Brady Corporation Reports Fiscal 2022 Second Quarter Results and Updates Fiscal 2022 Guidance

Rhea-AI Summary

Brady Corporation (NYSE: BRC) reported a significant 19.6% increase in quarterly sales, reaching $318.1 million for Q2 of fiscal 2022. Organic sales rose by 13.1%, with a notable 26.1% growth in Identification Solutions. Income before taxes increased by 6.7% to $42.0 million, while diluted EPS rose 10.2% to $0.65. For the full year, EPS guidance was adjusted to $3.00 to $3.15, reflecting inflationary pressures. Despite short-term margin challenges, the CEO expressed confidence in future growth and strong earnings prospects.

Positive

• Sales increased by 19.6% to $318.1 million.
• Diluted EPS rose 10.2% to $0.65.
• Identification Solutions segment saw a 26.1% sales increase.
• Net income grew to $33.8 million from $30.9 million year-over-year.
• Continued commitment to return funds to shareholders with $14.5 million in dividends and share buybacks.

Negative

• Guidance for diluted EPS was revised down to $3.00 to $3.15 due to inflation and currency strength.
• Inflationary pressures are expected to compress gross profit margins in the short term.

• Sales for the quarter increased 19.6 percent. Organic sales increased 13.1 percent.
  
• Income before income taxes increased 6.7 percent to $42.0 million in the second quarter of fiscal 2022 compared to $39.4 million in the second quarter of fiscal 2021. Income Before Income Taxes Excluding Amortization* increased 12.4 percent to $45.8 million in the second quarter of fiscal 2022 compared to $40.8 million in the second quarter of fiscal 2021.
• Diluted EPS in the second quarter of fiscal 2022 increased 10.2 percent to $0.65 compared to $0.59 in the same quarter of the prior year. Diluted EPS Excluding Amortization* increased 14.8 percent to $0.70 in the second quarter of fiscal 2022 compared to $0.61 in the same quarter of the prior year.
• Earnings per diluted Class A Common Share guidance for the full year ending July 31, 2022 adjusted to a range of $3.00 to $3.15, excluding after-tax amortization expense and $2.78 to $2.93 on a GAAP basis.

MILWAUKEE, Feb. 17, 2022 (GLOBE NEWSWIRE) -- Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2022 second quarter ended January 31, 2022.

Quarter Ended January 31, 2022 Financial Results:
Sales for the quarter ended January 31, 2022 increased 19.6 percent, which consisted of an organic sales increase of 13.1 percent, an increase of 8.6 percent from acquisitions and a decrease of 2.1 percent from foreign currency translation. Sales for the quarter ended January 31, 2022 were $318.1 million compared to $265.8 million in the same quarter last year. By segment, sales increased 26.1 percent in Identification Solutions and increased 2.0 percent in Workplace Safety, which consisted of an organic sales increase of 16.0 percent in Identification Solutions and an organic sales increase of 5.2 percent in Workplace Safety.

Income before income taxes and losses of unconsolidated affiliate increased 6.7 percent to $42.0 million for the quarter ended January 31, 2022, compared to $39.4 million in the same quarter last year. Income Before Income Taxes Excluding Amortization* for the quarter ended January 31, 2022 was $45.8 million, an increase of 12.4 percent compared to the second quarter of last year.

Net income for the quarter ended January 31, 2022 was $33.8 million compared to $30.9 million in the same quarter last year. Earnings per diluted Class A Nonvoting Common Share were $0.65 for the second quarter of fiscal 2022, compared to $0.59 in the same quarter last year. Net Income Excluding Amortization* for the quarter ended January 31, 2022 was $36.7 million and Diluted EPS Excluding Amortization* for the quarter ended January 31, 2022 was $0.70.

Six-Month Period Ended January 31, 2022 Financial Results:
Sales for the six-month period ended January 31, 2022 increased 17.8 percent, which consisted of an organic sales increase of 10.0 percent, an increase of 8.5 percent from acquisitions and a decrease of 0.7 percent from foreign currency translation. Sales for the six months ended January 31, 2022 were $639.5 million compared to $543.1 million in the same period last year. By segment, sales increased 25.8 percent in Identification Solutions and decreased 3.1 percent in Workplace Safety, which consisted of an organic sales increase of 14.6 percent in Identification Solutions and an organic sales decline of 2.0 percent in Workplace Safety.

Income before income taxes and losses of unconsolidated affiliate increased 6.3 percent to $86.7 million for the six months ended January 31, 2022, compared to $81.6 million in the same period last year. Income Before Income Taxes Excluding Amortization* for the six months ended January 31, 2022 was $94.3 million, an increase of 11.8 percent compared to the same period of last year.

