Brady Q3 Earnings Call Highlights

Key Points

• Brady delivered a record quarter with adjusted EPS of $1.50, up 23% year over year, while organic sales rose 8.2% and total sales climbed 13.8%. Management credited broad-based growth across regions, stronger margins, and operating efficiencies.
• Profitability and cash generation improved, as gross margin expanded to 51.8%, operating cash flow rose 30.7% to $78.2 million, and free cash flow increased 20.8% to $67.2 million. The company ended the quarter with a net cash position of $148.6 million, more than triple a year earlier.
• Brady raised full-year guidance and detailed its Honeywell PSS acquisition, boosting fiscal 2026 adjusted EPS outlook to $5.20-$5.30 and reaffirming mid-single-digit organic sales growth. The company expects the PSS deal to close around Aug. 1 and to add about $0.80 of adjusted EPS accretion in the first year, excluding synergies.

Brady NYSE: BRC reported what Chief Executive Officer Russell Shaller called a “fantastic quarter,” as the identification and safety products company posted record adjusted earnings per share and broad-based organic sales growth in its fiscal 2026 third quarter.

The company reported adjusted diluted earnings per share of $1.50, up 23% from $1.22 in the same quarter last year and a new quarterly record. GAAP diluted earnings per share rose to $1.21 from $1.09. Net income increased 10.6% to $57.8 million, while adjusted net income rose 22.3% to $71.9 million.

Organic sales grew 8.2% in the quarter, with total sales growth of 13.8% after including contributions from acquisitions and foreign currency translation. Chief Financial Officer Ann Thornton said the results reflected “strong organic sales growth, improved gross profit margin, efficiencies throughout SG&A, and growth in operating income throughout our global businesses.”

Sales Growth Led by Both Regions

Brady said both of its operating regions contributed to the quarter’s organic growth. The Americas and Asia region grew organic sales 10.1%, while Europe and Australia grew 4.5% organically.

In Americas and Asia, sales reached a record $290.1 million, up 14.4% on a reported basis. Shaller said Brady grew sales in all key product lines in the region, with particular strength in wire identification. Wire ID represents 20% of revenue in Americas and Asia, and sales in that product line increased 19% during the quarter.

Shaller said data centers are making a “meaningful impact” on growth in wire identification. He also cited strong sales of portable, benchtop and automated printer units, which supported growth across wire identification, product identification and safety and facility identification.

In Europe and Australia, total sales rose 12.6% to $145.2 million, aided by an 8.1% benefit from foreign currency translation. Shaller said the region returned to growth despite a weak manufacturing environment in Europe and conflict in the Middle East. Wire ID represents 13% of sales in Europe and Australia and grew 13% in the quarter.

Margins and Cash Flow Improve

Gross profit margin improved to 51.8% from 51.0% in the prior-year quarter. Thornton said the improvement reflected cost reduction actions taken last year, including the closure of manufacturing facilities in Beijing, China, and Buffalo, New York, as well as sales growth led by highly engineered products.

SG&A expense was $128.7 million, compared with $108.7 million a year earlier. As a percentage of sales, SG&A increased to 29.6% from 28.4%. Excluding amortization, acquisition-related expenses and certain prior-year reorganization costs, however, SG&A declined to 25.3% of sales from 26.5%.

Brady continued to increase research and development spending. R&D expense was $23.5 million, or 5.4% of sales, compared with $19.2 million, or 5.0% of sales, in the prior-year quarter. Thornton said printer unit sales increased nearly 8% year over year, adding that consumable revenue is expected to follow printer placements.

Operating cash flow increased 30.7% to $78.2 million, while free cash flow rose 20.8% to $67.2 million. Year to date, operating cash flow was up nearly 35%. Brady ended the quarter with a net cash position of $148.6 million, which Thornton said was more than triple the company’s net cash position a year earlier.

Guidance Raised for Fiscal 2026

Brady raised its full-year adjusted EPS guidance to a range of $5.20 to $5.30, up from its previous range of $4.95 to $5.15. The company said the new adjusted EPS outlook implies growth of 13% to 15.2% compared with fiscal 2025.

The company also updated its GAAP EPS guidance to a range of $4.66 to $4.76, compared with the prior range of $4.62 to $4.82. Brady continues to expect organic sales growth in the mid-single-digit percentage range for the fiscal year ending July 31, 2026.

Other guidance assumptions include depreciation and amortization expense of approximately $44 million, capital expenditures of approximately $45 million and a full-year income tax rate of about 21%. Thornton said potential risks include a stronger U.S. dollar, inflationary pressures the company cannot offset quickly enough and a broader slowdown in economic activity.

Honeywell PSS Acquisition in Focus

Brady also discussed its previously announced agreement to acquire Honeywell’s Productivity Solutions and Services, or PSS, business. Shaller said the transaction would more than double the markets Brady can serve and add enterprise-level workforce productivity as a “critical third pillar” to the company’s customer offering.

Shaller said the combination would bring together Brady’s durable labels, printers, software and specialty adhesive materials with PSS’s mobility and scanning solutions. He said Brady intends to preserve PSS’s customer and channel partner relationships and continue investing in R&D and software offerings, including operational intelligence, voice and SwiftDecoder.

Brady said PSS sales declined by just under 2% in calendar 2025 compared with calendar 2024, then grew nearly 5% in the first quarter of calendar 2026. Shaller said Brady expects the acquired business to add approximately $0.80 of adjusted EPS accretion in the first year after closing, excluding synergies. He said the company’s best estimate for closing remains Aug. 1, pending regulatory filings and other external factors.

Thornton said Brady plans to finance the acquisition with $500 million of Term Loan A bank debt and $800 million of private placement debt, with an expected interest rate below 6%. She said the company expects net leverage of approximately 2.0 to 2.5 times at closing and expects to delever below 2 times within two years.

Executives Address Data Centers, New Printer and Board Resignations

During the question-and-answer session, Shaller said data center-related demand remains a tailwind, particularly for wire identification. He said Brady is not seeing acceleration or deceleration from current trends, but views the pace of data center construction as supportive of multi-year demand rather than a short-term surge.

Asked about the i4311 portable 4-inch printer launched in February, Shaller said it is performing about 50% above the company’s normal expectations for a printer launch. He described the product as “new to the world” and said it allows users to print larger-format thermal transfer labels without returning to a printer station.

Shaller also addressed recent board resignations, saying the optics were “awful” but attributing the departures to the significantly increased time commitment required by the Honeywell transaction. He said all board members present for the acquisition vote supported the deal and that there was “no dissent.”

“We reported an excellent quarter,” Shaller said in closing, adding that Brady’s investments in R&D are paying off and that the company finished the quarter with momentum.

About Brady NYSE: BRC

Brady Corporation is a global provider of identification and safety solutions, specializing in the design, manufacture and sale of products that help businesses improve safety, security and efficiency. The company offers an array of durable labels, signs, safety devices, printing systems and software platforms tailored to a wide range of industrial and commercial environments.

Founded in 1914 by William H. Brady, Brady Corporation has grown from a regional marker manufacturer into a diversified global enterprise.

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