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BC

BRADY CORP (BRC)·Q3 2025 Earnings Summary

Executive Summary

  • Record adjusted diluted EPS of $1.22 (+11.9% YoY) on revenue of $382.6M (+11.4% YoY); organic +1.6%, acquisitions +10.5%, FX −0.7% .
  • EPS modest beat vs S&P Global consensus ($1.22 actual vs $1.215 estimate*) but revenue slight miss ($382.6M actual vs $386.6M estimate*) — driven by Europe & Australia organic decline and tariff costs; guidance tightened to reflect tariff uncertainty .
  • Americas & Asia solid: +12.9% total growth (+5.4% organic) with segment profit +15%; Europe & Australia +8.7% total growth but −5.4% organic and segment margin compression .
  • Q4 outlook: Americas & Asia low single-digit organic growth; Europe & Australia approximately flat; full-year adjusted EPS guidance tightened to $4.48–$4.63; GAAP EPS updated to $3.95–$4.10 .
  • Tariffs are the swing factor: ~$3M EPS headwind in Q3 and estimated $3–$5M in Q4 net of mitigations; focus on price actions and supply chain optimization .

What Went Well and What Went Wrong

What Went Well

  • Record adjusted EPS: “We grew adjusted earnings per share by 11.9% in the quarter” .
  • Strong Americas & Asia performance: +12.9% total sales, +5.4% organic; segment profit +15% with strength in higher-margin product lines .
  • R&D execution and product launches: increased R&D spend (+8.5% YoY) and new products (i6100 industrial label printer; HH86 handheld RFID reader) to expand integrated identification solutions .

What Went Wrong

  • Europe & Australia organic decline (−5.4%) and margin compression (segment margin 13.6% vs 16.5% YoY), reflecting a tough macro backdrop (Germany weakness, Australia macro drag) .
  • Tariff impact: $3M cost in Q3 ($0.05 EPS) with Q4 exposure estimated at $3–$5M despite mitigations (pricing, sourcing, footprint) .
  • Gross margin softened to 51.0% (−60 bps YoY), partly due to facility closure and reorganization costs (≈30 bps impact) .

Financial Results

Consolidated Results (trend)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$377.065 $356.675 $382.590
GAAP Diluted EPS ($)$0.97 $0.83 $1.09
Adjusted Diluted EPS ($)$1.12 $1.00 $1.22
Gross Margin %50.3% 49.3% 51.0%
Operating Income ($USD Millions)$58.922 $51.234 $67.190
Net Income ($USD Millions)$46.783 $40.334 $52.263
Cash from Operations ($USD Millions)$23.406 $39.6 $59.9

Q3 2025 Actual vs Prior Year, Prior Quarter, and Estimates

MetricQ3 2024Q2 2025Q3 2025 ActualQ3 2025 Consensus*Delta vs YoYDelta vs QoQDelta vs Est*
Revenue ($USD Millions)$343.384 $356.675 $382.590 $386.610*+$39.206 (+11.4%)+$25.915 (+7.3%)−$4.020 (−1.0%)*
GAAP Diluted EPS ($)$1.05 $0.83 $1.09 —+$0.04 (+3.8%)+$0.26 (+31.3%)—
Adjusted Diluted EPS ($)$1.09 $1.00 $1.22 $1.215*+$0.13 (+11.9%)+$0.22 (+22.0%)+$0.005 (+0.4%)*
Gross Margin %51.6% 49.3% 51.0% —−60 bps+170 bps—

Note: *Values retrieved from S&P Global.

Segment Breakdown

SegmentQ1 2025 Net Sales ($M)Q2 2025 Net Sales ($M)Q3 2025 Net Sales ($M)Q3 2025 Segment Profit ($M)Q3 2025 Segment Margin
Americas & Asia$245.428 $233.846 $253.652 $57.164 22.5%
Europe & Australia$131.637 $122.829 $128.938 $17.478 13.6%
Total$377.065 $356.675 $382.590 $74.642 19.5%

KPIs and Non-GAAP

KPIQ1 2025Q2 2025Q3 2025
R&D Expense ($USD Millions)$18.921 $18.723 $19.191
SG&A Expense ($USD Millions)$111.846 $105.886 $108.678
SG&A as % of Sales29.7% 29.7% 28.4%
Free Cash Flow ($USD Millions)$16.1 $32.5 $55.6
Adjusted Pretax Income ($USD Millions)$68.572 $62.372 $74.429
Adjusted Net Income ($USD Millions)$54.157 $48.121 $58.820

