- Earnings call transcript Q3 2022

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Operator

Good day, and welcome to the MSA Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Chris Hepler, Executive Director of Corporate Development and Investor Relations. Please go ahead, sir.

Chris Hepler

Thank you. to Quarter welcome Conference and morning, MSA's XXXX Third Call. Good of Chris and Hepler, is Corporate Executive This Director Development Investor Relations. I'm and CEO; and Vartanian, Chairman, Senior Nish Buck, President Officer. Jon CFO; here Vice and Accounting Lee with McChesney, Chief President

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

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

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

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

Moving on agenda. to today's

Nish before the a quarter. our details discuss the on Lee to remarks few will then results provide of First, highlights the to quarter. discuss key John the call turning of will

Finally, closing provide comments. Nish will

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

Nish Vartanian

quarter. having we're Chris, report month a consecutive Thanks, At to third thanking on excellent MSA, and not with the all I'm comments in in incident. start pleased my results it lost everyone. I'll our MSA the of good by morning, delivering team for closing safety. time XXth starts

margin The we to present Demand pressures across strong sales, product throughout supply we both XX.X% markets. growth gears hands performance. the million October. Book-to-bill see healthy double-digit step That, up organic at resulted during during this very and financial is a goal increased operating the saw While each for to at keep the than combined rising closely high times across performance and the of front $XXX has healthy drove over in pace pace, be month a exceptional for get saw Order toward in We quarter. record activity at above to with quarter, deliveries more broad-based levels, historically easing our looking be of the the more remained a that backlog X has slight we're in year robust remains time, proactive adjusted great margins continued products business. and we've another initiatives chain enjoyed the continue and and chain our of into to In engineering lead aspirational year-over-year. orders our and XX%. incremental orders Shifting our activity pricing Inflationary on with strong and above costs. pace customers. with safety and year-over-year our implemented quarter remains It's truly happy to response, customers. and progress, we've been the in improved of continue order quarter. supply various

our business. in Our investing we balance and strong, remains sheet continue

pace customers areas our value also rewarded I'm supply and last to to pleased continue mitigate be this deliver and as market-leading a for margins I with key delivery differentiated technologies safety continue innovation with and credit to to a in chain mentioned we Even solutions. the environment, we recognize see as As inventory our challenging products. our that solid quarter, to in order strong work continue we we add customers. we risk times improve to

to With MSA industry. welcome our now continued drive Lee I'm Chief call Vice Officer. over before want on our in team. Lee start Financial a the growth delighted board as help have Lastly, our to review turn I Lee? to Lee. joined I'll and that, and week to our the to President leadership Lee of to take quarterly Senior we financial last highlights, McChesney moment

Lee McChesney

everyone. Thank morning, and Nish. you, good

Let with The management that ultimately delighted you of itself, me to a growth stakeholders. opportunities the on on coming to start by that passion work saying company such over look to value call forward the team, the I'm to for for many I purpose. team history weeks Nish drive months. and lie mission, MSA the great speaks MSA really and and long-term of getting and join sustained that excited ahead will the our I'm know with a

strong Incoming team jump year-over-year up let's in and $XXX our versus balanced Now quarter across were the sales a organically environment. price a last And a realization was consecutive the year. with constant basis was a a currency third currency in very This on quarter XX% Overall, growth. unit growth XX% quarter. XX% basis reported double-digit of of constant the that up volume. million, executed orders key into on dynamic the up highlights of robust second quarter and

healthy a will commentary. the to for well for the With also provide and XX% we before to year-over-year to was do MSA profitability last that, you of prior into results. during these turn period XXX with that call at fuel really call transition, earnings turn $X.XX, recognize finance adjusted points and doing margin With was the operating I that, their entire But improvement can leadership John more in John share basis this team so the margins. over thank over These combined done. to over overview, XX.X%, the want I will he executions his insight John year. and of saw operating per and gross year's third and up Importantly, up quarter. now I in margin quarter, Adjusted growth over

Jon Buck

recap our sheet Thank today's call, On quarter and financial metrics. review I'll a provide performance of Lee. and you, third balance cash flow key

on the acquisition. I date the results, we into the X, of to getting anniversary that want Before X-year reached note July Bacharach

on quarter data an discussed organic this comparison today the call and noted. are otherwise filings So basis, in on unless the our

a up Lee sales As XX% on basis. currency mentioned, third quarter constant were

a exposure. orders in and translation International a in of and and and resulting the approximately chain quarter ongoing the in our backlog supply was segment, in growth Foreign British X% end primarily quarter. the Strong book-to-bill pronounced headwind challenges X.Xx record euro resulted from most currency at pound

