Third Bridge 专家访谈称 Brady 工业标识业务受数据中心、航空航天和国防需求支撑

[[00:01:42]]
Can you break down Brady Corp's main products and divisions? The largest division is Industrial Solutions. From a volume or size perspective, how does the identification business compare to the rest of the company? How has that exposure changed over time?

[[00:02:11]]
It's easiest to look at Brady as two different things. One is people identification and then the other is industrial identification. Globally, it is, I would say, probably 90% industrial identification. The largest market, which is the Americas, is 20-25% people identification and 75-80% industrial identification. Really, the difference between those two groups, people identification is literally identifying people. Think hospital identification, wrist bands, identification badges, things to identify and track human beings and all the software consumables and products related to that. I did not manage that group. That was a smaller group. I managed the industrial identification, which is, again, three-fourths of Brady's business in the Americas. That is 50/50 historically. 50% is what is referred to as product and wire identification and 50% is what's referred to as safety and facility and visual workplace. The difference between those two halves, product and wire identification is, think of it as labels that go on manufactured products, whereas the other group, the safety, facility, visual workplace is labels identification for safety purposes on buildings, institutions, things like that.

Maybe a practical example would be the product and wire ID side of the business. If you look on the bottom of your laptop, you're going to see a bunch of labels you probably never thought of before, barcodes, compliance labels. Those labels go on every laptop that gets made. That's on the product and wire ID side of the business. Whereas if you go to the men's room and you see a no smoking sign or you see a safety sign or if you were in a warehouse and you saw floor marking on the warehouse floor, that's the safety, facility and visual workplace side of the business. Product and wire ID is basically tied to something getting manufactured and the safety side is essentially think of it as building or machine labelling. They are pretty much 50/50, although the product and wire identification side has been growing faster, as you noted in the information that you provided. I can explain why that is when we get to that. Generally speaking, historically, those were 50/50 parts of the business, each managed separately but related.

[[00:05:00]]
I'm assuming you're saying in terms of revenue size rather than volume. Is that correct?

[[00:05:12]]
Revenue. Yes, I'm stating revenue. Profitability-wise, the product and wire ID side is more profitable than the safety and facility side, but they're both profitable parts of the business.

[[00:05:24]]
Is the profit difference between the product and wire identification side and the safety and facility side based on complexity of machinery, so the complexity of the product itself?

[[00:05:37]]
Yes, it's a few things. First off is competitive pressure. There are a lot more competitive threats and solutions for the safety side of the business, whereas the product and wire ID side, there is less competition. It's more fragmented. More specifically, Brady has well-known, very specific high-performance, highly specified materials, which are less available and therefore, command a better price point and margin.

[[00:06:18]]
What's your outlook for industrial labelling demand in 2026-27 vs previous years? What impact do you see from tariffs, the Middle East conflict and other broad concerns? If you want to talk about post-pandemic trends as well, that might be helpful.

[[00:06:45]]
Yes. Both sides of the business have performed well for different reasons. I'll start with the product and wire ID side. Product and wire ID is product identification and wire identification. On the product identification side, Brady has benefited from investing in additional technical selling resources, better printer technology, better software. They just plain made a better mousetrap than most of the other products that are out there. A lot of the product identification growth has come from better technology. They've just outsmarted the competition. The other reason product identification increases, not just for Brady, but for the industry, is reshoring. You've seen a lot of high-performance manufacturing return to the US. Some of that's post-COVID, some of it's tariff related. It's a little bit of all those things. All that reshoring manufacturing tends to be the type of manufacturing that requires product identification, think traceability, barcodes, compliance labels, rating plates and things like that. That's what Brady's sweet spot is on the product identification. The real growth, though, is on the wire identification side, and that's tied to a couple of things. First, notably, aerospace and defence. Probably no surprise to an analyst like you, but the aerospace industry can't keep up with demand for creating aircraft in the United States.

Aircrafts consume tremendous amounts of wire and obviously need a lot of wire identification for those aircraft. In addition, defence spending has continued to rise for a variety of reasons. Defence includes, of course, aerospace, but also marine, ground defences, space defence, satellite defence. All those things require a tremendous amount of wire identification, and it needs to be really good wire identification, not like you just go put some random label on a wire that's going on a satellite. That's what Brady's speciality is, super high-performing wire identification. The real thing, which I'm sure is what you really want to know, is about data centres. Brady positioned itself a very long time ago to have very unique wire identification solutions for data management, which, of course, led to data centres. Brady has been very, very active in the data centre market for a very long time. Of course, as you know, data centres are going crazy right now because of AI. Brady was the best positioned in the market to capitalise on that, and now they are capitalizing on that. The wire ID business is going to continue to grow as long as you believe aerospace and defence and data comm are going to grow. Renewable energy, also nuclear energy, those are all large consumers of wire identification. Separate from that, there is the construction boom.

