8-K
BRADY CORP (BRC)
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 17, 2022
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 class | Trading <br>Symbol | Name of each exchange on which registered |
|---|---|---|
| Class A Nonvoting Common Stock, par value $0.01 per share | BRC | New 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 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
|---|
On February 17, 2022, Brady Corporation (the “Company”) issued a press release announcing its fiscal 2022 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 7.01 | REGULATION FD DISCLOSURE |
|---|
On February 17, 2022, the Company hosted a conference call related to its fiscal 2022 second quarter financial results. A copy of the slides referenced in the conference call, which is also posted on the Company’s website, is being furnished to the Securities and Exchange Commission as Exhibit 99.2 attached hereto and is incorporated herein by reference.
| Item 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
|---|
(d) Exhibits
| EXHIBIT NUMBER | DESCRIPTION |
|---|---|
| 99.1 | Press Release of Brady Corporation, dated February 17, 2022, relating to fiscal 2022 second quarter financial results. |
| 99.2 | Informational slides provided by Brady Corporation, dated February 17, 2022, relating to fiscal 2022 second quarter financial results. |
| 104 | Cover 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 17, 2022 | |
| /s/ AARON J. PEARCE | |
| Aaron J. Pearce | |
| Chief Financial Officer and Treasurer |
Document
EXHIBIT 99.1
For More Information:
Investor contact: Ann Thornton 414-438-6887
Media contact: Kate Venne 414-358-5176
Brady Corporation Reports Fiscal 2022 Second Quarter Results and Updates Fiscal 2022 Guidance
•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 (February 17, 2022) -- 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 |
f22q2conferencecallprese
February 17, 2022 Brady Corporation F’22 Q2 Financial Results
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; increased cost of raw materials, labor and freight as well as raw material shortages; Brady’s ability to develop technologically advanced products that meet customer demands; 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.
3Q2 F’22 Financial Summary • Sales grew 19.6% to $318.1M in Q2 of F’22 compared with $265.8M in Q2 of F’21. – Organic sales grew 13.1%, acquisitions increased sales by 8.6% and foreign currency translation decreased sales 2.1%. • Gross profit margin of 47.0% in Q2 of F’22 compared with 48.7% in Q2 of F’21. • SG&A expense of $92.5M (29.1% of sales) in Q2 of F’22 compared with $82.2M (30.9% of sales) in Q2 of F’21. • GAAP Income before income taxes and losses of unconsolidated affiliate increased 6.7% to $42.0M in Q2 of F’22 compared with $39.4M in Q2 of F’21. – Income Before Income Taxes Excluding Amortization* in the second quarter of fiscal 2022 increased 12.4% to $45.8M. • GAAP Diluted EPS in the second quarter of fiscal 2022 increased 10.2% to $0.65, compared with $0.59 in the second quarter of the prior year. – Diluted EPS Excluding Amortization* increased 14.8% to $0.70 in the second quarter of fiscal 2022. * Income Before Income Taxes Excluding Amortization and Diluted EPS Excluding Amortization are non-GAAP measures. See appendix.