While quarter, expect XXXX. during supply we do we some chain, chain the into saw normalized the least not well improvements supply a in at until

turning Now profitability. to

drove margin year. offset gross profit increase in and and the points an over improvement by implemented was product relate margins, in XX healthy throughout Pricing this Our the warranty. inventory XX.X% the basis quarter, sales was of year charges underlying prior indirect of initiatives

rising recently went into the in to A We in business. prior increase XX.X% costs SG&A the to be continue million front compared October in pricing XX.X% favorable the were price approximately our quarter. had active sales We on the in of nonrecurring in with both effect of quarter year. $X segments. pace for adjustments keep with expenses

segments. back now XX%. due basis sales cross-border by favorable volumes, translation and was the elevated was to On margin than With and margin detection the X%. to supply by constraints sales acquisition. an transaction year. and I'll the the sales sales to purchases the $XX basis in year-over-year We to GAAP X% was Results the Bacharach compared net million expenses year-over-year adding prior XX.X% to gas million impacted share The was on share quarter. or GAAP operating In operating of compared mix million $XX basis, XX% quarter. of targeted International incremental operating segment, on in margin Americas with to at in quarter year-to-date prior XX%, net year. XX% the headwind look of a products. volume, adjusted or increased was per operating reported diluted improvement. year. in share disciplined year sales per strong line XXX $XX the sales prior of the FX and $X.XX $X.XX addition, Currency in year. contracted the and included increase during higher XX.X%. declined Book-to-bill income quarter. more adjusted the an the In prior a On incremental were adjusted or in to in restructuring, items, was chain our million levered the XX% realization On margin was a basis, diluted compared per adjusted shows diluted positive XX% X.Xx points in compared XXX on $X.XX lower income liability and basis, with up well closer related $XX net in on margin amount or XX% less provide Reported product margin backlog to XX.X% an of prior per In $X share headwinds to diluted that, product points similar income our cost the were our improved management sales financial margin price segment, range our performance X.X%

a Quarterly flow cash Now and cash $XX ago. $XX up free flow compared first sheet. turning was to to the Year-to-date million, million. flow year was for X months cash free balance the XX%

As high demand, and an in backlog carrying shortages. levels we've throughout we strong been year discussed elevated of to level quarter, response last inventory input the

to capital in and dividends to we $X We paid returned to through than $XX repurchase of was million expect Quarterly shareholders quarter. working repurchases. in shareholders million and the million to Year-to-date, dividends in have realize quarter. CapEx $X deployed share more improvements We fourth shares the $XX million.

million of back $XXX end the adjusted X.Xx call net Nish million remains that, EBITDA or the XX had closing remarks. Our was of balance to Nish? and trailing we strong. months. over debt the At turn $XXX I'll sheet With for quarter, cash for the

Nish Vartanian

some our good with like quarter thoughts entered you, In outlook. Thank fourth our provide Jon. I'd momentum. near-term to We closing, on

into be an pace markets to market and the backlog optimistic about MSA's record our of As next next and trend our I line business. service gas uneven This supply business we chain, days longer-cycle and our us ahead levels. very against of record The economy. XX resiliency last of positions the The range in position end year. the year's fixed headwinds order in expect fire is global an quarter. broad products we and of the over diversified market. and noted strong in position sight Despite gives flame good serve at and backdrop quarter to sales earlier, detection us leading remains well currency fourth uncertain our continues foreign with I'm healthy

weakening the of given closely watching macroeconomic current While is outlook. robust, demand signs any for softening we're

As formal our that meet team managing challenges concludes remains always, our for may on ability our focused stakeholders. the and delivering That lie in controllables I'm ahead. the confident remarks. MSA any to value

Q&A So I'll at call our operator our we so turn begin can session. the this time, to over

Operator

our from Stanley Stifel. [Operator And first question will Elliott with Instructions] today come

Stanley Elliott

results, orders, a double-digit and you commentary momentum call. the to the Lee, the Is on the of had strong lot and Nish, the business what you're of what's some kind right the there Congratulations of confidence welcome of outlook. of kind any despite about more little more share seeing now, macro that level of a you indicators could the mixed? giving this in kind being to