Non-GAAP adjustments (Q3): Amortization $4.754M; facility closure/reorganization $3.930M; EPS impact +$0.08 and +$0.06 respectively .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Diluted EPSFY2025$4.45–$4.70 $4.48–$4.63 Tightened (midpoint slightly down)
GAAP Diluted EPSFY2025$3.99–$4.24 $3.95–$4.10 Updated (lower)
Organic Sales GrowthFY2025Low-single digits Low-single digits Maintained
Income Tax RateFY2025~21% ~20% Lower
Depreciation & AmortizationFY2025~$40M ~$40M Maintained
Capital ExpendituresFY2025~$35M ~$25M Lowered
DividendNext payment—$0.24/share payable July 31, 2025 Declared

Q4 regional outlook: Americas & Asia low-single-digit organic growth; Europe & Australia approximately flat .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Tariffs/MacroPotential tariff exposure; mitigation via footprint and local manufacturing $3M Q3 impact ($0.05 EPS); Q4 estimate $3–$5M net; pricing and sourcing mitigations underway Rising headwind; active mitigation
R&D and Product Launchesi-5300 bundle with V-4500; i-7500 high-speed printer; increased R&D spend i6100 industrial desktop printer; HH86 handheld RFID reader; R&D +8.5% YoY Strong pipeline; integrated solutions focus
Regional TrendsAmericas & Asia strength; Europe mixed; Asia ex-China strong Americas & Asia +5.4% organic; Europe & Australia −5.4% organic; Asia +22.9% organic; China modest recovery Divergence persists
Cost Actions/RestructuringFacility closures (Beijing, Buffalo); Europe overhead reductions Additional headcount reductions in China and Europe; $3.9M Q3 reorg costs Continuing efficiency actions
M&A/PortfolioGravotech acquisition; AB&R sales-force expansion Acquisition of Funai Microfluidics Solutions (~$11.6M; est. $15–$20M year-1 sales) Bolt-ons to round out part-marking

Management Commentary

  • “We grew organic sales 1.6%, acquisitions grew sales 10.5%, and we grew adjusted earnings per share by 11.9% in the quarter.” — Russell R. Shaller, CEO .
  • “Our gross profit margin was 51% this quarter… excluding restructuring expense in COGS, gross margin would have been 51.3%.” — Ann Thornton, CFO .
  • “As for the financial impact of tariffs, we realized approximately $3 million in incremental tariff expense in the third quarter or about $0.05 of diluted earnings per share.” — Ann Thornton, CFO .
  • “We launched our i6100 industrial desktop label printer… and our HH86 handheld RFID reader… purposefully designed to withstand challenging industrial environments.” — Russell R. Shaller .
  • “We repurchased 476,000 shares for $33.2 million, and we returned another $11.3 million… in the form of dividends.” — Ann Thornton, CFO .

Q&A Highlights

  • Tariffs impact and demand: No observed demand destruction yet; expect pricing response to recapture costs; magnitude depends on tariff scope and rates .
  • SG&A efficiency sustainability: Long-term journey to drive down SG&A; expect quarterly noise but aim for multiyear reductions .
  • Funai acquisition: Industrial inkjet cartridges; complements lasers and labels for direct part marking; estimated $15–$20M first-year sales .
  • Q4 regional guide: Anticipate tariffs headwind in Americas; Europe stabilization to flat following Q3 deterioration .
  • Europe macro and WPS: Germany industrial weakness; actions reduced cost structure; ability to respond quickly to dynamics .

Estimates Context

  • Q3 2025 EPS: $1.22 actual vs $1.215 consensus mean*; slight beat.
  • Q3 2025 Revenue: $382.6M actual vs $386.6M consensus mean*; slight miss.
  • Number of estimates: 2 for EPS and revenue*.

Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat on EPS with resilient gross margins despite tariff headwinds; revenue modestly below consensus as Europe softness weighed on organic growth .
  • Americas & Asia are the growth engine; Asia ex-China accelerating, while Europe remains the key swing factor for H2 trajectory .
  • Guidance prudently tightened for FY25; capex trimmed to ~$25M and tax rate lowered to ~20%, partially offsetting macro/tariff risks .
  • Continued R&D/product cadence (i6100, HH86) and integrated solutions strategy should support mix and margin; watch adoption curves and cross-sell .
  • Active portfolio building: Gravotech and Funai broaden direct part marking capabilities; expect incremental revenue with integration execution risk .
  • Near-term trading: Tariff headlines and Europe data likely drive volatility; EPS resilience and buybacks/dividends ($0.24 declared) provide support .
  • Medium-term thesis: Diversified footprint, high-margin consumables, and solution bundling underpin durable cash generation and EPS growth through cycles .