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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 18, 2021
BRADY CORPORATION
(Exact name of registrant as specified in its charter)
Commission File Number 1-14959
Wisconsin 39-0971239
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
6555 West Good Hope Road
Milwaukee, Wisconsin 53223
(Address of principal executive offices and Zip Code)
(414) 358-6600
(Registrant’s Telephone Number)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol
Name of each exchange on which registered
Class A Nonvoting Common Stock, par value $0.01 per shareBRCNew York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 or the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐




Item 2.02RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On February 18, 2021, Brady Corporation (the “Company”) issued a press release announcing its fiscal 2021 second quarter financial results. A copy of the press release is being furnished to the Securities and Exchange Commission as Exhibit 99.1 attached hereto and is incorporated herein by reference.

Item 7.01REGULATION FD DISCLOSURE

On February 18, 2021, the Company hosted a conference call related to its fiscal 2021 second quarter financial results. A copy of the slides referenced in the conference call, which is also posted on the Corporation’s website, is being furnished to the Securities and Exchange Commission as Exhibit 99.2 attached hereto and is incorporated herein by reference.

Item 9.01FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits
EXHIBIT NUMBERDESCRIPTION
99.1
99.2
104Cover Page Interactive Data File (embedded within Inline XBRL document).

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
  BRADY CORPORATION
Date: February 18, 2021 
 /s/ AARON J. PEARCE
 Aaron J. Pearce
 Chief Financial Officer and Treasurer


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EXHIBIT 99.1


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


Brady Corporation Reports Fiscal 2021 Second Quarter Results and Announces its Fiscal 2021 EPS Guidance

Income before income taxes and losses of unconsolidated affiliate was $39.4 million in the second quarter of fiscal 2021 compared to $42.4 million in the same quarter of the prior year.
Diluted EPS was $0.59 in the second quarter of fiscal 2021 compared to $0.62 in the same quarter of the prior year.
Sales for the quarter declined 3.9 percent. Organic sales declined 6.3 percent and the impact of foreign currency translation increased sales by 2.4 percent.
Net cash provided by operating activities was $36.1 million in the second quarter of fiscal 2021 compared to $14.3 million in the second quarter of the prior year.
Diluted EPS guidance for the full year ending July 31, 2021 announced at a range of $2.48 to $2.58, which equates to EPS guidance for the second half of fiscal 2021 of $1.25 to $1.35.

MILWAUKEE (February 18, 2021) -- Brady Corporation (NYSE: BRC) (“Brady” or “Company”), a world leader in identification solutions, today reported its financial results for its fiscal 2021 second quarter ended January 31, 2021.

Quarter Ended January 31, 2021 Financial Results:
Income before income taxes and losses of unconsolidated affiliate decreased 7.0 percent to $39.4 million for the quarter ended January 31, 2021, compared to $42.4 million in the same quarter last year.
Net income for the quarter ended January 31, 2021 declined 8.0 percent to $30.9 million compared to $33.6 million in the same quarter last year. Earnings per diluted Class A Nonvoting Common Share were $0.59 for the second quarter of fiscal 2021, compared to $0.62 in the same quarter last year.
Sales for the quarter ended January 31, 2021 declined 3.9 percent, which consisted of an organic sales decline of 6.3 percent and an increase of 2.4 percent from foreign currency translation. Sales for the quarter ended January 31, 2021 were $265.8 million compared to $276.7 million in the same quarter last year. By segment, sales declined 5.4 percent in Identification Solutions and increased 0.4 percent in Workplace Safety, which consisted of an organic sales decline of 6.9 percent in Identification Solutions and an organic sales decline of 4.8 percent in Workplace Safety.




