Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2023 third quarter ended April 30, 2023
Sales for the quarter decreased 0.4 percent compared to the same quarter of the prior year. Organic sales increased 1.9 percent, foreign currency reduced sales by 2.1 percent and the divestiture of the PremiSys business reduced sales by 0.2 percent in the quarter.
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Diluted EPS increased 23.1 percent to a record high of $0.96 in the third quarter of fiscal 2023 compared to $0.78 in the same quarter of the prior year. Diluted EPS Excluding Certain Items* increased 10.5 percent to a record high of $0.95 in the third quarter of fiscal 2023 compared to $0.86 in the same quarter of the prior year.
Net cash provided by operating activities increased 77.2 percent to $72.5 million in the third quarter of fiscal 2023 compared to $40.9 million in the third quarter of last year.
Earnings per diluted Class A Common Share guidance was adjusted for the full year ending July 31, 2023 from the previous range of $3.23 to $3.43 to the new range of $3.32 to $3.47 on a GAAP basis, and the low end was raised from the previous range of $3.40 to $3.60 to the new range of $3.45 to $3.60, on a non-GAAP basis.
Effective February 1, 2023, the Company is organized and managed on a geographic basis with two reportable segments: Americas & Asia and Europe & Australia. All segment-related data has been recast to reflect the new reportable segments.
MILWAUKEE, May 18, 2023 (GLOBE NEWSWIRE) -- Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2023 third quarter ended April 30, 2023.
Quarter Ended April 30, 2023 Financial Results:
Sales for the quarter ended April 30, 2023 decreased 0.4 percent, which consisted of an organic sales increase of 1.9 percent, a decrease of 2.1 percent from foreign currency translation and a decrease of 0.2 percent from the divestiture of the PremiSys business. Sales for the quarter ended April 30, 2023 were $337.1 million compared to $338.6 million in the same quarter last year. By region, sales increased 0.1 percent in the Americas & Asia and decreased 1.4 percent in Europe & Australia, which consisted of an organic sales increase of 1.2 percent in the Americas & Asia and an organic sales increase of 3.4 percent in Europe & Australia.
Income before income taxes increased 23.0 percent to $63.0 million for the quarter ended April 30, 2023, compared to $51.3 million in the same quarter last year. Income Before Income Taxes Excluding Certain Items* for the quarter ended April 30, 2023, which was adjusted for amortization expense of $2.5 million and removes the $3.8 million pre-tax gain on the sale of the PremiSys business, was $61.7 million, an increase of 8.6 percent compared to the third quarter of last year.
Net income for the quarter ended April 30, 2023 was $48.1 million compared to $40.1 million in the same quarter last year. Earnings per diluted Class A Nonvoting Common Share were $0.96 in the third quarter of fiscal 2023, compared to $0.78 in the same quarter last year. Net Income Excluding Certain Items* for the quarter ended April 30, 2023 was $47.6 million and Diluted EPS Excluding Certain Items* for the quarter ended April 30, 2023 was $0.95. Net Income Excluding Certain Items* for the quarter ended April 30, 2022 was $44.2 million, and Diluted EPS Excluding Certain Items* for the quarter ended April 30, 2022 was $0.86.
Nine-Month Period Ended April 30, 2023 Financial Results:
Sales for the nine-month period ended April 30, 2023 increased 0.8 percent, which consisted of an organic sales increase of 5.0 percent, a decrease of 4.1 percent from foreign currency translation and a decrease of 0.1 percent from the divestiture of the PremiSys business. Sales for the nine months ended April 30, 2023 were $985.9 million compared to $978.1 million in the same period last year. By region, sales increased 2.8 percent in the Americas & Asia and decreased 3.1 percent in Europe & Australia, which consisted of an organic sales increase of 4.0 percent in the Americas & Asia and an organic sales increase of 7.0 percent in Europe & Australia.
Income before income taxes increased 17.3 percent to $161.9 million for the nine-month period ended April 30, 2023, compared to $138.0 million in the same period last year. Income Before Income Taxes Excluding Certain Items* for the nine months ended April 30, 2023, which was adjusted for amortization expense of $9.4 million and removes the $3.8 million gain on the sale of our PremiSys business, was $167.5 million, an increase of 10.8 percent compared to the same period of the prior year.
