Q3 2024 Brady Corporation Earnings Call

May 22, 2024

Okay.

Unknown Executive: Good day, and thank you for standing by. Welcome to the third quarter 2024 Brady Corporation Earnings Call. At this time, all participants are in listen-only mode.

Speaker Change: Good day and thank you for standing by welcome to the third quarter of 2020 for Brady Corporation earnings call. At this time, all participants are in listen only mode.

Unknown Executive: 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 that your hand is raised.

Speaker Change: Speakers presentation there'll be a question and answer session.

Speaker Change: Ask a question during the session you will need to press star one on your telephone you will then hear an automated message in a box in your head as race to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like.

Unknown Executive: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Ann Thornton, CFO. Please go ahead.

Speaker Change: The hand, the conference over to your first speaker today and for Orange CFO. Please go ahead.

Ann E. Thornton: Thank you. Good morning, and welcome to the Brady Corporation fiscal 2024 third quarter earnings conference call. The slides for this morning's call are located on our website at www.bradycorp.com under 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.

Speaker Change: Thank you.

Speaker Change: And welcome to the Brady Corporation fiscal 2024 third 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.

Speaker Change: Please note that during this call we may make comments about forward looking information words, such as expect will may believe forecast and anticipate are just a few examples of words identifying forward looking statements.

Ann E. Thornton: 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 10-K, which was filed with the SEC in September. Also, please note that this teleconference is copyrighted by Brady Corporation and may not be rebroadcast without the consent of Brady. Brady 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 Shaller. Right, Russell?

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

Speaker Change: Risk factors were noted in our news release this morning, and in Brady's fiscal 2023 Form 10-K, which was filed with the SEC in September.

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

Speaker Change: 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.

Russell R. Shaller: Thanks, Ann. And thanks, everyone, for joining us today. We released our third quarter results this morning, and I'm thrilled to report a new company record high earnings per share this quarter. Both of our regional businesses performed well, with total organic sales growth of 4.5%, an improved gross profit margin to 51.6%, and we continued our strong cash generation. Our teams are executing incredibly well and delivering great results despite sluggish economic conditions. We also return funds to our shareholders through both our normal quarterly dividend and an increased amount of share buybacks. This quarter, we purchased 863,000 shares for 50.4 million.

Speaker Change: I'll now turn the call over to Brady's, President and Chief Executive Officer, Russell Sheller Russell, Thanks, Ann and thanks, everyone for joining US today, we released our third quarter results. This morning, and I'm thrilled to report a new company record high earnings per share this quarter.

Speaker Change: Both of our regional businesses performed well with total organic sales growth of four 5% improved gross profit margin to 51, 6% and we continued our strong cash generation. Our teams are executing incredibly well and delivering great results despite sluggish economic conditions.

Speaker Change: We also return funds to our shareholders through both our normal quarterly dividend and an increased amount of share buybacks. This quarter, we purchased 863000 shares.

Speaker Change: For $54 million, we continue to view opportunistic share buybacks is an excellent way to deliver return to our shareholders and our purchases this quarter demonstrated this commitment.

Russell R. Shaller: We continue to view opportunistic share buybacks as an excellent way to deliver returns to our shareholders. And our purchases this quarter demonstrated this commitment. As part of our journey developing new technologies, we introduced several products this quarter. We launched a rugged barcode scanner, which is the result of an integrated development effort with one of the companies we acquired in 2021, and we launched a new industrial inkjet color label printer. On the material side, we launched Topstripe Max, which is a re-engineered and improved version of our high-quality floor marking tape designed for the highest traffic areas in our manufacturing site.

Speaker Change: As part of our journey developing new technologies, we introduced several products. This quarter, we launched a rugged barcode scanner, which is the result of an integrated development effort with one of the companies we acquired in 2021 and.

Speaker Change: And we launched a new industrial E jet color label printer.

Speaker Change: On the materials side, we launched top striped Max which is a re engineered it an improved version of our high quality floor, marking tape designed for the highest traffic areas in our manufacturing site.

Russell R. Shaller: We have several new printers and other innovative new products in our pipeline planned for launch this fall and throughout next year as well. I'm incredibly proud of the results this quarter. We're identifying new sales opportunities, and we're improving our service levels, all of which is making an impact every day. I can also see the potential that generative AI can bring to Brady to increase productivity and to better equip our sales force with the data and information they need to be more effective.

Speaker Change: We have several new printers and other innovative new products in our pipeline planned for launch this fall and throughout next year as well.

Speaker Change: I'm incredibly proud of the results this quarter were identifying new sales opportunities and we're improving our service levels all of which is making an impact every day.

Speaker Change: I can also see the potential that generative AI can bring to Brady to increase productivity and to better equip our sales force with the data and information they need to be more effective.

Russell R. Shaller: It's an exciting time in the world of technology, and the potential that generative AI has to positively impact our customers and the broader economy is substantial. I know that we're making the right investments today to continue to increase sales and profitability for years to come. And none of this would be possible without the hard work and focus by the entire Brady team. Now, I'll turn it over to Ann to provide more financial details on our financial results. Ann?

It's an exciting time in the world of technology, and the potential that generative AI has deposited typically impact our customers and the broader economy is substantial I know that we're making the right investments today to continue to increase sales and profitability for years to come.

Speaker Change: And none of this would be possible without the hard work and focus.

By the entire Brady team.

Speaker Change: Now I will turn it over to Ed to provide more financial details on our financial results and.

Ann E. Thornton: Thank you, Russell. This quarter we grew organic sales 4.5% while increasing our EPS to a new quarterly record. We reported GAAP EPS of $1.05 per share, which was up 9.4% compared to the third quarter of last year. Non-GAAP EPS, which is calculated as our GAAP EPS, excluding the after tax impact of amortization expense, as well as the gain on a divestiture from last year, was $1.09 per share, which was up 14.7% compared to the third quarter of last year.

Ed: Thank you Russell.

Ed: This quarter, we grew organic sales four 5%, while increasing our EPS to a new quarterly record, we reported GAAP EPS of $1 <unk> per share, which was up nine 4% compared to the third quarter of last year non.

Ed: non-GAAP EPS, which is calculated as our GAAP EPS, excluding the after tax impact of amortization expense as well as the gain on a divestiture from last year was $1 <unk> per share, which was up 14, 7% compared to the third quarter of last year.

Ann E. Thornton: Our organic growth was strong in both regions, with our Americas and Asia region growing 4.5% and our Europe and Australia region growing 4.4% this quarter. We're growing well in excess of GDP in most of our end markets and geographies. We also continue to integrate our businesses into our regional structure, which has allowed us to capitalize on additional sales growth opportunities and to deliver increased profitability. The key financial takeaways this quarter are an increased rate of organic organic revenue growth, non-gap EPS growth of 14.7%, continued improvement in gross profit margin, and an ongoing commitment to return funds to our shareholders through our quarterly dividend and increased share buybacks, which together this quarter were $61.6 million.

Ed: Our organic growth was strong in both regions with our Americas, and Asia region, growing four 5% and our Europe, and Australia region growing four 4% this quarter.

Ed: We're growing well in excess of GDP and most of our end markets and geographies.

We also continued to integrate our businesses into our regional structure, which has allowed us to capitalize on additional sales growth opportunities excuse me and to deliver increased profitability.

Ed: The key financial takeaways. This quarter are an increased rate of organics organic revenue growth non-GAAP EPS growth of 14, 7% continue.

Ed: Continued improvement in gross profit margin and an ongoing commitment to return funds to our shareholders through our quarterly dividend and increase share buybacks, which together this quarter were $61 6 million.

Ann E. Thornton: Starting on slide number four, you'll find our quarterly sales trend. Organic sales grew 4.5%, and foreign currency translation decreased sales by 0.3% this quarter, and the impact of divestitures reduced sales by 2.3%, resulting in total sales growth of 1.9%. Growth was driven by both of our regions this quarter.

Ed: Starting on slide number four you'll find our quarterly sales trends.

Ed: Organic sales grew four 5% and foreign currency translation decreased sales by <unk>, 3% this quarter and the impact of divestitures reduced sales by two 3%.

Ed: Resulting in total sales growth of one 9%.

Ed: Growth was driven by both of our regions this quarter.

Ann E. Thornton: Turning to slide number five for gross profit margin trending, this details another quarterly improvement in our gross profit margin to 51.6% from 50.3% in the third quarter of last year, which was an increase of 130 basis points. We continue to realize benefits from our sales growth coming from higher-margin products, along with stabilizing input costs compared to last year. Slide number six details our SG&A expense trending. SG&A was $95.8 million this quarter compared to $91 million in the third quarter of last year.

Ed: Turning to slide number five for our gross profit margin trending this details another quarterly improvement in our gross profit margin to 51, 6% from 53% in the third quarter of last year, which was an increase of 130 basis points.

Ed: We continue to realize benefits from our sales growth coming from higher margin products, along with stabilizing input costs compared to last year.

Ann E. Thornton: If you exclude amortization expense from both the current and prior year and exclude the gain on a divestiture from last year, then SG&A expense decreased from 27.4% of sales to 27.2% of sales. Moving along to slide number seven, you'll find our investments in research and development. This quarter, we once again increased our investment in R&D from $15.7 million to $17.7 million, which represented 5.1% of sales in the quarter. We launched three excellent new products this quarter, which Russell will describe in more detail during the regional discussion.

Ed: Slide number six details our SG&A expense trending.

Ed: SG&A was $95 8 million this quarter compared to $91 million in the third quarter of last year.

Ed: If you exclude amortization expense from both the current and prior year and excluded the gain on a divestiture from last year than SG&A expense decreased from 27, 4% of sales to 27, 2% of sales.

Ed: Moving along to slide number seven you'll find our investments in research and development.

Ed: This quarter, we once again increased our investment in R&D from $15 7 million to $17 7 million, which represented five 1% of sales in the quarter.

Speaker Change: We launched three excellent new products this quarter, which Russell will describe in more detail during the regional discussion.

Speaker Change: Turning to slide number eight this details our pre tax earnings, which increased two 2% on a GAAP basis from 63 to $64 4 million.

Ann E. Thornton: Turning to slide number eight, this details our pretax earnings, which increased 2.2% on a GAAP basis from $63 million to $64.4 million. On a non-GAAP basis, our pre-tax earnings increased 8.2%, from $61.7 million to $66.8 million.

Speaker Change: On a non-GAAP basis, our pretax earnings increased eight 2% from $61 7 million to $66 8 million.

Ann E. Thornton: Our earnings and DPS are detailed on slide number 9. We continue to increase earnings on a quarter over quarter basis, and this quarter represents a new company record. Our gap EPS increased by 9.4%, and excluding the after tax impact of amortization from both periods and the gain on the divestiture from last year, non gap EPS increased 14.7% compared to last year. Slide number 10 summarizes our cash generation. Operating cash flow increased from $72.5 million in the third quarter of last year to $72.7 million this quarter. For the full nine months to date, our operating cash flow is up significantly, from $129.9 million last year to $171.1 million this year, which is an increase of 31.8%. Moving along to slide number 11.

Speaker Change: Our earnings and EPS are detailed on slide number nine.

Speaker Change: We continue to increase earnings on a quarter over quarter basis, and this quarter represents a new company record.

Speaker Change: GAAP EPS increased by nine 4%.

Speaker Change: And excluding the after tax impact of amortization from both periods and the gain on the divestiture from last year non-GAAP EPS increased 14, 7% compared to last year.

Speaker Change: Slide number 10 summarizes our cash generation.