Six-Month Period Ended January 31, 2021 Financial Results:
Income before income taxes and losses of unconsolidated affiliate decreased 2.7 percent to $81.6 million for the six-month period ended January 31, 2021, compared to $83.9 million for the same period last year.
Net income for the six-month period ended January 31, 2021 declined 9.4 percent to $64.3 million compared to $71.1 million for the same period last year. Earnings per diluted Class A Nonvoting Common Share were $1.23 for the six-month period ended January 31, 2021, compared to $1.32 for the same period last year. Net income and earnings per diluted Class A Nonvoting Common Share for the six-month period ended January 31, 2020 were impacted by a reduced income tax rate of 15.3 percent primarily due to a favorable tax audit settlement and tax benefits from equity-based compensation.
Sales for the six-month period ended January 31, 2021 declined 3.6 percent, which consisted of an organic sales decline of 5.6 percent and an increase of 2.0 percent from foreign currency translation. Sales for the six months ended January 31, 2021 were $543.1 million compared to $563.6 million in the same period last year. By segment, sales declined 6.6 percent in Identification Solutions and increased 5.2 percent in Workplace Safety, which consisted of an organic sales decline of 7.6 percent in Identification Solutions and organic sales growth of 0.4 percent in Workplace Safety.

Commentary:
“Our operations are running globally as we continue to do our part to supply products to first responders, healthcare providers, transportation, food processing and many other critical industries,” said Brady’s President and Chief Executive Officer, J. Michael Nauman. “Our outlook has improved and to supplement organic sales growth, we are investing in sales, marketing and new product development that will help accelerate growth in the back half of this fiscal year and into the future. We are also actively investigating acquisitions that complement our strategic growth initiatives. Brady is in a strong financial position and we are using this strong financial position to set ourselves up for strong growth as we exit from the pandemic.”
“Brady continues to generate strong cash flow and has a very strong balance sheet. As of January 31, 2021, we had $277.6 million of cash on hand and no outstanding debt,” said Brady’s Chief Financial Officer, Aaron Pearce. “We generated $36.1 million of cash flow from operating activities this quarter, which was an increase of 153 percent compared to last year’s second quarter. Positively impacting our cash flow this quarter were benefits from improved working capital management and a reduction in incentive-based compensation payments when compared to the second quarter of last year. This quarter, we also returned $12.3 million to our shareholders in the form of dividends and share buybacks. Although the economy is still challenged, we do expect the general trend of improving economic conditions to continue over the next several quarters. Regardless of what happens with the macro economy, Brady’s strong balance sheet and cash generation position us well for future financial success."

Fiscal 2021 Guidance:
The Company expects earnings per diluted Class A Nonvoting Common Share to range from $2.48 to $2.58 for the full fiscal year ending July 31, 2021. This equates to diluted earnings per share in the range of $1.25 to $1.35 in the second half of the fiscal year ending July 31, 2021. The Company also expects organic sales growth to be in the mid-single digits in the second half of fiscal 2021. This guidance is based on foreign currency exchange rates as of January 31, 2021 and assumes a continued economic recovery.




A webcast regarding Brady’s fiscal 2021 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, 2020, employed approximately 5,400 people in its worldwide businesses. Brady’s fiscal 2020 sales were approximately $1.08 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.

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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; Brady’s ability to develop technologically advanced products that meet customer demands; raw material and other cost increases; difficulties in protecting our websites, networks, and systems against security breaches; extensive regulations by U.S. and non-U.S. governmental and self-regulatory entities; risks associated with the loss of key employees; divestitures and contingent liabilities from divestitures; Brady’s ability to properly identify, integrate, and grow acquired companies; litigation, including product liability claims; foreign currency fluctuations; potential write-offs of Brady’s 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 issues 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, 2020 and subsequent Form 10-Q filings.

