Brady Corporation (NYSE:BRC) Q3 2025 Earnings Call Transcript
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Overview
Despite strong EPS growth and dividend increases, challenges like declining gross profit margins, increased SG&A expenses, and tariff-related uncertainties could offset positives. The Q&A revealed cautious management responses, particularly regarding tariffs and regional growth. With only low single-digit sales growth expected and a moderate market cap, the stock is likely to remain stable, leading to a neutral prediction.
Key Financial Performance
Adjusted Earnings Per Share (EPS) $1.22 EPS, an increase of 11.9% from $1.09 EPS in Q3 2024 due to organic sales growth and acquisitions.
Organic Sales Growth 1.6% growth, with 5.4% growth in Americas and Asia offset by a 5.4% decline in Europe and Australia.
Total Sales Growth 11.4% growth, driven by 10.5% from acquisitions and a 0.7% decrease from foreign currency translation.
Gross Profit Margin 51%, down from 51.6% in Q3 2024, impacted by $1.1 million in restructuring costs.
SG&A Expense $108.7 million, up from $95.8 million in Q3 2024; as a percentage of sales, it increased to 28.4% from 27.9%.
R&D Expense $19.2 million, an increase of 8.5% from $17.7 million in Q3 2024, reflecting ongoing investment in new product development.
Pretax Earnings $65.7 million, up from $64.4 million in Q3 2024; adjusted pretax earnings increased 11.5% to $74.4 million.
Net Income $52.3 million, up from $50.9 million in Q3 2024; adjusted net income increased 11.6% to $58.8 million.
Operating Cash Flow $59.9 million, down from $72.7 million in Q3 2024.
Free Cash Flow $55.6 million, down from $64.4 million in Q3 2024.
Net Cash Position $49.3 million as of April 30, 2025.
Dividends and Share Buybacks Returned $44.5 million to shareholders through dividends and share buybacks.
Acquisition Cost Acquired Funai’s microfluidic business for $11.6 million.
Tariff Expense Impact Approximately $3 million in incremental tariff expense in Q3 2025, impacting diluted EPS by about $0.05.
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Operating Highlights
New Product Launches: Launched the I6100 industrial desktop label printer and the HH86 handheld RFID reader, enhancing capabilities for high-volume printing and RFID scanning.
Market Expansion: Acquired Funai's microfluidic business to enhance product offerings and entered new markets.
Geographic Revenue Distribution: 52% of revenue from the US, 30% from Europe, 8% from Asia, and 10% from Australia and the rest of the Americas.
Operational Efficiencies: Implemented restructuring actions in Europe and China to lower costs, resulting in a more efficient operational structure.
R&D Investment: Increased R&D investment by over 8% to support organic growth and new product development.
Strategic Shifts: Tightened adjusted diluted EPS guidance due to uncertainties in global trade and tariffs.
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Risk or Challenges
Global Trade and Tariffs: Brady Corporation is facing uncertainty due to global trade and tariffs, which have impacted their operations. They reported approximately $3 million in incremental tariff expenses in Q3 2025, with expectations of continued exposure to high-demand materials and potential incremental tariffs ranging from $3 million to $5 million in Q4 2025.
Economic Conditions in Europe and Australia: The company is experiencing a tough macroeconomic environment in Europe and Australia, leading to an organic sales decline of 5.4% in these regions. This decline is attributed to a challenging economic environment for industrial manufacturers.
Supply Chain Challenges: Brady imports goods from China for specific product lines, representing approximately $50 million in annual sales. The company has some ability to adjust sourcing and manufacturing locations to mitigate tariff impacts, but ongoing changes in trade policy present risks.
Strengthening US Dollar and Inflationary Pressures: Potential risks to the company's guidance include a strengthening US dollar and inflationary pressures, which could affect profitability and sales.
Overall Economic Slowdown: There is a risk of an overall slowdown in economic activity, which could impact the company's performance and growth outlook.
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Guidance & Outlook
Acquisitions: Acquisition of Funai’s microfluidic business for $11.6 million to enhance custom part marking capabilities.
R&D Investment: Increased investment in R&D by over 8% this quarter, focusing on organic business growth and integration of acquired technologies.
Cost Structure Optimization: Restructuring actions taken in Europe and China to lower costs and improve efficiency.
New Product Launches: Launched I6100 industrial desktop label printer and HH86 handheld RFID reader to enhance product offerings.
Adjusted EPS Guidance: Tightened adjusted diluted EPS guidance range from $4.45-$4.70 to $4.48-$4.63 for the fiscal year.
Organic Sales Growth: Expected organic sales growth in low single-digit percentages for the year ending July 31, 2025.
Capital Expenditures: Projected capital expenditures of approximately $25 million.
Depreciation and Amortization: Estimated depreciation and amortization expense of approximately $40 million.