Net income for the nine-month period ended April 30, 2023 was $125.5 million compared to $108.9 million in the same period last year. Earnings per diluted Class A Nonvoting Common Share were $2.51 for the nine months ended April 30, 2023, compared to $2.09 in the same period last year. Net Income Excluding Certain Items* for the nine months ended April 30, 2023 was $130.3 million and Diluted EPS Excluding Certain Items* for the nine months ended April 30, 2023 was $2.60. Net Income Excluding Certain Items* for the nine months ended April 30, 2022 was $118.9 million, and Diluted EPS Excluding Certain Items* for the nine months ended April 30, 2022 was $2.28.
Commentary:
“Our most recent financial results once again demonstrate how our investment in research and development is paying off and adding tremendous value to our customers. This quarter, we launched several new industrial printers that continue to separate us from our competition. Our ability to innovate has never been stronger and is setting the stage for continued future growth,” said Brady’s President and Chief Executive Officer, Russell R. Shaller. “This quarter, we completed the reorganization of Brady around two new operating segments: Americas & Asia and Europe & Australia. This reorganization is allowing us to better integrate our businesses while supporting continued organic growth by combining our best go-to-market strategies in each geography, facilitating an increased pace of new product development, and further simplifying our global businesses. While we recognize that the macro-economy is uncertain, we will continue to invest in our critical organic and inorganic growth initiatives throughout the economic cycle, which we believe positions us for future success.”
“Brady had a strong quarter. We posted record high quarterly diluted EPS of $0.96 and our operating cash flow was $72.5M, which equates to 151 percent of GAAP net income and is up 77 percent from the same quarter last year,” said Brady’s Chief Financial Officer, Ann Thornton. “We also returned $11.4 million to our shareholders in the form of dividends this quarter and we repurchased $29.8 million in shares during the first nine months of this fiscal year. We have minimal debt and we are in a net cash position of $84.2 million at April 30, 2023. As for capital allocation, we expect to continue to fully fund our organic investments, return cash to our shareholders in the form of dividends, be opportunistic with share buybacks and execute strategic acquisitions that increase our growth trajectory.”
Fiscal 2023 Guidance:
The Company adjusted its GAAP earnings per diluted Class A Nonvoting Common Share guidance for the year ending July 31, 2023 from the previous guidance range of $3.23 to $3.43 per share to the new full year guidance range of $3.32 to $3.47 per share. The Company raised the low end of its Diluted EPS Excluding Certain Items* guidance for the year ending July 31, 2023 from the previous range of $3.40 to $3.60 per share to the new full year guidance range of $3.45 to $3.60 per share.
The assumptions included in our fiscal 2023 guidance include a full-year income tax rate of approximately 21 percent, depreciation and amortization expense ranging from $32 million to $34 million, and capital expenditures of approximately $20 million. Our fiscal 2023 guidance is based on foreign currency exchange rates as of April 30, 2023 and assumes continued economic growth.
A webcast regarding Brady’s fiscal 2023 third quarter financial results will be available at www.bradycorp.com/investors beginning at 9:30 a.m. central time today.
Brady Corporation is an international manufacturer and marketer of complete solutions that identify and protect people, products and places. Brady’s products help customers increase safety, security, productivity and performance and include high-performance labels, signs, safety devices, printing systems and software. Founded in 1914, the Company has a diverse customer base in electronics, telecommunications, manufacturing, electrical, construction, medical, aerospace and a variety of other industries. Brady is headquartered in Milwaukee, Wisconsin and as of July 31, 2022, employed approximately 5,700 people in its worldwide businesses. Brady’s fiscal 2022 sales were approximately $1.30 billion. Brady stock trades on the New York Stock Exchange under the symbol BRC. More information is available on the Internet at www.bradyid.com.
* Income Before Income Taxes Excluding Certain Items, Net Income Excluding Certain Items, and Diluted EPS Excluding Certain Items are non-GAAP measures. See appendix for more information on these measures, including reconciliations to the most directly comparable GAAP measures.
