Before I welcome the next presenter, I'd just like to remind everyone, if you have questions, press that Q&A button at the bottom of your screen, type them in, and we'll get to as many as we can, time permitting. That being said, so happy to be joined this afternoon by Brady Corporation, the ticker is BRC, and CFO Ann Thornton.
And with that, let me turn it over to you, Ann.
All right. Thanks so much, Steve, and good afternoon, everybody. Thanks for joining today. I'll start off by giving just a little bit of background on Brady, and just who we are and what we do, and then I'll share some financials, and then I'll leave some time at the end for some Q&A. So Brady, overall, we're a leader in the research, development, and manufacturing of high-performance specialty adhesives that are intended for safety and identification, with a particular specialty in applications in harsh environments, where precision and safety are critical. So we have a very broad product portfolio that consists of wire identification, specialty adhesive labels and printers, safety and facility identification signage, floor marking, pipe marking, product identification labels, printers and scanners, healthcare identification, patient ID wristbands, and then people identification access badges, among many, many other things.
There's a wide variety of applications and end markets where our products are ideal, and the more specific the need for the adhesive product, the better for Brady, as that is where we really stand out from our competition and from basically whatever else is even available. We're very diversified. We have an incredibly diversified customer base. No one individual customer comes even close to 10% of our total sales. We sell thousands of products, and 47% of our revenue as of for our last fiscal year that we just closed in July was generated outside of the U.S. Then at the same time, our competitive landscape is very fragmented. We don't compete with one single company across all of our product offerings, not even close to this.
Our competition is very specific to a particular type of product, and then can often, in addition to that, be specific to a geography or a country. We're also very focused on producing long-term sustainable results. We've absolutely refocused our attention on innovation, and I'll show you in a couple of slides that our R&D spend was up to an all-time high of 5.1% of sales in fiscal year 2024, which is incredibly important to us as we work to improve our organic growth profile as a company. Also, if you look back over the last eight years, we have actually reduced our SG&A as a percentage of sales by 800 basis points, which has been absolutely fantastic for our bottom line.
We're coming off of four consecutive record years of EPS: 2021, 2022, 2023, and now 2024 were record EPS years, with our 2024 EPS up by 17% over 2023. We're on a very nice run from an earnings standpoint. We're also very focused on cash generation, and we're always making cash-based decisions within the company. Operating cash flow was up 22% in 2024, compared to last year, which was an increase to $255 million, which was another company record, which we're very proud of that as well. As far as what we do with the cash that we generate, we're disciplined, and we're patient.
We continue to invest in the organic business throughout the economic cycle, and for us, that means adding salespeople, investing in R&D, doing more geographic expansion so that we can overall improve our rate of organic sales growth. We return dividends to our shareholders, and at the beginning of this fiscal year, which was just six weeks ago, basically, we announced our 39th consecutive annual dividend increase. We've increased our dividend every single year since we went public, and then in addition to that, when it comes to acquisitions, we take a disciplined approach. The opportunity must provide some level of technology or add a product offering that we don't currently have today. The price also needs to be right, it needs to fit, and it needs to help us drive our strategies forward.
And then if we don't find the right deal, we have no problem stepping aside and waiting. We also return funds to our shareholders in the form of share buybacks as well. In 2024, we returned $117 million to our shareholders through buybacks and dividends, a combination. In 2023, we returned $120 million in buybacks and dividends, and in 2022, we returned $150 million through buybacks and dividends. So returning funds to our shareholders is absolutely a focal point of our capital allocation approach. So overall, we believe we have a well-balanced organization that's very diversified, which also gives us protection throughout the economic cycle. All right, so this slide just breaks down briefly our geographic layout.
I mentioned earlier, 47% of our revenue last year was generated outside of the U.S., and 53% was generated inside the U.S. Internationally, 30% of our revenue's in Europe, which is mostly Western Europe, and then 11% makes up Asia and Australia combined. So we're a very global business for $1.3 billion in revenue. We operate our business geographically within two regions that you can kind of see outlined on this page here. One geography is the Americas and Asia, which represents about 2/3 of our total revenue, and then Europe and Australia represents the remaining 1/3 of our total revenue. We sell the full suite of Brady products throughout each of our geographies, and then we break this down further into five major product categories.
The first one that you see in the upper left here is just a small handful of products that would fit into the safety and facility identification product line. An easy way to describe this pretty broad product category would be to just think about all the signage, safety, identification products that exist throughout a manufacturing facility. So safety signs, floor marking tape, pipe markers, lockout tagout, machine lockdown products, and many more. We offer a full suite of hardware, which would be basically represent our printers, and then software within those printers, and then what culminates in the high-performance specialty label materials for those printers, which we manufacture ourselves here at a coating facility in Milwaukee, and then sell throughout our global businesses. The next category in the upper right is wire identification.
