Brady Corporation Investor Presentation Fiscal 2020 Q2 - - PowerPoint PPT Presentation

Fiscal 2020 – Q2

Brady Corporation

Investor Presentation

2

Forward-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” or “plan”

• r 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.

3

Brady’s Mission & Vision

Brady will:

• Be the expert in safety, identification, and

compliance.

• Possess deep knowledge in niche applications.
• Solve problems and provide solutions for our customers.
• Innovate to provide market-leading, high-performance

products.

• Deliver via our own manufacturing capabilities and

exceptional customer service.

Sustainable Long-Term Shareholder Value Growth

4

Summary

Strong Balance Sheet:

• Leader in niche safety, identification, and compliance markets.
• Diversified customer base, products, and geographic footprint.
• 100+ year history of innovation & strong customer service.
• Historical annual cash generation in excess of net earnings.
• Strong balance sheet. Net cash of $240M at January 31, 2020.
• 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.

Global Leader with Innovative Solutions: Focused on Long-term Sustainable Results: Patient & Disciplined Capital Allocation:

• Organic investment opportunities.
• Dividends (increased 34 consecutive years).
• Share buybacks and technology-based acquisitions.

5

Geographical Presence

Asia-Pacific

Australia, China, India, Japan, South Korea, Malaysia, Singapore, Thailand.

Europe, Middle East & Africa

Belgium, Denmark, France, Germany, Hungary, Italy, Netherlands, Norway, Poland, Qatar, Romania, Russia, Saudi Arabia, Slovakia, South Africa, Spain, Sweden, Turkey, UAE, U.K. Canada, Mexico, Brazil.

53% 5% 12% 30% F’19 Sales by Region

(70 facilities in 33 countries)

EMEA = 51% Americas = 33% Australia = 16% Workplace Safety: Americas = 67% EMEA = 22% Asia = 11% ID Solutions:

Rest of Americas U.S.A.

Products:

• Vast offering of workplace safety

products (signs, tags, labels, safety equip, etc.).

Primary Brands:

• Seton, Emed, Signals,

Securimed.

Primary Channels:

• Primarily direct through Catalog,

Internet, Telesales.

Geographic Presence:

• Approx. 1/3 of sales are in the

Americas.

Workplace Safety

(approx. 30% of sales)

6

Global Divisions

Products:

• Safety & Facility ID
• Wire ID
• Product ID
• People ID
• Healthcare ID.

Primary Brands:

• Brady and PDC.

Primary Channels:

• Distrib. & GPOs. = 70%,

remainder = Direct.

Geographic Presence:

• Approx. 2/3 of sales

are in the Americas.

Identification Solutions

(approx. 70% of sales)

Driving Operational Excellence

7

• Clarity, focus, and

culture of innovation.

• Local ownership

and accountability.

• Deliver what we

promise.

• Customer at the

center.

• Consistently

execute fundamentals.

• Sustainable

activities.

• Automation.
• Simplify

processes.

• Custom

manufacturing.

• Customer at the

center.

• Improve the

customer experience.

• Complete

solutions.

• Industry-leading

digital.

• Invest in

commercial resources and new products.

• Geographic

expansion.

• Customer at the

center.

• Long-term focus.
• Renewed

innovation.

• Capability-

enhancing capital expenditures.

• Incentivize the

right behaviors.

• Build the next

generation of leaders.

• Consistent and

patient capital allocation.

• Customer at the

center.

Invest in Our Future Growth Focused Efficiency Focused Right Culture for Success

8

Patient & Disciplined Capital Allocation

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 34th 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.

9

Taking the Long View

Environmental

Environmental, Social, Governance

Brady’s long-term focus balances all stakeholders. Social Governance

• Employee

Engagement.

• Diversity & Affinity

Groups.

• Data Privacy.
• Brady Foundation

& Corp. Giving.

• Strong Culture.
• Executive

Compensation.

• Diverse Board

Composition.

• Financial

Transparency.

• Upgraded

Facilities.

• Reduced Footprint.
• Energy Efficiency.
• Waste Reduction.
• Biodegradable

Products.