Net income for the six-month period ended January 31, 2022 was $68.9 million compared to $64.3 million in the same period last year. Earnings per diluted Class A Nonvoting Common Share were $1.32 for the six months ended January 31, 2022, compared to $1.23 in the same period last year. Net Income Excluding Amortization* for the six months ended January 31, 2022 was $74.6 million and Diluted EPS Excluding Amortization* for the six months ended January 31, 2022 was $1.43.

Commentary:
“We experienced very strong revenue growth of 19.6 percent this quarter and our investments in sales, marketing, and research and development, combined with our reinvigorated innovative spirit have set the stage for strong future growth. We are transforming Brady into a solution provider that is now growing in excess of GDP and is poised for future sales growth due to the strong foundation and positive momentum resulting from the many investments made over the last five-plus years,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “Our strong sales growth was driven by our Identification Solutions division which had total sales growth of 26.1 percent this quarter. The three acquisitions completed last year are performing at or above our initial expectations and are helping shift Brady into faster-growing end markets. Our Workplace Safety business returned to organic sales growth this quarter – returning to growth one quarter earlier than originally anticipated. We are experiencing inflation in many areas including wages, freight, utilities, and raw materials, which we expect to continue to pressure our gross profit margins in the short-term. We believe that these gross margin challenges are temporary and once our pricing and efficiency initiatives catch up to cost inflation, our strong sales growth and improved gross profit margins will drive solid bottom-line growth.”

“Brady is financially strong, is experiencing strong revenue growth, and continues to generate strong earnings. We grew sales nearly 20 percent and grew Diluted EPS Excluding Amortization* nearly 15 percent, which represents another very strong quarter,” said Brady’s Chief Financial Officer, Aaron Pearce. “This quarter, we returned $14.5 million to our shareholders in the form of dividends and share buybacks and over the first six months of this year, we returned a total of $45.0 million to our shareholders, which exemplifies our commitment to returning funds to our shareholders. We have a net cash balance of $64.4 million as of January 31, 2022. We believe that Brady’s strong second quarter revenue growth, improving earnings per share, and solid balance sheet position us well for future financial success.”

Fiscal 2022 Guidance:
Brady’s organic revenue growth was 10.0% during the six months ended January 31, 2022, however, inflationary forces compressed Brady’s gross profit margin during this period. Brady expects these cost pressures to continue for at least the short-term before price increases and efficiency actions can fully offset these inflationary forces. As such, we are modifying our Diluted EPS Excluding Amortization* guidance from our original range of $3.12 to $3.32 per share to a range of $3.00 to $3.15 for the full year ending July 31, 2022, which includes a reduction of $0.05 due to the strengthening of the U.S. dollar versus other major currencies. This implies that we expect Diluted EPS Excluding Amortization, to improve by 9% to 15% for the full year ending July 31, 2022 when compared to the adjusted fiscal 2021 diluted earnings per share of $2.75. Also included in our full-year fiscal 2022 guidance are a full-year income tax rate of approximately 20 percent and depreciation and amortization expense ranging from $34 million to $36 million. Capital expenditures, excluding facility purchases are expected to range from $20 million to $25 million during the year ending July 31, 2022. The Company’s fiscal 2022 guidance is based on foreign currency exchange rates as of January 31, 2022 and assumes continued economic growth.

A webcast regarding Brady’s fiscal 2022 second 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, 2021, employed approximately 5,700 people in its worldwide businesses. Brady’s fiscal 2021 sales were approximately $1.14 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 Amortization, Net Income Excluding Amortization, and Diluted EPS Excluding Amortization 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, earnings, 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,” “continue” or “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: adverse impacts of the novel coronavirus (“COVID-19”) pandemic or other pandemics; decreased demand for our products; our ability to compete effectively or to successfully execute our strategy; increased cost of raw materials, labor and freight as well as raw material shortages; increased cost of raw materials, labor and freight as well as raw material shortages; Brady’s ability to properly identify, integrate, and grow acquired companies, and to manage contingent liabilities from divested businesses; 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, 2021 and in any subsequent filings on Form 10-Q.

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.

BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share data)
	Three months ended January 31,								Six months ended January 31,
		2022				2021				2022				2021
Net sales	$	318,055			$	265,838			$	639,530			$	543,065
Cost of goods sold		168,693				136,316				335,180				278,115
Gross margin		149,362				129,522				304,350				264,950
Operating expenses:
Research and development		13,965				9,876				27,872				20,079
Selling, general and administrative		92,525				82,234				189,271				165,271
Total operating expenses		106,490				92,110				217,143				185,350
Operating income		42,872				37,412				87,207				79,600
Other (expense) income:
Investment and other (expense) income		(578	)			2,036				(35	)			2,191
Interest expense		(252	)			(51	)			(434	)			(157	)
Income before income taxes and losses of unconsolidated affiliate		42,042				39,397				86,738				81,634
Income tax expense		8,227				8,206				17,877				16,788
Income before losses of unconsolidated affiliate		33,815				31,191				68,861				64,846
Equity in losses of unconsolidated affiliate		—				(331	)			—				(505	)
Net income	$	33,815			$	30,860			$	68,861			$	64,341
Net income per Class A Nonvoting Common Share:
Basic	$	0.65			$	0.59			$	1.33			$	1.24
Diluted	$	0.65			$	0.59			$	1.32			$	1.23
Net income per Class B Voting Common Share:
Basic	$	0.65			$	0.59			$	1.31			$	1.22
Diluted	$	0.65			$	0.59			$	1.30			$	1.21
Weighted average common shares outstanding:
Basic		51,800				52,018				51,887				52,020
Diluted		52,162				52,282				52,299				52,288

BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
	January 31, 2022				July 31, 2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	147,407			$	147,335
Accounts receivable, net of allowance for credit losses of $7,868 and $7,306 respectively		172,471				170,579
Inventories		167,456				136,107
Prepaid expenses and other current assets		12,681				11,083
Total current assets		500,015				465,104
Property, plant and equipment—net		126,551				121,741
Goodwill		601,681				614,137
Other intangible assets		83,608				92,334
Deferred income taxes		15,234				16,343
Operating lease assets		33,710				41,880
Other assets		26,264				26,217
Total	$	1,387,063			$	1,377,756
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	80,611			$	82,152
Accrued compensation and benefits		56,510				81,173
Taxes, other than income taxes		12,141				13,054
Accrued income taxes		4,783				3,915
Current operating lease liabilities		16,601				17,667
Other current liabilities		56,850				59,623
Total current liabilities		227,496				257,584
Long-term debt		83,000				38,000
Long-term operating lease liabilities		20,341				28,347
Other liabilities		89,658				90,797
Total liabilities		420,495				414,728
Stockholders’ equity:
Common stock:
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 48,243,347 and 48,528,245 shares, respectively		513				513
Class B voting common stock—Issued and outstanding, 3,538,628 shares		35				35
Additional paid-in capital		341,889				339,125
Retained earnings		833,981				788,369
Treasury stock—3,018,140 and 2,733,242 shares, respectively, of Class A nonvoting common stock, at cost		(130,911	)			(109,061	)
Accumulated other comprehensive loss		(78,939	)			(55,953	)
Total stockholders’ equity		966,568				963,028
Total	$	1,387,063			$	1,377,756

BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
	Six months ended January 31,
		2022				2021
Operating activities:
Net income	$	68,861			$	64,341
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		16,996				11,421
Stock-based compensation expense		7,170				5,471
Deferred income taxes		(788	)			(3,866	)
Equity in losses of unconsolidated affiliate		—				505
Other		(812	)			121
Changes in operating assets and liabilities:
Accounts receivable		(7,216	)			(4,157	)
Inventories		(34,360	)			15,018
Prepaid expenses and other assets		(1,148	)			(2,436	)
Accounts payable and accrued liabilities		(25,357	)			11,990
Income taxes		982				481
Net cash provided by operating activities		24,328				98,889
Investing activities:
Purchases of property, plant and equipment		(16,440	)			(14,511	)
Other		59				(1,881	)
Net cash used in investing activities		(16,381	)			(16,392	)
Financing activities:
Payment of dividends		(23,249	)			(22,837	)
Proceeds from exercise of stock options		374				471
Payments for employee taxes withheld from stock-based awards		(5,025	)			(2,638	)
Purchase of treasury stock		(21,720	)			(3,593	)
Proceeds from borrowing on credit facilities		131,216				19,957
Repayment of borrowing on credit facilities		(86,216	)			(20,220	)
Other		115				32
Net cash used in financing activities		(4,505	)			(28,828	)
Effect of exchange rate changes on cash		(3,370	)			6,276
Net increase in cash and cash equivalents		72				59,945
Cash and cash equivalents, beginning of period		147,335				217,643
Cash and cash equivalents, end of period	$	147,407			$	277,588

