GDP of our underlying countries plus a couple of points.

What the total macro environment will be next year I think is anybody's guess America seems very strong Europe's okay in China is not.

Not doing too well.

Russell Schaller: Throughout Europe, we continue to realize organic growth across our major product lines and we're benefiting from many similar trends that we're seeing in the US. Many companies are working to shorten their supply chain and find workers resulting in real demand for our productivity solutions. Our Australian business grew sales organically by nearly 13% this quarter and contributed significant increase in segment profit. In total, Europe and Australia segment profit increased 9.1% to 18.4 million this quarter.

Yeah got you if I could just drill down on.

One of your comments before about expanding the sales force can you describe a bit more color in terms of how much you're expanding the sales force is a by.

Several percentage points above revenue growth or where is the salesforce growing in terms of the driver.

Yes, we continue sales for us as a great marginal investment.

Unfortunately, those salespeople are kind of granular. So if you hire two people in Texas.

Worth hiring a third person in Texas for instance.

Russell Schaller: Europe is realizing the impact of inflation as the impact has occurred slightly later than the impact of inflation in the US. This results in segment profit as a percentage of sales decreasing slightly from 15.9% to 15.6% this quarter. We're actively working to address these cost pressures through operational efficiencies and selective price increases. By near term, inflation expectations bring profitability challenges along with it.

We look at that as we continue to invest in salespeople as long as we're getting a marginal return on them.

Is it an enormous increase in salesforce, absolutely not but we continue to push the bounds of saying should we add another 5% to 7% to our.

Our sales force as we continue to grow our business and it's it's something that we look at every month.

Because they are they're very granular decisions about whether we would add say a salesperson in India or whether we would invest in digital marketing.

Russell Schaller: In total, our fourth quarter for our entire global business, our historical global ID solutions business, would have fied organic sales growth of 7.3% and our historic global workplace safety business would have fied organic sales growth of 5.1%.

<unk>.

In the UK for instance, so.

We have a great analytics team that is helping us tremendously.

The resolution of where we're making our investments.

Operator: With that, we'd like to start the Q&A operator. Would you please provide instructions to our listeners? Thank you. At this time, we'll conduct the question and answer session as a reminder to ask a question. You will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment for our first question.

Great and if I could sneak one more in here and then I'll turn it over to others.

Terms of the profitability of the segments.

Part of it is it's just a little bit tougher environment in Europe , the cost structures are a little bit higher.

Keith Housum: Our first question comes from Keith Hussam with North Coast Research. Your line is open. Good morning, guys. And congratulations on a great quarter. You know, Russell, perhaps you can touch on some of the growth initiatives that you've put in place, I guess, or since your tenure as the EOS started. And perhaps with pride of the color in terms of how it's driving growth that we're seeing here, and what we can expect next year. Keith Housum, Ann Thornton, Stephen Ferazani, Cashen Keeler, Russell Shaller, Unknown Executive Keith Housum, Ann Ann Thornton Stephen Ferazani, Cashen Keeler, Unknown Executive, Brady Corp Keith Housum, Ann Ann Thornton He's got a lot of questions.

I think both businesses are in a good place in terms of profit margins.

Always the question if you push profit margins do start destroying demand for some of our products and we do see that if you push pricing too far people will buy two printers instead of three or they will buy less consumables. So.

If you look at the European region in particular, and how cut up it is by the different countries in different languages and logistics costs and what have you. It's just a slightly more expensive place to do business, we love them and we love their growth opportunities I mean clearly.

Clearly did fantastic in the last quarter, but with that said, it's just slightly more difficult to do business. There than you would have in the U S.

Great I appreciate it guys I'll turn it over thanks.

Yes.

One moment for our next question.

Our next question comes from Steve <unk> with Sidoti Your line is open.

Good morning, Russell morning, Ann.

I wanted to ask a little bit about cost management SG&A, obviously, you've continued to do a great job.

And reducing costs I wanted to go back to when you.

Announced the re segmentation and talked about it adding 10 to 20 in EPS to fiscal 2024, I'm, assuming we've seen some of those benefits already in the second half.

This year, yes.

At a 10% to 20 benefit next year and what other efforts are being made here do you see further reductions in SG&A going forward.

Yes, so youre absolutely right, we did capture more of that savings in 'twenty three than we had originally expected. So I think when I had said that 10% to 20 in 2024, I was probably a bit pessimistic and how fast we were going to be able to realize the savings.