The infrastructure bill was passed, tremendous amount of airport and hospital and school construction. All of those have a whole lot of wire identification needs. Every time you build a building, it's got a lot of wire in it, it's got a lot of wire identification. If you believe that infrastructure spending and construction spending are going to continue to grow, then you also believe that the wire identification market is going to grow, and therefore, Brady's share of it would grow as well. On the safety side of the business, which has also grown, but not as much. The only reason that hasn't grown as much is because when you build a data centre, you have four walls, you have a floor, you have a roof. That all needs to get labelled and all needs to get marked. That's the safety side of the business You only have to do that once, whereas in the data centre, wire identification is for the building, but it's also for all the server racks and server racks get replaced with some frequency and get rewired and all that. The safety side of the business benefits from the data centre getting built once. Then there is some residual sales, but basically once, whereas every data centre has a whole long stream of wire identification labels in the future. The safety side of the business has also benefited, obviously, from reshoring, new factories getting built, industrial condominiums, all those sorts of things.

[[00:11:10]]
Could you go back to your point about technology differences and the competitive moat that Brady has established in the market? Is the company's technology difference around low latency with reading the labels, or is it more around the strength of the product? Could you break out some of Brady's qualities and how they manifest into a premium, or into customer retention rates if that's how the company benefits?

[[00:11:57]]
It's a little bit of a few things. Let me start from the top. Brady is above everything else, a material science and technology company. The most important thing is the actual label and Brady makes the best labels in the industry. Best is a relative term, but in this context, think of best as most reliable, lasts the longest, if not literally. They make some labels that you could argue last literally forever. You can read them in harsh environments. They don't fall off. That is what Brady built their business on is the material science behind the labels. Separate from that, though, Brady is also a technology company. They design and build their own printers. Unlike most of the other industrial label machines, printers, if you will, in the marketplace, Brady doesn't try and be everything to everybody. Instead, they make printers that are very easy to use, easy to set up, extremely reliable, super friendly with high mix and high-volume applications. Then the trifecta is they also do their own software. There's lots of label software that you can get on the market. Most of them are cumbersome. They require an in-house expert. They're not super intuitive. They require a lot of training.

Brady's, you could teach Brady's label printing software to anybody, which makes it very easy to train users on it, which means they have a high rate of adoption, which means, to your point before, they have very sticky customer relationships. That's both sides of the business. That's the product and wire and the safety side. The safety side also, though, in addition to the material science and the ease of printing, they also have a tremendous level of safety and compliance expertise. They are viewed not just as a label supplier. If you were a safety manager at a factory, you wouldn't look at your Brady rep as just your safety label partner. You would look at your Brady rep as a safety partner, somebody that can speak to you about safety regulations and workplace safety and visual workplace safety and lean operations. There's a consultative element to the Brady safety team that makes them indispensable to their customer base.

[[00:14:20]]
Is it fair to say that Brady benefits from its technology difference largely with customer retention, or is it more that the full suite of products and services lends itself to easier new customer acquisition growth?

[[00:14:56]]
Yes. It takes a while to win a customer in the technology space but once you have them and you achieve what's called spec position, you're there for a long time. We'll use Boeing, for example. Let's pretend that Boeing is a customer. Boeing builds aeroplanes. Everything on that plane is highly specified, engineered and specified all the way down to labels. Whoever wins spec position for the label for, just say, the avionics on that aircraft, they're not going anywhere. They're going to be on that spec position for as long as that build is in place. Aircraft are usually built for a very long time. The build rate is very long. The customer retention is not just like, "Hey, I like doing business with you," or "Hey, I like your product better." In some cases, they have no choice because they've built it into engineering specifications, and Brady has spec position from decades.

[[00:15:55]]
How prevalent is cross-selling between the safety products and the Industrial Solutions products in data centre and non-data centre markets? Does the safety side usually drive Industrial Solutions products' revenue or contracts? How does that cross-selling relationship work between the two businesses?

