BRC 10-K & 10-Q changes, risk factors and insider trading

RawOur materialincreased indebtedness could limit our financial flexibility and other cost inflation as well as product shortages could adversely affect our business and financial results.

While we have implemented certain cost containment measures andmeasures, selective price increases,increases as well as takenand other actions intended to offset recentmitigate inflationary pressures in ourand supply chain,chain wepressures, these actions may not be ablesufficient to offset all of the increases in our operationalcosts costs,or whichthe effects of supply shortages and disruptions. If we are unable to obtain necessary materials and components on acceptable terms or recover increased costs through pricing, our business, financial condition and results of operations could be adversely impact our business and financial results.affected.

•Economic and operational impact of the war between Russia and Ukraine and conflict in the Middle East or other wars

We actively compete with companies that produce and market the same or similar products, and in some instances, with companies that sell different products that are designed for the same target markets. Competition may force us to reduce prices or incur additional costs to remain competitive in an environment in which business models, including the development and use of artificial intelligenceAI technologies, are changing rapidly. We compete on the basis of several factors, including customer support, product innovation, product offering, product quality, price, expertise, digital capabilities, production capabilities, and for multinational customers, our global footprint. Present or future competitors may develop and introduce new and enhanced products, offer products based on alternative technologies and processes, accept lower profit, have greater financial, technical or other resources, or have lower production costs or other pricing advantages. Any of these could put us at a disadvantage by threatening our share of sales or reducing our profit margins, which could adversely impact our business and financial results.

The failure to properlyeffectively identify,manage integrateacquisitions, divestitures and growother acquiredportfolio companies,management and to manage contingent liabilities from divested businessesactivities could adversely affect our business and financial results.

Our historical growth has included acquisitionsacquisitions, including, for instance, the acquisition of the PSS business, and acquisitions may continue to be part of our future growth strategy includes acquisitions.strategy. Acquisitions place significant demands on management, operational, and financial resources. Recentresources and future acquisitions willmay require the integration of operations, sales and marketing, information technology, finance,finance and administrative operations,functions, and information technology, which could decrease the time and resources available to focus on our existing businesses and other growth strategies. We cannot assureguarantee that we will be able to successfully identify and integrate acquisitions, that theseacquired acquisitionsbusinesses will operate profitably, or that we will be able to achieve the desiredanticipated sales growthgrowth, synergies or operationalother success.benefits from acquisitions. Our sales, results of operations, cash flow, and liquidity could be adversely affected if we do not successfully integrate acquired businesses, including realizing synergies, or if our otherexisting businesses sufferare dueadversely toaffected by the increased focus on the acquired businesses.

We continually assess the strategic fit of our existing businesses and may divest businesses that we determine do not align with our strategic plan,plan or that are not achieving the desired return on investment. Divestitures pose risks and challenges that could negatively impact our business. When we decide to sell a business or specific assets, weWe may be unable to docomplete soa divestiture on satisfactory terms or within our anticipated timeframe, and eventransactions aftermay reaching a definitive agreement to sell a business, the sale is typicallybe subject to pre-closing conditions whichthat may not be satisfied. InSeparating addition,a business may also require significant management attention and resources and could result in operational disruptions, including challenges associated with separating systems, processes, personnel and other shared functions, providing or receiving transition services, retaining key employees and maintaining customer and supplier relationships. Divestitures may also result in stranded costs or other expenses that are greater than anticipated, and the impact of thea divestiture on our revenuerevenue, andearnings netor incomecash flows may bediffer largerfrom thanour projected,expectations. whichIn couldaddition, distract management, and disputeswe may arisealso with buyers. We have retainedretain responsibility for and have agreedagree to indemnify buyers against certain contingent liabilities related to several businesses that we havesell sold.and Thethe resolution of theseany contingencies hascould not hadhave a material adverse impact on our financial results, but we cannot be certain that this pattern will continue.results.

