Brady Corporation Investor Presentation Fiscal 2020 – Q2
Forward-Looking Statements 2 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” 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: our ability to compete effectively or to successfully execute our strategy; Brady’s ability to develop technologically advanced products that meet customer demands; difficulties in protecting our websites, networks, and systems against security breaches; decreased demand for our products; raw material and other cost increases; 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; the impact of the Tax Reform Act and any other changes in tax legislation and tax rates; potential write-offs of Brady’s substantial intangible assets; 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, 2019. 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’s Mission & Vision 3 Brady will : • Be the expert in safety, identification, and Sustainable compliance. Long-Term • Possess deep knowledge in niche applications. • Solve problems and provide solutions for our customers. Shareholder • Innovate to provide market-leading, high-performance Value products. • Deliver via our own manufacturing capabilities and Growth exceptional customer service.
Summary 4 Global Leader with Innovative Solutions: • Leader in niche safety, identification, and compliance markets. • Diversified customer base, products, and geographic footprint. • 100+ year history of innovation & strong customer service. Focused on Long-term Sustainable Results: • Parallel focus on organic growth and long-term profitability improvements. • Investing in innovation. • Investing in automation and capability-enhancing capital expenditures. • Driving sustainable efficiency gains. • Efficiency focus has enabled Brady to grow earnings in challenging economic environments. 18 consecutive quarters of pre-tax income growth. Strong Balance Sheet: • Historical annual cash generation in excess of net earnings. • Strong balance sheet. Net cash of $240M at January 31, 2020. Patient & Disciplined Capital Allocation: • Organic investment opportunities. • Dividends (increased 34 consecutive years). • Share buybacks and technology-based acquisitions.
Geographical Presence 5 F’19 Sales by Region (70 facilities in 33 countries) 5% 12% 53% 30% ID Solutions: Workplace Safety: EMEA = 51% Americas = 67% EMEA = 22% Americas = 33% Australia = 16% Asia = 11% U.S.A. Rest of Americas Europe, Middle East & Africa Asia-Pacific Belgium, Denmark, France, Germany, Canada, Mexico, Brazil. Australia, China, India, Japan, South Hungary, Italy, Netherlands, Norway, Korea, Malaysia, Singapore, Thailand. Poland, Qatar, Romania, Russia, Saudi Arabia, Slovakia, South Africa, Spain, Sweden, Turkey, UAE, U.K.
Global Divisions 6 Identification Solutions Workplace Safety (approx. 70% of sales) (approx. 30% of sales) Products: Products: • Safety & Facility ID • Vast offering of workplace safety products (signs, tags, labels, safety • Wire ID equip, etc.). • Product ID • People ID • Healthcare ID. Primary Brands: • Seton, Emed, Signals, Primary Brands: Securimed. • Brady and PDC. Primary Channels: Primary Channels: • Distrib. & GPOs. = 70%, • Primarily direct through Catalog, Internet, Telesales. remainder = Direct. Geographic Presence: Geographic Presence: • Approx. 2/3 of sales • Approx. 1/3 of sales are in the Americas. are in the Americas.
Driving Operational Excellence 7 Right Culture for Efficiency Focused Invest in Our Future Growth Focused Success • Long-term focus. • Improve the • Renewed customer innovation. experience. • Capability- • Consistently • Complete enhancing capital execute solutions. expenditures. fundamentals. • Industry-leading • Incentivize the • Sustainable • Clarity, focus, and digital. right behaviors. activities. culture of • Build the next • Invest in innovation. • Automation. commercial generation of • Local ownership resources and leaders. • Simplify and accountability. new products. processes. • Consistent and • Deliver what we • Geographic patient capital • Custom promise. allocation. expansion. manufacturing. • Customer at the • Customer at the • Customer at the • Customer at the center. center. center. center.
Patient & Disciplined Capital Allocation 8 Reinvest in the Business: • Invest as necessary to deliver strong customer service. • Invest in innovative new products. • Capital expenditures to enhance capabilities and deliver efficiency gains. • Improve under-performing businesses. Dividends: • Committed to consistently returning capital to shareholders. • F’20 is the 34 th consecutive year of annual dividend increases. After funding organic growth investments and dividends, our capital allocation approach is patient and disciplined: Share Buybacks: • Opportunistic and patient use of share buybacks to drive shareholder value. • Intrinsic-value based. Acquisitions: • Tuck-ins or clear technological advantages that allow Brady to leverage capabilities.
Taking the Long View 9 Environmental, Social, Governance Brady’s long-term focus balances all stakeholders. Environmental Social Governance •Upgraded •Employee •Strong Culture. Facilities. Engagement. •Executive •Reduced Footprint. •Diversity & Affinity Compensation. Groups. •Energy Efficiency. •Diverse Board •Data Privacy. Composition. •Waste Reduction. •Brady Foundation •Financial •Biodegradable & Corp. Giving. Transparency. Products. Long-term Shareholder Value
10 Financial Overview
Revenues 11 SALES – ANNUAL TRENDS SALES: (millions of USD) $1,225 $1,172 $1,174 $1,161 • Investing in selling $1,200 $1,121 $1,113 resources, new product development, and capability- $1,000 enhancing capital expenditures while delivering strong customer service to $800 drive long-term organic sales F'14 F'15 F'16 F'17 F'18 F'19 growth. 0.2% 1.0% (0.7%) 0.5% 2.6% 2.8% Organic Growth • Recent industrial economic (0.1%) (5.4%) (3.7%) (1.2%) 3.0% (2.6%) weakness. Foreign Currency -- % -- % -- % -- % (0.2%) (0.5%) Divestitures SALES – QUARTERLY TRENDS (millions of USD) $305 $298 $298 $295 $293 $295 $290 $290 $288 $287 $282 $285 $277 $275 $265 $255 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 Organic 1.7% 3.2% 3.2% 2.5% 4.7% 2.3% 2.4% 1.7% (0.4%) (1.2%) Growth
Gross Profit Margins 12 GPM – ANNUAL TRENDS GROSS PROFIT MARGIN: 60% • Operational improvements and 50.1% 50.1% 49.8% 49.9% 49.9% $700 47.7% automation benefits are more 50% than offsetting input cost $610 $588 increases. $579 40% $600 $558 $559 $558 30% • Gross profit margins up in the 1 st $500 half of F’20. 20% $400 10% $300 0% F'14 F'15 F'16 F'17 F'18 F'19 GPM – QUARTERLY TRENDS $175 55% 50.6% 50.3% 50.3% 50.3% 49.9% 50.0% 49.6% 49.6% 49.5% 49.3% 50% $151 $147 $150 $147 $147 $146 $146 $144 45% $141 $140 $139 40% $125 35% $100 30% 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
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