[[00:16:37]]
There is a tremendous correlation. The two teams are separated for a couple of reasons. Number one, the decision-makers are different. The people responsible for making safety decisions in a factory have almost no interaction with the people that are designing the parts that need to get labelled. There's no sales process reason to have one rep try and sell both and the expertise is very different. You need to have totally different personas for your sales reps. That said, there is typically a fairly sizable cross-selling overlap there. It's not as big as you would think, but it is pretty big. I'll give you an example. A chicken factory, there's almost no product or wire identification in a chicken factory. The output is a chicken, but if you had a factory where they were making laptops, there'd be a tremendous amount of cross-selling overlap. The way that works, generally speaking, is Brady has a CRM and a pipeline management tool like every other manufacturer. They have tools in place so that opportunities or new customers, when they're open and they are in a certain industrial classification, you're able to see that visibly, which is standard, out-of-the-box CRM stuff.

If somebody is working in a factory that makes laptops, the safety person can see it and figure out how to try and get to a decision maker just like if it's a safety person, the product and wire identification person can find it. Yes, cross-selling is super common. The bigger cross-selling though is within those platforms like you're selling product ID, now you want to sell them wire ID or you're selling them wire ID for one application, now you want to sell them wire ID for another application or you're selling them floor marking tape for a warehouse, now you want to sell them no smoking signs or you want to sell them lockout/tagout devices. That's more of the cross-selling.

[[00:18:50]]
If there were opportunities between the safety business and Industrial Solutions, Brady would already have captured it, so, going forwards, the only cross-selling would come from new acquisitions. Is that right?

[[00:19:10]]
Yes. There's surely exception but generally speaking, yes, I would agree it's probably more of a new customer acquisition strategy.

[[00:19:22]]
For the areas without cross-pollination between the safety business and Industrial Solutions, why might there not be cross-selling for a data centre or an aerospace manufacturing customer? Would competitive pressures inhibit the cross-selling potential?

[[00:20:07]]
Let's use the data centre example. On the data centre side, the safety side starts with breaking ground utilities. Then once the building is up, then you're labelling signs, all that stuff. Pretend you're the safety sales rep. You need to have won each of those tranches of business at different stages of the construction process. For example, maybe you didn't win the floor marking bid, maybe your price was too high. Maybe the construction company, the general contractor already had inventory of floor marking, pick your reason. The production and wire guy or gal, may have already secured the wire identification business, even though the building is not up yet. Lack of cross-selling is usually because one or the other side didn't win, not because they didn't coordinate. There was just your point about a competitive threat or a performance gap or a pricing reason or sometimes just an old-fashioned relationship.

[[00:21:28]]
What is normal organic growth for the Industrial Solutions business? I recognise there's a lot of nuance between different end markets. What is normal outside of 2025-26?

[[00:21:59]]
My goal was always to perform at 2x GDP. Depending on which year you're looking at GDP, that GDP is anywhere from, call it, 1.5-3%. We were looking at 3-6%. I would tell you, given the complexity of the business, obviously, anything over 5% organic is pretty good. There's pricing pressures and price increases that were post-COVID, and you mentioned tariffs. Certainly, all of that is in play, too, but broadly speaking, you're just trying to get 5-10%.

[[00:22:39]]
Is the Industrial Solutions growth you mentioned driven by replacement of labelling? I know that's apparent in some markets – not necessarily something that's going on a plane, but you mentioned replacing labels for servers or racks. How much of that organic growth is usually just replacing existing labels?

[[00:23:04]]
The churn is actually higher than you would think. Yes, you're right. An aeroplane, probably low churn. They're going to be making planes pretty much forever. I don't know. During COVID, they stopped for about one year. Generally speaking, the assumption is planes aren't going to stop getting made. Use an airport, airport gets built, so it gets a new control tower. There might not be another airport getting new control tower next year. Now you've got to go replace whatever volume was associated with that control tower, plus find 5% more growth. The churn is very low for industrial identification for durable goods manufacturing, the actual products getting made. That tends to be pretty low churn. The high churn is project-based, bid-based business, which is almost all of the safety side of the business and then, I don't know, a good one-fourth of the product and wire ID side in the form of specifically the construction business. Data centres are an in-betweener there because you've got the one-time businesses wiring up the data centre, but server racks need to get updated, need to get replaced, they need to get rewired. You never have as much volume as you do in your first two years, but you do have volume pretty much every year.