Speaker Change: Operating cash flow increased from $72 5 million in the third quarter of last year to $72 $7 million this quarter.

Speaker Change: For the full nine months to date, our operating cash flow is up significantly.

Speaker Change: From $129 9 million last year to $171 $1 million. This year, which is an increase of 31, 8%.

Speaker Change: Moving along to slide number 11, this slide summarizes our net cash position.

Ann E. Thornton: This slide summarizes our net cash position. We continue to focus on always making cash-based decisions throughout the organization, which shows through our increase in cash flow from operating activities, as well as our net cash position of $96.7 million as of April 30th. We are consistent and disciplined in our approach to capital allocation.

Speaker Change: We continue to focus on always making cash based decisions throughout the organization, which shows through our increase in cash flow from operating activities as well as our net cash position of $96 $7 million as of April 30th.

Speaker Change: We are consistent and disciplined in our approach to capital allocation.

Ann E. Thornton: First, we use our cash to fully fund organic sales and efficiency opportunities. This includes investing in research and development, sales-generating resources, and capital expenditures that increase our automation and our overall efficiency. We will continue to deploy capital to productivity and sales growth opportunities throughout the economic cycle. Next, we focus on consistently increasing our dividends. This fiscal year marked our 38th consecutive annual increase in our dividend. After fully funding our organic investments and our dividend, we then deploy our cash in a disciplined manner for acquisitions where we have clear synergies and for opportunistic share buybacks. In this quarter, we repurchased 863,000 shares for $50.4 million.

Speaker Change: First we use our cash to fully fund organic sales and efficiency opportunities. This includes investing in research and development sales generating resources and capital expenditures that increase our automation and our overall efficiency.

Speaker Change: We will continue to deploy capital to productivity and sales growth opportunities throughout the economic cycle.

Speaker Change: Next we focus on consistently increasing our dividends this fiscal year marked our 38th consecutive annual increase in our dividend.

Speaker Change: After fully funding our organic investments and our dividend. We then deploy our cash in a disciplined manner for acquisitions, where we have clear synergies and for opportunistic share buybacks and this quarter, we repurchased 863000 shares for 50 $54 million.

Ann E. Thornton: Our strong balance sheet puts us in a position to execute additional growth opportunities through our R&D investments and our sales resources, to acquire companies strategically when synergies are clear and the price is right, and to return funds to our shareholders through dividends and share buybacks. On slide 12, you'll find our fiscal 2024 guidance. We are increasing our full year fiscal 2024 EPS guidance range of $3.80 to $3.95 on a gap basis and $3.95 to $4.10 on a non-gap basis, to $3.93 to $4 on a gap basis and to $4.08 to $4.15 on an inclusive basis.

Speaker Change: Our strong balance sheet puts us in a position to execute additional growth opportunities through our R&D investments and our sales resources to.

Speaker Change: To acquire companies strategically when synergies are clear and the price is right and to return funds to our shareholders through dividends and share buybacks.

Speaker Change: On slide number 12, you'll find our fiscal 2020 for guidance.

Speaker Change: We are increasing our full year fiscal 2024, EPS guidance range of $3 80 to $3 95 on a GAAP basis, and $3 95 to $4 10 on a non-GAAP basis.

Speaker Change: <unk> $3 93 to $4 on a GAAP basis.

Speaker Change: And to $4 eight to $4 15 on a non-GAAP basis.

Ann E. Thornton: We still expect low single-digit organic sales growth for the full fiscal year 2024, which means we're expecting low single-digit organic sales growth in the fourth quarter. This is based upon our current forecasts and the comparison to our sales results in the fourth quarter of last year. Our outlook is based upon April 30th foreign currency exchange rates, and it assumes continued economic expansion. We also expect a tax rate of approximately 21% for the full year, depreciation and amortization expense ranging from 30 to 32 million, and capital expenditures of approximately 75 million, which is inclusive of approximately 55 million of capital expenditures this year for the purchase of a previously leased facility which took place earlier in the fiscal year, along with the build out The build out of the new facility will allow us to consolidate two locations into one, which will reduce our overall footprint.

Speaker Change: We still expect low single digit organic sales growth for the full fiscal year 2024, which means we're expecting low single digit organic sales growth in the fourth quarter. This was based upon our current forecast and the comparison to our sales results in the fourth quarter of last year.

Speaker Change: Our outlook is based upon April 30th foreign currency exchange rates and assumes continued economic expansion.

Speaker Change: We also expect a tax rate of approximately 21% for the full year, depreciation and amortization expense ranging from $30 million to $32 million and capital expenditures of approximately $75 million, which is inclusive of approximately $55 million of capital expenditures. This year for the purchase of a previously leased.

Speaker Change: <unk>, which took place earlier in the fiscal year, along with the Buildout of our new facility.

Speaker Change: The build out of the new facility will allow us to consolidate two locations into one which will reduce our overall footprint.

Russell R. Shaller: Potential risks to our guidance, among others, include potential strengthening of the US dollar, inflationary pressures that we're unable to offset in a timely enough manner, or an overall slowdown in economic activity. I'll now turn the call back over to Russell to cover our regional results and to provide some closing thoughts before Q&A.

Speaker Change: 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.

Russell Sheller: I'll now turn the call back over to Russell to cover our regional results and to provide some closing thoughts before our Q&A Russell, Thanks, Ann our Americas and Asia Regional results begin on slide 13 sales.

Russell R. Shaller: Thanks, Ann. Our Americas and Asia regional results begin on slide 13. Sales were $224.8 million this quarter, and organic sales growth was 4.5%. However, the impact of divestitures reduced sales by 3.5%.

Russell Sheller: Sales were $224 8 million this quarter and organic sales growth was four 5% the impact of divestitures reduced sales by three 5% in total including foreign currency translation sales increased 9%.

Russell R. Shaller: In total, including foreign currency translation, sales increased 0.9%. We had great results this quarter; we grew in all of our major product lines, with the strongest growth in our core identification and safety solutions business, as well as wire identification. We really had some nice momentum at the close of the quarter, and I'm pleased with the team's ability to improve our rate of growth this quarter following a slower first half of the year. Our Asia business grew organically 1.9% this quarter. China took a step back compared to the second quarter, and our sales declined just over 17%.

Speaker Change: We had great results. This quarter, we grew in all of our major product lines with the strongest growth in our core identification and safety solutions businesses as.

Speaker Change: As well as wire identification.

Speaker Change: We really had some nice momentum at the close of the quarter and are pleased with the team's ability to improve our rate of growth. This quarter. Following a slower first half of the year.

Speaker Change: Our Asia business grew organically one 9% this quarter.

Speaker Change: China took a step back compared to the second quarter and our sales declined just over 17% economic conditions are challenging in China, but our business outside of China more than made up for this decline with another strong quarter of growth led by India and Singapore.

Russell R. Shaller: Economic conditions are challenging in China, but our business outside of China more than made up for this decline, with another strong quarter of growth led by India and Singapore. Segment profit in America's in Asia increased by 1% to 49.7 million, and segment profit as a percentage of sales was consistent with last year at 22.1% We added to our sales force this quarter, and we hired additional engineers in R&D, which slowed our segment profit growth in the region These are the types of investments Brady will continue to make to ensure our long-term organic sales growth. Turning to slide 14, you'll find the performance of our Europe and Australia regions. Sales were $118.6 million this quarter. Organic sales growth was 4.4%, and foreign currency decreased sales by 0.6% for a total growth of 3.8%.

Speaker Change: <unk> profit in Americas, and Asia increased by 1% to $49 7 million and segment profit as a percentage of sales was consistent with last year at 22, 1%.

Speaker Change: We added to our sales force this quarter and we hired additional engineers in R&D, which slowed our segment profit growth in the region for the quarter. These are the types of investments Brady will continue to make to ensure our long term organic sales growth.

Speaker Change: Turning to slide 14, you will find the performance of our Europe, and Australia region sales were $118 6 million. This quarter organic sales growth was four 4% and foreign currency decreased sales by <unk>, 6% for total growth of three 8% sales.

Russell R. Shaller: Sales growth was strongest in our core safety solution products, where we continue to identify new opportunities to solve problems for our customers, which is resulting in sales growth well in excess of GDP. At 4.7%, our organic growth in Europe was well above its GDP, and organic growth in Australia was 2.6% in the quarter. Strong organic sales growth in Europe resulted in a significant improvement in segment profit in the quarter from $17.1 million to $19.5 million, an increase of 14.3%. As a percentage of sales, segment profit increased 150 basis points from 15% to 16.5%.

Speaker Change: Sales growth was strongest in our core identification and CPE solution products, where we continue to identify new opportunities to solve problems for our customers.

Speaker Change: Which is resulting in sales growth well in excess of GDP.

Speaker Change: At four 7% our organic growth in Europe was well above their GDP and organic growth in Australia was two 6% in the quarter.

Speaker Change: Strong organic sales growth in Europe resulted in a significant improvement in segment profit in the quarter from $17 1 million to $19 5 million an increase of 14, 3% as a percentage of sales segment profit increased to 150 basis points from 15% to 16, 5%.

Russell R. Shaller: We continue to identify opportunities for efficiencies following our regional reorganization that we put into place last year, and we've been able to offset increased cost pressures through manufacturing efficiencies and targeted price increases. Our Europe and Australia business continue to deliver excellent results. Turning to products, we recently launched three exciting new products that I'm particularly proud of, the V4500 barcode scanner, the J7300 industrial inkjet color label printer, and the Tough Stripe Max floor marking tape.

Speaker Change: We continue to identify opportunities for efficiencies following our regional reorganization that we put into place last year, and we've been able to offset increased cost pressures through manufacturing efficiencies and targeted price increases.

Our Europe, and Australia business continued to deliver excellent results.

Speaker Change: Turning to products, we recently launched three exciting new products that I'm, particularly proud of.

Speaker Change: <unk> 4500, barcode scanner to 70, J 7300, industrial inkjet color label printer on the tough stripe Macs for our marketing team.

Russell R. Shaller: The V4500 is a wireless programmable barcode scanner with a rugged exterior, making it ideal for industrial applications. Bluetooth enabled includes our proprietary Cortex decoder technology, which allows it to easily interpret extremely small barcodes and other hard-to-read surfaces. Its dynamic user interface allows the user to move from setup to first scan in seconds, and it includes a data parsing feature that can sort and arrange data and connect to the cloud and the user's ERP system. Its high speed allows for scanning from any angle.

Speaker Change: The 4500 is a wireless programmable barcode scanner with rugged exterior, making it ideal for industrial applications with Bluetooth enabled includes our proprietary cortex decoder technology with a lot, which allow us to easily interpret extremely small barcodes and other.

Speaker Change: Hard to read surfaces.

Speaker Change: It's dynamic user interface allows the user to move from setup to first scan in seconds and includes the data parsing feature that can sort and arrange data and connect to cloud and the users ERP system is high speed allows for scaling from any angle and we're looking forward to bringing this scanner to market and so far the <unk>.

Russell R. Shaller: And we're looking forward to bringing this scanner to market, and so far, the response from our customers has been incredibly positive. The J7300 industrial inkjet color printer is the culmination of several years of printer ink and material development. It's a fast industrial grade color printer for variable print jobs with a wide range of applications that offers many features previously unavailable at this price. The printer is ideal for industrial labeling; it changes frequency from regulatory signage and lean visuals to barcoding, to lab identification and GHS labeling. It prints smear-free inks on label materials that resist water, chemicals, and abrasions for up to two-year outdoor durability and even longer periods indoors.

