BRADY CORP (BRC)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Brady Corporation is a global manufacturer and supplier of identification and direct part marking solutions, high-performance materials and workplace safety products that identify and protect premises, products and people. The Company is organized and managed on a geographic basis with two reportable segments: Americas & Asia and Europe & Australia. This regional operating structure allows the Company to further integrate its businesses, support continued growth through the application of the best go-to-market strategies in key geographies, facilitate new product development within recent acquisitions and further simplify and scale the global business.

Within each of the reportable segments, the Company markets, sells and distributes a broad range of identification and safety products and solutions across the following primary product categories:

•Safety and facility identification, which includes safety signs, traffic signs and control products, floor-marking tape, pipe markers, labeling systems, spill control products, lockout/tagout devices, personal protection equipment, first aid products, and software and services for safety compliance auditing, procedures writing and training.

•Product identification, which includes materials, printing systems, radio frequency identification (“RFID”) and barcode scanners for product identification, direct part marking, engraving equipment, brand protection labeling, work in process labeling, finished product identification, asset tracking labels, asset tags and industrial track and trace applications.

•Wire identification, which includes handheld printers, wire markers, sleeves, and tags.

•Healthcare identification, which includes wristbands, labels, printing systems, and other products used in hospital, laboratory, and other healthcare settings for tracking and improving the safety of patients.

•People identification, which includes name tags, badges, lanyards, rigid card printing systems, and access control software.

The ability to provide customers with a broad range of proprietary, customized and diverse products for use in various applications across multiple industries and geographies, along with a commitment to quality and service, have made Brady a leader in many of its markets. Brady’s long-term sales growth and profitability will depend not only on the overall economic environment and our ability to successfully navigate changes in the macro environment, but also on our ability to develop and market innovative products, deliver a high level of customer service, advance our digital capabilities, and continuously improve the efficiency of our global operations. Our strategy for growth includes an increased focus on certain industries and products, streamlining our product offerings, expanding into higher growth end-markets, intensifying efforts to leverage our diverse product portfolio and synergies across our business, improving the overall customer experience, developing technologically advanced, innovative, and proprietary products, and improving our digital capabilities.

The following are key initiatives supporting our strategy in fiscal 2026:

•Investing in organic growth by enhancing our research and development process and utilizing customer feedback and observations to develop innovative new products that solve customer needs and improve environmental sustainability.

•Delivering a high-quality customer experience by aligning with customers’ preferred communications channels and leveraging technology to strengthen engagement.

•Expanding and enhancing sales capabilities through an improved digital presence and the use of data-driven marketing automation tools.

•Maintaining profitability through pricing mechanisms to mitigate the impacts of ongoing supply chain disruptions and inflationary pressures while ensuring prices remain competitive.

•Integrating recent acquisitions and advancing the pending acquisition of PSS business to enhance our strategic position and accelerate long-term sales growth.

•Advancing operational excellence by executing sustainable efficiency gains within our selling, general and administrative structures and within our global operations, including cost reduction initiatives, insourcing of critical products and manufacturing activities, and reducing the Company’s environmental footprint.

•Continuing to build a high-performance culture, which rewards execution, fosters inclusion, and strengthens employee engagement, recruitment, and retention.

Pending Acquisition of the PSS Business

On April 20, 2026, the Company entered into an Equity Purchase Agreement with Honeywell International Inc. (“Honeywell”) to acquire Honeywell’s Productivity Solutions and Services (“PSS”) business, a global manufacturer and provider of mobile computers, barcode scanners and printing solutions, for a base purchase price of $1.4 billion in cash, subject to customary adjustments related to cash, indebtedness, working capital and transaction expenses. We believe the pending

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acquisition of the PSS business, if completed, will provide a complementary product portfolio that will add scale and extend the Company’s reach into adjacent workflows and large enterprise customers.