[[00:24:32]]
Brady is targeting mid-single-digit organic growth for FY26. Would you say that the markets that are going to be driving growth the most would be aerospace and data centres more broadly? Which regions or end markets might be lagging behind, if most of the growth is going to be coming through data centres and aerospace?

[[00:25:14]]
I'm not sure I can answer that. I will tell you, data centres are obviously a big driver of volume right now, so is aerospace and defence, but I wouldn't discount marine. We're starting to talk about building more ships in the United States and ships consume a lot of wire. Our rail infrastructure needs to get updated, lots of wire and rail. The infrastructure spending is all still out there. You got bridges, you got airports. I don't know, it'd be pretty hard for me to name an industry. I'm still in the industrial world. My current job, I'm in markets that are almost identical to Brady's with the exception of some of the electronics and just about all of them are up to some degree. Maybe agriculture is still a little bit behind, so I'd throw that out there.

[[00:26:13]]
Which products usually have the most labelling content per unit within data centres or aircrafts?

[[00:26:51]]
It's definitely wire identification right now. Wire identification is a broad term for dozens and dozens of different types of technology, printers, software and of course, labels themselves. Wire identification right now is definitely across the board, the largest growing market for anybody in that space. That is absolutely data centre, aerospace, defence driven. Constructions out there, too. Most every market that uses wire is up right now.

[[00:27:31]]
How many wire identification labels are included on a single rack or data centre?

[[00:27:44]]
You know what a rack looks like? Every port has a cable that goes in one end and another end. Every port has at least two labels on it, sometimes three. If you're talking about a rack with a couple of dozen blades on it, you could be talking about thousands of labels per rack. There could be dozens of racks in a cell and there could be hundreds of cells in the data centre. It's an order of magnitude of hundreds of thousands, if not millions of individual labels.

[[00:28:18]]
Is the number of labels on an aircraft comparable to that of a data centre or a rack?

[[00:28:36]]
No. All in, a data centre is going to have more just because it has more individual ported cables that each have to have two labels. Whereas on an aircraft, you have long wires that are running the length of the plane. The performance standards are different also. There are a lot of labels on an aircraft, don't get me wrong. Probably way more than you would possibly imagine, but they are also a more specified product, which means they're more expensive.

[[00:29:13]]
What qualities would you call out about Brady's acquisition strategy and ability to maintain organic growth through its historical acquisitions? What do you see as the larger challenges with sustaining organic growth through multiple acquisitions?

[[00:29:47]]
The acquisitions they've made in the last few years are really very smart if you think about what their business model is. Take the Honeywell or the Code acquisition, they basically have bought companies that read the labels that they're producing. Brady's business is making labels that you print barcodes on. Every single customer also has to have some way to read those barcodes. Logically it makes sense to have the readers if you're going to sell the labels with the barcodes on them. Honeywell obviously brings a different element to that in the form of mobility solutions and handheld computers and warehousing and inventory tracking and things like that. That adds a different layer of opportunity for Brady. It's all about reading the labels that they're printing. It's a silly thing that they didn't have label readers since they make labels. They already make printers, they already make software, they already make the labels. It just makes sense that they would have the label readers as well.

They've made other acquisition. They bought a company called Gravotech. Gravotech is just another labelling company. It's just that they permanently label things. They don't print a label and put it on something. They sell machines that label machines. It's all very much in the same space, either business that can be integrated or even if it's standalone, it's all very complementary. Keep in mind, my knowledge is in the industrial side of the business, which is the bigger part of the business. The People ID side of the business, you've been to a doctor, they barcode and scan things one million times a day. That side of the business will also benefit from all those mobility and traceability tools. Organic growth, yes, I believe Brady is in a position to grow all these businesses successfully.

[[00:31:50]]
You mentioned Brady's acquisition of the Honeywell Productivity Solutions and Services business, announced in April 2026. Why wasn't Brady in the barcode reading space before? Why does it make sense in the current market to vertically integrate now, as opposed to 1-2 years ago?

