MSA - Earnings call transcript Q2 2022 | MSA Safety Incorporated

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Operator

Good day, and welcome to the MSA Q2 2022 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Chris Hepler. Please go ahead.

Chris Hepler

Thank you, Chad. to Quarter welcome Conference and morning, MSA’s XXXX Second Call. Good of Chris and Hepler, is Corporate Executive This Director Development Investor Relations. I’m and CEO; President, Vartanian, Chairman, Krause, Nish Vice Treasurer. CFO here Senior and and with Ken President

we XXXX. this may of during the I’d matters the Litigation Securities statements call to everyone include remind Before that begin, Reform discussed Private within forward-looking meaning like Act of

of not include, to, all levels but anticipated are limited future statements Forward-looking and performance. projections

may uncertainties Forward-looking These actual forward-looking cause no as statements any factors statements update that by a our other include undertakes from risks, today. filings. to in SEC except other our required law. risks, to discussed and made materially of and differ are on results detailed publicly call, duty MSA factors number those uncertainties this

certain available as our Relations well our as our have part non-GAAP and are non-GAAP as website morning investors.msasafety.com. We measures release of on the press financial this discussion reconciliations at Investor second quarter included

Nish highlights Moving to today’s discuss the performance. our over to closing of then and Nish on turn financial remarks. agenda. the discuss then Ken quarter provide call to will will key

the our for questions. turn the prepared open to call call over remarks, Nish. I’ll that, Following With we will

Nish Vartanian

good morning, Thank you, Chris, and everyone.

quarter, into of information call that getting us excited. I’ll has at details Before of by the the all today’s start sharing some MSA, very

the fire in finalize apparatus contracts breathing departments able with significant past the the to we of most weeks, Within recognized were several X world.

following apparatus exciting the SCBA the we Angeles selected GX new London its the MSA you the system. respiratory its choice. may in has selected up new Department as Brigade news, As County SCBA Fire press that read breathing MX that recent Then Los of have learned Fire our as release, protection

product protective and up quarter. Fire of development continue growth of wins helmets, good basis already we trend Today, continues find inorganic Both more as to market, is on is core to Xx in of know, of in team and MSA to the organically. in the head the customers markets. the London above you brand well-established us. clothing very strategy strategy. County quarter trust and again year. to the When from firefighter" and Book-to-bill excellent demand are global our be examples Tuesday. element over to press contract orders constant cross-selling quarter can issued And in the were XX% existing Through combination a the Brigade fire firefighter leader initiatives our we prior overall advance and currency grateful our continue that and safety a our to July, that information our key at like to brands "protect LA to strong who investments Orders we’re look for products more and in in a in most all from Bristol, broadly, continued across business and this XX% well continued see Globe You release MSA know the toe. in that on place a

remarks. be in the years past up persist factors, this headwind expect as Our level and across currency ongoing $XXX constant continues of on record we result end million steadily a over inflation which near all Currency $XXX and in quarterly product and Ken Backlog and Supply a strong continue the over a was this issues at ago X.X was basis. year restrained detail at chain demand chain be translation in a categories. to up is has increased again chain issues. was supply more term. of XX% the to Backlog a basis million, X% revenue, a to and quarter reported discuss supply will quarter. X% by on his from in

chain As anticipated, components most issues business. gas in pronounced were our supply in detection electronic

a teams challenges. these on to are number working initiatives of address Our

chain for build by availability components continue to visibility we’re well using better resiliency, redesigns components. and engineering especially as of supply qualifying electronic suppliers, to more for to components, and as technology alternative We high-risk to get increase components, future flexibility

We’re also consciously select serve considering components, building demand customers inventory for greater in-sourcing key to and certain our high in we’re areas.

As Social to our MSA Corporate very remain building and in can of use business of strong challenging durability our published demand customer a things is to it, customers’ environment I report. our our June, optimistic solutions. we we products and see expectations. the ensure gears respond bit, good in inventory around this the sheet for Responsibility we of Shifting All annual balance fundamentals considered, a