Our business systems collect, transmit and store data about our customers, vendors and others, including credit card information and personally identifiable information. We also employ third-party service providers that store, process and transmit proprietary, personal and confidential information on our behalf. We rely on encryption and authentication technology licensed from third parties in an effort to securely transmit confidential and sensitive information, including credit card numbers. Our security measures, and those of our third-party service providers, may not detect or prevent all attempts to hack our systems, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches or other similar disruptions and cybersecurity incidents that may jeopardize the security of information stored in or transmitted by our sites, networks and systems or that we or our third-party service providers otherwise maintain. We engage third-party service providers to assist with certain of our website and digital platform upgrades, which may result in a decline in sales when initially deployed, which could have an adverse effect on our business and financial results.

We and our service providers may not have the resources or technical sophistication to anticipate or prevent all types of attacks, and techniques used to obtain unauthorized access to or to sabotage systems change frequently and may not be known until launched against us or our third-party service providers. The increasing sophistication of cyberattacks requires us to continually evaluate the threat landscape and new technologies and processes intended to detect and prevent these attacks. There can be no assurance that the security measures and systems configurations we choose to implement will be sufficient to protect the data we manage. In addition, security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or by persons with whom we have commercial relationships. Although we maintain privacy, data breach and network security liability insurance, we cannot be certain that our coverage will be adequate or will cover liabilities actually incurred, or that insurance will continue to be available to us on economically reasonable terms, or at all. Any compromise or breach of our security measures, or those of our third-party service providers, could adversely impact our ability to conduct business, violate applicable privacy, data security and other laws, and cause significant legal and financial exposure, adverse publicity, and a loss of confidence in our security measures, which could have an adverse effect on our business and financial results.

ApproximatelyBecause 50%a significant portion of our salesbusiness areis derivedconducted outside of the United States.States, Salesour sales and purchases in currencies other than the U.S. dollar expose us to fluctuations in foreign currencies relative to the U.S. dollar, andwhich may adversely affect our financial results. Increased strength of the U.S. dollar could increase the effective price of our products sold in currencies other than U.S. dollars into other countries. Decreased strength of the U.S. dollar could adversely affect the cost of materials, products, and services purchased overseas. Our sales and expenses are translated into U.S. dollars for reporting purposes, and further strengthening of the U.S. dollar could result in unfavorable translation effects. In addition, certain of our subsidiaries may invoice customers in a currency other than its functional currency or may be invoiced by suppliers in a currency other than its functional currency, which could result in unfavorable translation effects on our business and financial results.

Globally, many countries have enacted, or plan to enact, legislation and other guidance to align with the Organisation for Economic Co-operation and Development’s (“OECD”) Inclusive Framework on Base Erosion and Profit Shifting Pillar Two (“Pillar Two”) model rules, which aim to establish a global minimum tax rate of 15 percent for large multinational enterprise groups. TheIn January 2026, the OECD hasissued continuedadditional guidance, including a safe harbor framework for certain U.S. parented groups that is expected to issuelargely new administrative guidance onreduce the Pillar Two model rules throughout 2025. Significant uncertainty remains regarding the interpretation and consistent implementation of the Pillar Two model rules across jurisdictions, their interaction with existing national tax laws, and their alignment with current tax treaty obligations. Final adoption and implementationimpact of Pillar Two infor the jurisdictionsCompany. whereEven wewith operatethis safe harbor, the Company could adverselystill affectbe our business and financial results. While it is impossiblesubject to predictlocal whether otherminimum tax proposalsregimes willin becountries enacted, many couldthat have anadopted these rules. As of July 31, 2026, Pillar Two has not had a material impact on ourthe businessCompany’s andincome financialtax results.liability, provision for income taxes, or effective tax rate, nor does the Company expect a material impact in the future.

