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BC

BRADY CORP (BRC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 revenue rose 10.6% to $356.7M on 2.6% organic growth and 10.2% from acquisitions; FX was a 2.2% headwind. GAAP diluted EPS fell 7.8% to $0.83, while adjusted EPS increased 7.5% to $1.00, driven by mix and efficiency, partially offset by reorganization costs and higher amortization .
  • Americas & Asia remained the growth engine (organic +4.3%), while Europe & Australia saw a slight organic decline (−0.8%); segment margin in E&A compressed to 9.3% on amortization and restructuring, while A&A held near 19.7% .
  • Management raised the low end of FY25 adjusted EPS guidance to $4.45–$4.70 (from $4.40–$4.70) and updated GAAP EPS to $3.99–$4.24 to reflect facility closure/reorganization costs; tax-rate assumption increased to ~21% (from ~20%) .
  • Cash generation improved: Q2 operating cash flow was $39.6M (vs. $36.1M last year); free cash flow was $32.5M vs. $(13.5)M in Q2 FY24; net cash position increased to $50.8M, supporting continued R&D, M&A, dividends, and buybacks .

What Went Well and What Went Wrong

  • What Went Well

    • Americas & Asia delivered another strong quarter (organic +4.3%), with Asia ex-China up 24% organically; management highlighted momentum in Japan and India and high single-digit growth in printers and consumables in the region .
    • Adjusted EPS grew 7.5% to $1.00 despite FX headwinds and restructuring costs; management emphasized ongoing efficiency initiatives and a strong balance sheet enabling both organic and inorganic investments .
    • New product cadence: launch of the I-7500 industrial label printer with LabelSense technology (rapid changeover, zero waste) and a 7-inch touchscreen; reinforced strategy to drive growth via R&D and integrated solutions .

  • What Went Wrong

    • Europe & Australia organic sales declined 0.8% with segment margin down to 9.3% (−430 bps YoY), pressured by macro conditions, increased amortization, and restructuring costs; Australia particularly weak amid exposure to China and commodities .
    • Gross margin declined to 49.3% (from 50.2% LY), with ~70 bps hit from facility closure/reorganization costs (Beijing and Buffalo); excluding these costs, GM would have been ~50.0% .
    • FX turned into a more intense headwind; the low end of adjusted EPS guidance was raised anyway, but management acknowledged FX is a risk alongside macro softness .

Financial Results

MetricQ2 2024Q1 2025Q2 2025Consensus (Q2 2025)
Revenue ($M)$322.6 $377.1 $356.7 N/A (S&P Global consensus unavailable)
GAAP Diluted EPS ($)$0.90 $0.97 $0.83 N/A (S&P Global consensus unavailable)
Adjusted Diluted EPS ($)$0.93 $1.12 $1.00 N/A (S&P Global consensus unavailable)
Gross Margin (%)50.2% 50.3% 49.3% N/A (S&P Global consensus unavailable)
Income Before Taxes ($M)$55.8 $58.8 $52.0 N/A (S&P Global consensus unavailable)
Operating Cash Flow ($M)$36.1 $23.4 $39.6 N/A (S&P Global consensus unavailable)

Segment performance and mix:

  • Revenue and margin mix by segment
SegmentQ2 2024Q1 2025Q2 2025
Americas & Asia Sales ($M)$211.6 $245.4 $233.8
Americas & Asia Segment Profit ($M)$43.9 $54.9 $46.0
Americas & Asia Segment Margin (%)20.7% 22.4% 19.7%
Europe & Australia Sales ($M)$111.0 $131.6 $122.8
Europe & Australia Segment Profit ($M)$15.1 $13.1 $11.4
Europe & Australia Segment Margin (%)13.6% 10.0% 9.3%

Key operating KPIs:

KPIQ2 2024Q1 2025Q2 2025
R&D Expense ($M)$16.8 $18.9 $18.7
Free Cash Flow ($M)$(13.5) $16.1 $32.5
Net Cash Position ($M, end period)N/A$29.0 $50.8

Additional notes:

  • Organic growth: +2.6% (total +10.6% incl. M&A; FX −2.2%) .
  • Adjusted pretax income +7.2% YoY to $62.4M (adds back $10.3M of amortization and reorg) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Diluted EPSFY2025$4.40–$4.70 $4.45–$4.70 Raised low end by $0.05
GAAP Diluted EPSFY2025$4.02–$4.32 $3.99–$4.24 Updated lower (reflects facility closure/reorg costs)
Organic Sales GrowthFY2025Low single-digit % Low single-digit % Maintained
Income Tax RateFY2025~20% ~21% Higher
D&A ExpenseFY2025~$40M ~$40M Maintained
Capital ExpendituresFY2025~$35M ~$35M Maintained
DividendNext PaymentN/A$0.24 per share payable Apr 30, 2025 (record Apr 9) Declared (capital return)