4Sales Overview • Total sales increased 19.6%. • Organic sales increased 13.1%: • ID Solutions – Organic sales increased 16.0%. • Workplace Safety – Organic sales increased 5.2%. • 8.6% increase due to acquisitions. • 2.1% decrease due to foreign currency translation. Q2 F’22 SALES: • ID Solutions experienced strong organic sales growth in all regions. • Workplace Safety was able to overcome challenging comparables to return to organic growth faster than we had originally anticipated. • Both Identification Solutions and Workplace Safety sales are above pre-pandemic levels. Q2 F’22 SALES COMMENTARY: $293 $282 $290 $295 $287 $277 $266 $252 $277 $266 $296 $306 $321 $318 $200 $225 $250 $275 $300 $325 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%) Q3 F'21 6.5% Q4 F'21 12.6% Q1 F'22 7.0% Q2 F'22 13.1% Organic Sales Growth (Decline) SALES (millions of USD)
Gross Profit Margin 5 • Gross profit margin of 47.0% compared to 48.7% in Q2 of F’21. • Gross margin has been negatively impacted by inflationary pressures including wage increases, freight increases, and raw material cost increases. • Efficiency gains, automation and selected price increases have partially offset the negative impacts caused by input- cost inflation. Q2 F’22 – GROSS PROFIT MARGIN: $147 $140 $146 $147 $141 $139 $130 $119 $135 $130 $149 $148 $155 $149 50.0% 49.5% 50.3% 49.6% 49.3% 50.3% 48.7% 47.1% 48.9% 48.7% 50.4% 48.2% 48.2% 47.0% 38% 40% 42% 44% 46% 48% 50% $100 $125 $150 $175 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 Q3 F'21 Q4 F'21 Q1 F'22 Q2 F'22 GROSS PROFIT & GPM% (millions of USD)
SG&A Expense 6 • SG&A expense was 29.1% of sales compared to 30.9% of sales in the same quarter last year. • SG&A expense was negatively impacted by an increase in amortization expense from the acquisitions completed in the fourth quarter of last year. Amortization expense was $3.7M in Q2 of F’22 and $1.4M in Q2 of F’21. • We will continue to drive efficiencies in SG&A expenses while also investing in sales and marketing activities to accelerate sales growth. Q2 F’22 – SG&A EXPENSE: $95 $93 $95 $89 $90 $87 $83 $76 $83 $82 $91 $94 $97 $93 32.3% 32.8% 32.7% 30.2% 31.2% 31.6% 31.3% 30.2% 30.0% 30.9% 30.7% 30.6% 30.1% 29.1% 10% 15% 20% 25% 30% 35% $60 $70 $80 $90 $100 $110 $120 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 Q3 F'21 Q4 F'21 Q1 F'22 Q2 F'22 SG&A EXPENSE AND SG&A EXPENSE AS A % OF SALES (millions of USD)
R&D Expense 7 $11.3 $11.1 $11.4 $11.3 $11.0 $10.5 $9.8 $9.4 $10.2 $9.9 $11.3 $13.2 $13.9 $14.0 3.9% 3.9% 3.9% 3.8% 3.8% 3.8% 3.7% 3.7% 3.7% 3.7% 3.8% 4.3% 4.3% 4.4% 1.5% 2.5% 3.5% 4.5% $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 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 Q3 F'21 Q4 F'21 Q1 F'22 Q2 F'22 R&D EXPENSE AND R&D EXPENSE AS A % OF SALES (millions of USD) • R&D expense is up as a result of investments made to drive future sales growth combined with additional R&D expense from the acquisitions completed in the fourth quarter of F’21. • The acquisitions of Magicard, Code, and Nordic ID carry higher R&D expense levels than Brady’s core business. • We have a solid new product pipeline and we are focused on ensuring that our R&D spend is both efficient and effective. Q2 F’22 – R&D EXPENSE:
8Income Before Income Taxes • GAAP Income before income taxes was $42.0M in Q2 of F’22 compared to $39.4M in Q2 of F’21. • Q2 of F’22 income before income taxes was negatively impacted by an increase in amortization expense resulting from the acquisitions completed in the fourth quarter of last year. • Income Before Income Taxes Excluding Amortization* increased 12.4% to $45.8M in Q2 of F’22 compared to $40.8M in Q2 of F’21. Q2 F’22 - INCOME BEFORE INCOME TAXES: INCOME BEFORE INCOME TAXES (millions of USD) $39.9 $36.7 $41.0 $47.1 $41.6 $42.4 $22.2 $34.9 $42.2 $39.4 $47.8 $41.6 $44.7 $42.0 $10 $20 $30 $40 $50 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%) Q3 F'21 115.7% Q4 F'21 19.4% Q1 F'22 5.8% Q2 F'22 6.7%Year-on-Year Growth * Income Before Income Taxes Excluding Amortization is a non-GAAP measure. See appendix.