We have goodwill of $676.9$686.0 million and other intangible assets of $105.4$97.8 million as of July 31, 2025,2026, which represent 45.1%42.3% of our total assets, and we have recognized impairment charges in the past. Additionally, we expect these balances and their percentage of our total assets to increase substantially as a result of the PSS acquisition completed on August 3, 2026. We evaluate goodwill and other intangible assets for impairment on an annual basis, or more frequently if impairment indicators are present, based upon the fair value of each respective asset. The valuations prepared for the required impairment test include management'smanagement’s estimates of sales, profitability, cash flow generation, capital structure, cost of debt, interest rates, capital expenditures, and other assumptions. Significant negative industry or economic trends, disruptions to our business, inability to achieve sales projections or cost savings, inability to effectively integrate acquired businesses, unexpected changes in the use of the assets, and divestitures may adversely impact the assumptions used in the valuations. Given the substantial increase in our intangible assets, any failure to successfully integrate PSS or realize its expected benefits could heighten the risk of future impairment. If the estimated fair value of our goodwill or other intangible assets change in future periods, we may be required to record an impairment charge, which would reduce net income in such period.

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.

References in this Annual Report on Form 10-K to “organic sales” refer to sales calculated in accordance with U.S. GAAP,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.

We believe that our financial resources and liquidity levels, including the undrawn portion of our credit agreement and our ability to increase that credit line as necessary, 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. Refer to Risk Factors, included in Part I, Item 1A of this Annual Report on Form 10-K for the year ended July 31, 2025,2026, for further discussion of the possible impact of global economic or geopolitical events on our business.

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. The comparability of the operating results for the Americas & Asia segment has also been impacted by the divestiture of two non-core businesses, one in March 2023 and another in October 2023.

Net sales increased 12.8%9.8% to $1,661.6 million in fiscal 2026 compared to $1,513.6 million in fiscal 2025 compared to $1,341.4 million in fiscal 2024,2025, which consisted of organic sales growth of 2.6%5.3%, an increase from foreign currency translation of 2.3%, and sales growth from acquisitions of 10.5%, which was partially offset by a decrease of 0.3% due to divestitures.2.2%. Organic sales grew 4.8%7.5% in the Americas & Asia segment,segment whileand organic sales declinedgrew 1.8%1.2% in the Europe & Australia segment.

R&D expenses increased 17.9%17.7% to $94.0 million in fiscal 2026 compared to $79.9 million in fiscal 2025 compared to $67.7 million in fiscal 2024.2025. As a percentage of net sales, R&D expenses increased to 5.7% in fiscal 2026 compared to 5.3% in fiscal 2025 compared to 5.1% in fiscal 2024.2025. The increase in R&D spending in fiscal 20252026 was primarily due to the acquisitionacquisitions of Gravotech,Microfluidic and,Solutions toand aMecco, lesser extent,and an increase in R&D headcount within the Company'sCompany’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 2026.2027.

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 17.9%13.1% to $502.3 million in fiscal 2026 compared to $444.3 million in fiscal 2025 compared to $376.7 million in fiscal 2024.2025. As a percentage of net sales, SG&A expense increased to 30.2% in fiscal 2026 compared to 29.4% in fiscal 2025 compared to 28.1% in fiscal 2024 primarily due to incrementalcosts amortizationincurred expenserelated to the acquisition of the PSS business of $35.7 million which were partially offset by cost reductions from acquired intangible assets of $9.5 million and facility closureclosures and other reorganization costsactivities completed in the prior fiscal year, as well as the absence of $13.6 million.million of charges related to those activities recorded in the prior year.

Operating income decreasedincreased 2.8%11.3% to $263.5 million in fiscal 2026 compared to $236.6 million in fiscal 2025 compared to $243.4 million in fiscal 2024.2025. As a percentage of sales, operating income decreasedincreased to 15.9% in fiscal 2026 compared to 15.6% in fiscal 2025 compared to 18.1% in fiscal 2024.2025. The decreaseincrease in operating income in fiscal 20252026 was primarily due to facilityorganic closuresales growth in both reportable segments, gross margin improvements across both reportable segments, and otherSG&A reorganizationcost costs,efficiencies incremental amortization expense related to acquired businesses, andin the fairEurope value& adjustmentAustralia tosegment, inventorypartially fromoffset acquisitions.by PSS transaction-related costs of $35.7 million.