We certainly picked some of it up in 'twenty three the remainder will be in 'twenty four.

We've digested all of the costs that were associated with making this change and yet we've still been able to to churn out record profit. So.

We are well positioned in 'twenty four but it explicitly answer your question some of that gain absolutely we've seen in 'twenty three.

Great.

Thank you.

$55 million in Capex related to the.

Conversion of our new facility can you provide a little more detail on.

What you're funding.

Yeah sure so.

Doing that but it's still it's a significant cash outlay.

Proximately $37 million.

For the for the plant, which previously would have been a lease and we have another facility that we've been in the process of constructing four.

Russell Schaller: Great. And if I can speak one more in here and I'll turn over to two others. In terms of the profitability of the segments, you know, the Europe and Australia segment obviously has a lower segment profit margin than America, the Asia. I think both businesses are in a good place in terms of profit margins. You know, it's always the question, if you push profit margins, do you start destroying demands for some of our products.

Once every few years it just.

Incidentally these two lined up at the same time.

Is that supporting any particular growth segment product.

No.

These are on both our ongoing operations now they will certainly help us streamline.

<unk> streamlined a little bit of our activities, but both locations were previously occupied by Brady and so it doesn't appreciably change our footprint. It just gives us a little bit more long term control over the cost of doing business.

Russell Schaller: And we do see that, you know, if you push pricing too far, people will buy two printers instead of three or they'll buy less consumables. So, you know, if you look at the European region in particular and how cut up it is by the different countries and the different languages and the logistics costs and what have you. It's just a slightly more expensive place to do business. We love them and we love their growth opportunities. I mean, clearly did fantastic in the last quarter. But with that said, it's just slightly more difficult to do business there than you'd have in the US.

Operator: Great. I appreciate that. I'll turn it over. Thanks. One moment for our next question.

Okay got you. Thank you.

You talked about still having a pretty good job.

Our pipeline of new product launches coming in fiscal 'twenty four.

Can you give us any kind of a preview also if you can comment a little bit on.

Products tied to code in Nordic acquisitions, and where you are with industrial track and trace kind of a weird question.

Steve Ferazani: Our next question comes from Steve Feronzi with Sedotti. Your line is open. Morning, Russell. Morning, Ann. I want to ask a little bit about cost management SGNA. Obviously, you've continued to do a great job in reducing costs. I want to go back to when you announced the resegmentation and talked about it, adding 10 to 20 cents in EPS to fiscal 2024. I'm assuming we've seen some of those benefits already in the second half of this year.

It's a combination of both new printers as well as some product refresh on one of the things that we're super excited is the capability too.

Print from voice, we're in prototyping, right, now, but but talking to some of our devices and allowing that print technology to occur.

I personally I'm Super excited about that.

Also this fiscal year, we will be launching the industrial versions of our RFID and optical readers.

Steve Ferazani: Is it a 10 to 20 cent benefit next year and what other efforts are being made here? Do you see further reductions in SGNA going forward? Yeah, so you're absolutely right. We did capture more of that savings in 23 that we had originally expected. So I think when I had said that 10 to 20 cents in 2024, I was probably a bit pessimistic and how fast we were going to be able to realize the savings.

Is a long journey that started with the purchase of code in Nordic We knew it was going to take a substantial amount of development effort to make them sufficiently rugged that they were.

Industrial use contractor use case products, but you can look to see those in the coming year.

Are you guys excited about tracked industrial track and trace that market.

I guess when the previous CEO announced approach.

Steve Ferazani: So we certainly picked some of it up in 23. The remainder will be in 24. You know, I feel fantastic so far with how that has come together. In fact, it has absolutely exceeded our expectations and our business case and going through it. You know, we always said this was going to be a pay as you go event. We've digested all of the costs that were associated with making this change. And yet, we've still been able to turn out record profits.

And what I'll call niche manufacturing of parts.

There is a tremendous opportunity for Brady in what I'll call. The medium size corporations out there that manufacture things. So those would be the one to a couple of billion dollar companies.

Russell Schaller: So I think we're well positioned in 24, but to explicitly answer your question, some of that gain absolutely was seen in 23. Great. The 55 million in cat-backs related to the conversion in a new facility, can you provide a little bit more detail? What you're funding? Yeah, sure. So we always do the decision, I think is all companies do of make versus buy or excuse me, lease versus buy on facilities and we had the opportunity of converting a pretty significant plant lease to a purchasing decision.