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,
 2021202020212020
Net sales$265,838 $276,665 $543,065 $563,612 
Cost of goods sold136,316 137,538 278,115 283,080 
Gross margin129,522 139,127 264,950 280,532 
Operating expenses:
Research and development9,876 10,517 20,079 21,484 
Selling, general and administrative82,234 87,366 165,271 176,913 
Total operating expenses92,110 97,883 185,350 198,397 
Operating income37,412 41,244 79,600 82,135 
Other income (expense):
Investment and other income2,036 1,760 2,191 3,140 
Interest expense(51)(647)(157)(1,348)
Income before income taxes and losses of unconsolidated affiliate39,397 42,357 81,634 83,927 
Income tax expense8,206 8,804 16,788 12,876 
Income before losses of unconsolidated affiliate31,191 33,553 64,846 71,051 
Equity in losses of unconsolidated affiliate(331)— (505)— 
Net income$30,860 $33,553 $64,341 $71,051 
Net income per Class A Nonvoting Common Share:
Basic$0.59 $0.63 $1.24 $1.33 
Diluted$0.59 $0.62 $1.23 $1.32 
Dividends$0.22 $0.22 $0.44 $0.44 
Net income per Class B Voting Common Share:
Basic$0.59 $0.63 $1.22 $1.32 
Diluted$0.59 $0.62 $1.21 $1.31 
Dividends$0.22 $0.22 $0.42 $0.42 
Weighted average common shares outstanding:
Basic52,018 53,320 52,020 53,232 
Diluted52,282 53,827 52,288 53,781 




BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 January 31, 2021July 31, 2020
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$277,588 $217,643 
Accounts receivable, net of allowance for credit losses of $7,450 and $7,157, respectively154,052 146,181 
Inventories122,922 135,662 
Prepaid expenses and other current assets12,774 9,962 
Total current assets567,336 509,448 
Property, plant and equipment—net122,088 115,068 
Goodwill420,726 416,034 
Other intangible assets19,809 22,334 
Deferred income taxes8,261 8,845 
Operating lease assets38,849 41,899 
Other assets30,813 28,838 
Total$1,207,882 $1,142,466 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$67,483 $62,547 
Accrued compensation and benefits52,098 41,546 
Taxes, other than income taxes8,518 8,057 
Accrued income taxes9,393 8,652 
Current operating lease liabilities16,534 15,304 
Other current liabilities47,518 49,782 
Total current liabilities201,544 185,888 
Long-term operating lease liabilities27,134 31,982 
Other liabilities59,869 61,524 
Total liabilities288,547 279,394 
Stockholders’ equity:
Common stock:
Class A nonvoting common stock—Issued 51,261,487 shares, and outstanding 48,486,758 and 48,456,954 shares, respectively513 513 
Class B voting common stock—Issued and outstanding, 3,538,628 shares35 35 
Additional paid-in capital334,077 331,761 
Retained earnings745,960 704,456 
Treasury stock—2,774,729 and 2,804,533 shares, respectively of Class A nonvoting common stock, at cost(109,789)(107,216)
Accumulated other comprehensive loss(51,461)(66,477)
Total stockholders’ equity919,335 863,072 
Total$1,207,882 $1,142,466 




BRADY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
Six months ended January 31,
20212020
Operating activities:
Net income$64,341 $71,051 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization11,421 11,672 
Stock-based compensation expense5,471 5,384 
Deferred income taxes(3,866)1,272 
Equity in losses of unconsolidated affiliate505 — 
Other121 1,664 
Changes in operating assets and liabilities:
Accounts receivable(4,157)6,209 
Inventories15,018 (1,311)
Prepaid expenses and other assets(2,436)(2,621)
Accounts payable and accrued liabilities11,990 (39,777)
Income taxes481 (436)
Net cash provided by operating activities98,889 53,107 
Investing activities:
Purchases of property, plant and equipment(14,511)(13,100)
Other(1,881)(3,406)
Net cash used in investing activities(16,392)(16,506)
Financing activities:
Payment of dividends(22,837)(23,136)
Proceeds from exercise of stock options471 4,686 
Payments for employee taxes withheld from stock-based awards(2,638)(7,733)
Purchase of treasury stock(3,593)— 
Other(231)134 
Net cash used in financing activities(28,828)(26,049)
Effect of exchange rate changes on cash6,276 179 
Net increase in cash and cash equivalents59,945 10,731 
Cash and cash equivalents, beginning of period217,643 279,072 
Cash and cash equivalents, end of period$277,588 $289,803 




