Brady Corporation

Good day, and thank you for standing by. Welcome to the Brady Corporation third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Ann Thornton,

Thank you. Good morning and welcome to the Brady Corporation Fiscal 2022 Third Quarter Earnings Conference Call. The slides for this morning's call are located on our website at www.bradycorp.com slash investors. We will begin our prepared remarks on slide number three. 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 2021 Form 10-K, which was filed with the SEC in September. 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 new president and chief executive officer, Russell Schaller. Russell?

Thank you, Anne. Good morning, and thank you all for joining us. This morning, we released our fiscal 22 third quarter financial results. which before getting too deep into the quarter results, I'd like to start with a few of my views since taking the CEO role on April 1st. Brady is a great organization with incredible brands. We have loyal customers who place their trust in Brady every single day. We have an expansive and relevant product offering of safety and identification products, most of which have deep moats and create defensible competitive positions. We have an outstanding group of highly innovative people who are focused on providing excellent customer service, always doing what's right, and ensuring that we serve all of our stakeholders, including our employees, our communities, and, of course, our shareholders. To that end, we are committed to an inclusive culture where our employees are encouraged to take ownership and seek out solutions together. Financially, Brady is incredibly strong. We are in a net cash position, and we have a history of robust cash generation. Lastly, we are well on our way in transforming Brady into a company that will consistently grow in excess of GDP. So far this year, we've grown organic sales by nearly 10%. Brady has a rich history, a solid foundation, and is financially strong. However, there are areas where we can do better. First, while we have a fantastic culture that puts the customer at the center of all that we do and where we value and encourage innovation, we could be better at addressing the competitiveness of some of our businesses. For instance, in our workplace safety business, we have a solid core, but historically we were too slow in adjusting our business model. At the beginning of the third quarter, the WPS team took actions to improve profitability, and you can see that in the positive results of these actions in our much improved financial results. Second is our portfolio management. There are certain pieces of our portfolio where we need to make changes, including additional acquisitions to strengthen our foundation and position us well for long-term growth. Third is our geographic footprint. We have an opportunity to invest more in certain economies in Southeast Asia and other markets where we are under-penetrated. We strive to be closer to our customers, and there are several areas that we see as ripe for expansion. Fourth, We need to be aggressive in providing solutions to our customer and shifting our portfolio into faster-growing end markets where there are clear macro tailwinds. For instance, industrial track and trace is an area that has several positive macro trends behind it and is an area where Brady's product portfolio and capabilities definitely give us the right to win. And lastly would be our uses of capital. We generate significant cash which gives us the ability to drive shareholder value through buying back stock when we are trading below intrinsic value and being more aggressive with acquisitions. Last quarter, we accelerated our buyback program as we saw a disconnect in what we believe the intrinsic value of Brady is versus our trading price. I'd like to touch on one last item before moving into the financials, and that's ESG. ESG is definitely a passion of mine. because doing our part is both the right thing to do and can be very positive to our shareholders. ESG must be executed in a smart manner and must be woven into the overall fabric of our company. To generate the strongest return from our environmental investments, we can't just focus internally on reducing Brady's environmental footprint. We must also focus on designing products aimed at reducing the environmental footprint and improving the efficiency of our customers as well. This has been a clear focus of ours, and we've launched many new products that our customers want and need that will aid in their own ESG journey while increasing their efficiency. Earlier this week, we published our 2021 ESG report. I encourage you to download the report from our website and take a look at some of the great things we're doing as we move forward on our ESG journey. Finally, I'm pleased to announce that we've created and filled a new position director of ESG for a company with our complexity and scope to truly have a successful ESG program, it's clear we need someone who can see the big picture and drive accountability across the organization. Now to our quarterly results. This morning we released our Q3 financial results, which showed excellent sales growth and all-time record high earnings per share. I'm proud of how the team has been able to work through this challenging macro environment and deliver for both our customers and our shareholders. We grew sales by a healthy 14.6%, and we increased GAAP earnings per share by 9.9%. This quarter, we incurred certain costs to streamline and improve the overall competitiveness of our WPS business. Included in these changes were severance, which executed early in the third quarter, helping to improve the overall profitability of our WPS business. If you exclude the impact of these WPS-related charges and exclude amortization expense from all periods presented, then our earnings per share was up even more significantly at 17.8%. We're proud of what we've accomplished at Brady, and we have a solid foundation, but we're far from done. As we look ahead, our priorities are, first and foremost, to continue our evolution into a company that consistently grows in excess of GDP. Second, is to continue integrating our recent acquisitions in order to improve our capabilities in the industrial track and trace segment, Third is to take the necessary pricing and efficiency actions to mitigate the impacts of this inflationary environment and return to pre-pandemic gross margin levels, all while ensuring that we are providing the best possible customer service and have the products available to meet customer demands. And finally, to effectively deploy our capital in order to drive long-term shareholder value, which would include organic investments, acquisitions, and returning funds to our shareholders. Although we don't know what the next challenge will be, I'm confident in our ability to deliver results for our customers, our employees, and, of course, our shareholders. I'll now turn the call over to Aaron to provide some more details on our financial results. Then I'll return to provide specific commentary about our identification solutions and workplace safety businesses and what I see as the strategic priorities for each of these businesses.