In this news release, statements that are not reported financial results or other historic information are “forward-looking statements.” These forward-looking statements relate to, among other things, the Company's future financial position, business strategy, targets, projected sales, costs, income, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations.
The use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project,” “plan” or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements by their nature address matters that are, to different degrees, uncertain and are subject to risks, assumptions, and other factors, some of which are beyond Brady’s control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For Brady, uncertainties arise from: increased cost of raw materials, labor and freight as well as raw material shortages and supply chain disruptions; decreased demand for our products; our ability to compete effectively or to successfully execute our strategy; our ability to develop technologically advanced products that meet customer demands; Brady’s ability to identify, integrate, and grow acquired companies, and to manage contingent liabilities from divested businesses; adverse impacts of the novel coronavirus (“COVID-19”) pandemic or other pandemics; difficulties in protecting our websites, networks, and systems against security breaches; risks associated with the loss of key employees; extensive regulations by U.S. and non-U.S. governmental and self-regulatory entities; litigation, including product liability claims; foreign currency fluctuations; potential write-offs of goodwill and other intangible assets; changes in tax legislation and tax rates; differing interests of voting and non-voting shareholders; numerous other matters of national, regional and global scale, including major public health crises and government responses thereto and those of a political, economic, business, competitive, and regulatory nature contained from time to time in Brady’s U.S. Securities and Exchange Commission filings, including, but not limited to, those factors listed in the “Risk Factors” section within Item 1A of Part I of Brady’s Form 10-K for the year ended July 31, 2022.
These uncertainties may cause Brady's actual future results to be materially different than those expressed in its forward-looking statements. Brady does not undertake to update its forward-looking statements except as required by law.
For More Information:
Investor contact: Ann Thornton 414-438-6887
Media contact: Kate Venne 414-358-5176BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited; Dollars in thousands, except per share data) Three months ended April 30, Nine months ended April 30, 2023 2022 2023 2022 Net sales$337,116 $338,551 $985,934 $978,081 Cost of goods sold 167,425 174,525 504,539 509,705 Gross margin 169,691 164,026 481,395 468,376 Operating expenses: Research and development 15,715 14,923 45,025 42,795 Selling, general and administrative 90,975 96,214 273,202 285,485 Total operating expenses 106,690 111,137 318,227 328,280 Operating income 63,001 52,889 163,168 140,096 Other income (expense): Investment and other income (expense) 785 (1,308) 1,596 (1,343) Interest expense (753) (329) (2,886) (763) Income before income taxes 63,033 51,252 161,878 137,990 Income tax expense 14,981 11,198 36,399 29,075 Net income$48,052 $40,054 $125,479 $108,915 Net income per Class A Nonvoting Common Share: Basic$0.97 $0.78 $2.52 $2.11 Diluted$0.96 $0.78 $2.51 $2.09 Net income per Class B Voting Common Share: Basic$0.97 $0.78 $2.51 $2.09 Diluted$0.96 $0.78 $2.49 $2.08 Weighted average common shares outstanding: Basic 49,653 51,326 49,755 51,700 Diluted 50,001 51,568 50,033 52,055 BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) April 30, 2023 July 31, 2022 (Unaudited) ASSETS Current assets: Cash and cash equivalents$135,047 $114,069 Accounts receivable, net of allowance for credit losses of $8,417 and $7,355, respectively 184,907 183,233 Inventories 182,809 190,023 Prepaid expenses and other current assets 14,020 10,743 Total current assets 516,783 498,068 Property, plant and equipment—net 139,747 