This product category consists of a wide variety of materials that can be printed upon and then applied to a multitude of different types of wires in many different applications and industries. The printers that you see here, and throughout our other product categories, are the razor blade model. We manufacture both our printers and the keyed consumables. There's a chip embedded in each of the cartridges, and we manufacture all of them, very vertically integrated, and they're intended and absolutely ideal for harsh environments. As far as applications for these products, think of basically what an electrician would use every single day to label wires and panels, or other OEM applications, such as aerospace or mass transit, things along those lines.
Product identification mostly consists of barcode labels and other brand protection type of labels. We manufacture RFID-enabled labels, the label design software, 1D and 2D bar coding software, as well as the RFID readers and barcode readers, which we acquired, actually. It came along with two acquisitions that we made in 2021. Healthcare identification mostly consists of patient identification wristbands and other labels that are intended to ensure that all of the care that a patient receives in a healthcare setting is accurate and is what is intended, and we also source and resell a variety of other healthcare supply products within healthcare identification as well, and then, our last major product category would be people identification.
Some of the products that we would manufacture and sell within that, here would be employee badges, access badges, building access badges, lanyards, things like that. And then we offer a full printer lineup that is designed for this product category, which came along with another acquisition from three years ago. So overall, some of the common themes between our product categories would be high quality, long-lasting products that are intended for a wide variety of end markets. Specialty, very niche, particularly intended for harsh environments, where the cost of failure or the cost of non-compliance, rather, would be very high.
All right, I'll touch on one slide related to ESG. Within Brady, we try to look at ESG as just simply the right way to conduct business. As an example, when we think about the environmental component of ESG, it's not just to us about making our products more environmentally friendly, but it's also about making our manufacturing process more environmentally friendly, and our customers' manufacturing processes more environmentally friendly. Which inevitably translates into reduced costs of goods sold, because we'll use less energy, we'll waste fewer materials, we'll ultimately send less waste to landfill, and so on. But ultimately, we're driving benefits for our shareholders, as well as for the environment. Also, all companies must have a strong system of governance in place.
Then from a social standpoint, it's all about ensuring that we have a diverse, engaged workforce. This, we believe, allows for more creative thought, hopefully ultimately results in less turnover, people feels that they're being heard, and then that, in turn, means that we'll be more productive and drive more value for our shareholders as well. So a lot of what we focus on in ESG is directly related to improving our profitability and doing the right thing for our employees and for our shareholders, improving cash generation, and then ultimately, just the right way to do business. Okay, so just a brief summary, and then I'll move on to some financial slides. So where we are today, we're super focused on improving our rate of organic sales growth to basically get ourselves to GDP+ .
We're investing in innovation, we're investing in automation, we're focusing on making the right decisions today that will pay off for our shareholders in the long term. We're also driving profit improvement. I mentioned EPS was up 17% in fiscal 2024. Efficiency opportunities are constantly being tackled throughout our businesses. SG&A is actually down very significantly from eight years ago, but the key to our focus is that these reductions are sustainable. Everything that we're focusing on are sustainable improvements, truly fixing the front end to ultimately have that back-end benefit. We're all about simplifying what we do and how we do it, and it's done, and it's been paying benefits, for sure, and then we're returning cash to our shareholders, so we believe we're positioned very well for the future. We have a really diverse product portfolio.
We believe, I mean, when you combine that with our niche product offerings, we're in a really good spot for the long term. All right, so I'll just touch on some of our financial trends before turning it back over. So from a revenue standpoint, just looking back several years, even though we're four years beyond the pandemic, it still tends to be kind of a milestone, I feel like, for a lot of companies these days. So just immediately pre-pandemic, we grew revenue 2.8% organically in fiscal 2019. Then, of course, the pandemic hit in fiscal 2020, and we dropped, like many companies, and we were actually down 5.4% that year, and then we recovered in fiscal 2021 and 2022.
One item just to keep in mind, in case you're new to us, is that Brady, that does have a July thirty-first fiscal year end. So if you call the pandemic a year, the pandemic year was basically the second half of fiscal 2020 and the first half of fiscal 2021, is about how that breaks down. And then in fiscal 2023, we grew sales 5.5% organically, and then this past year that we just released a couple of weeks ago, we grew sales 2.6% organically. So onto gross profit margins, we have very strong gross profit margins. Historically, pre-pandemic, you can see it's a pretty straight line.