[[00:32:32]]
Definitely speculative is the right way to put it. I will tell you that before I arrived at Brady, Brady was not as technologically minded. They were not as engineering-focused. They had not been funding R&D the way they have been over the last several years. I don't know what the strategy was 15-20 years ago, but from people that I worked with at Brady, they weren't focusing on new products, new technology. They were just trying to sell what they had. Call that a lack of technological vision or whatever. That's not been the case for several years. They've invested heavily in R&D. They've committed to R&D, both personnel, technology resources. They've acquired businesses with R&D. They are very, very technology forward right now. That would be one big difference. Another one is they have invested in their SG&A, their selling resources. They've invested in marketing, their digital platform. They have really built a business model, an omnichannel business model so that no matter where you are, what type of end user you are, there is a way for you to get technical support, sales support and Brady products any way you want, whether it's direct or through any of the hundreds of channels of distribution that Brady has.

[[00:34:02]]
You mentioned that the Honeywell acquisition is complementary to Brady's existing products. Is there more recurring or aftermarket revenue that the company can capture by replacing those scanners? Does that happen more frequently than actual label replacement?

[[00:34:30]]
No, absolutely. A barcode scanner that's in a lab, think like an academic lab, probably not replaced very often. It probably sits on a lab counter, doesn't get changed very often. A barcode scanner that's held by a warehouse worker that drives around a forklift, scanning stuff all day, going to get broken, need to be replaced, need to be serviced a lot more frequently. There's a wide range there. Generally speaking, my understanding is a lot of the Honeywell business is warehousing, industrial traceability. Even though the products are rugged and very durable, they do break, they do need to replace, they get dirty, they get lost, they get stolen. Definitely more of a run rate with the traceability part of the business than, say, an industrial printer that sits on a desk. Those don't tend to break or get stolen. The run rate business is really all about software and of course, the labels. That's where it's all at. If you're Honeywell, Honeywell has labels, but they don't have labels like Brady has labels. Now Honeywell's entire network of customers, they're the opposite of my point earlier. They have all the mobility and traceability technology, but they don't have the labels. Now they have the labels, whereas Brady had all the labels and all the printers, but didn't have the mobility and traceability tools.

[[00:36:03]]
How sustainable do you consider Brady's acquisition strategy, as enacted over the last couple of years? The company has been pretty active. Would you see future acquisitions coming through this complementary vertical integration strategy as well, or more through consolidating like-minded products in Industrial Solutions and identification?

[[00:36:58]]
I really don't know that I can answer that question. There are other traceability, mobility, personal computing companies that are out there. I'm not sure what would fit or what would make sense. I don't know that I can answer that. Labelling means a lot of things. There are a lot of manufacturers and a lot of industries that do a lot of things that fall under labelling and identification that could possibly be complementary to some part of Brady's business. I just couldn't tell you what they are off the top of my head.

[[00:37:42]]
Do you see Brady's acquisitions and approach as sustainable? Could the company continue the aggressive acquisitions that it's enacted over the last few years?

[[00:38:04]]
I have to point out to you, I wouldn't describe their acquisition history as particularly aggressive over the last few years. They've made a couple of big single bets but if you go back historically, look at Brady from 2000 to 2015, they bought a lot of businesses. They bought dozens and dozens of businesses. It just depends on how you define aggressive. Obviously, Honeywell doubles their business so that is a very big bet. I don't know how you follow that up in the short term, but that's frankly out of my wheelhouse.

[[00:38:42]]
I know it's still early days with Honeywell, but Brady is targeting about USD 25m in synergies over the next 2-3 years, and you mentioned some cross-selling opportunities. Is there any operational overlap or opportunities to push synergies farther than that? Do you consider the synergy target pretty reasonable, or do you see that as conservative or aggressive in the current environment?

[[00:39:32]]
USD 25m over a USD 1bn acquisition, that's like a rounding error. That could be as simple as just synergising your finance teams or customer service or whatever. There are definitely some overseas factory synergies that I'm sure that somebody will look at. Brady already has factories that make technology over in Asia. I'm sure Honeywell does, too. It only stands to reason that maybe they don't need all the overlapping technology there. That seems like an easily achievable number. If I was an investor, I think I'd expect more than that.

[[00:40:26]]
Brady has been stable over the last couple of quarters on margins and profitability, at least in the Americas, with about 20-22% segment margins. I know gross profit margins are a lot higher than that. How does the margin profile of the business improve over time? Does that naturally come with the trend of replacing labels accelerating?