Nish Vartanian

Sure, When And when as across at products. you business, surprisingly business it's segments strong The all that it evidenced industrial look good. has of been in we frankly, the our those comes reported. we incoming to quite the hardhat business strong, construction Stanley. saw, and as revenue

confidence out we into quarter the the have areas. supply chain. We're in improvement in the fourth with the to look touch due for and certain perfect. not As future It's we It's seeing have. still some business, backlog the go we

a gas down in in really better a quarter. on that feel portable a the saw, of fourth components. We you and global that's the business for position was matter basis, we're slightly As detection

detection. as catch high market, concerned, is be in a you The as a We're through well marketplace. know This service for quarter. is confident good. way 'XX chain in what fixed our through is and we we the that, planning when that shape. But we XXXX. other up might don't strong. gas of And and competing new work is confidence positive issues But degree the at some very the to fire just supply product. looking up at should the good we far and backlog our is is for pop pretty solid. business and We're late-cycle us backlog going consider flame look business doing as certainly So markets, be really we the pipeline have The there

will good parts as significant in and spending nice world particularly and And business have business. think for I outlook and We 'XX. in the That a demand gas gas, relatively with here East. drop to we is into and other and oil backlog doubt we'll be America XXXX the that. as I fixed for The forward that for to a the react be East, flame, Middle look the oil for need to North continues good of Middle Americas strong should see

continues have the see some we fine. think That's business. utilities watch. that some in commercial and It's could continue that construction, area where be slowdown I business a to good business we we'll So possibly in a to

watching that maybe us. help we'll some to we're through so closely. And hopefully, come see federal And spend infrastructure

at So our think good an backlog. We outsized if have getting a And with slowdown, backstop the of we're market. have obviously, we markets, outlook we've for also backlog in pricing. The business built backlog good. look the And the the when getting helps resilient is portfolio. level. factors at a plus, is record that do we And product those you into and a us

a had price around mentioned, X. the increase Jon As world, October we

XXXX. So months we'll see X in benefit price of

of going things there. go year. in half But just some get back know where are don't should the to we the So we help

watching our SG&A in nice making we we're very that done things We've sure aligned. managing closely. job and get So a

fourth get about outlook the are. We're business going where other macroeconomic to And Hopefully, same hopefully, nice and feel as our continue We'll we of the feel we continue as margin until to on despite margins to watch third pulled the and but watch get hire hire go some the side. into be in of better in production, improvement had going the to we So for on slow headcount up in get the quarter, here to certainly in we'll we'll improve. number that pretty We're optimistic I quarter, the going engineers. 'XX, see And XXXX. performance we into parts concerns there. our headcount path year. we for we'll margin We of we're closely. the some our expect a

Stanley Elliott

color. done the to vendor core mentioned you buys in just great those products, that you of America the of result find some That's And Are much? that it's North still guys of additional internally? have kind about when you as made you sources? of the using improving the some Is volumes of chain and feels third have does because down parties we think like Great. Big buys modestly. supply kind the wind work 'XX, improvements broker actually all

Nish Vartanian

Exactly.

team the an So done internally. job has exceptional

complete now short period Our engineer qualifying products team in approvals they've got an and a and job the electronic did our that additional in time. and exceptional components relatively that for of

job great a them. Just by

options. Now we have

with We of electronic 'XX. one. should the that of supply Number components suppliers piece, have the options being in chain two, number much us help half to told we're for back supply better chains get

So on nice get with beauty certainly, is and half. would have our regard down And those more the driving but drop components to optionality we'll supply the certainly those half the off. those costs do then hopefully see a we'll electronic first off chains as buys better. some to on few job to components see of drop a the year, of in in expect I Maybe expect of broker back some would

think that us position we've in good combination it's things done that So puts we going a a forward. of

Stanley Elliott

the maybe you help And of Europe European out or good. out is organic growth could China on what us X% international with you're seeing the pretty of business, maybe versus

I think the some too. of would there there side. getting by be it was what's is masked sort FX of But commentary helpful, happened any on

Nish Vartanian

right, Stanley. exactly That's

They big segment. obviously XX%. headwind, had for think, FX of I about International So had positive growth we our a very

Asia matter some with continues standpoint Middle created East. of very business was as and that's detection We in mentioned What orders The forward. this we timing. that incoming good of demand have. on some you for from So I then saw gas And The Fixed an saw the a backlog challenges Asia. international business the was product for be that the the strong of to -- will better go ship flame we them. service detection piece. for and be fire gas because -- timing market, could in segment

an able the a volumes job. be should we well volume also door back. team instrumentation. the So quarter international and the The there positioned job done international, really next come our we're year we done and team's has standpoint with nice we Americas portable really the and a look and into fourth those expenses, nice When to across think managing from in really out SG&A as get

our some place, have Bob We doing is things in and cost structure pricing. on

So see as normal I think you'll that to start back those us of XXXX. into to margins get expect levels get we we

Stanley Elliott

Perfect.