We intend to fund the acquisition and related transaction costs through a combination of cash on hand and new debt financing. In connection with the pending acquisition, we entered into a debt commitment letter that provides for 364-day bridge facilities with aggregate commitments of up to $1.8 billion, subject to customary closing conditions. We expect to replace or reduce the commitments under the bridge facilities contemplated by the debt commitment letter with permanent financing prior to closing. The transaction is not subject to a financing condition.

The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in the second half of calendar year 2026.

Macroeconomic Conditions and Trends

The Company’s operations and financial performance are subject to the risks and uncertainties inherent in the global economic environment, including inflationary pressures, supply chain disruptions, changes in trade policy, and other macroeconomic and geopolitical challenges. These conditions may impact the Company’s business, financial condition and results of operations as the global economic outlook remains uncertain.

The global trade environment remains complex and continues to evolve, driven by the imposition of tariffs on goods entering the U.S. and countermeasures from other nations. Our business has incurred additional costs related to these incremental tariffs and countermeasures, and future impacts will depend on changes in trade policy and the timing, availability and amount of potential refunds of tariffs previously paid. We also continue to face broader macroeconomic pressures impacting the cost and availability of certain raw materials, components, freight and other inputs. The Company has taken and will continue to take action to mitigate these pressures through a combination of targeted price increase, strategic sourcing adjustments, product portfolio optimization, as well as our ongoing efforts to drive sustainable efficiency gains in our operations and administrative structures. However, these actions may not fully offset the impact of tariffs, inflationary pressures or other macroeconomic pressures on our results.

The Company continues to evaluate developments related to tariff policy, including the timing, availability and amount of potential refunds of tariffs previously paid. Any such refunds remain subject to ongoing administrative processes and uncertainty.

Notwithstanding the uncertain macroeconomic environment, we believe our financial strength positions us well to continue investing in acquisitions and organic growth opportunities, such as expanded sales channels, marketing programs, and research and development (“R&D”). We remain focused on driving sustainable efficiency gains and automation across our operations and selling, general and administrative (“SG&A”) functions, while also returning capital to our shareholders through dividends and opportunistic share repurchases.

We believe that our financial resources and liquidity levels, including the undrawn portion of our credit agreement and available financing commitments are sufficient to support the execution of our growth strategy and to manage the impact of economic or geopolitical events that could potentially reduce sales, net income, or cash provided by operating activities. In addition, in connection with the pending acquisition of the PSS business, we entered into a debt commitment letter that provides for 364-day bridge facilities with aggregate commitments of up to $1.8 billion, subject to customary closing conditions, including completion of the acquisition. Refer to Risk Factors, included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended July 31, 2025, and Part II, Item 1A of this Quarterly Report on Form 10-Q, for further discussion of the possible impact of global economic or geopolitical events on our business and additional risks relating to our acquisition of the PSS business.

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Results of Operations

The comparability of the operating results for the three and nine months ended April 30, 2026 compared to the same periods in the prior year have been impacted by the acquisitions of Microfluidic Solutions business unit of Funai Electric Co., Ltd. (“Microfluidic Solutions”) on April 1, 2025 and MECCO Partners LLC (“Mecco”) on August 4, 2025. The comparability of the operating results for the nine months ended April 30, 2026 compared to the same period in the prior year has also been impacted by the acquisition of American Barcode and RFID Incorporated (“AB&R”) on October 1, 2024. All three entities have been included in the Americas & Asia reportable segment since their respective acquisition dates.

A comparison of results of operating income for the three and nine months ended April 30, 2026 and 2025, is as follows:

References in this Quarterly Report on Form 10-Q to “organic sales” refer to sales calculated in accordance with GAAP, excluding the impact of foreign currency translation, sales recorded from acquired companies prior to the first anniversary date of their acquisition, and sales recorded from divested companies up to the first anniversary of their divestiture. The Company’s organic sales disclosures exclude the effects of foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business trends. Management believes that the non-GAAP financial measure of organic sales is meaningful to investors as

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Brady Corporation is a global manufacturer and supplier of identification solutions and workplace safety products that identify and protect premises, products and people. The Company is organized and managed on a geographic basis with two reportable segments: Americas & Asia and Europe & Australia. See “Item 1. Business—Recent Development” for a discussion of our acquisition of the PSS business. The financial results of the PSS business will be integrated into the Company’s consolidated financial statements starting from August 3, 2026 and are expected to be included in our Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2026.