Investment and other income was $5.6 million in fiscal 2026 compared to $5.2 million in fiscal 2025 compared to $7.6 million in fiscal 2024.2025. The decreaseincrease in investment and other income in fiscal 20252026 was primarily due to aan decreaseincrease in interestthe incomemarket resultingvalue fromof asecurities reducedheld cashin balancedeferred andcompensation lower interest rates.plans.

Interest expense increased to $9.7 million in fiscal 2026 compared to $4.7 million in fiscal 2025 compared to $3.1 million in fiscal 2024.2025. The increase in interest expense in fiscal 20252026 was primarily due to anincreased increasefinancing incosts outstandingrelated borrowings onto the Company'sCompany’s new credit agreement and bridge facilities to fund acquisitions, which was partially offset by a decrease in the weightedPSS average interest rate compared to fiscal 2024.acquisition.

Americas & Asia net sales increased 12.1%11.4% to $1,106.6 million in fiscal 2026 compared to $993.7 million in fiscal 2025 compared to $886.5 million in fiscal 2024,2025, which consisted of organic sales growth of 4.8% and7.5%, sales growth from acquisitions of 8.3%,3.3%, whichand werean partially offset by a decreaseincrease from foreign currency translation of 0.6% and a decrease due to a divestiture of 0.4%.0.6%. Organic sales growth reflected strong execution of our commercial strategies, supported by steady industrial demand in North America, continued expansion in key end markets across Latin America,America and resilientincreasing demand inthroughout Asia despite mixed economic conditions in certain countries.Asia.

Organic sales in the Americas increased inapproximately the low-single digits6% in fiscal 2025.2026. The increase in organic sales was primarily due to growth in the wire identification, product identification, safety and facility identificationidentification, and producthealthcare identification product lines, which was partially offset by a decline in the people identification andproduct healthcareline. Organic sales growth in the wire identification product lines.line was driven by continued demand from datacenter construction projects.

Organic sales in Asia increased approximately 13%15% in fiscal 2025.2026. The organic sales increase was primarilyrealized driventhroughout byAsia higherwith demandcontinued growth from electronics manufacturing services providers, technology companies, and industrial suppliers across Japan,the India,region. MalaysiaWhile and Singapore. Thisorganic growth was partiallybroad-based offsetacross the region, the most significant organic sales increases were driven by lowerIndia, volumesSingapore, and a return to growth in China.

Organic sales in AustraliaEurope declinedincreased in the mid-singlelow-single digits in fiscal 2025.2026. The organicOrganic sales declineincreased wasacross primarilyall drivenmajor byproduct alines decrease in volume inwith the wire identification, safety and facility identification, and wirepeople identification product lines.lines driving the organic sales growth.

The Company'sCompany’s cash balances are generated and held in numerous locations throughout the world. At July 31, 2025,2026, approximately 97%93% of the Company'sCompany’s cash and cash equivalents were held outside the United States. The Company'sCompany’s organic and inorganic growth has historically been funded by a combination of cash provided by operating activities and debt financing. The Company believes that its cash flow from operating activities and its borrowing capacity are sufficient to fund its anticipated requirements for working capital, capital expenditures, research and development,R&D, common stock repurchases, dividend payments, and strategic acquisitions for the next 12 months and beyond. Although the Company believes these sources of cash are currently sufficient to fund domestic operations, annual cash needs could require repatriation of cash to the U.S. from foreign jurisdictions, which may result in additional tax payments.

Cash and cash equivalents were $174.3$187.1 million at July 31, 2025,2026, aan decreaseincrease of $75.8$12.8 million from July 31, 2024.2025. The following summarizes the cash flow statement for the years ended July 31:

Net cash usedprovided inby financingoperating activities was $83.9$244.1 million during fiscal 20252026 compared to $70.5$181.2 million in fiscal 2024.2025. The increase in cash usedprovided inby financingoperating activities was primarily due to increasedorganic netsales repaymentsgrowth onand borrowingsimproved onworking ourcapital creditmanagement agreement followingin the funding of acquisitions in fiscal 2025, which was partially offset by a decline in share repurchases compared to the priorcurrent year.