Long-term Shareholder Value

Financial Overview

10

11

Revenues

$1,225 $1,172 $1,121 $1,113 $1,174 $1,161 $800 $1,000 $1,200 F'14 0.2% (0.1%)

• - %

F'15 1.0% (5.4%)

• - %

F'16 (0.7%) (3.7%)

• - %

F'17 0.5% (1.2%)

• - %

F'18 2.6% 3.0% (0.2%) F'19 2.8% (2.6%) (0.5%)

Organic Growth Foreign Currency Divestitures

SALES – ANNUAL TRENDS

(millions of USD)

• Investing in selling

resources, new product development, and capability- enhancing capital expenditures while delivering strong customer service to drive long-term organic sales growth.

• Recent industrial economic

weakness.

SALES:

$290 $288 $298 $298 $293 $282 $290 $295 $287 $277

$255 $265 $275 $285 $295 $305

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%)

Organic Growth

SALES – QUARTERLY TRENDS

(millions of USD)

12

Gross Profit Margins

$610 $558 $559 $558 $588 $579 49.8% 47.7% 49.9% 50.1% 50.1% 49.9% 0% 10% 20% 30% 40% 50% 60% $300 $400 $500 $600 $700 F'14 F'15 F'16 F'17 F'18 F'19

GPM – ANNUAL TRENDS

$146 $144 $151 $147 $147 $140 $146 $147 $141 $139 50.3% 49.9% 50.6% 49.6% 50.0% 49.5% 50.3% 49.6% 49.3% 50.3%

30% 35% 40% 45% 50% 55% $100 $125 $150 $175

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

GPM – QUARTERLY TRENDS

• Operational improvements and

automation benefits are more than offsetting input cost increases.

• Gross profit margins up in the 1st

half of F’20.

GROSS PROFIT MARGIN:

13

Research & Development

• Investing in R&D to drive future
• rganic sales growth.
• Increased the strength and

diversity of our new product pipeline.

• Focused on efficiency and

shortening the time to market.

R&D EXPENSE:

$35 $37 $36 $40 $45 $45 2.9% 3.1% 3.2% 3.6% 3.9% 3.9% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% $25 $30 $35 $40 $45 $50 F'14 F'15 F'16 F'17 F'18 F'19

R&D EXPENSE – ANNUAL TRENDING

(millions of USD)

$10.5 $11.3 $11.7 $11.7 $11.3 $11.1 $11.4 $11.3 $11.0 $10.5 3.6% 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% 3.8% 3.8% 3.8%

1.0% 2.0% 3.0% 4.0% $7 $9 $11 $13

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

R&D EXPENSE – QUARTERLY TRENDING

(millions of USD)

14

SG&A Expense is Trending Downward

$452 $423 $405 $388 $390 $371 36.9% 36.1% 36.1% 34.8% 33.3% 32.0%

22% 25% 28% 31% 34% 37% $300 $350 $400 $450

F'14 F'15 F'16 F'17 F'18 F'19

SG&A EXPENSE – ANNUAL TRENDING

(millions of USD)

$100 $98 $102 $91 $95 $93 $95 $89 $90 $87 34.5% 33.9% 34.1% 30.6% 32.3% 32.8% 32.7% 30.2% 31.2% 31.6%

22% 25% 28% 31% 34% 37% $70 $80 $90 $100 $110 $120

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

SG&A EXPENSE – QUARTERLY TRENDING

(millions of USD)

• Simplified and streamlined
• rganization focused on driving

sustainable efficiency gains.

• Reducing SG&A structure while

investing in growth.

• SG&A expense down in actual

dollars and as a percent or sales in the 1st half of F’20.

SG&A EXPENSE:

15

Pre-Tax Income

* See appendix for reconciliation of non- GAAP measures. No Non-GAAP adjustments after F’15.

• 18 consecutive quarters of pre-

tax income growth.

• Ability to grow pre-tax earnings

even in a challenging industrial economy.

• F’20 pre-tax income growth

driven by an increased gross profit margin and reduced SG&A expenses.

INCOME BEFORE TAXES:

$110 $92 $109 $127 $152 $165

$85 $110 $135 $160

F'14* (5.2%) F'15* (16.9%) F'16 19.1% F'17 15.8% F'18 20.0% F'19 8.3%

Yr on Yr Growth

INCOME BEFORE INCOME TAXES* - ANNUAL TRENDS

(millions of USD)

$35 $35 $37 $45 $40 $37 $41 $47 $42 $42

$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%

Yr on Yr Growth

INCOME BEFORE INCOME TAXES* - QUARTERLY TRENDS

(millions of USD)

16

Cash Generation

• Cash flow from operating

activities was 124% of net income in F’19.