BRADY CORPORATION AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)
Three months ended January 31,Six months ended January 31,
2021202020212020
NET SALES
ID Solutions$194,227 $205,362 $392,419 $420,349 
Workplace Safety71,611 71,303 150,646 143,263 
Total$265,838 $276,665 $543,065 $563,612 
SALES INFORMATION
ID Solutions
Organic(6.9)%(1.3)%(7.6)%(0.7)%
Currency1.5 %(0.5)%1.0 %(0.9)%
Total(5.4)%(1.8)%(6.6)%(1.6)%
Workplace Safety
Organic(4.8)%(1.0)%0.4 %(0.9)%
Currency5.2 %(1.6)%4.8 %(2.5)%
Total0.4 %(2.6)%5.2 %(3.4)%
Total Company
Organic(6.3)%(1.2)%(5.6)%(0.8)%
Currency2.4 %(0.8)%2.0 %(1.3)%
Total(3.9)%(2.0)%(3.6)%(2.1)%
SEGMENT PROFIT
ID Solutions$39,000 $40,655 $79,279 $83,098 
Workplace Safety3,463 5,455 11,451 10,612 
Total$42,463 $46,110 $90,730 $93,710 
SEGMENT PROFIT AS A PERCENT OF NET SALES
ID Solutions20.1 %19.8 %20.2 %19.8 %
Workplace Safety4.8 %7.7 %7.6 %7.4 %
Total16.0 %16.7 %16.7 %16.6 %
Three months ended January 31,Six months ended January 31,
2021202020212020
Total segment profit$42,463 $46,110 $90,730 $93,710 
Unallocated amounts:
Administrative costs(5,051)(4,866)(11,130)(11,575)
Investment and other income2,036 1,760 2,191 3,140 
Interest expense(51)(647)(157)(1,348)
Income before income taxes and losses of unconsolidated affiliate$39,397 $42,357 $81,634 $83,927 


