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What guidance did Graco's management provide for the next earnings period?

- **Revenue Growth**: Q2 sales up 3% YoY, driven by acquisitions, but organic revenue declined 3%. 
- **Margin Pressure**: Gross margin down 200 bps due to tariffs and lower volume; operating expenses rose 2%. 
- **Cash Flow Strength**: Free cash flow up 51% YoY, with 144% conversion in Q2. 
- **Strategic Moves**: $361M in share buybacks YTD and $300M+ in M&A activity. 
- **Tariff Mitigation**: Targeted price increases in September to offset $4M annual tariff impact. 
- **Market Outlook**: Cautious end-user spending but stable order rates; 2025 organic growth guidance maintained at low single-digit.

**【Management Opening Remarks】**
- Q2 2025 sales of $572 million, up 3% YoY, with 6% growth from acquisitions offsetting a 3% organic decline. 
- Net earnings decreased 4% to $128 million ($0.76 EPS). Adjusted non-GAAP EPS was $0.75, down 3%.
- Gross margin declined 200 bps due to $4M tariffs and lower factory volume. Operating expenses rose 2% due to acquisition-related costs, but savings from One Graco initiative reduced expenses by $7M (5%).
- Cash flow from operations was $308M, up 19%, with free cash flow increasing 51% YoY.

**【CEO Commentary】**
- Organic revenue declined 3% in Q2, driven by a 5% drop in Contractor segment (North America softness, DIY channel weakness). 
- Tariffs added $4M cost, impacting EPS by $0.02. Targeted price increases in September aim to offset tariff impact. 
- Incoming orders stable vs. full year, with 6-week run rate exceeding Q2 2024 levels. 
- Acquired Color Service (EUR 34M/2024) to expand industrial automation capabilities. 
- 2025 organic revenue guidance maintained at low single-digit growth. 

**【CFO Financial Commentary】**
- Free cash flow conversion at 144% for Q2, 125% YoY, driven by inventory management and One Graco savings. 
- Capital expenditures projected at $60-70M for 2025. 
- Share buybacks totaled $361M (4.4M shares) YTD, with M&A pipeline active ($300M+ committed). 

**【Q&A Highlights】**
- **Pricing Strategy**: Low single-digit increases in select markets to offset tariffs; no surcharges. 
- **Cash Flow Sustainability**: Inventory normalization and operational efficiency expected to sustain strong cash generation. 
- **M&A Pipeline**: Active deal flow with focus on adjacent technologies; recent Color Service acquisition fits long-term strategy. 
- **Market Trends**: End-user caution persists amid trade uncertainty, but order rates stable and semiconductor market improving.

Graco Inc. (GGG) Q2 2025 Earnings Call Transcript

Revenue

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

Pretax Income From Continuing Operations

Income Tax Expense

Current Income Tax

Deferred Income Tax

Income Tax Adjustments

Net Income from Continuing Operations

Income from Discontinued Operations

Other Items Before Net Income

Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

Net Income Attributable to Common Stockholders

Other Comprehensive Income

Total Comprehensive Income

Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

Basic EPS

Basic EPS from Continuing Operations

Basic EPS from Discontinued Operations

Diluted EPS

Diluted EPS from Continuing Operations

Diluted EPS from Discontinued Operations

GGG

GGG fundamentals

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