Our material cash requirements for known contractual obligations include capital expenditures, borrowings on our new credit agreement and lease obligations. We believe that net cash provided by operating activities will continue to be adequate to meet our liquidity and capital needs for these items over the next 12 months and in the long-term beyond the next 12 months. We also have cash requirements for purchase orders and contracts for the purchase of inventory and other goods and services, which are based on current and anticipated customer needs and are fulfilled by our suppliers within short time horizons. We do not have significant agreements for the purchase of inventory or other goods or services specifying minimum order quantities. In addition, we may have liabilities for uncertain tax positions, but we do not believe that the cash requirements to meet any of these liabilities will be material. A discussion of income taxes is contained in Note 11 of the notes to consolidated financial statements.

Credit AgreementAgreements and Covenant Compliance

Refer to Item 8, Note 6, “Debt” for information regarding the Company'sCompany’s new credit agreement, previous credit agreement and covenant compliance.

The Company’s business, results of operations, financial condition, and cash flows are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” of Company’s Annual Report on Form 10-K for the year ended July 31, 2025. There have been no material changes from the risk factors set forth in the 2025 Form 10-K.10-K, except as discussed below.

•Integrating recent acquisitions and evaluatingadvancing futurethe pending acquisition opportunitiesof PSS business to enhance our strategic position and accelerate long-term sales growth.

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 pressuresconditions 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 iscontinues rapidlyto evolving,evolve, driven by the imposition of tariffs on goods entering the U.S. and countermeasures from other nations. Our business has incurred, and expects to continue to incur,incurred additional costs as it relatesrelated to these incremental tariffs and countermeasurescountermeasures, forand future impacts will depend on changes in trade policy and the foreseeabletiming, future.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 inflationarythese pressures caused by the incremental tariffs through a combination of targeted price increases and surcharges,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.

Notwithstanding the uncertain situationmacroeconomic relating to tariffs,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 ouravailable abilityfinancing to increase that credit line as necessary,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.

The comparability of the operating results for the three and sixnine months ended JanuaryApril 31,30, 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 sixnine months ended JanuaryApril 31,30, 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 sixnine months ended JanuaryApril 31,30, 2026 and 2025, is as follows:

Net sales for the three months ended JanuaryApril 31,30, 2026 increased 7.7%13.8% to $384.1$435.2 million compared to $356.7$382.6 million in the same period in the prior year. The increase consisted of organic sales growth of 1.6%,8.2%, sales growth from acquisitions of 2.3%,2.1%, and a 3.8%3.5% increase from foreign currency translation. Organic sales grew 3.1%10.1% in the Americas & Asia segment,segment whileand organic sales declined 1.1%4.5% in the Europe & Australia segment during the three months ended JanuaryApril 31,30, 2026 compared to the same period in the prior year.

Net sales for the sixnine months ended JanuaryApril 31,30, 2026 increased 7.6%9.7% to $789.4$1,224.7 million compared to $733.7$1,116.3 million in the same period in the prior year. The increase consisted of organic sales growth of 2.2%,4.3%, sales growth from acquisitions of 2.8%,2.5%, and a 2.6%2.9% increase from foreign currency translation. Organic sales grew 3.9%6.0% in the Americas & Asia segment, while organicsegment sales declinedand 0.9% in the Europe & Australia segment during the sixnine months ended JanuaryApril 31,30, 2026 compared to the same period in the prior year.