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our audited consolidated financial statements and the notes to those statements (Item 8) in this Annual Report on Form 10-K. The following discussion is intended to help the reader understand the results of operations and financial condition of the Company for the year ended July 31, 2026 compared to the year ended July 31, 2025.

A discussion regarding our financial condition and results of operations for fiscal 2025 compared to fiscal 2024 can be found under Item 7 in our Annual Report on Form 10-K for the year ended July 31, 2025, filed with the SEC on September 4, 2025, which is available on the SEC’s website at www.sec.gov and our corporate website at www.bradyid.com/corporate/investors and such information is incorporated by reference herein.

References in this Annual Report on Form 10-K to “organic sales” refer to sales calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), excluding the impact of foreign currency translation, sales recorded from divested companies up to the first anniversary of their divestiture and sales recorded from acquired companies prior to the first anniversary date of their acquisition. The Company’s organic sales disclosures exclude the effects of foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business trends. Management believes that the non-GAAP financial measure of organic sales is meaningful to investors as it provides them with useful information to aid in identifying underlying sales trends in our businesses and facilitating comparisons of our sales performance with prior periods.

Macroeconomic Conditions and Trends

The Company’s operations and financial performance are subject to the risks and uncertainties inherent in the global economic environment, including inflationary pressures, supply chain disruptions, and other macroeconomic challenges. These pressures may impact the Company’s business, financial condition and results of operations as the global economic outlook remains uncertain.

The global trade environment remains complex and continues to evolve, driven by the imposition of tariffs on goods entering the U.S. and countermeasures from other nations. Our business has incurred, and we expect will continue to incur additional costs related to these incremental tariffs and related countermeasures. While we have received some refunds for tariffs previously paid, we continue to incur tariff costs that have remained above historical levels since the second half of fiscal 2025. Future impacts will depend on changes in trade policy and the timing, availability and amount of these further potential refunds. We also continue to face broader macroeconomic pressures impacting the cost and availability of certain raw materials, components, freight and other inputs. The Company has taken and will continue to take action to mitigate these pressures through a combination of targeted price increases, strategic sourcing adjustments, product portfolio optimization, as well as our ongoing efforts to drive sustainable efficiency gains in our operations and administrative structures.

The Company continues to evaluate developments related to tariff policy and related administrative proceedings. While we have received certain refunds for tariffs previously paid, we expect to continue to incur ongoing tariff costs while actively pursuing additional refunds. Any such potential refunds of tariffs previously paid remain subject to ongoing administrative processes and uncertainty regarding their timing, availability, and ultimate amount.

Refer to Risk Factors, included in Part I, Item 1A of this Annual Report on Form 10-K for the year ended July 31, 2026, for further discussion of the possible impact of global economic or geopolitical events on our business.

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Results of Operations

The comparability of the operating results for the year ended July 31, 2026 to the year ended July 31, 2025 has been impacted by the acquisition of MECCO Partners LLC (“Mecco”) on August 4, 2025. The operating results of Mecco have been included since the acquisition date and are reported within the Americas & Asia reportable segment. The comparability of the operating results for the year ended July 31, 2025 to the year ended July 31, 2024 has been impacted by the acquisitions of Gravotech Holding (“Gravotech”) on August 1, 2024, American Barcode and RFID Incorporated (“AB&R”) on October 1, 2024 and the Microfluidic Solutions business unit of Funai Electric Co., Ltd. (“Microfluidic Solutions”) on April 1, 2025. The operating results of Gravotech, AB&R and Microfluidic Solutions have been included since their acquisition dates. Gravotech has been included in both reportable segments, and AB&R and Microfluidic Solutions have been included in the Americas & Asia reportable segment.