As I’ve of what Social we the Responsibility Corporate said heart on MSA. at is at do many occasions,

is workers every the to and so may day their return world’s they safe mission safe Our home keep each families. to

journey. vision reflect our both I progress, As in our the steps the next energized on for CSR worker about safety I’m our of and future

solutions to and reimagine the generation worker make continue safety. in that worker products, services investments connected We of next

also sustainability business do supply such continue build talked the reduction chain to a in about. because at these this times. to MSA, these our are We investments that help programs us environmental as talent, various programs well of resiliency as around risk programs the better We kind as we model enhance just know and I

safety put design, bring develop, us to passion world’s manufacture our in protect for that trust Our brand. their MSA people best which the the people to inspires solutions continue and mission, who

the company, for very our our our fit Ken? to and journey results now With make while continues comments. that, this over our customers quarter, for pleased the future. to his So with our Ken associates turn I’m call I’ll

Ken Krause

of both good second Quarterly due on quarterly price morning, and euro translation organically, reported largely metrics. cash up a key British currency our year. last X% in call, pound financial across $XXX healthy Orders exposure both and to quarter, I’ll performance on were Organic our showed by International basis. On in orders portfolio, by business. constant also sales strong over reflecting the X% review flow a a XX% this recap sales were impacted in basis trends were today’s improvements XX% up double-digit volume. the million, improvement, very basis, up and quarter currency a constant we continue driven and price saw and in sheet a realization balance in provide order and each QX On growth and robust everyone. quarter see orders excess to was double-digit sales year-over-year and Nish, book-to-bill X% Quarterly Thanks, and of pace volume. Currency throughout across consolidated month July. X.Xx, into

growth chain issues our saw supply While and sales growth backlog. drive we and the strong up in order our to constrain quarter, continue

customer backlog, protective challenges. Backlog chain had up ongoing was robust driven we from As supply attributable the by demand gas finished mentioned, and quarter. with Nish quarter and $XX detection. to first million firefighter clothing was increase another primarily SCBA, The record by the

associated quarter Adjusting profitability, Pricing to prior $X employee improved points by higher is and price/cost turning gross quarter. Now in by SG&A of in This remains with profit and on the both was in the or XX The gross year-over-year was to the pressures costs up higher amortization quarter. increased the intangible offset slightly periods, activity. the XX.X% wages $XX sales on of charges, million team inflationary product a margin and in sales, gross largely focused Americas top driven down margin quarterly was basis at the of in amortization business impacted especially pricing, asset for equation. million basis. XX.X% by managing Acquisition-related was from our year. attributable our expense agenda, increase the segment. was warranty

pound up offset operating provide look SG&A which the Americas gross that, year. constant our organic we The X% the but up On unfavorable reported performance. in terms. at at XXX adjusted up As X% constant segment, and leverage margin I profit, strong double-digit Bacharach. higher basis basis closer XXX down offset currency headwinds headwinds, currency the In down on sales a to segment, an partially weaker growth, previously. gross XX.X%, impacting accretion that Reported SG&A were or operating was improvements X% XX X% in over from strong by percent up XX.X%, costs of XX.X%, a in due prior from on on basis, and sales, had mentioned operating was XX% points in International input or previously. In points we sales margin margin realized was mentioned euro profit margin was was margin year. basis the prior our organically. I orders quarterly points XX% XX.X%, growth performance. significant headwind the segment large sales, With line currency, Adjusted currency in I’ll year on a our operating translation last basis Adjusted up in with

million of On adjusted the years. or that $XX past compared in in see continue SG&A sales. GAAP over increase or prior or in to $XX prior international income leverage an basis, in was income the both $X.XX a on net net $XX similar XX% back the $X.XX the share very X% executed income EPS, was to was in per adding restructuring from periods, expense, we’ve earnings net in product increase liability million We adjusted million items, of GAAP couple over which share, and our year. restructuring $X.XX programs earnings per in year reported good

ahead is we is applications our just of a expanded our Margin performing year-to-date trending been expectations Demand has robust. well. the addressable backlog acquisition and is XX% detection frankly, our new strong completed periods. with over now, business expanded adjusted the performance under margins quite of year very business Bacharach into The for strong, Just quarter ago and operating gas Bacharach. market. very and

was the response on associated increase bottlenecks supply flow up capital, increase from and in quarter. by backlog. over approximately with cash receivables, and Turning inventory and shipping the cash strong the $X customer to demand at in and flow $XX of to million ongoing balance year-end Free chain sheet. impacted strong flow in is Inventory $XXX receivables end free Quarterly million notably million. cash the was working an

components, CapEx dynamic net X.Xx $XXX revenue second dividends of quarter, improvements to At million. to inventory shareholders versus half. trailing half the we the was Given and are had help expect we chain the and adjusted the supply deliver certain expect to of cash $XX in or the million shares the do of for We during first in of million and $XX end as backlog. XX quarter. months. to million million investing inventory paid We nature performance strengthening of sequential debt EBITDA the $XXX $XX to repurchase we Quarterly see our in see of availability the deployed

second of Our performance quarter diversified our the demonstrated strength business.