• Cash flow from operating

activities up 20.2% in the 1st half

• f F’20.
• Cash is deployed in accordance

with our patient and disciplined capital allocation strategy.

CASH GENERATION:

$93 $93 $139 $144 $143 $162

$50 $100 $150 F'14 F'15 F'16 F'17 F'18 F'19

CASH FROM OP. ACTIVITIES – ANNUAL TREND

(millions of USD)

$34.7 $7.7 $46.8 $53.8 $18.8 $25.4 $52.7 $65.3 $38.8 $14.3

$0 $10 $20 $30 $40 $50 $60 $70

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 42%

% of Net Income

CASH FROM OP. ACTIVITIES – QUARTERLY TREND (millions of USD)

Net Cash

17

$48 $44 $73 $129 $138 $151 $188 $229 $245 $240 $0 $50 $100 $150 $200 $250 $300

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

NET CASH

(millions of USD)

DEBT STRUCTURE

(millions of USD)

Interest Rate

• Jan. 31, 2020

Balance July 31, 2019 Balance Private Placements: EUR-den. 2010 Series (10-yr.) 4.24% (49.6) $ (50.2) $ TOTAL DEBT (49.6) $ (50.2) $ Cash and Cash Equivalents 289.8 279.1 NET CASH 240.2 $ 228.9 $

• January 31, 2020 cash = $289.8M and debt = $49.6M.
• More than half of our cash is held in the United States.
• Balance sheet provides flexibility for future investments.

STRONG BALANCE SHEET:

18

Global Divisional Results (Sales & Segment Profit %)

IDENTIFICATION SOLUTIONS:

• Divested of a non-core business during F’18.
• Consistent organic growth in digital sales in

Europe while North America continues to show improving financial trends.

• Segment profit growth of 4.0% in the first half of

F’20, despite challenging industrial economic environment.

WORKPLACE SAFETY: IDENTIFICATION SOLUTIONS

(millions of USD)

WORKPLACE SAFETY

(millions of USD)

$796 $800 $846 $863 14% 16% 17% 19% 10% 12% 14% 16% 18% 20% $750 $775 $800 $825 $850 $875 $900 F'16 (1.0%) F'17 1.6% F'18 3.4% F'19 4.1%

Organic Growth Organic Growth

$325 $313 $328 $298 9% 8% 10% 8% 6% 8% 10% 12% $280 $300 $320 $340 F'16 (0.7%) F'17 (2.0%) F'18 0.7% F'19 (0.7%)

• Improvement in segment profitability due to

the execution of efficiency opportunities in our

• perations and SG&A.
• Segment profit growth of 4.6% in the first half
• f F’20, despite challenging industrial

economic environment.

19

Summary

We are Investing in Future Growth:

• Investing in Sales Resources.
• Investing in R&D – Our Pipeline is strong.

We are Executing and Driving Efficiency Gains:

• Gross Profit Margins are Up.
• SG&A Expenses are down.
• Pre-Tax Earnings are Growing.

End Result is:

• Strong Profit Growth in a Challenging Industrial Economy.
• Strong Cash Flow – Operating Cash Flow up 20.2% in the 1st half of F’20.
• Strong Balance Sheet – Net Cash Position.

Organic Sales Investments and Efficiency Gains Position us well for when our End Markets Recover.

20

Investor Relations

Brady Contact:

Ann Thornton 414-438-6887 Ann_Thornton@Bradycorp.com See our web site at www.investor.bradycorp.com

Appendix -

Q2 F’20 Financial Review

21

22

Q2 F’20 Financial Summary

• Sales were $276.7M in Q2 of F’20 compared with $282.4M in Q2 of F’19.

– Organic sales declined 1.2%. – Foreign currency translation decreased sales 0.8%.

• Gross profit margin of 50.3% in Q2 of F’20 compared with 49.5% in Q2 of F’19.
• SG&A expense of $87.4M (31.6% of sales) in Q2 of F’20 compared with $92.7M

(32.8% of sales) in Q2 of F’19.