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February 18, 2021 Brady Corporation F’21 Q2 Financial Results
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2Forward-Looking Statements In this presentation, 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; Brady’s ability to develop technologically advanced products that meet customer demands; raw material and other cost increases; difficulties in protecting our websites, networks, and systems against security breaches; extensive regulations by U.S. and non-U.S. governmental and self-regulatory entities; risks associated with the loss of key employees; divestitures and contingent liabilities from divestitures; Brady’s ability to properly identify, integrate, and grow acquired companies; litigation, including product liability claims; foreign currency fluctuations; potential write-offs of Brady’s 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 issues 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, 2020 and subsequent Form 10-Q filings. 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.
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3Managing Through the Pandemic Managing Through the Pandemic: • Thank you to all of the Brady employees and front- line workers. • Brady’s products are helping in the fight of COVID- 19. Key Messages: • Workplace Safety is growing its customer base, but gross margins were impacted by mix. • ID Solutions continues to grow profit as a percent of sales. • SG&A continues to trend downwards, boding well for strong earnings growth as markets improve. • Strong balance sheet and cash generation.
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4Q2 F’21 Financial Summary • Sales were $265.8M in Q2 of F’21 compared with $276.7M in Q2 of F’20. – Organic sales declined 6.3%. – Foreign currency translation increased sales 2.4%. • Gross profit margin of 48.7% in Q2 of F’21 compared with 50.3% in Q2 of F’20. • SG&A expense of $82.2M (30.9% of sales) in Q2 of F’21 compared with $87.4M (31.6% of sales) in Q2 of F’20. • R&D expense of $9.9M (3.7% of sales) in Q2 of F’21 compared with $10.5M (3.8% of sales) in Q2 of F’20. • Income before income taxes and losses of unconsolidated affiliate declined 7.0% to $39.4M in Q2 of F’21 compared with $42.4M in Q2 of F’20. • Net income per Class A Diluted Nonvoting Common Share was $0.59 in Q2 of F’21 compared with $0.62 in Q2 of F’20. • Net cash provided by operating activities increased 153% to $36.1M in Q2 of F’21 compared to $14.3M in Q2 of F’20.
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5Sales Overview • Total sales declined 3.9%. • Organic sales declined 6.3%: • ID Solutions – Organic sales decline of 6.9%. • Workplace Safety – Organic sales decline of 4.8%. • 2.4% increase due to foreign currency translation. Q2 F’21 SALES: • ID Solutions – Decrease in rate of organic sales decline compared to Q1 of F’21 and Q4 of F’20. • Workplace Safety – Organic sales decline primarily due to North America business. Q2 F’21 SALES COMMENTARY: $290 $288 $298 $297 $293 $282 $290 $295 $287 $277 $266 $252 $277 $266 $200 $225 $250 $275 $300 Q1 F'18 1.7% Q2 F'18 3.2% Q3 F'18 3.2% Q4 F'18 2.5% Q1 F'19 4.7% Q2 F'19 2.3% Q3 F'19 2.4% Q4 F'19 1.7% Q1 F'20 (0.4%) Q2 F'20 (1.2%) Q3 F'20 (6.0%) Q4 F'20 (13.7%) Q1 F'21 (4.9%) Q2 F'21 (6.3%)Organic Sales SALES (millions of USD)
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Gross Profit Margin 6 • Gross profit margin of 48.7% compared to 50.3% in Q2 of F’20. • We continue to invest in automation and manufacturing efficiencies. • Gross profit margin was negatively impacted by reduced sales volumes in our ID Solutions business along with product mix in our Workplace Safety business. Q2 F’21 – GROSS PROFIT MARGIN: $146 $144 $151 $147 $147 $140 $146 $147 $141 $139 $130 $119 $135 $130 50.3% 49.9% 50.6% 49.6% 50.0% 49.5% 50.3% 49.6% 49.3% 50.3% 48.7% 47.1% 48.9% 48.7% 40% 45% 50% $100 $125 $150 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Q1 F'20 Q2 F'20 Q3 F'20 Q4 F'20 Q1 F'21 Q2 F'21 GROSS PROFIT & GPM% (millions of USD)