the focus As solid our and backlog. equation. we uncertain We of demand end price/cost managing getting robust to out on with the half in increasingly our environment, entered underlying product navigate continue a markets teams the economic through second the an door year and

provides and long-term, business Our optionality continue for balance our execution good strong positions invest us our and well to on profitable driving focus as sheet growth we in to shareholders.

the comment said, environment, Before wrapping risks dynamic want outlook. are our supported our performing healthy. to in and regions. is service of is of commodity markets just That up, construction prices, well. healthy. a are recession very OGP end macro The our key strong and by Funding the fire in market remain on utilities increasing I Despite there many

of internal business. back such, As I’ll to the softening in closing prepared for to Nish event over our Nish? a With remarks. range and in economic scenarios, we the call our continues actions take we planning to see are that, consider turn a

Nish Vartanian

recession interest In rates, to environment. in our to business rising our fundamentals We things. uncertainties of certainly but highlight of challenges high the work growing economic Ken. the macroeconomic of very and acknowledge you, today’s I closing, a want through I and remain ability inflation team’s confident the from couple risks, Thank

in which to our And and markets Our half this healthy, product products and the for their the plan very inventory to continue into our thank time, work, some MSA. put second serve any will in you record second in results. who And building the to in backlog questions areas I well executing and a July. customers better end brand. to a putting glad I bring second in balance entered continued healthy sheet, quarter and half underlying the have. remain technologies be MSA interest to strong at your and team our for trust demand you to with high-demand may take look robust forward we Ken I we’re

Operator

[Operator Instructions]

Stanley Elliott

be seeing head Americas? supply XX%. kind catching XX%, up of that what I may the within all. bit [Technical you’re you breathing Is mean a the of little apparatus protection for some just up Difficulty] up chain What

rest Just curious balance kind of to about how year? that thinking of the the

Nish Vartanian

and Stanley, markets So strong. strong. the industry is really The end-user are oil gas

construction continues for well the quite mentioned, do As Ken us. to industry

utilities, with we’re hat business along good, that gas seeing. is of that business portable so drives hard lot industrial the general Our an detection awful business,

know, detection and demand in good as to gas out fixed getting We the continue restrained see you that products, and door. for flame we’re

over of the orders. -- the we very we’re opportunity the well half starting for realized strong expect business, service now We grant really that been to just And fire of we’re with second is Fire you’ve improve see us, the year. sized see Department. some that business L.A. to pipeline funded; The some firefighter has into realize heard We’ve decent season. going assistance some other course, County to of and as

to to the in be the second begin half So here of those funds released year. are going

of any are are number like half products, good. year. know, So breathing It’s to we the for our really of the restocking situation of matter or should over order. apparatus see built good because a you back that end-user demand not a the markets as Overall, distributors

built see we a So that don’t whole into backlog. lot

overall is for us. pretty environment the strong Just

Ken Krause

could looking was despite if also having revenue a performance bit using the point of of it, financial north of apparatus, constant Xx. XXX% I more north breathing segment finer would on a and XX% book-to-bill Americas and Stanley, a I had growth, put what book-to-bill currency data. ratio even at The say

-- So your above respond navigate to see want the be demand be as manage industrial don’t you But demand through protection quickly. and be very the quarter. X to to to you a exceptional able we continues continues business be because above want through normally also X. to strong customers That’s to head

Stanley Elliott

sounds tracking ahead it expectation, is like of FX you the demand piece. have then basically, but And

for all side. through on for When wins. Very lot made to flow those a So Help either you just to putting see nice the for investments should the together. or with of guys kind us the the see start L.A. of have SCBA London? you

Nish Vartanian

third So the quarter. the ship most order the for will L.A. part in

shipping maybe start in late those to expect August, We September.

the we should of see So third most quarter. go that in order

in fourth the it extend second the schedule actually have may expectations start of beginning customer will stray delivery London fourth and Some quarter, the and and probably looking laid will continue for into that. on They what they’re out into a quarter. quarter, to that us ship based the for. to refine

that expect out be over quarters. we So spread X to

Stanley Elliott

of And some things you do hearing you of a costs concerns Europe of then with of is cost, especially that for lastly, How about kind concern Maybe energy in all? over those manufacturing can we’re to cetera. mitigate some higher the et big help all there?