[[00:41:10]]
Primarily, the margin is going to expand through mix. I mentioned when we started that the business historically was half safety, half production. That production wire side is more profitable, and that is growing faster. They're both growing, but that one is growing faster and that is higher margin, in some cases, significantly higher margin. The mix itself is a big driver. Then in addition to that, it is a volume play. The more volume you get for, say, wire identification, you will have cost downs, have better buying power. You'll have streamlined long runs of labels, which is the most cost-effective way to do it. There's definitely a cost benefit implication as they grow and sell more and more customers. Then the other thing is there are other things that are just naturally much higher margin like software, it's higher margin. Some of the safety products that are sold are unique and command higher margins, all software related, by the way. I think the opposite, where is margin going to be pressured, equipment is lower margin and Honeywell is predominantly equipment right now. Printers are lower margin. Obviously, any technology is lower margin. If they end up acquiring a business that's mostly equipment, that could create overall margin pressure. They can offset that, though, by getting those equipment customers to purchase labels.

[[00:42:48]]
Is Brady a business that could see 25-30% margins if it's materially improving mix and successfully cross-selling equipment from recent acquisitions? Is 30% reasonable in the long term?

[[00:43:27]]
I don't think so, only because the mix of the business is… The safety side of the business is never going to be as high, and that is always going to be a big part of the business. All things being equal, if they have the safety part of the business, I don't think it's going to get as high as 30%. It will go up for sure, depending on how the equipment plays into it.

[[00:43:57]]
You mentioned Brady's R&D and recent investment, and Q3 FY26 R&D was about 5% of revenue, having been 3-4% historically. What is driving the trend towards increased investment for the company?

[[00:44:40]]
Generally speaking, Brady's strategy is to have a closed-loop product solution for their customers to make them as sticky as possible. That R&D investment is pretty much across the board in technology. It's printing technology, it's software technology, and it's the material science behind the labels and science and such. It's also relative to things like portability and mobility. Brady makes a lot of portable printers and mobile printers and things like that. There's an element of making things lighter, more ergonomic, easier to use, more durable in that scenario. In my time at Brady, I think R&D expenses increased as a percentage of sale every year. If you go watch Brady's press releases, they release new technology, if not every month, at least every quarter, they've got some cutting-edge new product that they've launched. If you were to go back 10 years ago, they could go one year without launching anything new. It's a very product management-driven organisation right now with a super disciplined focus on voice of customer and voice of product and technology, voice of channel, all that stuff.

[[00:46:04]]
Is new product integration or development for commercial integration largely for new customer acquisition? How often does new product integration flow through to existing customers with upselling? Where is new product integration usually realised across the customer base?

[[00:46:34]]
It depends on the product category. For mobile and portable products, it's mostly upsell refresh business. The golden philosophy is if you make it easier to print labels, people print more labels. That's the idea. If I make it easier for you to print a label in the first place, you're more likely to label more stuff. Just the broad industrial label, think the desktop printers, production label printers and things like that that new technology is predominantly for new customer acquisition. Going out to the market, somebody that we have not sold, why haven't we sold them? Because their current solution works best for their operation. Brady has gone out and produced technology that works better for their operation, and now they're going to acquire new customers as a result of that.

[[00:47:37]]
You mentioned Brady being into high-value categories such as aerospace. How long is the process in those fields, usually? What are the larger capital or operating costs to get spec'd in?

[[00:48:07]]
The sales cycle for aerospace defence is usually on the low end, six months, on the high end, 18 months, even up to 24 months. It is pretty time consuming and there's pretty significant cost between testing, sometimes it's testing on site at the customer, sometimes it's testing at Brady's labs, sometimes it's both. There is a pretty significant investment there. However, in the case of aerospace, it's not like there's a lot of new aerospace factories going in. Usually, Brady already enjoys label business. There's already run rate business. When you're trying to get new spec position, it's usually not a new customer, too, in aerospace. You're trying to win spec position on a new build that they're doing or a new technology that they're doing. You already have business there. You're already one of or the incumbent label supplier, but it's still a pretty long sales process, sales cycle.

[[00:49:16]]
You mentioned that there aren't many threats to Brady, particularly in the aerospace and data centre fields. Where do you see the biggest threats?

[[00:49:39]]
The biggest threat to Brady's business is actually no labels at all. If you're Brady, that's what keeps you up at night. It's a world where things don't need to be labelled. You're familiar with dark factories, for example? Dark factory where there's no humans, it's all automated. It is conceivable that you could have a factory where you don't need any floor marking or no smoking signs because there's no people in there. We talked about all the labels on the bottom of your laptop. What if instead of any labels, you just had an RFID chip in the laptop that had all the information that you needed on it? Brady's acquisitions are somewhat to offset that. Brady's invested in RFID technology for that reason. Brady's invested in smart labelling technology, so RFID antennas and things like that for that reason. At the end of the day, imagine if all of a sudden, there was no need to put wire markers, wire identification on two ends of every wire that gets installed. There goes your wire ID business. How much of a real threat is that? I really don't know. I can't answer that. Nobody's figured out how to do it yet, Brady included.