9Net Income & Diluted EPS • GAAP Net income was $33.8M in Q2 of F’22 compared to $30.9M in Q2 of F’21. - Net Income Excluding Amortization* was $36.7M in Q2 of F’22 compared to $31.9M in Q2 of F’21. • GAAP Diluted EPS was $0.65 in Q2 of F’22 compared to $0.59 in Q2 of F’21. - Diluted EPS Excluding Amortization* was $0.70 in Q2 of F’22 compared to $0.61 in Q2 of F’21. Q2 F’22 – NET INCOME & DILUTED EPS: $0.58$0.55 $0.65 $0.68 $0.70 $0.62 $0.26 $0.53 $0.64 $0.59 $0.71 $0.53 $0.67 $0.65 $0.00 $0.20 $0.40 $0.60 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 Q3 F'21 Q4 F'21 Q1 F'22 Q2 F'22 DILUTED EPS $30.6 $29.2 $34.8 $36.6 $37.5 $33.6 $13.6 $27.7 $33.5 $30.9 $37.3 $28.0 $35.0 $33.8 $0 $10 $20 $30 $40 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 Q3 F'21 Q4 F'21 Q1 F'22 Q2 F'22 NET INCOME (millions of USD) * Net Income Excluding Amortization and Diluted EPS Excluding Amortization are non-GAAP measures. See appendix. *
10Cash Generation & Uses • Cash flow from operating activities was ($3.2M) in Q2 of F’22 compared to $36.1M in Q2 of F’21. • Free cash flow* was ($8.3M) in Q2 of F’22 compared to $30.9M in Q2 of F’21. • Year-to-date, free cash flow* was $7.9M in Q2 of F’22. • Cash generation was negatively impacted by increased inventory purchases to ensure that we can service the needs of our customers. • Cash generation was also negatively impacted by the payment of fiscal 2021 incentive-based compensation in the second quarter of F’22. Returning Funds to our Shareholders: We are committed to returning funds to our shareholders in the form of dividends and share buybacks. • Year-to-date, we returned $45.0M to our shareholders in the form of dividends and share buybacks. CASH FLOWS IN Q2 OF F’22: * Free Cash Flow is calculated as Net Cash Provided by Operating Activities less Capital Expenditures. CASH FLOW FROM OPERATING ACTIVITIES (millions of USD) $18.8 $25.4 $52.7 $65.3 $38.8 $14.3 $42.8 $45.1 $62.8 $36.1 $56.0 $50.8 $27.5 ($3.2) -$5 $15 $35 $55 $75 Q1 F'19 54% Q2 F'19 87% Q3 F'19 152% Q4 F'19 178% Q1 F'20 104% Q2 F'20 43% Q3 F'20 313% Q4 F'20 163% Q1 F'21 188% Q2 F'21 117% Q3 F'21 150% Q4 F'21 181% Q1 F'22 78% Q2 F'22 (9%) % of Net Income (millions of USD) 3 Mos. Ended Jan. 31, 2022 3 Mos. Ended Jan. 31, 2021 6 Mos. Ended Jan. 31, 2022 6 Mos. Ended Jan. 31, 2021 Cash Balance - Beginning of Period 157.6$ 256.3$ 147.3$ 217.6$ Cash Flow from Operating Activities (3.2) 36.1 24.3 98.9 Capital Expenditures (5.1) (5.2) (16.4) (14.5) Dividends (11.7) (11.4) (23.2) (22.8) Share Repurchases (2.8) (0.9) (21.7) (3.6) Debt Borrowings (Repayments) 16.0 - 45.0 - Effect of Exchange Rates on Cash (2.0) 4.7 (3.4) 6.3 Other (1.4) (2.0) (4.5) (4.3) Cash Balance - End of Period 147.4$ 277.6$ 147.4$ 277.6$
Net Cash 11 • January 31, 2022 cash = $147.4M. • January 31, 2022 debt = $83.0M. • Brady is in a net cash position of $64.4M. • Balance sheet provides flexibility for future organic and inorganic investments. STRONG BALANCE SHEET: $138 $151 $188 $229 $245 $240 $190 $218 $256 $278 $322 $109 $91 $64 $0 $50 $100 $150 $200 $250 $300 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 Q3 F'21 Q4 F'21 Q1 F'22 Q2 F'22 NET CASH (millions of USD)
12Updated F’22 EPS Guidance F’22 Diluted EPS, Excluding Amortization $3.00 to $3.15 (+9% to +15% vs. F’21) (Previous range of $3.12 to $3.32 per share) GAAP Diluted EPS $2.78 to $2.93 (+13% to +19% vs. F’21) (Previous range of $2.90 to $3.10/share) Guidance Assumptions: • Continued economic expansion. • Increase in after-tax amortization expense of $0.12/share (from $0.10/share in F’21 to $0.22/share in F’22). • Full-year income tax rate in the 20% range. • Foreign currency exchange rates as of January 31, 2022. • Total sales growth in excess of 12%. • Depreciation and amortization expense of approximately $34M to $36M. • Capital expenditures, excluding any future facility purchases, of approximately $27M to $32M (guidance is inclusive of $8M of facility purchases in the first half of F’22).