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SG&A Expense 7 • The $5.1M reduction in SG&A expense compared to Q2 of F’20 was due to ongoing benefits from efficiency actions combined with a reduction in discretionary spend. • Sequentially, SG&A expense was down $0.8M compared to the first quarter of this year. This decrease was primarily due to benefits from efficiency actions partially offset by foreign currency translation. Q2 F’21 – SG&A EXPENSE: $100 $98 $102 $91 $95 $93 $95 $89 $90 $87 $83 $76 $83 $82 34.5% 33.9% 34.1% 30.6% 32.3% 32.8% 32.7% 30.2% 31.2% 31.6% 31.3% 30.2% 30.0% 30.9% 10% 15% 20% 25% 30% 35% $60 $70 $80 $90 $100 $110 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Q1 F'20 Q2 F'20 Q3 F'20 Q4 F'20 Q1 F'21 Q2 F'21 SG&A EXPENSE AND SG&A EXPENSE AS A % of SALES (millions of USD)
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R&D Expense 8 $10.5 $11.3 $11.7 $11.7 $11.3 $11.1 $11.4 $11.3 $11.0 $10.5 $9.8 $9.4 $10.2 $9.9 3.6% 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% 3.8% 3.8% 3.8% 3.7% 3.7% 3.7% 3.7% 2.5% 3.0% 3.5% 4.0% $6.0 $8.0 $10.0 $12.0 $14.0 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Q1 F'20 Q2 F'20 Q3 F'20 Q4 F'20 Q1 F'21 Q2 F'21 R&D EXPENSE AND R&D EXPENSE AS A % of SALES (millions of USD) • We continue to invest in R&D to drive future organic sales growth. • Solid new product pipeline. • Focused on ensuring our R&D spend is both efficient and effective. INCREASING OUR INVESTMENT IN RESEARCH & DEVELOPMENT:Q2 F’21 – R&D EXPENSE:
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9Income Before Income Taxes • Income before income taxes and losses of unconsolidated affiliate decreased 7.0% to $39.4M in Q2 of F’21 compared to $42.4M in Q2 of F’20. Q2 F’21 - INCOME BEFORE INCOME TAXES AND LOSSES OF UNCONSOLIDATED AFFILIATE: INCOME BEFORE INCOME TAXES AND LOSSES OF UNCONSOLIDATED AFFILIATE (millions of USD) $34.8 $35.0 $37.0 $45.2 $39.9 $36.7 $41.0 $47.1 $41.6 $42.4 $22.2 $34.9 $42.2 $39.4 $10 $20 $30 $40 $50 Q1 F'18 12.2% Q2 F'18 20.4% Q3 F'18 20.7% Q4 F'18 26.0% Q1 F'19 14.8% Q2 F'19 4.8% Q3 F'19 10.8% Q4 F'19 4.1% Q1 F'20 4.2% Q2 F'20 15.4% Q3 F'20 (45.9%) Q4 F'20 (26.0%) Q1 F'21 1.6% Q2 F'21 (7.0%) Year on Year Growth
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10Net Income & Diluted EPS • Net income was $30.9M in Q2 of F’21 compared to $33.6M in Q2 of F’20. • Diluted EPS was $0.59 in Q2 of F’21 compared to $0.62 in Q2 of F’20. Q2 F’21 – NET INCOME & DILUTED EPS: $0.49 $0.08 $0.49 $0.66 $0.58 $0.55 $0.65 $0.68 $0.70 $0.62 $0.26 $0.53 $0.64 $0.59 $0.00 $0.20 $0.40 $0.60 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Q1 F'20 Q2 F'20 Q3 F'20 Q4 F'20 Q1 F'21 Q2 F'21 NET INCOME PER CLASS A DILUTED SHARE $25.8 $4.3 $26.0 $35.0 $30.6 $29.2 $34.8 $36.6 $37.5 $33.6 $13.6 $27.7 $33.5 $30.9 $0 $10 $20 $30 $40 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Q1 F'20 Q2 F'20 Q3 F'20 Q4 F'20 Q1 F'21 Q2 F'21 NET INCOME (millions of USD)
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11Cash Generation & Uses • Cash flow from operating activities was $36.1M in Q2 of F’21 compared to $14.3M in Q2 of F’20. • Free cash flow* was $30.9M in Q2 of F’21 compared to $8.9M in Q2 of F’20. • Cash flow from operating activities and free cash flow* were impacted by the payment of annual incentive compensation which was higher in Q2 of F’20. • We returned $12.3M to our shareholders in the form of dividends and share buybacks in Q2 of F’21. CASH FLOWS IN Q2 OF F’21: * Free Cash Flow is calculated as Net Cash Provided by Operating Activities less Capital Expenditures. CASH FLOW FROM OPERATING ACTIVITIES (millions of USD) $34.7 $7.7 $46.8 $53.8 $18.8 $25.4 $52.7 $65.3 $38.8 $14.3 $42.8 $45.1 $62.8 $36.1 $0 $20 $40 $60 Q1 F'18 134% Q2 F'18 181% Q3 F'18 180% Q4 F'18 154% Q1 F'19 54% Q2 F'19 87% Q3 F'19 152% Q4 F'19 178% Q1 F'20 104% Q2 F'20 43% Q3 F'20 313% Q4 F'20 163% Q1 F'21 188% Q2 F'21 117% % of Net Income (millions of USD) 3 Mos. Ended Jan. 31, 2021 3 Mos. Ended Jan. 31, 2020 6 Mos. Ended Jan. 31, 2021 6 Mos. Ended Jan. 31, 2020 Cash Balance - Beginning of Period 256.3$ 295.1$ 217.6$ 279.1$ Cash Flow from Operating Activities 36.1 14.3 98.9 53.1 Capital Expenditures (5.2) (5.4) (14.5) (13.1) Dividends (11.4) (11.6) (22.8) (23.1) Share Repurchases (0.9) - (3.6) - Effect of Exchange Rates on Cash 4.7 0.5 6.3 0.2 Other (2.0) (3.1) (4.3) (6.4) Cash Balance - End of Period 277.6$ 289.8$ 277.6$ 289.8$