Operator

from will come And our with Baird. question next Mason Rob

Rob Mason

extend demand my Lee shipments underway couple you're win talked SCBA quarter, everyone, seeing. Good the the that last in that on and the large I'll we thanks the Did get about of I all around to as morning, that quarter? did for color was well. the welcome strength Yes. in a the curious Nish, quarter.

Nish Vartanian

think, we did. Yes referring in We -- the L.A. shipped is County, you're we fact, -- what I to.

third quarter L.A. a County that the the business for It's had had going But that 'XX. shipped been us we is, of quarter. breathing apparatus into third very have into we're in we self-contained self-contained order seen the we The So breathing quarter backlog results that the will we apparatus. so fourth or would shipped fact certainly was with large not, matter for the strong. in of completed carry

correct? the County think it would out whether But shipped order L.A. in orders. have other go we did, shipped actually, -- that went Yes. and correct, is we Steve, the of September. in So third month fact, in I that

Rob Mason

Yes. Good.

October, where took current on And additional price, update of ratio. can I price/cost Okay. us we in that sit kind your you then guess, Fine. just just noting you

year. You've we've the through higher gross walk to margin been as the gone able sequentially

at where where curious just just you currently you I'm but parity up, whether catching there. currently or you're we're obviously, reside So sit,

Nish Vartanian

-- when growth at we're look price probably think we we the volume. parity. of saw business, X/X the look at from X/X the at you quarter, of that when we We and on think So

about inflation you what that's on that So seen at an price, we've in that, standpoint, look we think from product costs. X% and our

think a inflation pretty we the that job the we've done with in marketplace. we're staying that in par get So good at walking seeing

increase that as we forward. had, evaluating well that, So October will position And think the us that we go 'XX. we're we to continue

as look we're forward. into some get costs our that and confident and if is there pretty we adjustments 'XX, in adjustment the in our we watch certainly we closely, we'll pricing make go expenses, As inflation at

as that be confident and just we'll to we evaluating year. I'll we're that we're So had able execute year, as we 'XX into go the pretty -- have this

Rob Mason

to the just line, in both operating segments. a cluster. And think show you extreme. on that. Did it, reconcile of there up incrementals to however was geographic And couple of the more there onetime that at margin decrementals, geography. just -- that benefit in the go the million The maybe a look onetime back international, was depending to the a to or We're I at Americas, want trying I'm mention

Nish Vartanian

Right.

piece, the in So predominantly on SG&A was that the Americas.

the have charges acquisition? probably else? did of there are anything that. there they for benefit Was And was So Jon, the

Jon Buck

Yes.

in year, we I'll in dollars also quarter. costs. million Bacharach of a on about SG&A X% of the couple a say So that prior impact transaction the had had the currency

Rob Mason

near to about I'm through? we just to Okay. thought think those as we in at trying the currency the expect I made international, very are way you're how term, to. look Perhaps EBIT address trying but challenges to forward continue those here maybe -- line in the that, should that you work mention their that

Lee McChesney

Yes -- quarter went all for Europe think, point, for, your through extreme companies. a I to pretty

We're out things stays continue SG&A certainly, actions. we're forward in pricing be at of much to That's But it, world Nish done in of there's certain level but of those here have drive as efficiency a you as more as pressure, FX pressures, we've on we And on certainly getting areas lot parts still to been yes, statement price. a that think focus more, we'll going the just going macro space. well. I talked is really the do said, we nice as about, I And productivity. just focused FX will then the have where good as well. on So the

it next progress say, that more in a back just think comment. think have our to goes expected to I'd but And into pressures I I levels. quarter, time Over, we'll market. come given the So get in margins make earlier take X back here it the months, the to the you're fourth bit will European extreme the of going

Rob Mason

hop Understood. Understood. I'll work the quarter. on in back Nice queue. the

Operator

I'd And conference like Chris [Operator this the for closing remarks. back to over Instructions] will conclude Hepler question-and-answer to any session. turn . our

Chris Hepler

you for and joining this Thanks, morning. us thank

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

Operator

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

may You lines this your disconnect now at time.

MSA Safety (MSA) 27 Oct 222022 Q3 Earnings call transcript