Speaker Change: <unk> from our customers has been incredibly positive.

Speaker Change: The <unk> 7300, industrial inkjet color printer is the culmination of several years of printer ink and material development.

Speaker Change: Fast industrial grade color printer for variable print jobs with a wide range of applications that offers many features previously unavailable at this price point. The prayer is ideal for industrial labeling changes frequency from regulatory signage and lean visuals to barcoding to lab identification and GE.

Speaker Change: Chefs labeling.

Speaker Change: It prints smear free inks on label materials that resist water chemicals and abrasions.

Speaker Change: Up to two year outdoor durability and even longer periods indoors.

Russell R. Shaller: The J7300 is Wi-Fi enabled and includes a dashboard that allows users to plan, budget, and troubleshoot with status alerts, job cost calculator, remote monitoring, and much more. It includes the Brady workstation safety and facility ID suite, which helps create signs, markers, labels, and tags in graphics and color palettes that also connect to third-party software and print PDF files. The setup takes only seconds because our LabelSense technology instantly recognizes and sets up label rolls and inks while eliminating waste by printing on the very first label.

Speaker Change: The <unk> 7300, Wi Fi enabled and includes a dashboard that allows our users to plan budget and troubleshoot with status alerts job cost calculator remote monitoring and much more.

Speaker Change: Includes the Brady workstation safety and facility I'd.

Speaker Change: <unk>, which helps create signs markers labels and tags.

Speaker Change: In graphics and color palettes that also conducted third party software and print PDF.

Speaker Change: The set of takes only seconds, because our label sense technology instantly recognized and sets up labor roles in inks, while eliminating waste by printing on the very first label.

Russell R. Shaller: Brady is committed to innovating products that reduce our users' environmental impact. For example, Tough Stripe Max is our new offering in our top-selling product line of specialized floor marking tape. This version of Tough Stripe is 50% thinner, and its adhesive is applied edge-to-edge, making it last even longer in heavy forklift and industrial vehicle traffic.

Speaker Change: Brady has committed to innovating products that reduce our users environmental impact for example, tough stripe Max as our new offering with our top selling product line of specialized floor marketing team.

Speaker Change: This version of tough stripe is 50% thinner and it's adhesive and supplied to edge to edge, making it lapsed, even longer and heavy forklift and industrial vehicle traffic.

Unknown Executive: It's simple to apply and an excellent solution for our customers because it allows them to quickly and easily comply with safety requirements and prevents operational hazards in their operation. I'm really proud of these new products and I'm looking forward to the pipeline of more innovative new products that will be launched this year. Operator. Would you please provide instructions to our audience?

Speaker Change: It's simple to apply an excellent solution for our customers because it allows them to quickly and easily comply with safety requirements and prevents operations hazards in their operations.

Speaker Change: I'm really proud of these new products and I'm looking forward to the pipeline of more innovative new products that will be launched this year.

Speaker Change: With that we'd like to start the Q&A operator.

Speaker Change: Would you please provide instructions to our listeners.

Unknown Executive: Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: Thank you at this time, we will conduct a question and answer session.

Speaker Change: Wanted to ask a question you will need to press star one why are your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Unknown Executive: Please stand by while we compile the Q&A roster. Our first question comes from the line of Cashian Kuehler of Bank of America. Your line is now open. Yeah, hi, good morning.

Speaker Change: Okay.

Speaker Change: Our first question comes from the line of Kashi and cooler of Bank of America. Your line is now open.

Russell R. Shaller: Thanks for taking my questions, Russell and Ann. So I guess first off, you're expecting low single-digit growth for 4Q, but maybe as we look another quarter or two beyond that into fiscal 25, are you able to give us, I guess, any qualitative view on, you know, what you might be expecting in terms of organic growth and perhaps what your customers are telling you about demand beyond this quarter? Yeah, you know, this is Russell.

Speaker Change: Yes, hi, good morning, Thanks for taking my questions Russell.

Kashi: So I guess first off you're expecting low single digit growth for <unk>.

Kashi: <unk>, but maybe as we look another quarter or two beyond that in fiscal 'twenty. Five are you able to give us I guess any qualitative view on what you might do you expecting in terms of organic growth and perhaps what your customers are telling you about the demand beyond this quarter.

Russell R. Shaller: Obviously, I wish I had a perfect crystal ball. You know, I think a lot of industrial indicators are pointing to a favorable second half of the calendar, which would be the beginning of our fiscal year. You know, I do think that some of the expectations for recovery have been premature. You know, depending on who you read, it was supposed to happen in the first half of this calendar year, and yet it seems like a lot of things have pushed out.

Kashi: Yes.

Russell Sheller: This is Russell, obviously, I wish I had a perfect crystal ball I think a lot of industrial indicators are pointing to a favorable second.

Russell Sheller: Half of the calendar on which would be the beginning of our fiscal year I do think that some of the expectations for recovery have been premature unit, depending on who you read it was supposed to happen in the first half of this calendar year and yet it seems like a lot of things have pushed out so I guess, the long and short of it is.

Russell R. Shaller: So I guess the long and short of it is we, along with I think a lot of our industrial peers, are looking forward to a more robust second half of the year, but I still think there's a lot of uncertainties that maybe temper that optimism. Okay. That makes sense. And, relatedly, you know, what trends are you seeing in industrial automation at this point? I guess as it relates to industrial track and trace.

Russell Sheller: We along with I think a lot of our industrial peers are looking forward to a more robust.

Russell Sheller: Second half of the year, but I still think theres a lot of uncertainties.

Russell Sheller: It may be temper that optimism.

Speaker Change: Okay understood that makes sense.

Speaker Change: And I guess, just relatedly what trends are you seeing in industrial automation at this point.

Speaker Change: I guess as it relates to industrial track and trace.

Russell R. Shaller: And then secondly, you know, healthcare has been a continual drag on our organic basis over the past couple quarters. But I was just wondering if you could give us a quick update on that business as well. Thanks.

Speaker Change: And then secondly, I think healthcare has been a continual drag on an organic basis over the past couple of quarters.

Speaker Change: But just wondering if you can give us a quick update on that business as well.

Russell R. Shaller: Yeah, so I'll give you the short term and the long term on industrial track and trace and automation. So in the short term, we're definitely seeing some hesitancy in investment, I think, partially due to interest rate environments and general economic concerns. In the long run, though, we feel very optimistic because, if you look at, you know, machine learning or AI or whatever you want to talk about, it all depends on being able to identify individual parts in your manufacturing operation as they work through the process all the way through to being delivered to the customer, and in some cases, even after the customer sale, to provide service and support.

Yes, so I'll give you the short term and the long term on the industrial track and trace and automation. So the short term, we're definitely seeing some hesitancy hesitancy in investment I think partially due to interest rate environment and general economic concerns.

Speaker Change: In the long run, though we feel very optimistic because if you look at machine learning or AI or whatever you want to talk about.

Speaker Change: It all is reliant on being able to identify individual parts in your manufacturing operation as they work through the process all the way through to being delivered to the customer in some cases, even post customer sale to provide service and support so.

Russell R. Shaller: So, you know, in the long run, I think this is a fantastic market. I do think there's some choppiness that is occurring right now, due to overall economic conditions in Europe and, to a lesser extent, in the US. Regarding the healthcare segment, you know, hospital admissions have really stagnated for the last several years, and we participate mostly in the hospital admission process. We have less of a footprint in what I'll call urgent care.

Speaker Change: Long run I think is a fantastic market I do think there's some choppiness that is occurring right now due to overall economic conditions in.

Speaker Change: In Europe and to a lesser extent in the U S.

Speaker Change: Regarding the healthcare segment hospital admissions.

Speaker Change: <unk> really been stagnant to down for the last several years and we participate on mostly in the hospital admission process, we have less of a footprint in what I'll call the urgent care. So.

Russell R. Shaller: So, you know, our sales have been reflecting that, and, you know, frankly, it is and has been a bit of a drag on the otherwise stellar growth for some of our industrial products. We don't foresee that trend changing dramatically, although we are launching some new products in the healthcare space in the next couple of quarters that we think will help us take a larger wallet share in what is a pretty stagnant market. Okay, thanks.

Speaker Change: I think our sales have been reflecting of that.

Speaker Change: Frankly, it is and has been a bit of a drag on the otherwise stellar growth for some of our industrial products.

Speaker Change: Foresee that trend.

Speaker Change: Changing dramatically, although we are launching some new products in the healthcare space in the next couple of quarters that we think will help us take a larger wallet share and what is a pretty stagnant market.

Speaker Change: Okay. Thanks.

Unknown Executive: Thank you, one moment for our next question. Our next question comes from the line of Steve Ferazani of Sudowdy. Your line is now open.

Speaker Change: Thank you one woman for next question.

Speaker Change: Our next question comes from the line of Steve <unk> of Sidoti. Your line is now open.

Unknown Executive: Morning, Russell, and thanks so much for the detail on the call. Russell, just I wanted to ask first on the three new products you detailed, were any of those available in the previous quarters when those products were coming? No, they're there.

Speaker Change: Good morning, Russell and thanks, so much for the detail on the call.

Steve: So just I wanted to ask first on the three new products, you detailed or any of those available in the previous quarter. So those products coming.

Russell R. Shaller: They're basically in pilot launch right now, so they really will start to see sales in Q4 and into next year. You know, the one thing, you know, while I am super excited about all three of those products and some of the products that are coming, you remember, we're comprised of literally hundreds of different products; we don't have the equivalent of an iPhone launch. So, those sales will feather into our overall organic growth rate, but you won't see a pop due to those launches. So the question is, given the macro concerns in Europe, the positive surprise to me was almost 5% organic growth. Because I think about you as sort of GDP plus, that's certainly much stronger.

Speaker Change: No there there.

Russell Sheller: They're basically in pilot launch right now so there really will start to see sales in in Q4 and into next year. The one thing.

Russell Sheller: While I am Super excited about all three of those products in some of the products that are coming you'll remember were comprised of literally hundreds of different products. We don't have the equivalent of an iPhone launch so those sales will feather into our.

Russell Sheller: Overall organic growth rate, but you won't see a pop due to those launches.

Speaker Change: So the question is given the Mac tobacco concerns in Europe, It's a positive surprise to me.

Speaker Change: Almost 5% organic growth.

Speaker Change: Because I think you are.

Speaker Change: Sort of GDP, plus that's certainly much stronger can you help us out on how you got there price versus volume or what how you're outpacing the market in Europe.

Russell R. Shaller: Can you help us out with how you got there, price versus volume, or how you're, you know, outpacing the market in Europe? So, you know, I would say we have just simply a fantastic team that is finding new ways to increase wallet share in Europe. Then you're right.

Speaker Change: So I would say we have just simply a fantastic team that he is finding new ways to increase wallet share in.

Speaker Change: In Europe.

Speaker Change: Youre right the GDP collective Gigi GDP of the EU region is.

Russell R. Shaller: You know, the GDP, the collective GDP of the EU region is probably less than one percent, although subject to revision. And we do sell to virtually all industrial companies worldwide, or at least in the EU and in the Americas. But not every company buys everything we can do, and I think the European team has been particularly successful in expanding wallet share at a number of our customers. And that's why you're seeing better organic growth because it is not coming via pricing. It is principally due to increased product consumption. And then I was surprised with even further gross margin expansion. Is that mix, is that with health care not growing as fast? Is that is that straight mix?

Speaker Change: Probably less than 1%, although subject to revision.