Gross margin increased 10.5%15.6% to $194.4$225.5 million in the three months ended JanuaryApril 31,30, 2026 compared to $175.8$195.1 million in the same period in the prior year. As a percentage of net sales, gross margin increased to 50.6%51.8% from 49.3%51.0% in the three-month period. Gross margin increased 10.3%12.1% to $403.2$628.7 million in the sixnine months ended JanuaryApril 31,30, 2026 compared to $365.5$560.6 million in the same period in the prior year. As a percentage of net sales, gross margin increased to 51.1%51.3% from 49.8%50.2% in the six-monthnine-month period. The increase in gross margin as a percentage of net sales during the three-month period iswas primarily driven by organic sales growth in higher gross margin products lines during both the absence of facility closurethree and othernine-month reorganizationperiods costscompared ofto $1.9the millionsame recordedperiods in the prior-yearprior period.year. The increase in gross margin as a percentage of net sales during the six months ended January 31, 2026 was primarily due to the absence of a $4.1 million non-recurring fair value adjustment related to acquisition inventory, as well as the facility closure and other reorganization costs recorded in the prior-year period. Organic sales growth in higher gross margin product linesperiod also contributed to the increase in both the threenine-month and six-month periods, which was partially offset by incremental tariffs in the same periods.period.

R&D expenses increased 29.8%22.6% to $24.3$23.5 million in the three months ended JanuaryApril 31,30, 2026 compared to $18.7$19.2 million in the same period in the prior year. As a percentage of net sales, R&D expenses increased to 6.3%5.4% in the three-month period compared to 5.2%5.0% in the same period in the prior year. R&D expenses increased 26.5%25.2% to $47.6$71.1 million in the sixnine months ended JanuaryApril 31,30, 2026 compared to $37.6$56.8 million in the same period in the prior year. As a percentage of net sales, R&D expenses increased to 6.0%5.8% from 5.1% in the six-monthnine-month period. The increase in R&D spending was primarily due to the acquisitions of Microfluidic Solutions and Mecco, and, to a lesser extent, an increase in R&D headcount within the Company’s organic business. The Company remains committed to investing in 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 remain the primary focus of R&D expenditures in fiscal 2026.

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 1.9%18.5% to $107.9$128.7 million in the three months ended JanuaryApril 31,30, 2026 compared to $105.9$108.7 million in the same period in the prior year. As a percentage of net sales, SG&A expenses decreasedincreased to 28.1%29.6% from 29.7%28.4% in the three-month period. SG&A expenses increased 3.6% to $225.5 million for the six months ended January 31, 2026 compared to $217.7 million in the same period in the prior year. As a percentage of net sales, SG&A expenses decreased to 28.6% from 29.7% in the six-month period. The increase in SG&A expenses during the three and six months ended January 31, 2026 was primarily due to foreign currency translation, as well as increased headcount and other costs from acquisitions, including incremental amortization expense from the acquired intangible assets. The decrease in SG&A as a percentage of net sales for both the threethree-month and six-month periodsperiod is primarily due to costs incurred related to the pending acquisition of the PSS business of $13.5 million, partially offset by cost reductions from facility closures and other reorganization activities completed in the prior fiscal year, as well as the absence of $3.8 million of charges related to those activities recorded in the prior-year periods.period.

Operating income increased 21.4%9.0% to $62.2$73.2 million and increased 18.2%14.7% to $130.2$203.4 million in the three and sixnine months ended JanuaryApril 31,30, 2026, respectively, compared to $51.2$67.2 million and $110.2$177.3 million in the same periods in the prior year. The increase in operating income in both the three and six-monthnine-month periods was driven by organic sales growth in the Americas & Asiaboth reportable segment,segments, gross margin improvement across both reportable segments, and SG&A cost efficiencies in the Europe & Australia segment.segment, which was partially offset by PSS transaction related costs of $13.5 million. Additionally, operating income for the three and sixnine months ended JanuaryApril 31,30, 2025 included facility closure and other reorganization costs of $5.7$3.9 million.million and $9.6 million, respectively. Operating income for the sixnine months ended JanuaryApril 31,30, 2025 also included non-recurring acquisition-related and other costs of $5.1 million.

The Company’s income tax rate was 22.5%21.2% and 20.5% for both the three months ended JanuaryApril 31,30, 2026 and 2025, respectively, and the income tax rate was 21.8%21.6% and 21.4%21.1% for the sixnine months ended JanuaryApril 31,30, 2026 and 2025, respectively.