A comparison of results of operating income for the years ended July 31, 2026, 2025, and 2024 is as follows:

Net sales increased 9.8% to $1,661.6 million in fiscal 2026 compared to $1,513.6 million in fiscal 2025, which consisted of organic sales growth of 5.3%, an increase from foreign currency translation of 2.3%, and sales growth from acquisitions of 2.2%. Organic sales grew 7.5% in the Americas & Asia segment and organic sales grew 1.2% in the Europe & Australia segment.

Gross margin increased 13.0% to $859.8 million in fiscal 2026 compared to $760.8 million in fiscal 2025. As a percentage of net sales, gross margin increased to 51.7% in fiscal 2026 from 50.3% in fiscal 2025. The increase in gross margin as a percentage of net sales was primarily driven by organic sales growth in higher gross margin product lines, as well as the absence of a non-recurring fair value adjustment related to acquisition inventory and facility closure and other reorganization costs recorded in the prior-year period. The net impact of incremental tariffs and tariff refunds did not materially impact gross margin or gross margin as a percentage of net sales in fiscal 2026 compared to fiscal 2025.

R&D expenses increased 17.7% to $94.0 million in fiscal 2026 compared to $79.9 million in fiscal 2025. As a percentage of net sales, R&D expenses increased to 5.7% in fiscal 2026 compared to 5.3% in fiscal 2025. The increase in R&D spending in fiscal 2026 was primarily due to the acquisitions of Microfluidic Solutions and Mecco, and an increase in R&D headcount within the Company’s organic business. The Company remains committed to investing in new innovative product development to drive long-term organic sales growth. Investments in new printing systems, pressure sensitive materials, engraving systems, microfluidic technologies, scanners and software are the primary focus of R&D expenditures in fiscal 2027.

Selling, general and administrative (“SG&A”) expenses include selling and administrative costs directly attributed to the Americas & Asia and Europe & Australia segments, as well as certain other corporate administrative expenses including finance, information technology, human resources and other administrative expenses. SG&A expenses increased 13.1% to $502.3 million in fiscal 2026 compared to $444.3 million in fiscal 2025. As a percentage of net sales, SG&A expense increased to 30.2% in fiscal 2026 compared to 29.4% in fiscal 2025 primarily due to costs incurred related to the acquisition of the PSS business of $35.7 million which were partially offset by cost reductions from facility closures and other reorganization activities completed in the prior fiscal year, as well as the absence of $13.6 million of charges related to those activities recorded in the prior year.

Operating income increased 11.3% to $263.5 million in fiscal 2026 compared to $236.6 million in fiscal 2025. As a percentage of sales, operating income increased to 15.9% in fiscal 2026 compared to 15.6% in fiscal 2025. The increase in operating income in fiscal 2026 was primarily due to organic sales growth in both reportable segments, gross margin improvements across both reportable segments, and SG&A cost efficiencies in the Europe & Australia segment, partially offset by PSS transaction-related costs of $35.7 million.

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OPERATING INCOME TO NET INCOME

The following is a reconciliation of operating income to net income for the years ended July 31:

Investment and other income was $5.6 million in fiscal 2026 compared to $5.2 million in fiscal 2025. The increase in investment and other income in fiscal 2026 was primarily due to an increase in the market value of securities held in deferred compensation plans.

Interest expense increased to $9.7 million in fiscal 2026 compared to $4.7 million in fiscal 2025. The increase in interest expense in fiscal 2026 was primarily due to increased financing costs related to the Company’s new credit agreement and bridge facilities to fund the PSS acquisition.

The Company’s income tax rate was 20.8% in fiscal 2026 compared to 20.2% in fiscal 2025. Refer to Item 8, Note 11, “Income Taxes” for additional information on the Company’s income tax rates.

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Business Segment Operating Results

The Company evaluates short-term segment performance based on segment profit and customer sales. Interest expense, investment and other income, income tax expense, and certain corporate administrative expenses are excluded

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