Speaker Change: And we do sell to virtually all industrial companies worldwide or at least in the EU and in the Americas.

Speaker Change: But not every company buys everything we can do and I think the European team has been particularly successful in expanding wallet share at a number of our customers and Thats why youre seeing.

Speaker Change: Better organic growth because it is not coming via pricing. It is principally due to increased.

Speaker Change: Product consumption.

Speaker Change: Okay.

Speaker Change: And then I was surprised with even further margin gross margin expansion is that mix is that with health care are not growing as fast.

Russell R. Shaller: How much of that is new products? And how sustainable is the margin you're being afforded this quarter? Yeah, you know, we've failed a gross margin that was very favorable. You know, I think we're living in a great period right now for Brady, where some of the part variance costs that we had previously and the premiums that we had paid on shipping and transportation have all gone away. And so you're seeing a much cleaner gross margin.

Speaker Change: Is that just that straight mix, how much of that is new products and how sustainable is the margin you reported this quarter.

Speaker Change: Yeah.

Speaker Change: We feel the gross margin was very favorable.

Speaker Change: We're living in a great period, right now for Brady, where some of the <unk>.

Speaker Change: <unk> variance cost that we had had previously and the premiums that we had paid on shipping and transportation have all gone away and so youre seeing a much cleaner.

Speaker Change: Gross margin there was a little bit of one time gains in that gross margin I think.

Russell R. Shaller: There's a little bit of one-time gains in that gross margin. I think, you know, 51 and change is probably close to the high watermark for our gross margin. So I wouldn't necessarily bank on that in the future.

Speaker Change: 51, and change is probably close to a high watermark.

Speaker Change: Our gross margin.

Speaker Change: So I wouldn't necessarily bank debt in the future but.

Russell R. Shaller: But, you know, we're, although we don't manage to gross margin directionally, in the 50% range is certainly a comfortable place for our portfolio. Great. And then just on SG&A, you've done such a great job over the last couple of years, breaking that down as a percentage of sales. Even though you grew this quarter, it's kind of flattening out.

Speaker Change: Although we don't manage to gross margin directionally in the 50% range is certainly a comfortable place for our portfolio.

Speaker Change: Great and then.

Speaker Change: Then just on SG&A.

Speaker Change: You've done such a great job over the last couple of years, breaking that down as a percentage of sales even though you grew this quarter, it's kind of flattening out do you still think there is room are you at.

Russell R. Shaller: Do you still think there's room at a comfortable level when you're thinking about SG&A as a percentage of sales? You know, I think there are a couple of competing factors there that are both helping to improve SG&A, as in lowering SG&A, and some other factors that are increasing it. So I'll kind of give you the puts and takes. Being able to deploy our salespeople more efficiently and effectively and using tools to better route their sales calls and target customers and accounts, that goes towards the plus side of driving down SG&A costs. On the flip side of that, paid advertising, particularly doing search and what have you, continues to be an increasing expense. The two right now are kind of balancing each other.

Speaker Change: Comfortable level, when you're thinking about SG&A as a percentage of sales.

Speaker Change: I think there is there is a couple of competing factors there.

Speaker Change: Are both helping to improve SG&A or as in lowering SG&A and some other factors that are increasing it. So I'll kind of give you the puts and takes.

Being able to deploy our salespeople more efficiently and effectively and using tools to better route their sales calls.

Speaker Change: Into two target customers and accounts that goes towards the plus column of driving down SG&A costs on the.

Russell R. Shaller: I think the future wildcard will be, you know, how search and paid search are potentially upended by some of the new tools coming out there, as well as the internal tools we're using to better optimize where we're placing our investments in terms of paid search catalogs and field salespeople. So, you know, that's kind of a long winded answer without giving you a lot of direction. Right now, we feel comfortable with SG&A. But, of course, we are always looking for ways to further drive down that cost and improve our efficiency. Okay, that's helpful.

Speaker Change: Flip side of that.

Speaker Change: Paid advertising, particularly doing search and what have you continues to be an increasing expense. The two right now we're kind of balancing each other I think the.

Speaker Change: The future wildcard will be how search is in paid search is potentially up ended with some of the new tools coming out there as well as the internal tools, we're using to better optimize where we're placing our investments in terms of paid search catalogs and.

Speaker Change: Field salespeople so.

Speaker Change: No that's kind of a long winded answer without giving you a lot of direction right now we feel comfortable with the SG&A, but of course, we are always looking for ways to further drive down that cost and improve our efficiency.

Russell R. Shaller: Last one for me, you didn't talk much about GraviTech. Are you waiting for that to close to provide more detail or anything you want to say about it? Yeah, so I can give you, it's still in the regulatory approval process. I don't want to delve too much into that till we get ready to close. But I think it is reasonable to talk about the thesis of GraviTech and why we are looking at that as a business.

Speaker Change: Okay. That's helpful last one for me just you Didnt talk much about <unk>, you're waiting for that to close to provide more detail or anything you want to say, yes. So I can give you.

Speaker Change: Still in the regulatory approval process.

Speaker Change: So I don't want to delve too much into that until we get ready to close but I think it is reasonable to talk about the thesis of <unk> and why we are looking at that as a business.

Russell R. Shaller: You know, so half or more of our products are related to identification and identification solutions. So whether it's part marking, or it's machine readable barcodes, or what have you. The one part of the ecosystem that we don't have is direct part marking.

Speaker Change: So.

Speaker Change: <unk> or more of our products are related to identification and identification solutions, so whether it's part marking or.

Speaker Change: Machine readable barcodes or what have you.

The one part of the ecosystem that we don't have is direct part marking so we do labels and we do materials, but there is a percentage of products that are direct part marked.

Russell R. Shaller: So we do labels and we do materials, but there is a percentage of products that are directly part marked on either laser or via mechanical marking, and that's not been part of our portfolio previously. We see the potential with GraviTech to provide a more complete solution to our customers where we can provide both the labels for customers that want that, but also part marking and machine readable barcodes directly on parts for another segment of the customer base that wants those. And again, it is very much geared toward manufacturing professional use. There's there's a part of lasers that are consumer based, but that's not really our target market. Thanks, Russell.

Speaker Change: Neither laser or via mechanical marking and that's not been part of our portfolio previously.

Speaker Change: We see the potential with grab attack to provide a more complete solution to our customers, where we can provide both the labels for customers that want that but also part marking in machine readable barcodes directly on parts for another segment of the <unk>.

Speaker Change: Customer base that wants those and again this is very much geared towards a manufacturing professional use theres a part of lasers that are consumer based.

Speaker Change: That's not really our target market.

Speaker Change: Okay.

Speaker Change: Thanks Russell.

Unknown Executive: Thanks, Ann. Thank you one moment for our next question. Our next question comes from a line Keith Housum of North Coast Research. Your line is now open. Good morning, Russell.

Speaker Change: Thank you Amit for next question.

Speaker Change: Our next question comes from the line of Keith Wholesome of Northcoast Research. Your line is now open.

Unknown Executive: Good morning, Ann. And congratulations on the quarter. You definitely, you know, surpassed our expectations and outperformed your peers. Russell, as we're looking at you guys rolling out your rugged track and trace products, I think your scanner is probably the first one coming out here. Does your go-to-market strategy change at all as you're approaching what I think is a relatively new market when it comes to these types of devices? Yeah, I would say partially.

Keith Michael Housum: Good morning, Ralph Good morning, and congratulations on the quarter definitely beat our expectations and outperformed your peers.

Russell Sheller: Hey, Russell as we're looking at you guys Rolling out your rug, a track and trace products that anchor scanners by the first one coming out here.

Speaker Change: Your go to market strategy change at all as you approach and what I think is relatively new market, we're comfortably type of devices.

Speaker Change: Yeah, I would say, partially so there are a significant number of our customers that work with us directly and we'll continue to do so.

Speaker Change: It's also true of some of our distributors that are involved in this space.

Speaker Change: The one thing that is additive to our channel to market is were working more through value added resellers.

Speaker Change: Course throughout the World. There is a network of Vars now, we purchased code and Nordic I'd years ago.

Russell R. Shaller: Now, when we purchased Code and Nordic ID years ago, you know, that is a very comfortable space for them. They are, although in slightly different markets, they've been working with VARs for many years. Brady, traditionally, had not been doing that much.

Speaker Change: That is a very comfortable space to them. They are on although in slightly different markets. They have been working with vars for many years on Brady traditionally had not been doing that much. So.

Russell R. Shaller: So, you know, what you're looking at is kind of twofold. We're taking some of the VAR network that Code established in the US and Nordic has in Europe. And we're just expanding our portfolio to include them. At the same time, we are working with a number of other segments that we have used in the past, but to a much smaller extent because we didn't have that full portfolio of products. And then to expand further, you know, part of the thesis of GravoTech is to add lasers and direct marking to that overall capability to help us further work with some of the VAR integrators in a manufacturing environment.

Speaker Change: What you are looking at is kind of twofold were taking some of the var network that code height established in the U S and Nordic has in Europe and were just expanding our portfolio to them at the same time, we are working with a number of other segments that we have used in the past but to a much.

Speaker Change: Less extent, because we didn't have that full portfolio of products and then to expand further.

Part of the thesis of <unk> is to add.

Speaker Change: Laser is in direct marketing to that overall capability to help us further work with some of the var integrators in a manufacturing environment.

Russell R. Shaller: Great, appreciate that. In terms of your share repurchases, is there any restriction on your share repurchases going forward based on where you have cash? I guess maybe ask a question another way, you know, will you be paying for Gravitac out of your European funds or your US funds? Yeah, good question, Keith.

Speaker Change: Great I appreciate that.

Speaker Change: In terms of your share repurchases.

Speaker Change: Is there any restriction on your share repurchases going forward based on where you have cash I guess, maybe ask the question. Another way, we've even for <unk> out of your European firms or out of the U S funds.

Ann E. Thornton: No, no restriction on our ongoing share repurchases from the standpoint of where cash is located. We have 37 million remaining on our current authorization and will continue to be opportunistic as the opportunities present themselves in the future. Great, thank you.

Keith Michael Housum: Yes, yes. Good question Keith no restriction on our ongoing share repurchases from a from the standpoint of where our cash is located.

Keith Michael Housum: $37 million remaining on our current authorization and will continue to be opportunistic as the as the opportunities present themselves in the future.

Speaker Change: Great. Thank you I remember if I heard I think I heard you say that as you guys ended the quarter you ended the quarter with some momentum so it sounds like youre activity actually picked up picked up throughout the quarter as carrying into the fourth quarter is that fair.

Russell R. Shaller: Yeah, let's hope it continues into the fourth quarter. But, definitely, we definitely saw a better last month of the quarter than the first two. The first two months were very much a continuation of what we had seen in the first half of our fiscal year, but this last month really was an acceleration of product adoption. And, you know, we hope to see that come through in the fourth quarter, but we'll just see how that turns out. It may have partially answered my next question, the final question, but what surprised you in the quarter? Was it the fact that you accelerated so quickly in the last month?

Speaker Change: Yes, let's hope it continues into the fourth quarter.

Speaker Change: Yes, definitely we definitely saw a better.

Speaker Change: Last month of the quarter than the first two the first two months, where we're very much a continuation of what we had seen.

Speaker Change: In the first half of our fiscal year.

Speaker Change: But this last month.

Speaker Change: Really was an acceleration of product adoption and John.

Speaker Change: We hope to see that come through in.

Speaker Change: In the fourth quarter, but we'll just see how that turns out.