Think of it this way. 50 years ago, every single thing you bought at a grocery store had a price tag on it, an actual sticker, if you will, with a price on it. When was the last time you bought anything that has a price sticker on it, except for maybe the corner Bodega? Somebody figured out how to get rid of all those price tags. They did that in the form of UPC codes and barcode readers. At some point, if let's say, a wire manufacturer figures out how to barcode or RFID the wire itself, then why pay to have somebody put a label on a wire? That is just my opinion. That would be long term, the biggest threat to that business is not somebody else making better labels or making better printers to make labels, it would be somebody not needing labels at all.

[[00:51:56]]
There's no end market or product where that conversion has already happened. It's just a longer-term risk, is that right? How prevalent is that risk today?

[[00:52:15]]
It's probably more than you realise. I'll give you an example, pallets, used to be, pallets all had labels on them. Now you can inkjet a barcode onto shrink wrap onto a pallet. If you're a manufacturer, you might not have to put labels on all four sides of the pallet. Basically imagine an inkjet printer that just sprays on a barcode right onto the plastic. Why pay for an extra label, just paint it onto the plastic? Is it growing fast enough to offset the growth of wire and just widget manufacturing? Probably not, but it is out there. By the way, obviously, it's real because Brady bought Gravotech and Gravotech makes permanent marking. Brady recognised that that's a real possibility, and so they bought somebody that does it.

[[00:53:15]]
If the use case for no labels becomes more prevalent on wire identification for racks, how fast do you think the market would convert to that method? Would it be 1-2 years until the existing labelling business would be effectively gone?

[[00:53:38]]
No, it would take a very, very long time.

[[00:53:45]]
Are there any markets or products where you see a less apparent or more defensible risk of labelling disappearing?

[[00:54:01]]
It's most defensible today for anything that has to have extremely specific… It goes back to the specification. Imagine a barcode label with traceability that's going on a bomb. You can't risk the legibility of the label, you can't risk the label falling off. If you were to try and direct mark that, you couldn't risk it being ineligible or falling off. The real high-performance stuff ironically is the stuff that's less likely to get replaced by non-labels only because the label technology itself is so good. Defence of any variety, marine, locomotive or rail, if you will, those are probably very unlikely to stop using labels in the foreseeable future. Do you want an example of something where it would go away? Think of anything that goes in a vial. Lab vials, test specimens, that would be one that I would say is more likely to go away.

[[00:55:09]]
Could you highlight 2-3 priorities for Brady over the rest of FY26 and into FY27?

[[00:55:41]]
Brady is in a better position than other broad label manufacturers for a couple of reasons. Number one, Brady doesn't play in what's called prime labelling, which is the labels that go on packaged foods or when you buy a package of chicken or you buy bottle of wine. Brady doesn't do those labels. Those markets are all the ones that are under the most pressure, owing to a number of things. Obviously, GLP-1 drugs are causing people to consume less food, less food means less packaging, less packaging means less what's called prime labelling Brady is likely to outperform, I would say, any other label manufacturers that you're going to find out there. Because they years and years ago, very brilliantly got into data centre businesses, they are spec-ed everywhere for data centres. If as an analyst, you think data centres are going to keep getting built, which I would assume you do because of AI, Brady is going to be riding that train for quite a while.

Then the other one we didn't talk about much was medical devices and healthcare and stuff like that. Certainly, medical device manufacturing is on the rise. That's getting reshored in the United States. That's all high-performance labelling as well. I don't know. My outlook would be very good. It's a great company, well run, very technology minded. They don't try and be everything to everybody, but they do try and be everything to everybody in their space. They're not afraid to invest in both the commercial selling expenses and the technology.

[[00:57:26]]
I just wanted to close it there. We're basically right at the hour here. I appreciate your time and your input. I really enjoyed the conversation. That was super helpful and really interesting. I appreciate your time, as always. We'll be in touch, but thanks again.

[[00:57:41]]
Thanks. Have a good day.

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