The following is a summary of segment information for the three and sixnine months ended JanuaryApril 31,30, 2026 and 2025:

Americas & Asia net sales increased 7.6%14.4% to $251.6$290.1 million in the three months ended JanuaryApril 31,30, 2026 compared to $233.8$253.7 million in the same period in the prior year, which consisted of organic sales growth of 3.1%,10.1%, sales growth from acquisitions of 3.5%,3.1%, and a 1.0%1.2% increase from foreign currency translation. Americas & Asia net sales increased 8.6%10.6% to $520.5$810.6 million in the sixnine months ended JanuaryApril 31,30, 2026 compared to $479.3$732.9 million in the same period in the prior year, which consisted of organic sales growth of 3.9%,6.0%, sales growth from acquisitions of 4.2%,3.9%, and a 0.5%0.7% increase from foreign currency translation.

Organic sales in the Americas increased approximately 10% in the low-singlethree months ended April 30, 2026 and in the mid-single digits in both the three and sixnine months ended JanuaryApril 31,30, 2026 compared to the same periods in the prior year. Organic sales growth in both the three and six-monthnine-month periods was driven by growth in the wire identification, product identification and productsafety and facility identification product lines, which was partially offset by an organic sales decline in the people identification product line.line in the nine-month period. Organic sales growth in the wire identification product line was supported by datacenter construction projects.

Organic sales in Asia increased approximately 14%12% in the three months ended JanuaryApril 31,30, 2026, and increased approximately 13% in the sixnine months ended JanuaryApril 31,30, 2026 compared to the same periods in the prior year. The organic sales increase in both the three month and six-monthnine-month periods was realized throughout Asia with continued growth from electronics manufacturing services providers, technology companies, and industrial suppliers across the region. Organic sales growth in both the three and six-monthnine-month periods was primarily driven by increased organic sales inacross China,Southeast Asia, India and Malaysia,China, as well as Japan in the six-monthnine-month period.

Americas & Asia segment profit increased 16.9%20.2% to $53.8$68.7 million in the three months ended JanuaryApril 31,30, 2026 compared to $46.0$57.2 million in the same period in the prior year. Segment profit increased 12.6%15.3% to $113.6$182.3 million in the sixnine months ended JanuaryApril 31,30, 2026 compared to $100.9$158.1 million in the same period in the prior year. As a percentage of net sales, segment profit increased to 21.4%23.7% from 19.7%22.5% in the three-month period and segment profit increased to 21.8%22.5% from 21.0%21.6% in the six-monthnine-month period ended JanuaryApril 31,30, 2026 compared to the same periods in the prior year. The increase in segment profit as a percentage of net sales was due to increased profit from organic sales growth in both the three and six-monthnine-month periods, as well as the absence of costs from the prior year period related to the closure of two facilities duringfrom theboth three-monthprior periodyear and incremental amortizationperiods and purchase accounting adjustments duringin the six-monthprior nine-month period.

Organic sales in AustraliaEurope declinedincreased in the mid-single digits in the three months ended April 30, 2026 and in the low-single digits in both the three and sixnine months ended JanuaryApril 31,30, 2026 compared to the same periods in the prior year. TheOrganic sales increased across all major product lines during the three-month period with the wire identification and product identification product lines driving the organic sales declinegrowth in both the three and six-monthnine-month periods was driven by an organic sales decline in the product identification and safety and facility identification product lines, which was partially offset by organic sales growth in the wire identification product line.periods.

Europe & Australia segment profit increased 35.5%22.8% to $15.4$21.5 million in the three months ended JanuaryApril 31,30, 2026 compared to $11.4$17.5 million in the same period in the prior year. Segment profit increased 39.4%32.8% to $34.2$55.6 million in the sixnine months ended JanuaryApril 31,30, 2026 compared to $24.5$41.9 million in the same period in the prior year. As a percentage of net sales, segment profit increased to 11.6%14.8% from 9.3%13.6% for the three-month period and segment profit increased to 12.7%13.4% from 9.6%10.9% for the six-monthnine-month period ended JanuaryApril 31,30, 2026, compared to the same periods in the prior year. The increase in segment profit as a percentage of net sales was primarily driven by a more efficient cost structure following reorganization activities completed in the prior fiscal year. Additionally, segment profit for the three and sixnine months ended JanuaryApril 31,30, 2025 included reorganization costs and purchase accounting adjustments.