139,511 Goodwill 590,684 586,832 Other intangible assets 65,210 74,028 Deferred income taxes 15,124 15,881 Operating lease assets 27,378 31,293 Other assets 21,840 21,719 Total$1,376,766 $1,367,332 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable$74,745 $81,116 Accrued compensation and benefits 65,789 76,764 Taxes, other than income taxes 13,246 12,539 Accrued income taxes 5,103 8,294 Current operating lease liabilities 14,196 15,003 Other current liabilities 63,357 61,458 Total current liabilities 236,436 255,174 Long-term debt 50,849 95,000 Long-term operating lease liabilities 14,573 19,143 Other liabilities 79,812 86,717 Total liabilities 381,670 456,034 Stockholders’ equity: Common stock: Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 45,935,672 and 46,370,708 shares, respectively 513 513 Class B voting common stock—Issued and outstanding, 3,538,628 shares 35 35 Additional paid-in capital 350,758 345,266 Retained earnings 983,694 892,417 Treasury stock—5,325,815 and 4,890,779 shares, respectively, of Class A nonvoting common stock, at cost (244,503) (217,856)Accumulated other comprehensive loss (95,401) (109,077)Total stockholders’ equity 995,096 911,298 Total$1,376,766 $1,367,332 BRADY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; Dollars in thousands) Nine months ended April 30, 2023 2022 Operating activities: Net income$125,479 $108,915 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 24,522 25,448 Stock-based compensation expense 6,427 9,153 Gain on sale of business (3,770) — Deferred income taxes (5,947) 2,858 Other (1,336) (1,080) Changes in operating assets and liabilities: Accounts receivable 1,744 (26,438) Inventories 9,279 (47,784) Prepaid expenses and other assets (3,429) (932) Accounts payable and accrued liabilities (19,704) (5,584) Income taxes (3,404) 680 Net cash provided by operating activities 129,861 65,236 Investing activities: Purchases of property, plant and equipment (12,912) (22,130) Sale of business 8,000 — Other 11 59 Net cash used in investing activities (4,901) (22,071) Financing activities: Payment of dividends (34,202) (34,701) Proceeds from exercise of stock options 4,091 663 Payments for employee taxes withheld from stock-based awards (1,965) (5,070) Purchase of treasury stock (29,774) (84,930) Proceeds from borrowing on credit agreement 102,916 155,216 Repayment of borrowing on credit agreement (147,067) (116,216) Other 66 3,276 Net cash used in financing activities (105,935) (81,762) Effect of exchange rate changes on cash and cash equivalents 1,953 (5,670) Net increase (decrease) in cash and cash equivalents 20,978 (44,267) Cash and cash equivalents, beginning of period 114,069 147,335 Cash and cash equivalents, end of period$135,047 $103,068 BRADY CORPORATION AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited; Dollars in thousands) Three months ended April 30, Nine months ended April 30, 2023 2022 2023 2022 NET SALES Americas & Asia$222,813 $222,579 $661,375 $643,292 Europe & Australia 114,303 115,972 324,559 334,789 Total$337,116 $338,551 $985,934 $978,081 SALES INFORMATION Americas & Asia Organic 1.2% 9.2% 4.0% 10.7% Currency (0.8)% (0.1)% (1.1)% 0.3% Divestiture (0.3)% —% (0.1)% —% Acquisition —% 8.6% —% 8.3% Total 0.1% 17.7% 2.8% 19.3% Europe & Australia Organic 3.4% 8.4% 7.0% 7.6% Currency (4.8)% (8.1)% (10.1)% (4.6)% Acqusition —% 8.7% —% 8.8% Total (1.4)% 9.0% (3.1)% 11.8% Total Company Organic 1.9% 9.0% 5.0% 9.6% Currency (2.1)% (3.0)% (4.1)% (1.5)% Divestiture (0.2)% —% (0.1)% —% Acquisition —% 8.6% —% 8.5% Total (0.4)% 14.6% 0.8% 16.6% SEGMENT PROFIT Americas & Asia$49,192 $45,021 $130,511 $114,659 Europe & Australia 17,099 16,050 47,316 46,165 Total$66,291 $61,071 $177,827 $160,824 SEGMENT PROFIT AS A PERCENT OF NET SALES Americas & Asia 22.1% 20.2% 19.7% 17.8% Europe & Australia 15.0% 13.8% 14.6% 13.8% Total 19.7% 18.0% 18.0% 16.4% Three months ended April 30, Nine months ended April 30, 2023 2022 2023 2022 Total segment profit$66,291 $61,071 $177,827 $160,824 Unallocated amounts: Administrative costs (7,060) (8,182) (18,429) (20,728) Gain on sale of business 3,770 - 3,770 - Investment and other