Russell R. Shaller: I'm sorry, I didn't. Yeah, what surprised you with your results for the quarter? I thought you said price. No, sorry.

Speaker Change: It may have partially answered my next question and final question, but what's the price during the quarter was the fact that you accelerated so quickly last remark.

Speaker Change: I'm, sorry, I didn't.

Speaker Change: Yes, what's surprised you with your results for the quarter.

Speaker Change: Alright.

Speaker Change: Sorry.

Russell R. Shaller: Um, you know, it was very broad based; it wasn't a particular customer or a particular end market. It was generally very broadly based. I do think that we're kind of in a very fascinating time of a lot of money sitting on the sidelines and some uncertainty about the level of investments. Apparently, in April, a number of our customers woke up and decided they wanted to, So, um, you know, I don't mean to be flippant about that, but, you know, it can be fickle sometimes when you look at capital expenditures and how companies look at their investment thesis going out. You know, we've got our stable M&R, M&O, MRO products, you know, that continue to be very stable Great. Thank you. I appreciate it.

Speaker Change: It was very broad based it wasn't a particular customer or.

Speaker Change: Particular end market.

Speaker Change: Was generally very broadly based.

Speaker Change: I do think it's we're kind of in a very fascinating time of a lot of money sitting on the sidelines and some uncertainty about level of investments.

Speaker Change: Apparently in April a number of our customers woke up and decided they wanted to buy things so.

Speaker Change: I don't mean to be flip on that but it can be fickle, sometimes when you look at capital expenditures and how companies look at their investment thesis going out with.

Speaker Change: Our stable <unk> <unk> MRO products that continue to be very stable and then you have some that are more sensitive to overall economic conditions and it just.

Speaker Change: On it.

Speaker Change: Well for us in April.

Speaker Change: Great. Thank you appreciate it.

Unknown Executive: Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Russell Shaller, President and CEO, for closing remarks. Great. Thanks, everyone, for your time and participation today.

Speaker Change: Thank you I'm showing no further questions at this time I would now like to turn it back to Russell <unk>, President and CEO for closing remarks.

Russell R. Shaller: Great. Thanks, everyone for your time and participation today, our results were very good this quarter with four 5% organic sales growth and record high earnings per share. Our gross profit margins have improved to more than 50%, which demonstrates the value, we're bringing to our customers with our innovative products and solutions.

Russell R. Shaller: Our results were very good this quarter with 4.5% organic sales growth and record high earnings per share. Our gross profit margins have improved to more than 50%, which demonstrates the value we are bringing to our customers with our innovative products and solutions. We're investing in research and development, and our pipeline is filled with new and innovative products yet to come. Our financial position is excellent.

Russell R. Shaller: We're investing in research and development and our pipeline is filled with new and innovative products yet to come or financial.

Unknown Executive: Our balance sheet provides us with the ability to continue to invest in organic businesses through the addition of sales resources and talented engineers. We're proud of our increased annual dividend for 38 straight years, and we can buy back shares and transact strategic M&A when the opportunities are available. Our high-quality earnings are the result of significant cash generation, which allows us to fund all of our capital allocation priorities simultaneously in order to generate shareholder return over the long term.

Russell R. Shaller: Position is excellent our balance sheet provides us with the ability to continue to invest in organic businesses through the addition of sales resources and talented engineers. We're proud of our increased annual dividend for 38 straight years, and we can buy back shares and transact strategic M&A when the opportunities are available.

Russell R. Shaller: Our high quality earnings are the result in significant cash generation, which allows us to fund all of our capital allocation priorities simultaneously and.

Russell R. Shaller: In order to generate shareholder return over the long term, we're focused on our consistent priorities, which are to continue to launch innovative new products that provide unique and effective solutions for our customers to continue to invest in sales generating resources and increase organic sales.

Unknown Executive: We're focused on our consistent priorities, which are to continue to launch innovative new products that provide unique and effective solutions for our customers, to continue to invest in sales-generating resources and increase organic sales, to execute operational efficiencies and continue to increase profitability, 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 buyback. The macroeconomic environment can present uncertain uncertainties at times.

Russell R. Shaller: To execute operational efficiencies and continue to increase profitability 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 the.

Brady Operator: The macro economic environment can present uncertain uncertainties at times, but we will continue to control what we can control. So that we deliver consistent long term value for our shareholders. Thank you for your time this morning and for your interest in Brady Operator, you may disconnect the call.

Speaker Change: Thank you for your participation in today's conference. This concludes the program you may now disconnect.

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Speaker Change: Good day and thank you for standing by welcome to the third quarter 2020 for Brady Corporation earnings call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone you will then hear an automated message of device.

Unknown Executive: But we'll continue to control what we can control so that we deliver consistent, long-term value for our shareholders. Thank you for your time this morning and for your interest in Brady. Operator, you may disconnect the call.

Unknown Executive: Thank you for your participation in today's conference. This concludes the program. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good day, and thank you for standing by. Welcome to the third quarter 2024 Brady Corporation earnings call. At this time, all participants are on listen-only mode.

Speaker Change: In your hand as rates to withdraw 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 first speaker today <unk> CFO. Please go ahead.

Ann E. Thornton: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Ann Thornton, CFO. Please go ahead.

Thank you good morning, and welcome to the Brady Corporation fiscal 2024 third quarter earnings Conference call.

Speaker Change: Bids for this morning's call are located on our website at www Dot <unk> Dot com slash investors, we will begin our prepared remarks on slide number three please.

Speaker Change: Please note that during this call we may make comments about forward looking information words.

Speaker Change: Such as expect will May believe forecast and anticipate are just a few examples of words identifying forward looking statements. It's.

Russell R. Shaller: 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 10-K, which was filed with the SEC in September. 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 Shaller. Russell?

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

Speaker Change: Risk factors were noted in our news release this morning, and in Brady's fiscal 2023 Form 10-K, which was filed with the SEC in September.

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

Speaker Change: 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.

Speaker Change: I'll now turn the call over to <unk>, President and Chief Executive Officer, Russell Shallower Russell, Thanks, Ann and thanks, everyone for joining US today, we released our third quarter results. This morning, and I'm thrilled to report a new company record high earnings per share this quarter.

Russell R. Shaller: Both of our regional businesses performed well with total organic sales growth of four 5% improved gross profit margin to 51, 6% and we continued our strong cash generation. Our teams are executing incredibly well and delivering great results despite sluggish economic conditions.

Russell R. Shaller: We also return funds to our shareholders through both our normal quarterly dividend and an increased amount of share buybacks. This quarter, we purchased 863000 shares.

Russell R. Shaller: For $50 4 million, we continue to view opportunistic share buybacks as an excellent way to deliver return to our shareholders and our purchases this quarter demonstrated this commitment.

Russell R. Shaller: We continue to view opportunistic share buybacks as an excellent way to deliver returns to our shareholders, and our purchases this quarter demonstrated this commitment. As part of our journey developing new technologies, we introduced several products this quarter. We launched a rugged barcode scanner, which is the result of an integrated development effort with one of the companies we acquired in 2021, and we launched a new industrial inkjet color label printer. On the material side, we launched Tough Stripe Max, which is a reengineered and improved version of our high-quality floor marking tape designed for the highest traffic areas in our manufacturing site.

Russell R. Shaller: As part of our journey developing new technologies, we introduced several products. This quarter, we launched a rugged barcode scanner, which is the result of an integrated development effort with one of the companies we acquired in 2021 and.

Russell R. Shaller: And we launched a new industrial inkjet color label printer.

Russell R. Shaller: On the material side, we launched top striped Max which is a re engineered and improved version of our high quality floor marketing tape designed for the highest traffic areas in our manufacturing site.

Russell R. Shaller: We have several new printers and other innovative new products in our pipeline planned for launch this fall and throughout next year as well. I'm incredibly proud of the results this quarter, we're identifying new sales opportunities, and we're improving our service levels, all of which is making an impact every day. I can also see the potential that generative AI can bring to Brady to increase productivity and to better equip our sales force with the data and information they need to be more effective.

We have several new printers and other innovative new products in our pipeline planned for launch this fall and throughout next year as well.

Russell R. Shaller: I'm incredibly proud of the results this quarter were identifying new sales opportunities and we're improving our service levels all of which is making an impact every day.

Russell R. Shaller: I can also see the potential that generative AI can bring to Brady to increase productivity and to better equip our sales force with the data and information they need to be more effective.

Ann E. Thornton: It's an exciting time in the world of technology, and the potential that generative AI has to positively impact our customers and the broader economy is substantial. I know that we're making the right investments today to continue to increase sales and profitability for years to come. And none of this would be possible without the hard work and focus by the entire Brady team. Now, I'll turn it over to Ann to provide more financial details on our financial results. Ann?

Russell R. Shaller: It's an exciting time in the world of technology, and the potential that generative AI has deposited typically impact our customers and the broader economy is substantial I know that we're making the right investments today to continue to increase sales and profitability for years to come.

Russell R. Shaller: None of this would be possible without the hard work and focus.

Brady team: By the entire Brady team.

Brady team: Now I'll turn it over to Anne to provide more financial details on our financial results and.

Anne: Thank you Russell.

Anne: This quarter, we grew organic sales four 5%, while increasing our EPS to a new quarterly record, we reported GAAP EPS of $1 <unk> per share, which was up nine 4% compared to the third quarter of last year non.

Anne: non-GAAP EPS, which is calculated as our GAAP EPS, excluding the after tax impact of amortization expense as well as the gain on a divestiture from last year was $1 <unk> per share, which was up 14, 7% compared to the third quarter of last year.

Ann E. Thornton: Our organic growth was strong in both regions, with our Americas and Asia region growing 4.5%, and our Europe and Australia region growing 4.4% this quarter. We're growing well in excess of GDP in most of our end markets and geographies. We also continue to integrate our businesses into our regional structure, which has allowed us to capitalize on additional sales growth opportunities and to deliver increased profitability. The key financial takeaways this quarter are an increased rate of organic, organic revenue growth, non-gap EPS growth of 14.7%, continued improvement in gross profit margin, and an ongoing commitment to return funds to our shareholders through our quarterly dividend and increased share buybacks, which together this quarter were $61.6 million.

Anne: Our organic growth was strong in both regions with our Americas, and Asia region, growing four 5% and our Europe, and Australia region growing four 4% this quarter.

Anne: We're growing well in excess of GDP and most of our end markets and geographies.

Anne: We also continue to integrate our businesses into a regional structure, which has allowed us to capitalize on additional sales growth opportunities excuse me and to deliver increased profitability.

Anne: The key financial takeaways. This quarter are an increased rate of organics organic revenue growth non-GAAP EPS growth of 14, 7%.

Speaker Change: Continued improvement in gross profit margin and an ongoing commitment to return funds to our shareholders through our quarterly dividend and increase share buybacks, which together this quarter were $61 6 million.

Ann E. Thornton: Starting on slide number four, you'll find our quarterly sales trend. Organic sales grew 4.5%, and foreign currency translation decreased sales by 0.3% this quarter. And the impact of divestitures reduced sales by 2.3%, resulting in total sales growth of 1.9%.

Speaker Change: Starting on slide number four you'll find our quarterly sales trends.

Organic sales grew four 5% and foreign currency translation decreased sales by <unk>, 3% this quarter and the impact of divestitures reduced sales by two 3%.

Speaker Change: Resulting in total sales growth of one 9%.