• R&D expense of $10.5M (3.8% of sales) in Q2 of F’20 compared with $11.1M

(3.9% of sales) in Q2 of F’19.

• Income before income taxes increased 15.4% to $42.4M in Q2 of F’20

compared with $36.7M in Q2 of F’19.

• Net income per Class A Diluted Nonvoting Common Share increased 12.7% to

$0.62 in Q2 of F’20 compared with $0.55 in Q2 of F’19.

23

Sales Overview

• 1.2% organic sales decline:
• ID Solutions – Organic sales decline of 1.3%.
• Workplace Safety – Organic sales decline of

1.0%.

• 0.8% decrease due to foreign currency translation.

Q2 F’20 SALES:

• ID Solutions – Organic sales were down slightly in the

Americas, down low-single digits in Europe and down mid-single digits in Asia.

• Workplace Safety – Organic sales were effectively flat

in Europe and Australia and down in the low-single digits in North America.

• Foreign currency translation had a negative impact on

sales in the quarter.

Q2 F’20 SALES COMMENTARY:

$290 $288 $298 $297 $293 $282 $290 $295 $287 $277

$255 $265 $275 $285 $295 $305 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%)

Organic Sales

SALES

(millions of USD)

Gross Profit Margin

24

• Gross profit margin of 50.3% compared to 49.5% in Q2 of F’19.
• We continue to invest in automation and manufacturing efficiencies.
• Efficiency activities more than offset input cost increases in Q2 of F’20.

Q2 F’20 – GROSS PROFIT MARGIN:

$146 $144 $151 $147 $147 $140 $146 $147 $141 $139 50.3% 49.9% 50.6% 49.6% 50.0% 49.5% 50.3% 49.6% 49.3% 50.3%

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

GROSS PROFIT & GPM%

(millions of USD)

SG&A Expense

25

• SG&A expense was $87.4M (31.6% of sales) in Q2 of F’20 compared to $92.7M (32.8% of sales) in Q2 of F’19.
• Approximately 75% of the decrease in SG&A expense was due to on-going efficiency gains and the remaining 25% of

the decrease was due to foreign currency translation.

• We continue to drive sustainable efficiency gains in administrative expenses and non-customer facing selling

expenses while investing in sales-generating resources.

Q2 F’20 – SG&A EXPENSE:

$100 $98 $102 $91 $95 $93 $95 $89 $90 $87 34.5% 33.9% 34.1% 30.6% 32.3% 32.8% 32.7% 30.2% 31.2% 31.6%

25% 28% 30% 33% 35% $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

SG&A EXPENSE AND SG&A EXPENSE AS A % of SALES

(millions of USD)

R&D Expense

26

$10.5 $11.3 $11.7 $11.7 $11.3 $11.1 $11.4 $11.3 $11.0 $10.5 3.6% 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% 3.8% 3.8% 3.8%

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

R&D EXPENSE AND R&D EXPENSE AS A % of SALES

(millions of USD)

• Investing in R&D to drive future organic sales growth.
• Solid new product pipeline.
• Focused on ensuring our R&D spend is efficient and effective.

INCREASING OUR INVESTMENT IN RESEARCH & DEVELOPMENT: Q2 F’20 – R&D EXPENSE:

27

Income Before Income Taxes

• Income before income taxes increased 15.4% to $42.4M in Q2 of F’20 compared to $36.7M in Q2 of F’19.
• The increase in pre-tax income was primarily driven by on-going efficiency activities.

Q2 F’20 - INCOME BEFORE INCOME TAXES: INCOME BEFORE INCOME TAXES

(millions of USD) $34.8 $35.0 $37.0 $45.2 $39.9 $36.7 $41.0 $47.1 $41.6 $42.4

$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%

Year on Year Growth

28

Net Income & Diluted EPS

• Net income increased 14.8% to $33.6M in Q2 of F’20 compared to $29.2M in Q2 of F’19.
• Diluted EPS increased 12.7% to $0.62 in Q2 of F’20 compared to $0.55 in Q2 of F’19.

Q2 F’20 – NET INCOME & DILUTED EPS:

$0.49 $0.08 $0.49 $0.66 $0.58 $0.55 $0.65 $0.68 $0.70 $0.62

$0.00 $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

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 $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

NET INCOME

(millions of USD)

29

Cash Generation & Uses

• Cash flow from operating activities was $14.3M

in Q2 of F’20 compared to $25.4M in Q2 of F’19.