The Company’s cash balances are generated and held in numerous locations throughout the world. At JanuaryApril 31,30, 2026, approximately 98%97% of the Company’s cash and cash equivalents were held outside the United States. The Company’s organic and inorganic growth has historically been funded by a combination of cash provided by operating activities and debt financing. The Company believes that its cash flow from operating activities and its borrowing capacity are sufficient to fund its anticipated requirements for working capital, capital expenditures, research and development, share repurchases, and dividend payments for the next 12 months. Although the Company believes these sources of cash are currently sufficient to fund domestic operations, annual cash needs could require repatriation of cash to the U.S. from foreign jurisdictions, which may result in additional tax payments.

Cash and cash equivalents were $176.5$175.5 million at JanuaryApril 31,30, 2026, an increase of $2.1$1.1 million from July 31, 2025. The significant changes were as follows:

Net cash provided by operating activities was $86.7$164.9 million in the sixnine months ended JanuaryApril 31,30, 2026,2026 compared to $63.0$122.9 million in the same period of the prior year. The increase in cash provided by operating activities was primarily due to improvedincreased segmentnet profitincome fromand bothhigher reportablenon-cash segments.adjustments, driven by changes in deferred taxes, in the current nine-month period.

Net cash used in financinginvesting activities was $47.9$43.6 million in the sixnine months ended JanuaryApril 31,30, 2026,2026 compared to $22.3$165.1 million used in the same period of the prior year. The changedecrease in net cash used in investing activities was primarily drivendue by increased net repayments onto the Company'sacquisition creditof agreementGravotech and,for to$123.6 amillion lesser extent, increased share repurchases duringin the sixprior monthsnine-month ended January 31, 2026period, compared to the sameacquisition periodof Mecco for $17.4 million in the priorcurrent year.nine-month period.

As of JanuaryApril 31,30, 2026, the outstanding balance on the Company’s credit agreement was $78.7$26.9 million. The maximum amount outstanding on the credit agreement during the sixnine months ended JanuaryApril 31,30, 2026 was $119.6 million. As of JanuaryApril 31,30, 2026, the U.S.outstanding dollar-denominatedbalance borrowingsconsists of $15.0 million bear interest at 4.9%; the Euro-denominated borrowings of €44.023.0 million bearbearing interest at 2.8%; and the British Pound-denominated borrowings of £8.0 million bear interest at 4.6%.2.9%. The Company had letters of credit outstanding under the credit agreement of $2.1$1.8 million as of JanuaryApril 31,30, 2026, and there was $219.2$271.3 million available for future borrowing, which can be increased to $1,169.2$1,306.3 million at the Company’s option, subject to certain conditions. The credit agreement has a final maturity date of November 14, 2027. As such, borrowings were classified as long-term on the condensed consolidated balance sheets.

The Company’s credit agreement requires it to maintain certain financial covenants, including a ratio of debt to the trailing twelve months EBITDA, as defined in the debt agreements, of not more than a 3.5 to 1.0 ratio (leverage ratio) and the trailing twelve months EBITDA to interest expense of not less than a 3.0 to 1.0 ratio (interest expense coverage). As of JanuaryApril 31,30, 2026, the Company was in compliance with these financial covenants, with a ratio of debt to EBITDA, as defined by the agreements, equal to 0.20.1 to 1.0 and the interest expense coverage ratio equal to 77.975.2 to 1.0.

•Numerous other matters of national, regional and global scale, including major public health crises and government responses thereto 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 (“SEC”) 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, 2025.2025, and Part II, Item 1A of this Quarterly Report on Form 10-Q.