Ann E. Thornton: Growth was driven by both of our regions this quarter. Turning to slide number five, our gross profit margin trending. This details another quarterly improvement in our gross profit margin to 51.6% from 50.3% in the third quarter of last year, which was an increase of 130 basis points. We continue to realize benefits from our sales growth coming from higher-margin products, along with stabilizing input costs compared to last year. Slide number six details our SG&A expense trending. SG&A was $95.8 million in this quarter, compared to $91 million in the third quarter of last year.

Speaker Change: Growth was driven by both of our regions this quarter.

Speaker Change: Turning to slide number five for our gross profit margin trending this details another quarterly improvement in our gross profit margin to 51, 6% from 53% in the third quarter of last year, which was an increase of 130 basis points.

Speaker Change: We continue to realize benefits from our sales growth coming from higher margin products, along with stabilizing input costs compared to last year.

Speaker Change: Slide number six details our SG&A expense trending.

Speaker Change: G&A was $95 8 million this quarter compared to $91 million in the third quarter of last year.

Speaker Change: If you exclude amortization expense from both the current and prior year and excluded the gain on a divestiture from last year than SG&A expense decreased from 27, 4% of sales to 27, 2% of sales.

Speaker Change: Moving along to slide number seven you'll find our investments in research and development.

Speaker Change: This quarter, we once again increased our investment in R&D from $15 7 million to $17 7 million, which represented five 1% of sales in the quarter.

We launched three excellent new products this quarter, which Russell will describe in more detail during the regional discussion.

Ann E. Thornton: Turning to slide number eight, this details our pre-tax earnings, which increased 2.2% on a GAAP basis from $63 million to $64.4 million. On a non-GAAP basis, our pre-tax earnings increased 8.2%, from $61.7 million to $66.8 million.

Turning to slide number eight this details our pre tax earnings, which increased two 2% on a GAAP basis from 63 to $64 4 million.

Speaker Change: On a non-GAAP basis, our pre tax earnings increased eight 2% from $61 7 million to $66 8 million.

Speaker Change: Our earnings and EPS are detailed on slide number nine.

Speaker Change: We continue to increase earnings on a quarter over quarter basis, and this quarter represents a new company record.

Speaker Change: GAAP EPS increased by nine 4% and excluding the after tax impact of amortization from both periods and the gain on the divestiture from last year non-GAAP EPS increased 14, 7% compared to last year.

Speaker Change: Slide number 10 summarizes our cash generation.

Operating cash flow increased from $72 5 million in the third quarter of last year to $72 7 million this quarter.

Speaker Change: For the full nine months to date, our operating cash flow is up significantly.

Speaker Change: From $129 9 million last year to $171 $1 million. This year, which is an increase of 31, 8%.

Speaker Change: Moving along to slide number 11, this slide summarizes our net cash position.

Ann E. Thornton: This slide summarizes our net cash position. We continue to focus on always making cash-based decisions throughout the organization, which shows through our increase in cash flow from operating activities, as well as our net cash position of $96.7 million as of April 30. We are consistent and disciplined in our approach to capital allocation.

Speaker Change: We are consistent and disciplined in our approach to capital allocation.

Ann E. Thornton: First, we use our cash to fully fund organic sales and efficiency opportunities. This includes investing in research and development, sales-generating resources, and capital expenditures that increase our automation and our overall efficiency. We will continue to deploy capital to productivity and sales growth opportunities throughout the economic cycle. Next, we focus on consistently increasing our dividends. This fiscal year marked our 38th consecutive annual increase in our dividends. After fully funding our organic investments and our dividend, we then deploy our cash in a disciplined manner for acquisitions where we have clear synergies and for opportunistic share buybacks. In this quarter, we repurchased 863,000 shares for $50.4 million.

Speaker Change: First we use our cash to fully fund organic sales and efficiency opportunities.

Speaker Change: This includes investing in research and development sales generating resources and capital expenditures that increase our automation and our overall efficiency.

Speaker Change: We will continue to deploy capital to productivity and sales growth opportunities throughout the economic cycle.

Speaker Change: Next we focus on consistently increasing our dividends this fiscal year marked our 38th consecutive annual increase in our dividend.

Our strong balance sheet puts us in a position to execute additional growth opportunities through our R&D investments and our sales resources to.

Speaker Change: To acquire companies strategically when synergies are clear and the price is right and to return funds to our shareholders through dividends and share buybacks.

Speaker Change: On slide number 12, you'll find our fiscal 2020 for guidance.

Speaker Change: We are increasing our full year fiscal 2024, EPS guidance range of $3 80 to $3 95 on a GAAP basis, and $3 95 to $4.10 on a non-GAAP basis.

Speaker Change: <unk> $3 93 to $4 on a GAAP basis.

Speaker Change: And to $4 eight to $4 15 on a non-GAAP basis.

Ann E. Thornton: We still expect low single-digit organic sales growth for the full fiscal year 2024, which means we're expecting low single-digit organic sales growth in the fourth quarter. This is based upon our current forecasts and a comparison to our sales results in the fourth quarter of last year. Our outlook is based upon April 30th foreign currency exchange rates, and it assumes continued economic expansion. We also expect a tax rate of approximately 21% for the full year, depreciation and amortization expense ranging from 30 to 32 million, and capital expenditures of approximately 75 million, which is inclusive of approximately 55 million of capital expenditures this year for the purchase of a previously leased facility which took place earlier in the fiscal year, along with the build out of a new facility.

Speaker Change: We still expect low single digit organic sales growth for the full fiscal year 2024, which means we're expecting low single digit organic sales growth in the fourth quarter. This is based upon our current forecast and the comparison to our sales results in the fourth quarter of last year.

Speaker Change: Our outlook is based upon April 30th foreign currency exchange rates and assumes continued economic expansion.

We also expect a tax rate of approximately 21% for the full year, depreciation and amortization expense ranging from $30 million to $32 million and capital expenditures of approximately $75 million, which is inclusive of approximately 55 million of capital expenditures. This year for the purchase of a previously leased.

Speaker Change: <unk>, which took place earlier in the fiscal year, along with the Buildout of our new facility.

Russell R. Shaller: The build out of the new facility will allow us to consolidate two locations into one, which will reduce our overall footprint. Potential risks to our guidance, among others, include potential strengthening of the US dollar, inflationary pressures that we're unable to offset in a timely enough manner, or an overall slowdown in economic activity. I'll now turn the call back over to Russell to cover our regional results and to provide some closing thoughts before Q&A.

Speaker Change: The buildout of the new facility will allow us to consolidate two locations into one which will reduce our overall footprint.

Russell: I'll now turn the call back over to Russell to cover our regional results and to provide some closing thoughts before our Q&A Russell, Thanks, Ann our Americas and Asia Regional results begin on slide 13 sales.

Russell R. Shaller: Thanks, Ann. Our Americas and Asia regional results begin on slide 13, sales were $224.8 million this quarter, and organic sales growth was 4.5%. However, the impact of divestitures reduced sales by 3.5%.

Russell: Sales were $224 $8 million this quarter and organic sales growth was four 5% the impact of divestitures reduced sales by three 5% in total including foreign currency translation sales increased 9%.

Speaker Change: We had great results. This quarter, we grew in all of our major product lines with the strongest growth in our core identification and safety solutions businesses as.

Speaker Change: As well as wire identification.

Our Asia business grew organically one 9% this quarter.

Russell R. Shaller: Economic conditions are challenging in China, but our business outside of China more than made up for this decline with another strong quarter of growth led by India and Singapore. Segment profit in Americas and Asia increased by 1% to $49.7 million, and segment profit as a percentage of sales was consistent with last year at 22.1%. We added to our sales force this quarter, and we hired additional engineers in R&D, which slowed our segment profit growth in the region for the quarter.

Speaker Change: <unk> profit in Americas, and Asia increased by 1% to $49 7 million and segment profit as a percentage of sales was consistent with last year at 22, 1%.

Russell R. Shaller: These are the types of investments Brady will continue to make to ensure our long-term organic sales growth. Turning to slide 14, you'll find the performance of our Europe and Australia regions. Sales were $118.6 million this quarter. Organic sales growth was 4.4%, and foreign currency decreased sales by 0.6% for total growth of 3.8%.

Brady: Turning to slide 14, you'll find the performance of our Europe, and Australia region sales were $118 $6 million. This quarter organic sales growth was four 4% and foreign currency decreased sales by <unk>, 6% for total growth of three 8% sales.

Russell R. Shaller: Sales growth was strongest in our core identification and safety solution products, where we continue to identify new opportunities to solve problems for our customers, which is resulting in sales growth well in excess of GDP. At 4.7%, our organic growth in Europe was well above its GDP, and organic growth in Australia was 2.6% in the quarter. Strong organic sales growth in Europe resulted in a significant improvement in segment profit in the quarter from $17.1 million to $19.5 million, an increase of 14.3%.

Brady: Sales growth was strongest in our core identification and CPE solution products, where we continue to identify new opportunities to solve problems for our customers.

Which is resulting in sales growth well in excess of GDP.

Speaker Change: At four 7% our organic growth in Europe was well above their GDP and organic growth in Australia was two 6% in the quarter.

Russell R. Shaller: As a percentage of sales, segment profit increased 150 basis points from 15% to 16.5%. We continue to identify opportunities for efficiencies following our regional reorganization that we put into place last year. And we've been able to offset increased cost pressures through manufacturing efficiencies and targeted price increases. Our Europe and Australia businesses continue to deliver excellent results. Turning to products, we recently launched three exciting new products that I'm particularly proud of: the V4500 barcode scanner, the J7300 industrial inkjet color label printer, and the Tough Stripe Max 4 marking tape.

Speaker Change: Our Europe, and Australia business continued to deliver excellent results.

Speaker Change: Turning to products, we recently launched three exciting new products that I'm, particularly proud of.

Speaker Change: <unk> 4500, barcode scanner to 70, J 7300, industrial inkjet color label printer and the tough stripe Max floor marketing Kate.

Russell R. Shaller: The V4500 is a wireless programmable barcode scanner with a rugged exterior, making it ideal for industrial applications. Bluetooth enabled includes our proprietary cortex decoder technology, which allows it to easily interpret extremely small barcodes and other hard-to-read surfaces. Its dynamic user interface allows the user to move from setup to first scan in seconds, and it includes a data parsing feature that can sort and arrange data and connect to the cloud and the user's ERP system. Its high speed allows for scanning from any angle.

Speaker Change: The 4500 is a wireless programmable barcode scanner with rugged exterior, making it ideal for industrial applications with Bluetooth enabled includes our proprietary cortex decoder technology will allow which allows them to easily interpret extremely small barcodes and other.

Speaker Change: Hard to read surfaces.

Speaker Change: It's dynamic user interface allows the user to move from set up to first scan in seconds and includes the data parsing feature that can sort of range data and connect to cloud and the users. The ERP system is high speed allows for scanning from any angle and we're looking forward to bringing this scanner to market and so far the <unk>.

Russell R. Shaller: And we're looking forward to bringing this scanner to market, and so far, the response from our customers has been incredibly positive. The J7300 Industrial Inkjet Color Printer is the culmination of several years of printer ink and material development. It's a fast industrial-grade color printer for variable print jobs with a wide range of applications that offers many features previously unavailable at this price. The printer is ideal for industrial labeling, changing frequently from regulatory signage and lean visuals to barcoding to lab identification and GHS labeling. It prints smear-free inks on label materials that resist water, chemicals, and abrasions for up to two years of outdoor durability and even longer periods indoors.

Speaker Change: <unk> from our customers has been incredibly positive.