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Net Cash 12 • January 31, 2021 cash = $277.6M. • Brady has no outstanding debt. • Balance sheet provides flexibility for future organic and inorganic investments. STRONG BALANCE SHEET: $48 $44 $73 $129 $138 $151 $188 $229 $245 $240 $190 $218 $256 $278 $0 $50 $100 $150 $200 $250 $300 $350 Q1 F'18 Q2 F'18 Q3 F'18 Q4 F'18 Q1 F'19 Q2 F'19 Q3 F'19 Q4 F'19 Q1 F'20 Q2 F'20 Q3 F'20 Q4 F'20 Q1 F'21 Q2 F'21 NET CASH (millions of USD)
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13F’21 Diluted EPS Guidance Diluted EPS Guidance for the Year Ending July 31, 2021 $2.48 to $2.58 Diluted EPS Guidance for the Second $1.25 to $1.35 Half of the Year Ending July 31, 2021 (compares to $0.79 in second half of F’20) Guidance Assumptions: • Continued economic improvement and the successful roll-out of vaccines around the globe. • Mid-single digit organic sales growth in the second half of the year ending July 31, 2021.
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Q2 F’21 vs. Q2 F’20 (millions of USD) 14Identification Solutions • Revenues declined - (5.4%): • Organic = - (6.9%). • Fx = + 1.5%. • Organic sales performed better in Asia than in North America and Europe. • Expenses are down due to sustainable efficiency activities as well as cost containment activities. • Segment profit as a percent of sales increased despite reduced sales volumes. Q2 F’21 SUMMARY: Q2 F’21 Q2 F’20 Change Sales $ 194.2 $ 205.4 - 5.4% Segment Profit 39.0 40.7 - 4.1% Segment Profit % 20.1% 19.8% + 30 bps $218 $209 $214 $222 $215 $205 $193 $171 $198 $194 19% 18% 19% 21% 20% 20% 19% 18% 20% 20% 5% 10% 15% 20% $150 $175 $200 $225 $250 Q1 F'19 5.7% Q2 F'19 3.6% Q3 F'19 4.0% Q4 F'19 3.3% Q1 F'20 (0.2%) Q2 F'20 (1.3%) Q3 F'20 (8.2%) Q4 F'20 (21.7%) Q1 F'21 (8.4%) Q2 F'21 (6.9%)OrganicGrowth SALES & SEGMENT PROFIT % (millions of USD) • Improving market conditions. • Anticipate organic sales growth in the second half of fiscal 2021. • Continued strong profitability and cash generation. OUTLOOK:
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Q2 F’21 vs. Q2 F’20 (millions of USD) 15Workplace Safety • Revenues increased + 0.4%: • Organic = - (4.8%). • Fx = + 5.2%. • Organic sales declined due to the North American business and Australia. • Europe experienced low-single digit organic sales growth in the quarter. • Segment profit and segment profit as a percent of sales decreased due to reduced sales volumes and product mix. Q2 F’21 SUMMARY: Q2 F’21 Q2 F’20 Change Sales $ 71.6 $ 71.3 + 0.4% Segment Profit 3.5 5.5 - 36.5% Segment Profit % 4.8% 7.7% - 290 bps Organic Growth $75 $73 $76 $73 $72 $71 $73 $81 $79 $72 7% 6% 8% 9% 7% 8% 6% 7% 10% 5% 0% 2% 4% 6% 8% 10% $50 $75 $100 Q1 F'19 2.2% Q2 F'19 (0.9%) Q3 F'19 (1.6%) Q4 F'19 (2.6%) Q1 F'20 (0.8%) Q2 F'20 (1.0%) Q3 F'20 0.2% Q4 F'20 10.8% Q1 F'21 5.5% Q2 F'21 (4.8%) SALES & SEGMENT PROFIT % (millions of USD) • Challenging comparables in the second half of F’21 due to strong Covid-related product sales last year. • Anticipate a continued slowdown in Covid-related product sales to be partially offset by increased core product sales. OUTLOOK:
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16Investor Relations Brady Contact: Ann Thornton Investor Relations 414-438-6887 Ann_Thornton@bradycorp.com See our web site at www.bradycorp.com/investors
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