• Free cash flow* was $8.9M in Q2 of F’20

compared to $19.3M in Q2 of F’19.

• We returned $11.6M to our shareholders in the

form of dividends in Q2 of F’20.

• Cash flow from operating activities was impacted

by the timing of annual incentive compensation payments.

• Cash flow from operating activities was up

20.2% during the 6 months ended Jan. 31, 2020.

CASH FLOWS IN Q2 OF F’20:

* 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

$0 $10 $20 $30 $40 $50 $60 $70

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

(millions of USD)

3 Mos. Ended

• Jan. 31, 2020

3 Mos. Ended

• Jan. 31, 2019

6 Mos. Ended

• Jan. 31, 2020

6 Mos. Ended

• Jan. 31, 2019

Cash Balance - Beginning of Period 295.1 $ 192.2 $ 279.1 $ 181.4 $ Cash Flow from Operating Activities 14.3 25.4 53.1 44.2 Capital Expenditures (5.4) (6.1) (13.1) (12.1) Dividends (11.6) (11.2) (23.1) (22.3) Debt Borrowings (Repayments) - Net

• (3.5)
• Effect of Exchange Rates on Cash

0.5 2.3 0.2 (0.8) Other (3.1) 3.1 (6.4) 11.8 Cash Balance - End of Period 289.8 $ 202.2 $ 289.8 $ 202.2 $

30

Global Divisional Results (Sales & Segment Profit %)

• Revenues decreased - (1.8%):
• Organic = - (1.3%)
• Fx = - (0.5%)
• Organic sales decreased due to an overall

slowdown in the industrial economy.

• Segment profit as a percent of sales increased

due to ongoing efficiency gains in our

• perations and SG&A structure.

Q2 F’20 IDENTIFICATION SOLUTIONS:

• Revenues decreased - (2.6%):
• Organic = - (1.0%)
• Fx = - (1.6%)
• Organic sales were effectively flat in Europe

and Australia and down in the low-single digits in North America.

• North America continues to show improving

financial trends.

• Segment profit as a percent of sales increased

due to ongoing efficiency gains in our

• perations and SG&A structure.

Q2 F’20 WORKPLACE SAFETY: IDENTIFICATION SOLUTIONS

(millions of USD)

WORKPLACE SAFETY

(millions of USD)

$210 $206 $212 $218 $218 $209 $214 $222 $215 $205 17% 17% 17% 17% 19% 18% 19% 21% 20% 20% 5% 7% 9% 11% 13% 15% 17% 19% 21% $180 $190 $200 $210 $220 $230 $240 $250 Q1 F'18 2.9% Q2 F'18 4.7% Q3 F'18 4.7% Q4 F'18 2.4% 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%)

Organic Growth Organic Growth

$80 $81 $86 $80 $75 $73 $76 $73 $72 $71 8% 9% 9% 13% 7% 6% 8% 9% 7% 8% 0% 2% 4% 6% 8% 10% 12% 14% $50 $70 $90 $110 Q1 F'18 (1.4%) Q2 F'18 (0.5%) Q3 F'18 1.7% Q4 F'18 3.0% 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%)

Appendix -

Non-GAAP Reconciliation

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Brady is presenting the Non-GAAP measure “Income from Continuing Operations Before Income Taxes.” 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 sustainable 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 (Loss) Income Before Income Taxes to Income Before Income Taxes Excluding Certain Items:

Reconciliation of Non-GAAP Income Before Income Taxes

(‘000s of USD)

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Non-GAAP Income Before Income Taxes

2014 2015 2016 2017 2018 2019 (53,109) $ 24,995 $ 109,345 $ 126,632 $ 152,015 $ 164,644 $ Postretirement benefit plan curtailment gain — (4,296) — — — — Other non-routine charges — 7,430 — — — — Restructuring charges 15,012 16,821 — — — — Impairment charges 148,551 46,867 — — — — (non-GAAP measure) 110,454 $ 91,817 $ 109,345 $ 126,632 $ 152,015 $ 164,644 $ (Loss) Income from Continuing Operations Before Income Taxes (GAAP measure) Income from Continuing Operations Before Income Taxes Excluding Certain Items Fiscal Year Ended July 31,