Russell R. Shaller: The J7300 is Wi-Fi enabled and includes a dashboard that allows users to plan, budget, and troubleshoot with status alerts, job cost calculator, remote monitoring, and much more. It includes the Brady Workstation Safety and Facility ID suite, which helps create signs, markers, labels, and tags in graphics and color palettes that also connect to third-party software and print PDF files. The setup takes only seconds because our LabelSense technology instantly recognizes and sets up label rolls and inks while eliminating waste by printing on the very first label.

Speaker Change: The <unk> 7300, industrial inkjet color printer is the culmination of several years of printer ink and material development.

Speaker Change: S labeling.

Speaker Change: It prints smear free inks on label materials that resist water chemicals and abrasions.

Speaker Change: Up to two year outdoor durability and even longer periods indoors.

The <unk> 7300, Wi Fi enabled and includes a dashboard that allows our users to plan and budget and troubleshoot with status alerts job cost calculator remote monitoring and much more.

Speaker Change: Includes the Brady workstation safety and facility I'd suite, which helps create signs markers labels and tags.

Speaker Change: In graphics and color palettes that also connected third party software and Pds.

Speaker Change: Brady has committed to innovating products that reduce our users environmental impact for example, tough striped Max as our new offering with our top selling product line a specialized floor, marking take this version of tough stripe is 50% thinner and it's adhesive is supplied to edge to edge, making it last even longer and heavy.

Speaker Change: Lift and industrial vehicle traffic.

Speaker Change: It's simple to apply and an excellent solution for our customers because it allows them to quickly and easily comply with safety requirements and prevents operations hazards in their operations.

Speaker Change: I'm really proud of these new products and I'm looking forward to the pipeline of more innovative new products that will be launched this year.

Speaker Change: With that wed like to start the Q&A operator.

Speaker Change: Would you please provide instructions to our listeners.

Unknown Executive: Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced.

Speaker Change: 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 one of your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Unknown Executive: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Cashian Keeler of Bank of America. Your line is now open. Yeah, hi, good morning.

Speaker Change: Okay.

Speaker Change: Our first question comes from the line of <unk> <unk> of Bank of America. Your line is now open.

Speaker Change: Yes, hi, good morning, Thanks for taking my questions Russell.

Speaker Change: First off you're expecting low single digit growth for <unk>.

Speaker Change: <unk>, but maybe as we look another quarter or two beyond that in fiscal 'twenty. Five are you able to give us I guess any qualitative view on what you might have to do you're expecting in terms of organic growth and perhaps what your customers are telling you about demand beyond this quarter.

Speaker Change: Yes.

Russell: This is Russell, obviously, I wish I had a perfect crystal ball I think a lot of industrial indicators are pointing to a favorable second.

Russell: Half of the calendar on which would be the beginning of our fiscal year I do think that some of the expectations for recovery have been premature unit, depending on who you read it was supposed to happen in the first half of this calendar year and yet it seems like a lot of things have pushed out so I guess, the long and short of it is.

Russell R. Shaller: So I guess the long and short of it is, we, along with I think a lot of our industrial peers, are looking forward to a more robust second half of the year, but I still think there's a lot of uncertainties that maybe temper that optimism. Okay. That makes sense. And, relatedly, you know, what trends are you seeing in industrial automation at this point? I guess as it relates to industrial track and trace.

Russell: We along with I think a lot of our industrial peers are looking forward to a more robust.

Russell: Second half of the year, but I still think theres a lot of uncertainties.

Speaker Change: Maybe temper that optimism.

Speaker Change: Okay understood that makes sense.

Speaker Change: And I guess, just relatedly what trends are you seeing in industrial automation at this point.

I guess as it relates to industrial track and trace.

Speaker Change: And then secondly, I think healthcare has been a continual drag on an organic basis over the past couple of quarters.

Speaker Change: But just wondering if you can give us a quick update on that business as well. Thanks.

Speaker Change: Yes, so I'll give you the short term and the long term on the industrial track and trace and automation. So the short term, we're definitely seeing some hesitancy hesitancy in investment I think partially due to interest rate environments and general economic concerns.

Speaker Change: In the long run, though we feel very optimistic because if you look at machine learning or AI or whatever you want to talk about.

Speaker Change: Along run I think is a fantastic market I do think there's some choppiness that is occurring right now due to overall economic conditions.

In Europe and to a lesser extent in the U S.

Speaker Change: Regarding the healthcare segment hospital admissions.

Speaker Change: Have really been stagnant to down for the last several years and we participate mostly in the hospital admission process, we have less of a footprint in what I'll call the urgent care. So.

Speaker Change: I think our sales have been reflecting of that.

Frankly, it is and has been a bit of a drag on the otherwise stellar growth for some of our industrial products.

Speaker Change: Foresee that trend.

Speaker Change #100: Okay. Thanks.

Speaker Change #101: Thank you one moment for our next question.

Speaker Change #101: Yeah.

Speaker Change #101: <unk>.

Unknown Executive: One moment for our next question. Our next question comes from the line of Steve Ferazani of Sidoti. Your line is now open. Morning, Russell, and thanks so much for the detail on the call. Russell, just I want to ask first about the three new products you detailed, were any of those available in the previous quarters when those products were coming? No, they're there.

Speaker Change #102: Our next question comes from the line of Steve <unk> of Sidoti. Your line is now open.

Speaker Change #103: Good morning, Russell and thanks, so much for the detail on the call.

Steve: Russell just I wanted to ask first on the three new products, you detailed or any of those available in the previous quarter. So those products coming.

Russell: No there there.

Steve: Sure.

Russell: They are basically in pilot launch right now so they are really will start to see sales in in Q4 and into next year. The one thing.

Russell: While I am Super excited about all three of those products in some of the products that are coming you'll remember were comprised of literally hundreds of different products. We don't have the equivalent of an iPhone launch so.

Russell: Sales will feather into our.

Overall organic growth rate, but you won't see a pop due to those launches.

Russell R. Shaller: So the question is, given the macro concerns in Europe, the positive surprise to me was almost 5% organic growth. Because I think about you as sort of GDP plus, that's certainly much stronger. Can you help us out with how you got there?

Russell: Okay.

Speaker Change #104: So the question is given the Mac tobacco concerns in Europe.

Speaker Change #104: Positive surprise to me.

Speaker Change #104: Almost 5% organic growth.

Speaker Change #105: I think everybody was sort of GDP plus that's certainly much stronger can you help us out on how you got there.

Russell R. Shaller: Price versus volume or how you're, you know, outpacing the market in your So, you know, I would say we have just simply a fantastic team that is finding new ways to increase wallet share in Europe. The, you're right, the GDP, the collective GDP of the EU region is probably less than 1%, although subject to revision. And we sell to virtually all industrial companies worldwide, or at least in the EU and in the Americas.

Speaker Change #106: This versus volume or what.

Speaker Change #107: You're outpacing the market in Europe.

Speaker Change #108: So I would say we have just simply a fantastic team that is finding new ways to increase wallet share.

Speaker Change #108: In Europe.

Speaker Change #109: Youre right the GDP collective DDG GDP of the EU region is.

Speaker Change #109: Probably less than 1%, although subject to revision.

Speaker Change #109: And we do sell to virtually all industrial companies worldwide or at least in the EU and in the Americas.

Speaker Change #109: But not every company buys everything we can do and I think the European team has been particularly successful in expanding wallet share at a number of our customers and Thats why youre seeing better organic growth because it is not coming via pricing. It is principally due to increase.

Russell R. Shaller: But not every company buys everything we can do, and I think the European team has been particularly successful in expanding wallet share at a number of our customers. And that's why you're seeing better organic growth because it is not coming via pricing. It is principally due to increased product consumption. And then I was surprised with even further gross margin expansion. Is that mix, is that with health care not growing as fast? Is that a straight mix?

Speaker Change #109: <unk>.

Speaker Change #109: Product consumption.

Speaker Change #109: Okay.

Speaker Change #110: And then I was.

Speaker Change #111: Surprised with even further margin gross margin expansion is that mix is that with health care and not growing as fast.

Russell R. Shaller: How much of that is new products? And how sustainable is the margin you're being afforded this quarter? Yeah, you know, we've failed a gross margin was very favorable. You know, I think we're living in a great period right now for Brady, where some of the part variance costs that we had had previously and the premiums that we had paid on shipping and transportation have all gone away. And so you're seeing a much cleaner gross margin.

Speaker Change #112: Is that just that straight mix, how much of that is new products and how sustainable is the margin you reported this quarter.

Speaker Change #111: Yeah.

Speaker Change #113: We feel the gross margin was very favorable.

Speaker Change #114: We're living in a great period, right now for Brady, where some of the <unk>.

Speaker Change #114: Part variance cost that we had had previously and the premiums that we had paid on shipping and transportation have all gone away and so youre seeing a much cleaner.

Russell R. Shaller: There's a little bit of one-time gains in that gross margin, but I think, you know, 51 and change is probably close to a high watermark for our gross margin. So I wouldn't necessarily bank that in for the future.

Speaker Change #115: Gross margin there is a little bit of one time gains in that gross margin I think.

Speaker Change #115: 51, and change is probably close to a high watermark.

Speaker Change #116: Our gross margin.

Speaker Change #116: So I wouldn't necessarily bank debt in the future, but we're although we don't manage to gross margin directionally in the 50% range is certainly a comfortable place for our portfolio.

Russell R. Shaller: But, you know, we're, although we don't manage to gross margin directionally, in the 50% range is certainly a comfortable place for our portfolio. Great. And then just on SG&A, you've done such a great job over the last couple of years, bringing that down as a percentage of sales. Even though you grew this quarter, it's kind of flattening out. Do you still think there's room?

Speaker Change #116: Great.

Speaker Change #116: And then just on SG&A.

Speaker Change #117: You've done such a great job over the last couple of years, breaking that down as a percentage of sales even though you grew this quarter, it's kind of flattening out do you still think there is room or at a comfortable level when you're thinking about SG&A as a percentage of sales.

Russell R. Shaller: Are you at a comfortable level when you're thinking about SG&A as a percentage of sales? You know, I think there are a couple of competing factors there that are both helping to improve SG&A, as in lowering SG&A, and some other factors that are increasing it. So I'll kind of give you the puts and takes. Being able to deploy our salespeople more efficiently and effectively and using tools to better route their sales calls and target customers and accounts, that goes towards the plus side of driving down SG&A costs. On the flip side of that, paid advertising, particularly doing search and what have you, continues to be an increasing expense. The two right now are kind of balancing each other.

Speaker Change #118: I think there is there is a couple of competing factors there.

Speaker Change #118: That are both helping to improve SG&A or as in lowering SG&A and some other factors that are increasing itself I'll kind of give you the puts and takes.

Speaker Change #118: Being able to do.

Speaker Change #118: Deploy our salespeople more efficiently and effectively and using tools to better route their sales calls.

Speaker Change #119: Into two target customers and accounts that goes towards the plus column of driving down SG&A costs on the flip.

Speaker Change #119: Flip side of that.

Speaker Change #119: Paid advertising, particularly doing search and what have you on continues to be an increasing expense. The two right now we're kind of balancing each other I think the on the future wildcard will be how search is in paid search is potentially up ended with some of.

Speaker Change #119: The new tools coming out there as well as the internal tools, we're using to better optimize where we're placing our investments in terms of paid search catalogs and field salespeople. So I know that's kind of a long winded answer without giving you a lot of direction right now we feel comfortable.