We're basically right around 50% annually, and then during the inflationary period and logistics challenges in 2022, you can see we dropped below this level slightly to 48.5%. But in fiscal 2023, we returned. We recovered to nearly 50%, I guess we're 60 basis points below. And then in 2024, our gross profit margin continued to improve to 51.3%. We've worked incredibly hard to execute operational efficiencies throughout our global businesses, along with executing strategic price increases. We're also getting some really solid sales growth from some of our higher gross profit margin products this year as well, which has brought along this very nice gross profit margin result.
All right, research and development. So on this slide, you can see that R&D has steadily increased really for the last eight years, kind of, again, barring the fiscal 2020 and the fiscal 2021 years, where things were a little bit different and choppier in those years. But basically, that trend line is very much straight up, which absolutely shows our commitment and belief in the return from our investment in R&D. In 2023, we were at 4.6% of sales, which was the highest in company history, and then we closed 2024 at 5.1% of sales, which is now absolutely our largest annual investment in company history. Our investment in R&D is really paying off. It's an area we will continue to invest in because we know that it drives long-term benefits to the organization for sure.
All right, so moving to SG&A expense. We've reduced SG&A as a percentage of sales by 800 basis points over the last eight years. The chart you can see here really does bring this to light. So in fiscal 2016, SG&A was over $400 million. You can see a step up in dollars in 2022, just following the table across, and the reason for that is because we made three acquisitions late in the year in 2021. But as a percentage of sales, we continue to reduce our SG&A structure, and we continue to work on efficiency and improvement projects throughout our back office support and within our sales function. We still have automation opportunities, and we do expect to continue to drive some improvements in this area.
Okay, so if you look at our pre-tax income, the key to focus on here for sure is again, check the table's going up and to the right with a little step back in 2020 . It basically, with the exception of the pandemic year, we've shown some really nice improvements in pre-tax income, which is truly the end result of everything that we just went through around organic driving organic sales growth, improving gross profit margin, and reducing our SG&A structure. And we did all of those things while at the same time increasing our investment in R&D.
So we generally do show and like to focus on pre-tax income here rather than net income, just to avoid the distraction of the fluctuation in the tax rate over the years, even though EPS is generally following the same trend. But we'll have to look at this for the underlying results. So then moving to EPS, it is the exact same story. Fiscal 2021, as you can see, was $2.47 of GAAP EPS. That was an all-time record high. In 2022, we were at $2.90, another record high, as was 2023 at $3.46, and then we recently just released our 2024 results, $4.07 of diluted EPS, which did represent our fourth consecutive year of record high earnings.
So we're super focused on converting our organic sales growth into bottom line growth and then doing whatever we can to offset inflation and continuing to drive that value for our shareholders. Okay, so cash flow from operating activities. Let's point out a couple of items here. If you look at our fiscal 2022 cash generation of $118 million, this was a big drop from fiscal 2021. One primary driver of this was inventory. So as we went through the pandemic, we absolutely took the approach of making sure that we had the inventory to serve our customers and deliver orders, which resulted in us building inventories a bit. This absolutely benefited us. We did whatever we could to have the products we needed so that we could fulfill orders as quickly as possible. This was a major competitive advantage. Just not necessarily every one of our competitors were in this situation.
Now we've been in the process of reducing inventory throughout 2023 and 2024, very, very procedurally and thinking through it long term. And then this was a big part of the reason for our strong cash generation last year and this year, which was also a company record. Okay, so this puts us in a net cash position. As of July 31st, we were in a net cash position of $159 million. We had total--w e reported total debt of $91 million, and cash of $250 million. We have a very strong balance sheet, which absolutely gives us many opportunities to deliver shareholder value over the long term.
All right, and then our regional results, just briefly on these couple of slides, we've been moving in the absolute right direction here as well. You can see very consistent results in terms of both growth and sales and profitability over the last three years within both the Americas and Asia region, as well as the Europe and Australia region. And in particular, within Europe, which I'll show here, where the macro conditions have definitely been more challenging, this year especially. We were still able to grow sales and improve profitability, which is tremendous.
All right, so with that, I'll just add a couple of closing thoughts. We're a very financially strong company. We're incredibly diverse. We're very focused on organic sales growth. Our profitability has consistently improved. Our cash generation has been fantastic, and we absolutely do make cash-based decisions, which we believe over the long term is the right way to go. We're returning funds to our shareholders, and as we sit here today, we believe we're in a great position with a strong balance sheet. Our organization is focused on execution. We have a great product line-up, with new products coming to market all the time, basically, and some really nice products planned for early in fiscal year 2025, and we really believe we're set up for a strong future.
So with that, I'll turn it back over to Steve, and any Q&A.