Actively engaged with many of them and I think the overall trends towards improving productivity saving labor.

Is something that will help us for years to come.

Thanks Ross.

Russell Schaller: The return on capital we thought was fantastic and we're doing that but it's still it's a significant cash outlay approximately 37 million for the for the plant which previously would have been a lease. We have another facility that we've been in the process of constructing for a little bit over a year but the significant parts of the bills do this year and occupancy will happen towards the end of next year. So, you know, those two are one time bites, they wouldn't be typical of our company.

Thank you that concludes the question and answer session. At this time I would like to turn it back to Russell shallow for closing remarks.

Year in 2024.

Like many other companies, we have to navigate through an uncertain and rapidly changing macro environment.

We're focused on controlling what we can control and consistently delivering on our priorities, which are to continue to invest and grow the top line and continue our evolution to a faster growing company to further develop our product offering to support our customers automation initiatives to execute operational efficiencies and ensure.

Russell Schaller: We tend to have plant purchases or significant investments once every few years. It just, incidentally, these two lined up at the same time. Is that supporting any particular growth segment products? No, it is these are on both are ongoing operations now that they will certainly help us streamline a little bit of our activities but both locations were previously occupied by Brady and so it doesn't appreciably change our footprint. It just gives us a little bit more long term control over the cost of doing business.

We grow profitably.

And to effectively deploy our capital to drive long term shareholder value through organic investments acquisitions, and returning funds to our shareholders through dividends and share buybacks.

Im looking forward to the future and I know that our global team has the ability to overcome challenges and continue to deliver results.

You all for your time this morning and for your interest in Brady Operator, you may disconnect the call.

You for your participation in today's conference. This does conclude the program you may now disconnect.

Russell Schaller: Yep, okay, gotcha. Thank you. You talked about it still having a pretty good pipeline, new product launches coming in fiscal 24. Can you can you give us any kind of a preview also if you can comment a little bit on product tied to the code in Nordic ID acquisitions and where you are with industrial track and trace. Kind of a lot. So, obviously we have a myriad of smaller products that we launch every month and throughout the year from locks to safety devices and what have you are more significant launches are our printers and optical and RFID readers.

Russell Schaller: We are having a few product launches this year in terms of printers. It is a combination of both new printers as well as some product refresh. One of the things that we are super excited is the capability to print from voice. You know, we are in prototyping right now but talking to some of our devices and allowing that print technology to occur. I personally am super excited about that. Also, this fiscal year will be launching the industrial versions of our RFID and optical readers.

Russell Schaller: You know, this is a long journey that started with a purchase of code and Nordic. We knew it was going to take a substantial amount of development effort to make them sufficiently rugged that they were industrial use contractor use case products.

Russell Schaller: But you can look to see those in the coming year. Are you as excited about track industrial track and trace that market as you were, I guess, when the previous CEO, I know. Yes, we absolutely are. For us, it's all part of our automation solutions. Now, it's important to recognize what that means for us. We're not really in distribution centers. That's not part of our business or freight shipping or what have you.

Russell Schaller: We're very intimately involved in manufacturing environments and what I'll call niche manufacturing of parts. I think there is a tremendous opportunity for Brady. In what I'll call the medium size corporations out there that manufacture things. So those would be the one to a couple billion dollar companies. We're actively engaged with many of them. And I think, you know, the overall trends towards improving productivity, saving labor is something that will help us for years to come. Thanks, Russell. Thank you.

Operator: That concludes the question and answer session.

Russell Schaller: We're focused on controlling what we can control and consistently delivering on our priorities, which are to continue to invest and grow the top line and continue our evolution to a faster growing company to further develop our product offering to support our customers automation initiatives to execute operational efficiencies and ensure that we grow profitably. And to effectively deploy our capital to drive long-term shareholder value through organic investments, acquisitions, and returning funds to our shareholders through dividends and share buybacks.

Russell Schaller: I'm looking forward to the future, and I know that our global team has the ability to overcome challenges and continue to deliver results. Thank you all for your time this morning and for your interest in Brady operator.

Operator: You may disconnect the call. Thank you for your participation in today's conference.

Operator: This does conclude the program.

Operator: You may now disconnect.

Q4 2023 Brady Corporation Earnings Call

Request a DemoDemo

BRC

Brady

Earnings