Income Tax Rate: Full-year income tax rate expected to be approximately 20%.
Tariff Impact: Estimated incremental tariffs to impact fourth quarter in the range of $3 million to $5 million.
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Shareholder Return Plan
Dividends Returned to Shareholders: $44.5 million was returned to shareholders through dividends and share buybacks.
Consecutive Annual Dividend Increases: Announced the thirty-ninth consecutive year of annual dividend increases.
Share Buyback Program: Purchased 476,000 shares for $33.2 million at an average price of $69.64 per share.
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Key Q&A
Q:Are you seeing any impact on the top line, either demand destruction or actually additional revenue as people are starting to talk and actually make some actions on moving manufacturing around?
A:No, we haven’t seen any tariff-related demand destruction at this point. However, we carry a couple of months’ worth of inventory, so you haven’t really seen the effect of tariffs just yet.
Q:How sustainable are the actions regarding adjusted SG&A? Are there onetime items that were artificially low for the quarter?
A:No, Brady has had a long-term journey to keep driving down SG&A. There will be a little bit of noise on a quarter to quarter basis, but our goal is to continue to drive out costs.
Q:Can you walk through the opportunity that the acquisition provides you guys? Were they already a supplier for you?
A:Funai has a long history and makes industrial inkjet cartridges. We see this acquisition as a huge opportunity for growth to provide a complete solution for our customers.
Q:If Americas and Asia was up 5% year over year in 3Q, and Europe was down 5%, why is the guide for Americas and Asia to grow only low single digits in Q4 and Europe to be flat?
A:We’re anticipating a bit of a headwind due to tariffs in America. We expect Europe to recover to flat, but we’re cautious.
Q:How much of the impact is from the old WPS?
A:The WPS factor in America is minor. In Europe, the WPS business has always been strong, but we’re seeing declines in industrial production, particularly in Germany.
Q:What are you seeing in China?
A:China has always been a tough market for us. We’re not planning on doing anything additional in China, and our business there is only about 3% of our revenue.
Q:Can you break out the $3.9 million facility closure and reorg cost to segments?
A:The reorg costs were split evenly between the two regions.
Q:Any guess how the acquisition contributes to revenue?
A:We’re estimating first-year sales within the realm of $15 to $20 million.
Q:Review of Unclear Management Responses
A:Management appeared to avoid giving a direct answer regarding the specific impact of tariffs on future demand and pricing strategies, as well as the exact reasons for the anticipated headwinds in the Americas.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Conference
Funai
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acquisition Gravitec
action cost
action headcount
beginning
closure charge
closure reorganization
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decrease
expectation
facility closure
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geography quarter
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number detail
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period facility
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BRC Transcript
Brady Corporation (BRC) Q1 2026 Earnings Call Transcript
Positive11-17
The earnings call summary shows strong financial performance with increased net income, operating cash flow, and free cash flow. The Q&A section reveals positive sentiment, with management addressing gross margin improvements, R&D investments, and potential synergies from acquisitions. Despite some uncertainties in inventory management and regional performance, the overall guidance and financial metrics are optimistic. Considering the company's market cap, the stock price is likely to experience a positive movement of 2% to 8% over the next two weeks.
Brady Corporation (BRC) Q4 2025 Earnings Call Transcript
Positive9-4
The company reported strong financial metrics, including record EPS growth and successful acquisitions, despite some challenges in Europe and Australia. The 40th consecutive year of dividend increases and share buybacks signal strong shareholder returns. Although gross margins declined slightly, the company's strategic cost-cutting and tariff mitigation efforts are promising. The Q&A reveals management's confidence in addressing challenges, despite some vague responses. Considering the company's market cap, these factors suggest a positive stock price movement in the short term.
Brady Corporation (NYSE:BRC) Q3 2025 Earnings Call Transcript
Unknown5-20
Despite strong EPS growth and dividend increases, challenges like declining gross profit margins, increased SG&A expenses, and tariff-related uncertainties could offset positives. The Q&A revealed cautious management responses, particularly regarding tariffs and regional growth. With only low single-digit sales growth expected and a moderate market cap, the stock is likely to remain stable, leading to a neutral prediction.
Earnings call transcript: Brady Corp Q3 2025 EPS miss, shares fall 4.79%
Unknown5-16
The earnings call reveals a mixed sentiment. Financial performance shows positive trends with EPS growth and acquisitions contributing to sales. However, concerns over declining gross margins, increased SG&A expenses, and reduced cash flow offset these positives. The Q&A section highlights management's vague responses to tariff impacts, adding uncertainty. The announcement of consecutive dividend increases and share buybacks is positive, but the market cap suggests a moderate reaction. Considering these factors, the stock price is likely to remain stable, leading to a neutral prediction.
BRC Slides
BRC Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