Great. Thanks so much, Ann. We've got about eight minutes remaining, and we do have a few questions in the queue already, but I'll remind everyone, if you have a question, press the Q&A button at the bottom of your screen and type them in. And I just wanna get started, Ann, 'cause obviously, your stock is now at essentially all-time highs. You've had. The EPS growth and margin growth over the last 12 months, there aren't a lot. If we group you in the industrials, which fair or unfair, but you do get grouped there, there aren't many in that space that can show that kind of growth over the last 12 months. What were you able to do differently, if you can point to something, and how much of that's sustainable?
Sure. Yeah, no, great, great comments, and hey, we look at other industrials as well when looking at comps, and they're our core, at least that's where you could say the majority of our end markets are concentrated, so that's always relevant for us, too, so it's fair to do so. I think an element of what has differentiated or what has resulted in our growth rate being a little bit better than the rest of industrials is the fact that we are still diversified. We sell directly into oil and gas and you know, food and beverage and aerospace, and those types of areas, and electrical contracting and commercial construction and all of that, which gives us a little bit of that downside protection.
It also can mean that not all end markets are moving in the same direction at once, which is also, you know, conversely, that thing that can hold you back. So the other item I'd point to, though, is, in particular in Europe, the execution of moving to the regional structure has truly worked out, and has-- It not worked out, but has truly been fantastic. I think, combining the teams, resulting in basically a larger presence in each of the countries, where we were individually relatively small previously, but still operating under two global product lines.
Now I'm going back a year and a half, but sometimes it takes this long to work through things. I think sharing the best practices, doing not a straight up 80/20 review of everything that we're doing, but in pockets, saying, "Let's no longer sell these products, let's push this more, and let's combine these efforts," has really differentiated, in particular, the European portion of the business. We've no plans of changing the approach or changing how we're going to market, but I think the macro conditions in Europe as we sit here right now this year versus last year are. It's a lot more questionable and a lot more challenging.
It'll be a little more dependent upon that, but you know, not that we've executed everything perfectly, but I think internally, moving to the regional structure was absolutely the right time for us, and still a lot of risk in making a change like that, especially an organizational change, in particular, a continent like Europe, where we were basically 50/50 in terms of revenue, with our previous organizational structure. But so, you know, it can either go well or not so well, and it's gone well.
Excellent. I do have questions about your R&D focus. You noted there is more investment. We've seen you roll out almost a complete line of upgraded or new printers in your top-selling group. Is there much more to go? Is R&D expected to stay at a higher level, and do you have much more to either--
We do have--
New products or upgrades?
Sure. Yeah, absolutely. No, it's great. I appreciate you pointing that out, for sure. We're basically continuing to target right around 5% of sales for spending on R&D, and that can come not perfectly every single quarter. Because we don't hold back if the opportunities, and we can move the products along or the projects along, you know, if we don't find the right people that need to fill the right roles, then things get pushed out. But in general, we're targeting 5% of sales, which would imply an increase, obviously, because we're expecting our sales to grow next year.
And that seems to be the very manageable pace to deliver results on our R&D, both efficiently, effectively, without. Basically, you don't wanna waste, either by putting too much money at something. So we've got some really nice products still planned in the pipeline, really for this year and for another year out, for sure, that will bring some nice, really solid improvements for our customers, adding a lot more technology, still from where we're at. And hopefully just increase the, and improve, I should say, the usability of our printers, add more capabilities. It's we've got a still a nice pipeline ahead. I can't talk details, specifics but it should be nice additive stuff for us.
When you launch these new products, and I don't know how closely you can track this, how much of it is you're selling more to existing customer base, or given the improvements in the products, expanding the customer base?
Oh, yeah, it's a great. That is a great question. We're well, we want to do all of the above.
Right.
But our effort is truly toward both. Because, expanding that, it, you know, expanding our customer reach, truly reaching new customers is ultimately the way to truly grow and, you know, expand the Brady name. And what we've found over time is, you know, as long as we stay focused on delivering a high-quality product with a, with, you know, that we stand behind with a strong level of customer service, and being able to answer our customers' questions and all of that, our customers do come back. So a new customer becomes a repeat customer for us, you know, pretty quickly, you know? So really we are very. We always wanna be serving, and serving our existing customers who've been loyal and always there with us, but we're truly trying to do both.
So as far as new product launches, how much we're actually launching those and gaining those new customers versus existing customers, I don't even have that stat available to me. It's a great question, but what we have found is our return rate of our customers is very strong, which is something we're super proud of. So the more growth in new customers we get, then maybe there, our hope is that you become a returning customer for us.
Excellent. CapEx is gonna be lower this year after you bought a previously leased facility last year.
