Brady Small-Cap Virtual Conference

Thanks, Steve. Good morning, everybody, and really appreciate the opportunity to talk about Brady. As Steve said, we've just completed the largest transaction in the company's over 100-year history. I thought what we would do today is talk a little bit about Brady, for those who might be new to the Brady story, and then talk about our acquisition of Honeywell's PSS business, which is now rebranded Intelligent Productivity Solutions within the Brady Corporation. Ann, if you can go to the next slide, please. Just at a high level, this is what we reported last year. This is the core Brady business, now named Brady Identification Solutions. About $1.7 billion in revenue, approaching 20% EBITDA margin. We're a global supplier of identification and workplace safety solutions. We serve a wide variety of end markets. You can see them here in the bottom left corner.

No single market is more than 5% of our revenue. You can see from a geographical split standpoint, largely focused on U.S. and EMEA, and then we are starting to see pretty good growth in Asia as well. We serve customers through an omni-channel presence, so direct distribution and also e-commerce. Next slide, please. I want to give you a sense for some of our products. If you walked into any factory, an industrial facility, a warehouse, you have likely interacted with our products, even though you may not have realized they come from Brady. Our largest portfolio is that of product and wire identification. This is labels that go onto various products, assets, wires, pipe markers.

What we do here is we sell printers and connected devices like scanners, that essentially take in data in a variety of ways from our customers and then are able to print highly differentiated performance labels that can be printed on a variety of materials, including metal, plastic, composites, and so on. Think of this as the razor blade model. We sell printers, and that unlocks a revenue stream, which is recurring, of high performance, differentiated, high margin consumables. In our safety business, this is really OSHA or compliance driven. Similar story where we sell industrial printers that print safety tags, labels, and then we are drawing through a pretty big consumable stream. You'll get the picture. Our healthcare business, which is the smallest business, also takes the same formula where we sell industrial healthcare printers and scanners.

We sell a lot of consumables, which are really the wristbands for patient identification at the time of entry. One statistic that we are very proud of is that 90% of babies born in the U.S. have a Brady manufactured wristband label on their wrist when they are born. Next slide, please. Brady has been around for over 100 years, and over that period, it has constantly evolved and transformed. It got its start really as a sign company and a catalog company, and then started pivoting towards, through acquisitions and organic growth, to a more of electronics and a consumables model.

That really takes us to today, where we have just closed in August on Honeywell's Productivity Solutions and Services business, which really positions us as an industrial technology company, moving more towards selected verticals and broad industrial, and squarely focused on identification and productivity solutions. Next slide, please. You can see that in the recent years, we have had an enviable track record of continuing to drive top-line growth, GDP plus, delivering predictable, high-quality revenue, consistent margin performance. Over the course of this period, we have also diversified our product portfolio, and we are putting more technology to work in solving customer problems. As we think about Brady's journey, the IPS acquisition is really the biggest step forward in our transformation journey.

As I said before, we were putting more technology to work in how we solve customer problems. We had sort of been building that portfolio that we coveted around more mobile PCs, printers, scanners, RFID, and in one fell swoop, we have been able to achieve that. If you go to the next slide. This deal, we believe, has really compelling strategic and financial benefits. Let's start with the comprehensive portfolio. We had been building towards this, but now complementing our printer and consumable portfolio, we have a full suite of connected devices and workflow software. We are also unlocking a lot of growth. We are adding scale with a $1 billion platform from IPS, which brings really strong positions in selected verticals like retail, transport, and logistics. They also have a healthcare offering that becomes very complementary to our healthcare offering. All of this is new and complementary to Brady.

The third thing I would tell you is that it has got a great platform for recurring revenue. Just like Brady has a great platform for recurring revenue from its consumables, the IPS business brings recurring revenue opportunity from software and services. There is an installed base of over 3.5 million devices that are under service contracts, which have a refresh cycle. Incumbency matters a lot in these markets, and so we are in a really good position to continue winning our customers' business and add to it and add more share of wallet as we add more software and services offerings. Then financially, it is accretive out of the gate. Double-digit accretion and has laid out a goal of $0.80 of accretion in year one.

We've taken on a little bit of debt, which we feel very comfortable with at about 2.5 times. We're generating a lot of cash, and we have a clear de-leveraging path within 2 years to get below 2 times while continuing to support our current capital allocation strategy. If you go to the next slide, you can see the portfolio that we are getting with the IPS business. Yes, there is a very strong hardware platform here around mobility, around scanners, around print. But what we get excited about is the software, the voice-activated solutions, which really adds to productivity, freeing up both hands when you think about operators in a factory or in a warehouse or in a logistics environment. There is a huge services component, which is very profitable, that we're going to add to our business.

There's a smaller piece around OEM business where we sell or provide barcode engines for third-party manufacturers to integrate into their offerings. If you go to the next slide. This really starts to show the big market that we can now address. Brady was already addressing roughly about a $4 billion-$5 billion market, and with the IPS business, the Productivity Solutions business, we now are expanding our end market served to total about $14 billion. When we think about what we're going to serve that business, that end market with, we've got common elements across Brady and the IPS business of printers, scanners, and RFID. Each brings unique elements around performance materials, direct part marking business, and the IPS business brings mobility, software service, and tools. It's really a very complementary acquisition for us. Next slide, please. From a geographical standpoint, we're both in the same places, so that gives us a lot of synergies to work with.

Ann has put out a target of $25 million of cost synergies by year 3, and we are very confident of getting to that number, and hopefully a little bit earlier. Next slide, please. When you then think of a manufacturing environment or an industrial environment, whether it's logistics, warehouse, or back of retail, you now start to see how Brady has a comprehensive offering covering everything from identity to intelligence. It's identify the products, collect the data, that's the identification and capture part, through a variety of means. It's standard high performance, standard labels, high performance labels, RFID labels. The scanning part is through handheld scanners, fixed scanners. You have workflow solutions, which include software that resides on devices as well as in the cloud.

We also have voice solutions that automate a lot of that, making the operator more productive. In addition, we have safety offerings, which help to help the facility comply with whatever safety regulations there are, whether it's OSHA in the U.S. or a variety of safety regulations in Europe and in Asia. You can start to see now how we have the ability to take a high degree of share of wallet from customers across the industrial space, in retail, in transport, in logistics. We feel really good about how the portfolio comes together to bring a very comprehensive solution to our customers. Next slide, please. This really then becomes the combined company as we think about the future.

A trusted industry leader that is delivering a comprehensive solution from identity to intelligence, serving broad markets in manufacturing and industrial, along with key verticals in retail, transport, logistics, and healthcare. Going to market through a multiple of channels. Yes, we are in distribution. We have a direct presence, but we also are inheriting a value-added reseller channel that is going to be super valuable as we think about serving the enterprise customers and high quality recurring revenue opportunities from software, from services, and from media. Next slide, please. This is the view of the combined company. Approaching $3 billion in sales, close to 10,000 employees. What I am really excited about is the capability within the company, the innovation heritage, both from the Brady side, but also from the IPS side, and I feel really strongly about our position to go serve this $14 billion addressable market.

Now we are positioned as an industrial technology company that helps customer solve problems and challenges from everything from identification to intelligence. As we think about our future, I could not be more excited and really optimistic about what we can deliver in terms of customer value, but also create a lot of value for all of our shareholders.