Q2 F’22 vs. Q2 F’21 (millions of USD) 13Identification Solutions • Revenues increased 26.1%: • Organic growth = + 16.0%. • Acquisition growth = + 11.8%. • Fx reduction = (1.7%). • Strong organic sales growth in all regions. • Segment profit negatively impacted by a $2.4M increase in amortization expense. Excluding amortization expense, segment profit as a percent of sales decreased by 120 basis points from 20.7% in Q2 of F’21 to 19.5% in Q2 of F’22. • We have increased our innovation investments and are actively investing in sales-generating resources. Q2 F’22 SUMMARY: Q2 F’22 Q2 F’21 Change Sales $ 245.0 $ 194.2 + 26.1% Segment Profit 44.1 39.0 + 13.2% Segment Profit % 18.0% 20.1% (210 bps) $215 $205 $193 $171 $198 $194 $218 $231 $249 $245 20% 20% 19% 18% 20% 20% 22% 18% 20% 18% 0% 5% 10% 15% 20% $150 $175 $200 $225 $250 $275 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%) Q3 F'21 9.8% Q4 F'21 24.5% Q1 F'22 13.2% Q2 F'22 16.0% Organic Growth SALES & SEGMENT PROFIT % (millions of USD) • Anticipate upper-teen percentage sales growth in fiscal 2022, inclusive of the acquisitions completed in the fourth quarter of fiscal 2021. • Continued strong profitability. OUTLOOK:
Q2 F’22 vs. Q2 F’21 (millions of USD) 14Workplace Safety • Revenues grew 2.0%: • Organic growth = + 5.2%. • Fx reduction = (3.2%). • Organic sales increased in EMEA and Australia as sales growth in our core product offerings more than offset the reduction of Covid-related product sales. • Organic sales were effectively flat in the Americas due to challenging comparables. • Increased sales volumes more than offset inflationary pressures, resulting in improved segment profit. Q2 F’22 SUMMARY: Q2 F’22 Q2 F’21 Change Sales $ 73.1 $ 71.6 + 2.0% Segment Profit 4.5 3.5 + 30.4% Segment Profit % 6.2% 4.8% +140 bps Organic Growth $72 $71 $73 $81 $79 $72 $77 $75 $73 $73 7% 8% 6% 7% 10% 5% 7% 8% 3% 6% 0% 2% 4% 6% 8% 10% $50 $75 $100 Q1 F'20 (0.8%) Q2 F'20 (1.0%) Q3 F'20 0.2% Q4 F'20 10.8% Q1 F'21 5.5% Q2 F'21 (4.8%) Q3 F'21 (2.2%) Q4 F'21 (12.7%) Q1 F'22 (8.6%) Q2 F'22 5.2% SALES & SEGMENT PROFIT % (millions of USD) • Anticipate increased core product sales to continue to fully offset the slowdown in Covid-related product sales in the second half of this fiscal year. • Year-on-year revenue growth and improving profitability as we progress throughout the remainder of this fiscal year. OUTLOOK:
15Investor Relations Brady Contact: Ann Thornton Investor Relations 414-438-6887 Ann_Thornton@bradycorp.com See our website at www.bradycorp.com/investors
Appendix GAAP to Non-GAAP Reconciliations 16
17Non-GAAP Reconciliations 2022 2021 2022 2021 42,042$ 39,397$ 86,738$ 81,634$ Amortization expense 3,749 1,353 7,556 2,704 45,791$ 40,750$ 94,294$ 84,338$ 2022 2021 2022 2021 8,227$ 8,206$ 17,877$ 16,788$ Amortization expense 887 338 1,787 676 9,114$ 8,544$ 19,664$ 17,464$ Three months ended January 31, Three months ended January 31, Income Tax Expense Excluding Amortization (non-GAAP measure) Income before income taxes and losses of unconsolidated affiliate (GAAP measure) Income Before Income Taxes Excluding Amortization (non-GAAP measure) 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: Six months ended January 31, Income tax expense (GAAP measure) Six months ended January 31, 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:
18Non-GAAP Reconciliations 2022 2021 2022 2021 33,815$ 30,860$ 68,861$ 64,341$ Amortization expense 2,862 1,015 5,769 2,028 36,677$ 31,875$ 74,630$ 66,369$ 2022 2021 2022 2021 $ 0.65 $ 0.59 $ 1.32 $ 1.23 Amortization expense 0.05 0.02 0.11 0.04 0.70$ 0.61$ 1.43$ 1.27$ Three months ended January 31, 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: Six months ended January 31, Net income per Class A Nonvoting Common Share (GAAP measure) Diluted EPS Excluding Amortization (non-GAAP measure) Three months ended January 31, 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: Six months ended January 31, Net income (GAAP measure) Net Income Excluding Amortization (non-GAAP measure) 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.