Earnings Call Themes & Trends

TopicQ4 2024 (prior-2)Q1 2025 (prior-1)Q2 2025 (current)Trend
AI/Tech/Productivity featuresLabelSense-enabled cartridges; voice-to-print for handhelds; focus on ease-of-use and interoperable solutions .Bundled I‑5300 printer with V‑4500 scanner (Code Corp tech); integrated, fast setup; focus on interoperable track/trace .Launch of I‑7500 industrial printer with LabelSense, 7" touchscreen, broad materials; higher speed/mix, zero waste changeovers .Accelerating product roadmap; deepening integration across print/read.
Regional macroEurope softness offset by OI improvement; Asia recovering (ex-China strong) .Americas & Asia organic +5.1%; Europe back to growth; China down ~6% .Americas & Asia organic +4.3%; Europe & Australia slight organic decline; Asia ex-China +24% .A&A resilient; Europe/Australia pressured; China weak; India/Japan strong.
R&D executionRecord R&D spend; pipeline of FY25 launches .R&D up; best ROI from engineered products; more launches ahead .R&D up 11%; Gravotech adds product dev opportunities .Sustained investment to drive mix and margins.
Tariffs/macro policy—Expect US investment post-election; cautious macro stance .Mitigation plans if tariffs implemented; ability to shift production or manufacture locally; watch for macro slowdown risk .Prepared to adapt; macro remains a key external risk.
Restructuring/cost structureRegional reorg benefits, SG&A efficiency trajectory .Portfolio review; cost opportunities ahead .Facility closures (Beijing, Buffalo) and Europe overhead actions; $5.7M reorg cost in Q2; aim to finish in FY25 .Second phase of structural optimization underway.
Gravotech integrationClosed Aug 1; FY25 sales ~$125M, EBITDA ~$13M (ex-integration) .Integration underway; AB&R bolt-on for niche solutions .Early wins; broader traction expected in coming quarters .Complementary tech; gradual integration benefits.

Management Commentary

  • “This is the fastest and most versatile printer we’ve designed to date... we believe it will be an incredible efficiency tool for our customers in a wide variety of end markets.” — CEO on I‑7500 launch .
  • “We generated adjusted EPS of $1.00 this quarter... driven by organic sales growth and a continued focus on long-term operational efficiency opportunities. Our balance sheet is strong and our net cash position increased to $50.8 million this quarter.” — CFO .
  • “We announced the closure of our manufacturing facility in Beijing... [and] in Buffalo... and we took actions to reorganize our overhead structure in Europe... facility closure and other reorganization costs of $5.7 million in the second quarter.” — CFO .
  • “Our business in Asia had another strong quarter with organic sales growth of 11.3%... outside of China, our business combined for a 24% organic sales growth.” — CEO .

Q&A Highlights

  • Tariffs exposure and mitigation: Management can move production and manufacture higher-margin products locally to mitigate tariff impacts; the bigger risk is macro slowdown if significant tariffs materialize .
  • Restructuring savings and timing: Aim to complete Europe overhead actions and facility closures within FY25; expected to improve run-rate efficiency going forward .
  • Product opportunity sizing: I‑7500 addresses unique high-mix applications; management “would love to see it north of $10M” depending on market traction; cannibalization risk seen as limited .
  • FX and guidance: Despite increased FX headwinds, strong Americas & Asia performance allowed raising the low end of adjusted EPS guidance .
  • Australia weakness: Macro tied to China and commodities weighing on demand; contrast with strong Middle East/Asia ex-China .
  • Gravotech traction: Still early; integration and product roadmap underway, expect broader impact in coming quarters .

Estimates Context

  • S&P Global consensus for Q2 FY25 EPS and revenue was unavailable due to access limits at query time; therefore, we cannot quantify beat/miss versus Street for the quarter (S&P Global data unavailable).
  • Guidance context: Company raised the low end of FY25 adjusted EPS to $4.45 (from $4.40), implying modest upward pressure to Street FY25 EPS models’ low end; GAAP EPS guidance was reduced to reflect restructuring costs .

Key Takeaways for Investors

  • Underlying execution intact: Adjusted EPS growth (+7.5%) and raised FY25 adjusted EPS low end signal resilience despite FX and European softness; A&A strength remains a core pillar .
  • Mix and innovation drive: New printers (I‑7500) and LabelSense enable speed and zero waste, supporting margin mix over time; robust R&D cadence underpins medium-term growth .
  • Cost actions a bridge to higher efficiency: Facility closures and Europe overhead reductions should improve FY26 run-rate margins after near-term charges; GM would have been ~50.0% excluding Q2 reorg costs .
  • Regional setup: Asia ex-China and the Americas are the near-term growth vectors; Europe & Australia likely remain constrained near-term, but integration and efficiencies could stabilize profitability .
  • Capital deployment balanced: Net cash of $50.8M supports organic investments, tuck-in M&A, dividends ($0.24 declared), and opportunistic buybacks; model continued cash conversion with normalized capex .
  • Watch list for trading: Headline catalysts include further guidance adjustments, traction of I‑7500/track-and-trace bundles, Gravotech integration updates, and any tariff/macro developments that could sway sentiment .

Appendix: Prior Two Quarters (for trend)

  • Q1 FY25: Sales $377.1M (+13.6% total; +3.6% organic), GAAP EPS $0.97, Adjusted EPS $1.12; maintained FY25 adjusted EPS guidance at $4.40–$4.70; tax ~20% .
  • Q4 FY24: Sales $343.4M (−0.7% total; +1.6% organic), GAAP EPS $1.15, Non-GAAP $1.19; announced FY25 adjusted EPS guidance $4.40–$4.70 at outset .

Other relevant Q2 FY25 press release:

  • Dividend declaration: $0.24 per share payable April 30, 2025 (record date April 9, 2025) .