Yeah.
You made a $130 million acquisition, and it was a drop in the bucket, maybe that's an overstatement, compared to what you're doing on cash flow, 'cause you still end up in a net cash position even after, or very close, even after closing it. You probably generate similar, or, well, you'll generate higher cash flow this year based on your guidance. How are you thinking about capital allocation? You did raise the dividend again for the 30th, 31st year. Where are you on the buyback, and if you can touch on M&A, just general capital allocation?
Sure. Sure, yeah, absolutely. I mean, I probably talked about or hit on the word organic growth many, many times just going through, going through these slides, but we're always incredibly focused on the organic business. So that's always happening, both through R&D and then expanding in a smart way our sales force, and geographic presence as well. We're super proud of the dividend. You're exactly right, Steve. We announced our increase again actually, when we released our year-end results, so that's a streak we don't wanna break either. B ut we've raised our dividend every single year since we went public, so this year marks 39 straight years.
Wow!
From there, we're opportunistic on buybacks and then on M&A as well. I mean, we were in conversations with this last deal that we did for quite a long time before you know, they were both ready to sell, and the price came into a range that we believed we could negotiate and it would work out strategically for us. At the same time, we'll wait on buying back shares if we feel that the gap between intrinsic value and the current trading price isn't fully there. We did spend $72 million buying shares this fiscal year.
Yeah.
Most, much of that was in the third quarter. But we certainly have the ability, just as you said, Steve, that, with our cash generation, what we would expect to build into next year to do all of the above at the same time if the opportunities are there, and we wouldn't be afraid to do that. Our goal isn't to be in a net cash position, it's just an outcome of what we have going on. We're not afraid to take on debt. We have the ability to, and we have a revolver that we can borrow upon. It's just a matter of, we don't wanna overpay for M&A, and at the same time, we wanna efficiently return cash to our shareholders. So yeah, we'll see. We'll see how the M&A market plays out. It's gotta be the right fit for us, though. We're not out there, you know, looking for overpriced deals, basically.
Right.
We'll see. We'll kind of see what the future brings, but that's kind of how we think about it.
We're running out of time, but I did want to touch on your growth prospects. You're typically thought of as a GDP+ name. There's a couple of areas I know that Russell's pointed out to on the last few conference calls, one being the opportunities in India and Southeast Asia, the other being industrial track and trace. Can you briefly touch on those two?
Sure, sure, absolutely. Yeah, India has been a tremendous area of growth for us. Now, it's a relatively small part of our business, but it's absolutely adding additive to itself every single year. So we've basically, we generally do talk about it every quarter because it's driving. It's largely been the driver of our growth in Asia, excluding China.
Right.
China's been down, as it is for most companies. So India's truly grown basically 20%, call it on an average, on a quarter-over-quarter basis, but from a pretty small base. But we don't see that changing as long as you know macro and kind of the mega trends that are happening right now continue to trend in the way that they're trending. But companies are relocating throughout Southeast Asia as they're exiting China, and trying to get more control over their supply chain, and that's bringing a lot of companies to India. Any amount of manufacturing type of expansion, our products are ideal. Any sort of movement like that, our Brady products are needed, especially when it's kind of a Western U.S., or a-
Yep.
A company based here who's already potentially a customer or used to products like ours. So we definitely see that as a nice area for growth for us. And then, track and trace, absolutely. We closed on the acquisition, just as you said, Steve, on August 1st. And mathematically, yeah, you can kind of use our year-end balance sheet and figure out that we're likely still in that cash position from that. But it. The acquisition of Gravotech absolutely rounds out. It fills a gap that we have today in part marking, basically directly marking on a part.
Brady is all about adhesive specialty materials- labeling something with a label as a medium. But we've never been in direct part marking, and Gravotech fills that gap, which is just another step in the whole track and trace kind of ecosystem of--
Oh, I hadn't thought of it that way.
Putting a code, a barcode, and a lot of what Gravotech will do. They'll do a dot peen kind of a 2D barcode, you know, like the QR code-looking type of a label. It's all about identifying and, ideally, tracking more products as through the WIP process and the manufacturing process, and that's kind of how we're looking at that, as rounding a little bit more of that out for us.
Excellent. We're just about out of time. Any closing thoughts before we wrap it up, Ann?
I'd just like to thank everybody for their time. Thank you so much for joining and your attendance. Please, always feel free, reach out. Steve does an incredible job covering us. He's fantastic. Or myself, I'm easy to find out there, and happy to talk about anything further.
Ann Thornton, CFO of Brady Corporation. Ann, thanks so much for being here. Hope everyone found the last half hour informative. Thanks, everyone.
Thank you.