Russell R. Shaller: But, of course, we are always looking for ways to further drive down that cost and improve our efficiency. Okay, that's helpful. Last one for me, you didn't talk much about GraviTech. Are you waiting for that to close to provide more detail or anything you want to say about that? Yeah, so I can give you, you know, it's still in the regulatory approval process. You know, I don't want to delve too much into that till we get ready to close.

Speaker Change #119: <unk> with the SG&A, but of course, we are always looking for ways to further drive down that cost and improve our efficiency.

Speaker Change #120: Okay. That's helpful.

Speaker Change #121: Last one from me just you Didnt talk much about gravitas, you're waiting for that to close to provide more detail or anything you want to say, yes. So I can give you.

Russell R. Shaller: But I think it is reasonable to talk about the thesis of GraviTech and why we are looking at that as a business. You know, so half or more of our products are related to identification and identification solutions. So whether it's part marking, or it's machine readable barcodes, or what have you. The one part of the ecosystem that we don't have is direct part marking.

Speaker Change #122: Still in the regulatory approval process.

Speaker Change #122: So I don't want to delve too much into that until we get ready to close but I think it is reasonable to talk about the thesis of <unk> why we are looking at that as a business.

Speaker Change #122: So half or more of our products are related to identification and identification solutions, so whether it's part marking or.

Speaker Change #122: Machine readable barcodes or what have you the.

Speaker Change #122: One part of the ecosystem that we don't have is direct part market. So we do labels and we do materials, but there is a percentage of products that are direct part marked.

Speaker Change #122: Either laser or via mechanical marking and that's not been part of our portfolio previously.

Speaker Change #122: See the potential with grab attack to provide a more complete solution to our customers, where we can provide both the labels for customers that want that but also part marking in machine readable barcodes directly on parts for another segment of the.

Speaker Change #123: Customer base that wants those and again it is very much geared towards a manufacturing professional use there is there is a part of lasers that are consumer based that's.

Russell R. Shaller: And again, it is very much geared towards manufacturing professional use. But there's there's a part of lasers that are consumer based. That's not really our target market. Thanks, Russell. Thanks, Ann. Please take one moment for our next question. Our next question comes from the line of Keith Housum of North Coast Research. Your line is now open. Good morning, Russell. Good morning, Ann.

Speaker Change #123: That's not really our target market.

Speaker Change #123: Okay.

Russell: Thanks Russell.

Lewis: Thank you will Lewis for next question.

Lewis: Yeah.

Lewis: Okay.

Lewis: Our next question comes from the line of Keith Wholesome of Northcoast Research. Your line is now open.

Unknown Executive: And congratulations on the quarter. You absolutely, you know, beat our expectations and outperformed your peers. Russell, as we're looking at you guys rolling out your rugged track and trace products, I think your scanner is probably the first one coming out here. Does your go-to-market strategy change at all as you're approaching what I think is a relatively new market when it comes to these types of devices? Yeah, I would say partially.

Speaker Change #125: Good morning, Ralph Good morning, and congratulations on the quarter yesterday ill beat our.

Keith Michael Housum: Patients and outperformed your peers.

Speaker Change #126: Hey, Russell as we're looking at you guys Rolling out your rugged track and trace products that anchor scanners by the first one coming out here.

You go to market strategy change at all as you approach and what I think is relatively new market, we're comfortably type of devices.

Russell R. Shaller: So, you know, there are a significant number of our customers that work with us directly and will continue to do so. And that's also true of some of our distributors that are involved in this space. The one thing that is additive to our channel to market is that we're working more through value-added resellers. And, of course, throughout the world, there's a network of VARs. Now, when we purchased Code and Nordic ID years ago, you know, that is a very comfortable space for them. They are, although in slightly different markets; they've been working with VARs for many years. Brady traditionally had not been doing that much.

Speaker Change #127: I would say, partially so there are a significant number of our customers that work with us directly and we will continue to do so.

Speaker Change #127: It's also true of some of our distributors that are involved in this space.

Speaker Change #127: The one thing that is additive to our channel to market is were working more through value added resellers.

Course throughout the World. There is a network of bars now when we purchased code and northern <unk> years ago.

Speaker Change #128: That is a very comfortable space to them. They are on although in slightly different markets they've been working with vars for many years on Brady traditionally had not been doing that much. So you know what you are looking at is kind of twofold were taking some of the var network that code height established in the U S and Nordic has in.

Speaker Change #129: Europe and were just expanding our portfolio to them at the same time, we are working with a number of other segments that we have used in the past, but to a much less extent because we didn't have that full portfolio of products and then to expand further.

Part of the thesis of grab of attack is to add <unk>.

Speaker Change #130: Lasers, and direct marketing to that overall capability to help us further work with some of the var integrators in a manufacturing environment.

Ann E. Thornton: Great, appreciate that. In terms of your share repurchases, is there any restriction on your share repurchases going forward based on where you have cash? I guess I could ask the question another way, you know, will you be paying for Gravitac out of your European funds or out of the US funds?

Speaker Change #131: Great I appreciate that.

In terms of your share repurchases.

Speaker Change #132: Is there any restriction on your share repurchases going forward based on where you have cash I guess, maybe ask the question another way, we'd be paying for <unk> out of a European firms or how the U S funds.

Ann E. Thornton: Yeah, good question, Keith. No, no restriction on our ongoing share repurchases from the standpoint of where cash is located. We have 37 million remaining on our current authorization and will continue to be opportunistic as the opportunities present themselves in the future. Great, thank you.

Speaker Change #132: Great.

Speaker Change #132: Yes, yes. Good question Keith No no restriction on our ongoing share repurchases from a from the standpoint of where our cash is located.

Keith Michael Housum: $37 million remaining on our current authorization and will continue to be opportunistic as the as the opportunities present themselves in the future.

Russell R. Shaller: And then Russell, I think I heard you say that as you guys ended the quarter, you ended the quarter with some momentum. So it sounds like your activity actually picked up throughout the quarter and is carrying into the fourth quarter. Is that fair? Yeah, let's hope it continues into the fourth quarter. But yes, definitely, we definitely saw a better last month of the quarter than the first two. The first two months were, were very much a continuation of what we had seen in the first half of our fiscal year.

Speaker Change #133: Great. Thank you and then if I heard I think I heard you say that as you guys ended the quarter you ended the quarter with some momentum so it sounds like youre activity actually picked up picked up throughout the quarter as carrying into the fourth quarter is that fair.

Speaker Change #134: Yes, let's hope it continues into the fourth quarter.

Speaker Change #135: Yes, definitely we definitely saw a better.

Speaker Change #135: Last month of the quarter than the first two the first two months, where we're very much a continuation of what we had seen.

Speaker Change #135: In the first half of our fiscal year.

Russell R. Shaller: But this last month really was an acceleration of product adoption. And, you know, we hope to see that come through in the fourth quarter, but we'll just see how that turns out. It may have partially answered my next question, the final question, but what surprised you in the quarter? Was it the fact that you accelerated too quickly in the last month?

Speaker Change #135: This last month.

Speaker Change #135: Really was an acceleration of product adoption and John.

Speaker Change #136: We hope to see that come through in the fourth quarter, but we'll just see how that turns out.

Speaker Change #136: Yes.

Speaker Change #137: Partially answered my next question our final question, but what's the price during the quarter was it. The fact that you accelerated so quickly last month.

Speaker Change #138: I'm, sorry, I didn't.

Russell R. Shaller: I'm sorry, I didn't. Yeah, what surprised you with your results for the quarter? I thought you said price. No, sorry.

Speaker Change #139: Yes, I guess, what surprised you with your results for the quarter.

Speaker Change #139: Alright.

Speaker Change #139: Sorry.

Russell R. Shaller: Um, you know, it was very broad based; it wasn't a particular customer or a particular end market. It was generally very broadly based. You know, I do think that we're kind of in a very fascinating time of a lot of money sitting on the sidelines and some uncertainty about the level of investments. Apparently, in April, a number of our customers woke up and decided they wanted to buy. So, you know, I don't mean to be flippant on that.

You know it was very broad based it wasn't a particular customer or.

Speaker Change #139: Particularly end market.

Speaker Change #139: It was generally very broadly based.

Speaker Change #139: Do think it's we're kind of in a very fascinating time of a lot of money sitting on the sidelines and some uncertainty about level of investments.

Speaker Change #139: Apparently in April a number of our customers woke up and decided they wanted to buy things so.

Russell R. Shaller: But, you know, it can be fickle sometimes when you look at capital expenditures and how companies look at their investment thesis going out, you know, that we've got our stable M&R, M&O, and MRO products that continue to be very stable. And then you have some that are more sensitive to overall economic conditions.

Speaker Change #139: I don't mean to be flip on that but.

Speaker Change #140: It can be fickle, sometimes when you look at capital expenditures and how companies look at their investment thesis going out.

Speaker Change #140: Our stable MLR MMO MRO products that continue to be very stable and then you have some that are more sensitive to overall economic conditions and it just.

Speaker Change #140: It.

Speaker Change #141: Well for us in April.

Russell R. Shaller: And it just, it, hit well for us in April. Great. Thank you. Appreciate it. Thank you. I'm not asking any further questions at this time. I'd now like to turn it back to Russell Shaller, President and CEO, for closing remarks.

Speaker Change #142: Great. Thank you appreciate it.

Speaker Change #143: Thank you I'm showing no further questions at this time I would now like to turn it back to Russell <unk>, President and CEO for closing remarks.

Russell R. Shaller: Thanks, everyone, for your time and participation today. Our results were very good this quarter with 4.5% organic sales growth and record high earnings per share. Our gross profit margins have improved to more than 50%, which demonstrates the value we are bringing to our customers with our innovative products and solutions. We're investing in research and development, and our pipeline is filled with new and innovative products yet to come. Our financial position is excellent.

Russell R. Shaller: We're investing in research and development and our pipeline is filled with new and innovative products yet to come.

Russell R. Shaller: Our financial position is excellent our balance sheet provides us with the ability to continue to invest in organic businesses through the addition of sales resources and talented engineers. We're proud of our increased annual dividend for 38 straight years, and we can buy back shares and transact strategic M&A when the opportunities are available.

Russell R. Shaller: Our balance sheet provides us with the ability to continue to invest in organic businesses through the addition of sales resources and talented engineers. We're proud of our increased annual dividend for 38 straight years. And we can buy back shares and transact strategic M&A when the opportunities are available. Our high quality earnings are the result of significant cash generation, which allows us to fund all of our capital allocation priorities simultaneously in order to generate shareholder return over the long term.

Russell R. Shaller: <unk> our high quality earnings are the result in significant cash generation, which allows us to fund all of our capital allocation priorities simultaneously and.

Russell R. Shaller: We're focused on our consistent priorities, which are to continue to launch innovative new products that provide unique and effective solutions for our customers, to continue to invest in sales-generating resources and increase organic sales, to execute operational efficiencies and continue to increase profitability, 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 buyback. The macroeconomic environment can present uncertain uncertainties at times. But we'll continue to control what we can control so that we deliver consistent, long-term value for our shareholders.

Speaker Change #144: The macro economic environment can present uncertain uncertainties at times, but we will continue to control what we can control. So that we deliver consistent long term value for our shareholders. Thank you for your time this morning and for your interest in Brady Operator, you may disconnect the call.

Unknown Executive: Thank you 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 concludes the program. You may now disconnect.

Speaker Change #145: Thank you for your participation in today's conference. This concludes the program you may now disconnect.

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