Nish Vartanian

the continue So we to analyze situation in Europe.

to with We’re And might staying arise recession of chains some our that and inflation. that, economic challenges pure Europe. on close the due secondly, to impact might supply of in it, have the obviously, impact a that then

making not with supply continue secondary alternative look at sourcing them we to work are out we on some build we’re offset about and where We products and using resources, and at unknowns opportunity continue We’ll Germany some those the and talk We to to to inventory, suppliers that the some do solutions to building inventory to have certainly have about balance of where to do of building to that’s And the those there. stay sheet where look of close shy marketplace. that, to sure inventory. working we strengthening Stanley. chain we some some in

Operator

William is Maria next with Larry from question The Blair. De

Larry De Maria

I expected, color but just below can Nice still, that? ability But which all your can performance were talk mid-XXs give in but second little the job hoping just those good we’re for, choppy given environment. and the to a we overall question, think on incrementals you hit incrementals bit what to A outlook. some obviously, half, you

Ken Krause

is question, Ken. Yes. a for the great thank you question. Larry, This and That’s

at feel our look we to the do And the like you have identify. we level half us that. plans get back back we indicate to of fact, that opportunity that profile plan, of an margin As internal doing in incremental

drivers revenue half stronger as emphasize certainly we our point associated think with and the to the sequentially our in to a realistic. we commentary, of the one expect do very is, want increasing that, see second if do about do we and we prepared second it’s that sequential When in second of So which in do some about talked some think that, we’ve we see major of come significant And leveraging terms drivers across SG&A. business, of expect see the through, we confidence across half. don’t between We have that performance. a we SG&A now half

much would help margins incremental first. And to level certainly so a higher volume that through, come that the additional would revenue boost

product Secondarily, certainly for of are our challenges. an some gas our at products, being -- the hampered the products example, would by at look of chain our business, mix certainly that we impact. backlog, higher-margin detection products When have the we look some we supply

that will a bit of do the So incremental profile. if be margin that also half, we improve in see our tailwind a into second

Larry De Maria

And last still build helpful. XQ kind through it we to XQ good hopefully hit year, is quarter obviously, think an I it very fourth That’s of heavy? quarters? both or should a Or had numbers we quarter. those consider incremental fourth margin

Ken Krause

when I how healthy pretty look you seasonality, and look at a think you the historically at is profiles in QX business terms quarter. normally business the that of

to healthy. it expect We be

other revenue be here up at our saw we But high the half the in wouldn’t again it second low expect unreasonable think to half growth that strongest historically. mid-single-digit is historically of all looking ability see impacted expect versus here some in European However, summing to in so do sort But very our be a low been year, sorts confidence QX year-over-year single, business, has of our in about of of similar QX we and high XXXX. holidays to last growth what to we as have events. versus increase quarter double-digit double-digit our year-over-year year. second also and by QX we it

Larry De Maria

secondly, think LUNAR new And happen then that’s is Can in, on is a the called perspective is And if is turnout of and wins, there doing, some $X start what or possibility that’s a LUNAR perspective, is could entirety? kind year? an million the -- that that in put for Or how put L.A. the just of London. Perfect. if just some start, on option? you bringing you I this for the London

Nish Vartanian

both The beauty departments. of

been So gear. turnout L.A.: an has L.A. MSA one customer with for

to user advantage our L.A. So of a and firefighter toe. part that been from the to of many cross-selling build That’s us turnout the head they’ve for covering in that we have with gear years, relationship business. Globe helped to win

So all opportunity. that’s in thermal look a the we longer-term LA iTIC. They Angeles the size saw are ordered at the department, LUNAR continue SOPs. will an what had because putting That be would their into that with that. cameras, magnitude of integrated as imaging units project their to with evaluating and the and Los of

choice major U.K., to from anticipate Fire Brigade. is the first for do follow apparatus. departments This Uniforms did to So and specific of with with to customer, departments London own business they That that Brigade a is also with so the leverage million number with customer. the chose our to with of familiarity some of The and what of a they breathing they of type London Fire the Bristol those win are we in is some London. And unit they to use their looking iTIC. have relationships to the help very again, business, all London and But what of go London. were us their the able surrounding that dollars