income (expense) 785 (1,308) 1,596 (1,343) Interest expense (753) (329) (2,886) (763) Income before income taxes$63,033 $51,252 $161,878 $137,990 GAAP to NON-GAAP MEASURES (Unaudited; Dollars in Thousands, Except Per Share Amounts) In accordance with the U.S. Securities and Exchange Commission’s Regulation G, the following provides definitions of the non-GAAP measures used in the earnings release and the reconciliation to the most closely related GAAP measure. Income Before Income Taxes Excluding Certain Items: Brady is presenting the non-GAAP measure, "Income Before Income Taxes Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our ongoing results. We believe this profit measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of the GAAP measure of Income before income taxes to the non-GAAP measure of Income Before Income Taxes Excluding Certain Items: Three months ended April 30, Nine months ended April 30, 2023 2022 2023 2022 Income before income taxes$63,033 $51,252 $161,878 $137,990 Amortization expense 2,461 3,735 9,350 11,291 Gain on sale of business (3,770) - (3,770) - Other non-routine charges - 1,841 - 1,841 Income Before Income Taxes Excluding Certain Items (non-GAAP measure)$61,724 $56,828 $167,458 $151,122 Income Tax Expense Excluding Certain Items: Brady is presenting the non-GAAP measure, "Income Tax Expense Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our ongoing results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of the GAAP measure of Income tax expense to the non-GAAP measure of Income Tax Expense Excluding Certain Items: Three months ended April 30, Nine months ended April 30, 2023 2022 2023 2022 Income tax expense (GAAP measure)$14,981 $11,198 $36,399 $29,075 Amortization expense 569 885 2,203 2,672 Gain on sale of business (1,431) - (1,431) - Other non-routine charges - 496 - 496 Income Tax Expense Excluding Certain Items (non-GAAP measure)$14,119 $12,579 $37,171 $32,243 Net Income Excluding Certain Items: Brady is presenting the non-GAAP measure, "Net Income Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this non-GAAP measure are derived from amounts included in the Consolidated Financial Statements and supporting footnote disclosures. We do not view these items to be part of our ongoing results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of the GAAP measure of Net income to the non-GAAP measure of Net Income Excluding Certain Items: Three months ended April 30, Nine months ended April 30, 2023 2022 2023 2022 Net income (GAAP measure)$48,052 $40,054 $125,479 $108,915 Amortization expense 1,892 2,850 7,147 8,619 Gain on sale of business (2,339) - (2,339) - Other non-routine charges - 1,345 - 1,345 Net Income Excluding Certain Items (non-GAAP measure)$47,605 $44,249 $130,287 $118,879 Diluted EPS Excluding Certain Items: Brady is presenting the non-GAAP measure, "Diluted EPS Excluding Certain Items." This is not a calculation based upon GAAP. The amounts included in this non-GAAP measure are derived from amounts included in the Consolidated Financial Statements. We do not view these items to be part of our ongoing results. We believe this measure provides an important perspective of underlying business trends and results and provides a more comparable measure from year to year. The table below provides a reconciliation of the GAAP measure of Net income per Class A Nonvoting Common Share to the non-GAAP measure of Diluted EPS Excluding Certain Items: Three months ended April 30, Nine months ended April 30, 2023 2022 2023 2022 Net income per Class A Nonvoting Common Share (GAAP measure)$0.96 $0.78 $2.51 $2.09 Amortization expense 0.04 0.06 0.14 0.17 Gain on sale of business (0.05) - (0.05) - Other non-routine charges - 0.03 - 0.03 Diluted EPS Excluding Certain Items (non-GAAP measure)$0.95 $0.86 $2.60 $2.28 Diluted EPS Excluding Certain Items Guidance: Fiscal 2023 Expectations Low High Earnings per diluted Class A Common Share (GAAP measure) $3.32 $3.47 Amortization expense 0.18 0.18 Gain on sale of business (0.05) (0.05) Diluted EPS Excluding Certain Items (non-GAAP measure) $3.45 $3.60
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