BRADY CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)
	Three months ended January 31,								Six months ended January 31,
		2022				2021				2022				2021
NET SALES
ID Solutions	$	244,986			$	194,227			$	493,603			$	392,419
Workplace Safety		73,069				71,611				145,927				150,646
Total	$	318,055			$	265,838			$	639,530			$	543,065
SALES INFORMATION
ID Solutions
Organic		16.0	%			(6.9	)%			14.6	%			(7.6	)%
Acquisition		11.8	%			—	%			11.7	%			—	%
Currency		(1.7	)%			1.5	%			(0.5	)%			1.0	%
Total		26.1	%			(5.4	)%			25.8	%			(6.6	)%
Workplace Safety
Organic		5.2	%			(4.8	)%			(2.0	)%			0.4	%
Currency		(3.2	)%			5.2	%			(1.1	)%			4.8	%
Total		2.0	%			0.4	%			(3.1	)%			5.2	%
Total Company
Organic		13.1	%			(6.3	)%			10.0	%			(5.6	)%
Acquisition		8.6	%			—	%			8.5	%			—	%
Currency		(2.1	)%			2.4	%			(0.7	)%			2.0	%
Total		19.6	%			(3.9	)%			17.8	%			(3.6	)%
SEGMENT PROFIT
ID Solutions	$	44,129			$	39,000			$	92,945			$	79,279
Workplace Safety		4,515				3,463				6,808				11,451
Total	$	48,644			$	42,463			$	99,753			$	90,730
SEGMENT PROFIT AS A PERCENT OF NET SALES
ID Solutions		18.0	%			20.1	%			18.8	%			20.2	%
Workplace Safety		6.2	%			4.8	%			4.7	%			7.6	%
Total		15.3	%			16.0	%			15.6	%			16.7	%
	Three months ended January 31,								Six months ended January 31,
		2022				2021				2022				2021
Total segment profit	$	48,644			$	42,463			$	99,753			$	90,730
Unallocated amounts:
Administrative costs		(5,772	)			(5,051	)			(12,546	)			(11,130	)
Investment and other (expense) income		(578	)			2,036				(35	)			2,191
Interest expense		(252	)			(51	)			(434	)			(157	)
Income before income taxes and losses of unconsolidated affiliate	$	42,042			$	39,397			$	86,738			$	81,634

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 Amortization:
Brady is presenting the non-GAAP measure, "Income Before Income Taxes Excluding Amortization." 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 and losses of unconsolidated affiliate to the non-GAAP measure of Income Before Income Taxes Excluding Amortization:
	Three months ended January 31,						Six months ended January 31,
	2022			2021			2022			2021
Income before income taxes and losses of unconsolidated affiliate (GAAP measure)	$	42,042		$	39,397		$	86,738		$	81,634
Amortization expense		3,749			1,353			7,556			2,704
Income Before Income Taxes Excluding Amortization (non-GAAP measure)	$	45,791		$	40,750		$	94,294		$	84,338
Income Tax Expense Excluding Amortization:
Brady is presenting the non-GAAP measure, "Income Tax Expense Excluding Amortization." 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 Amortization:
	Three months ended January 31,						Six months ended January 31,
	2022			2021			2022			2021
Income tax expense (GAAP measure)	$	8,227		$	8,206		$	17,877		$	16,788
Amortization expense		887			338			1,787			676
Income Tax Expense Excluding Amortization (non-GAAP measure)	$	9,114		$	8,544		$	19,664		$	17,464
Net Income Excluding Amortization:
Brady is presenting the non-GAAP measure, "Net Income Excluding Amortization." 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 Amortization:
	Three months ended January 31,						Six months ended January 31,
	2022			2021			2022			2021
Net income (GAAP measure)	$	33,815		$	30,860		$	68,861		$	64,341
Amortization expense		2,862			1,015			5,769			2,028
Net Income Excluding Amortization (non-GAAP measure)	$	36,677		$	31,875		$	74,630		$	66,369
Diluted EPS Excluding Amortization:
Brady is presenting the non-GAAP measure, "Diluted EPS Excluding Amortization." 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 Amortization:
	Three months ended January 31,						Six months ended January 31,
	2022			2021			2022			2021
Net income per Class A Nonvoting Common Share (GAAP measure)	$	0.65		$	0.59		$	1.32		$	1.23
Amortization expense		0.05			0.02			0.11			0.04
Diluted EPS Excluding Amortization (non-GAAP measure)	$	0.70		$	0.61		$	1.43		$	1.27

For More Information:
Investor contact: Ann Thornton 414-438-6887
Media contact: Kate Venne 414-358-5176

FAQ

What were Brady Corporation's Q2 fiscal 2022 sales figures?

Brady Corporation reported Q2 fiscal 2022 sales of $318.1 million, a 19.6% increase from the previous year.

How much did diluted EPS increase in Q2 fiscal 2022 for Brady?

Diluted EPS increased by 10.2% to $0.65 in Q2 of fiscal 2022.

What is Brady's guidance for diluted EPS for the full year 2022?

The guidance for diluted EPS has been adjusted to a range of $3.00 to $3.15 for the full year ending July 31, 2022.

Which segment drove sales growth in Brady's latest quarter?

The Identification Solutions segment drove significant sales growth, increasing by 26.1% in the latest quarter.

What are the anticipated effects of inflation on Brady's profit margins?

Brady expects inflationary pressures to compress gross profit margins in the short term.