Brady Corporation 2026 Q4 Earnings Call

Good morning, and welcome to the Brady Corporation fiscal 2026 fourth quarter earnings conference call. The slides for this morning's call are located on our website at www.bradycorp.com. We will begin our prepared remarks on slide number 3. Please note that during this call, we may make comments about forward-looking information. Words such as expect, will, may, believe, forecast, and anticipate are just a few examples of words identifying a forward-looking statement. It's important to note that forward-looking information is subject to various risk factors and uncertainties, which could significantly impact expected results. Risk factors were noted in our news release this morning and in Brady's fiscal 2026 Form 10-K, which was filed with the SEC this morning. Also, please note that this teleconference is copyrighted by Brady Corporation and may not be rebroadcast without the consent of Brady.

We will be recording this call and broadcasting it on the Internet. As such, your participation in the Q&A session will constitute your consent to being recorded. I'll now turn the call over to Brady's President and Chief Executive Officer, Vineet Nargolwala.

Vineet. Thank you, Ann, and good morning, everyone.

I was appointed by the board nearly 3 months ago to succeed Russell Shaller as he transitioned into retirement. Over his tenure as CEO, Russell built a strong foundation for growth at Brady, and I would like to thank him for his contribution towards Brady's success. As you may know, I've had the privilege to serve on Brady's board for the last 4-plus years. This has given me a great perspective on Brady and the transformation of the business leading to the PSS acquisition. With my decade-long tenure at Honeywell and my extensive technology background, the board asked me to be a point on the PSS acquisition along with the management team, and I championed that opportunity.

My diligence, which included discussions with former colleagues at Honeywell and numerous other executives in the industry, provided conviction that the PSS business would help create the next chapter of growth for Brady, not just by adding a business of scale, but also by growing our addressable markets. With the PSS acquisition closed as of a month ago, Brady is now pivoting from a classic industrial company to an industrial technology company that is able to put more connected devices, software, services, and media to work to solve the most challenging customer problems. We are entering new markets and immediately garnering the number two market position in the AIDC sector. With this acquisition and the beginning of fiscal year 2027, we are reorganizing our two business units into two separate reportable segments.

Ann will discuss this more in detail in a few minutes, but for clarity of discussion, we now refer to the existing Brady business as Identification Solutions, or IDS, and the former PSS business from Honeywell as Intelligent Productivity Solutions, or IPS. Olivier Bojarski, who previously was the President of Americas and Asia for Brady, will now lead the IDS business. David Barker, who was the President of PSS at Honeywell, will now lead our newly acquired IPS business. Olivier and David are both with us today on this call, and they will be available to answer questions during our Q&A session. Let me take a moment now to discuss the significant opportunity before us and how we intend to capitalize on that opportunity to drive long-term growth and shareholder value.

Brady has over 100-year history of helping organizations identify and protect assets and people, even in the world's most demanding environments. We are known for our specialty materials, printers, and consumables, serving small to medium-sized customers across numerous markets with unique solutions. We have a history of strong cash generation and over 40 years of increasing dividends to our shareholders. With the acquisition of Honeywell's PSS business, Brady becomes a leading identification, safety, and productivity solutions partner for businesses globally. The acquisition combines Brady's capabilities with PSS's strengths in scanners, mobile computing, software, and services designed for large, demanding enterprise customers, creating end-to-end solutions across critical workflows. We now operate in over 40 countries with over 9,000 employees worldwide and address a market of approximately $14 billion. Combined, we have over 1,000 engineers and scientists and nearly $200 million in R&D investment.

As Ann will discuss in more detail in a few minutes, our top-line revenue will increase by over 70% on an annualized basis, and we expect the IPS acquisition to be immediately accretive in this first fiscal year under our ownership. Since I became the CEO three months ago, I have taken every opportunity to meet with our employees, our customers, and our channel partners in both the IDS and IPS segments of our business. I have also met with several of our key shareholders. My listening tour revealed to me that my excitement about the future of Brady is not unique. First, there is overwhelming support across our organization. In town halls and roundtables across the businesses globally, there is genuine excitement about building new Brady and the opportunities it offers to our teams to learn and grow while serving our customers in many new ways.

Second, there is positive feedback from the VAR community that the IPS business is now part of Brady. Our partners are excited about having a true market alternative, and in fact, rooting for our success. Third, our major shareholders are supportive of the direction and the trajectory of new Brady. They too see the opportunity ahead and understand our commitment to a continuation of Brady's history of operational excellence and focus on shareholder returns. Although it is only a month since the close of the transaction, the IPS business joins Brady with momentum and is growing sales in the low single digits over the trailing 12 months. IPS' new product pipeline is strong, and we will augment that as we have line of sight to the meaningful opportunity ahead of us with our combined businesses.

Similarly, as you can see from Brady's financial results, the core Brady business is executing incredibly well as we achieve record revenue and adjusted earnings per share. Our strong organic growth, with the additional contributions from acquisitions and foreign exchange, drove 10% top-line growth for the quarter and the year. In addition, expanding margins drove a 15% increase in adjusted earnings per share in 2026 versus 2025. We enter fiscal 2027 with momentum and with clear strategic imperatives and distinct operational and financial objectives. Of course, there is much work to be done to integrate the organizations and the underlying systems, and our integration teams have been planning these processes for months, and we are well underway. We will keep you updated on our progress as the year unfolds.

Now, I will turn it over to Ann to review the results of the quarter and the year just ended, as well as our initial outlook for fiscal 2027.

Ann? Thank you, Vineet. We reported record-high revenue and adjusted earnings per share results in fiscal year 2026, which also represents our sixth consecutive record earnings year.

Our focus on new product development, and in particular on the ease-of-use capabilities of our printers, is driving consistent organic sales growth from our printers and our specialty adhesive materials. You are seeing this in our record-high earnings and cash flow results. This quarter, organic sales grew 8.4%, acquisitions added 1.1%, and foreign currency translation increased sales 0.5%, for total sales growth of 10% in the quarter. Gross profit margin improved to 52.9%, compared to 50.4% in the fourth quarter of last year. Last year, we took actions to streamline our cost structure, and we closed manufacturing facilities in Beijing, China, and in Buffalo, N.Y.