Scotland, us with So as with countries other the that U.K., is of probably the helped profile just help in and the part in the this region, Northeast some with the U.S. us business going we certainly expect to of Boston that win Ireland our

in putting departments win. But again, change a rolling would the for SOPs So it’s and of much and look a a number department that their A that taking technology major to product also pivotal around win London the world that is at into LUNAR a out find decision longer-term a large like look us. for due like that. to that, be intriguing.

continue us. be out there So those opportunities to for

Operator

Mason from question [Operator from next Baird. Instructions] is Rob The

Rob Mason

I guess, of second the year. half I your just pricing could you for to see wanted plans us if update on, the

seeing any with chain mentioned at and times, it’s the You curious being still price? inflationary triggered supply along adding I’m front a what additional just components challenge as thoughts inflation on you’re around well. whether

Nish Vartanian

in had it Rob, we bit inflation a did quarter the North down see second in quarter, of a in April. as down as tempered in a in we and America, increase inflation the price higher far the bit U.S., But of the second kind the first implemented came pace We in quarter. inflation.

International back increases in and if planned there for one we continue will year. June, part in June, increase have price for in price a the organization, to need our of the evaluate We additional be

up some up we’re catching still we’re price to The that. clearly, pricing. playing equation, So to the of cost still catch

we’re obviously, so off-cycle next organization April the -- if North in in And year. will price on increases of later we’ll we June in American the that, through did to to, button an The come increase couple price expect here the going increase And push November. the need and certainly quarters. we the

something discussing in as far as upon that’s inflation forward. what go we’re we supply see the So as we chain based

Rob Mason

guess underway. on some the around the may AFG Just that I well? get Nish, or thresholds front for you funding prospects to products. customer with about be to perhaps funding of anything could could deal that themselves fixed. Any you inflation levels help accounted deal be relatedly, the the as inflation inflation in that for cycle mentioned But with

Nish Vartanian

A question. really insightful

spend the on working their the that in supply limits fire we and et the departments with apparatus, they gear, brought and chain, pricing we all seeing turnout attention, administration breathing the recognized inflation on them are with when that We are, the fact amount cetera. on are to the can up working in fact, have And in to pricing. just manufacturers increase it

for work see probably it. they’re aware; they’re but aware certainly So of into that XXXX, cycle the we’ll

levels for dollars. municipalities those with it. of again, of But with working them local will still current breathing supplement a apparatus. them departments, some And funding to dollars the on room We’re number there’s in pricing purchase the

are we it. on working So

Rob Mason

Sure.

challenges, I’m maybe -- some the speaking chain and the component -- all one are and been not of has flame availability. rising. solved? SCBA around gas question last Just is to SCBA supply point, now SCBA, your hearing products detection volumes the fixed we around constraint were Is much At gas

Nish Vartanian

I we’re position SCBA. a in wouldn’t use better that much word with the solved. would say I

But Our that along commitments suppliers that, can inconsistent, for met and and the for quarter today the continues good to surprises the The the their but year we nice supply we outlook with get they’re hope chains good, through way. and backlog that supplying certainly have breathing right second us to looks about consistently and and a get QX now, apparatus, balance chain say door. supply have we is is because through QX the components. want what out that we’re yes, the certainly of going obviously,

and line, -- be and through in far and volume third in flame fixed to of able gas mainstay should flame electronic the see fourth we call X&S come quarter. get certainly the components. some in we talked we starting we’ve out the larger the the detection, volume as As those what XXXX. fixed gas certainly and to hope qualifying and detection here quarter about in on We volumes the That’s believe self-help alternative that

there’s year supply commitments. But keeping always work So through that here. again, the people chains should improve and in we risk the as

Operator

conference the for Ladies and gentlemen, to closing Hepler like over remarks. any Chris our session. back this turn concludes to would question-and-answer I

Chris Hepler

this us joining for morning. you Thank

Investor replay transcript missed call, to the will you. XX audio conference available you of an look on again with website a for and Relations Thank If speaking soon. portion be forward the next We our days. you

Operator

you has today’s Thank for conference presentation. concluded. attending now The

now disconnect. You may

MSA Safety (MSA) 30 Jul 222022 Q2 Earnings call transcript